It’s official – Lithuania doesn’t need EU institutions and service centres

European  Commission building in Brussels
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On early morning this weekend news portals and radio shows flashed with a message which rapidly descended to the bottom of the news feed: “Lithuania yields on ambitions to attract EU institutions from London.” This message should cause shock in our country where the government has long spoke that we are “a country of service centres,” that we have infrastructure adapted for it and that it is suited for various institutions and bureaus. A few days later another piece of news appeared, this time being noticed – the insurance giant AIG is withdrawing its service centre from Lithuania.

Government not bothering

According to BNS, the Brussels website EUobserver announced that only the Baltics and Slovenia will not seek to become the new hosts of the European Banking Association (EBA) or European Medicines Agency (EMA), when the UK departs the EU. 20 countries stated they wish to host the EMA, six would like to host the EBA. Some countries even hope to attract both agencies. The EU plans to decide over the new headquarters for the two agencies by the end of the year.

The Lithuanian government states that Lithuania does not have realistic possibilities to attract the institutions due to a lack of specialists, facilities and direct flights. And this is after several years of screaming about the bright future of service centres and attracting investment in them. After the country created infrastructure adapted to it and the big cities constantly have high rise buildings going up, though no-one knows who will make use of them. For some reason all these strategies were suddenly binned. In 2015 the Invest in Lithuania report states “Service centres have become a common sight in Lithuania. Some centres, confident in our citizens’ high qualification have expanded their work in the country several times.” In the same year the real estate agency Cushman & Wakefield announced the Business Process Outsourcing Location Index 2015 which included Lithuania. In the overall index which evaluates attractiveness for the business segment, Lithuania took 11th place of 36 and exceeded countries known for their service centres such as Poland (16th), the UK (27th) and Ireland (36th).

Bank and ministry have no need

While we may boast of good numbers and achievements in ratings, the government thinks otherwise.

“We did not present any application because we believe that we will not fulfil the high requirements,” Prime Minister’s advisor for foreign affairs Deividas Matulionis told BNS. A beautiful Lithuanian act of self-punishment at the European scale.

“The European Medicines Agency requires at least 900 staff, large facilities, the sort you cannot find in Vilnius. Furthermore there are problems regarding accessibility, lack of direct flights and international schools for children,” the advisor stated. What he pointed out is curious and also why no-one attempted to attract these things – the Ministry of Healthcare and the Bank of Lithuania showed little interest in attracting institutions.

For comparison, countries smaller than any of the Baltics have ambitions to attract the institutions – Cyprus, Luxembourg or Malta. Lithuania hosts a single EU institution – the European Gender Equality Institute. In simpler terms, the Prime Minister’s advisor and responsible institutions have written off everything that we worked toward for a number of years, what received tens of millions in investment and displayed that we are simply an EU backwater, whose institutions are simply too lazy to write up at least a formal application to attempt to draw in thousands of well-paid workplaces to the country. If we calculate that these are staff with families, several thousand financially stable individuals who would raise consumption. This is how many emigrate from Lithuania per week. For comparison, the Bank of Lithuania, whose workload was significantly reduced since the introduction of the euro, has a staff of 640 with an average pay of 1664.95 euro according to rekvizitai.lt. However it would appear that a few staff who could have worked for the country could not be found.

A red mark

Another problem that occurred after the government representative’s statement is that corporations and agencies which monitor the market and plan business expansion are marking Lithuania with a red danger mark. One of the state representative’s words that the staff and facilities needed for the European Medicines Agency is telling. Arguments that we will not find the specialists and facilities are, simply put, weird. Just over the first half of this year, service centres in Vilnius made decisions to create over a thousand jobs. And all of these people are working. Our cities found what to offer them.

For interest sake, the Lithuanian branch of Barclays Group Operations Limited employs 1183 staff according to rekvizitai.lt. The average wage is 2277.42 euro and somehow they fit in the facilities and find the staff. Western Union Processing Lithuania staffs 1793 people, with an average net wage of 1358.67 euro. Intermedix Lietuva has a staff of 680 in Kaunas with an average wage of 791.98 euro. A number of banks and institutions have moved their centres here. They are not standing idle and do find specialists.

Speaking of tens of local and foreign service centres employing hundreds of people, none of them were left on the street. There are ever more massive rapidly rising office buildings.

A tasty morsel

Though there are numerous office buildings being built, failing to find a suitable one for the EU institutions, our real estate developers would have to simply wave a dozen year lease contract (paying client, clear conditions, no overnight bankruptcy) and they will construct everything in a few years or retool a current building to fit requirements, the transition wouldn’t be instantaneous anyway. Our developers have more than enough experience and there are ample affordably employable Ukrainian contractors.

Lacking direct flights? So what are we funding our airports for? We chaired the EU and coped with it. There is after all this word “negotiations.” in speaking with airlines one can negotiate many things. There is a small hitch though – someone in the government has to take this up and understand that governance is team work and that one has to work not only for their own department or their ministry. If you wish to attract a “branch” organisation to your country, it is not only Invest in Lithuania that has to work with it, but even the Bank of Lithuania. Simply in the name of the motherland and its people for the same wage paid by tax payers.

A videos instead of an application

While we do not bother with attracting new institutions, current service centres are departing. One of the largest insurance companies in the world American International Group (AIG) announced its decision to close its Vilnius service centre.

This time the government is not to blame. Corporations have their own plans and geopolitical puzzles. Perhaps departing to a more affordable country, perhaps downsizing business and the branch became redundant. Currently the AIG IT centre in Vilnius has a staff of 225 with an average wage of 1334 euro before tax.

However you look at it, this is no tragedy or end of the world. After this we simply have to learn a lesson – the world is dynamic, you cannot stop and think that if you received a good evaluation in a rating once, it will remain so forever. Everything can change quite quickly. It is necessary to fight too and nail for every company that could benefit the country. That is exactly what our neighbours are doing. “Showed no interest” does not appeal to voters or at least shouldn’t. However for now instead of applications we send international institutions videos of how modern we are – the cabinet chancellery announced a public procurement for a video where foreign audiences would be presented with Lithuania as a modern and creative country.

We already have “Lithuania is a brave country”, where numerous millions were wasted, now we will have “Lithuania is a modern country.” This will not change the point, nor write an application, no-one will travel around to negotiate for institution transfers. No new corporations will open an office here due to the video. However the words of the advisor to the head of cabinet that we cannot host an established international institution with several hundred employees (In the scale of London this is not even a decent average company) will be noted and included in reports. Next time it will be hard to negotiate with potential investors. They will have yet another argument to request greater support and discounts. Because practically no such object arrives without negotiating specific conditions. Or perhaps the issue is different – we do not really want those European institutions because the locals will feel discomfort.

“Foreign companies have greater pay than local ones. It is obvious that local companies have to compete with foreign ones and this raises wages and not just for the staff at foreign companies, but for all those employed,” states Swedbank chief economist in Lithuania Nerijus Mačiulis.

About Arunas Milasius 3 Articles
Verslo žurnalistika man – ir darbas, ir pomėgis. Nuolat stebėdamas verslo aplinką ir nekilnojamojo turto rinką matau, kaip keičiasi miestai, žmonių gyvenamoji aplinka ir kokią didelę įtaką tai daro visuomenės gyvenimui.
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