Lithuania no longer a low labour cost country, say investors

“It was indicated as the main competitive advantage of Lithuania by only 48% of respondents [in 2015], while two years ago the number was as high as 74%. Obviously, in order to maintain or increase the amount of FDI we will have to rethink our strategy and focus not on the low cost of labour, but rather on qualification and the talent pool. By the way, 45% of investors believe that the talent pool is Lithuania’s main competitive advantage” said Vytautas Ulozas, Investors’ Forum analyst of the findings of the survey.

The lack of qualified labour is a challenge already today with 57% of investors admitting they currently face the problem, said Ulozas.

“Comprehensive education system reform, improved immigration policies, and a more flexible labour regulations would improve the situation. It takes some years to develop specialists of sufficient qualification, but we need them already today. “Barclays” technology centre alone needs a few hundred IT specialists. Lithuanian companies need them, too – innovative local business struggles trying to find professionals able to program and operate complex smart devices” he said.

The importance of education reform was stressed by “Investors’ Forum” analyst.

The Labour Code was also a serious barrier for investors. Half of the surveyed investors said they occasionally faced problems related to the outdated Labour Code, while almost 47% come across such problems constantly or often.

“The current Labour Code does not meet the demands of the market and has been constantly criticized both by investors and international organizations. Lithuania managed to reach a 13th position in the Economic Freedom Index, however, the labour regulations once again received very poor ratings,” said Rolandas Valiūnas, the chairman of “Investors’ Forum” board.

“We are glad the Government keeps supporting the reform and Parliamentary readings are coming to an end. Hopefully, political leaders will manage to avoid populism and agree on strategic reforms since the failure to adopt the new social model might strongly undermine investors’ confidence in our economy,” he said.

Participants of the ICIL survey unanimously stressed that if the Lithuanian Government was to achieve only one single goal in 2016, it must be successful Labour Code reform. However, due to the upcoming elections of Seimas investors are concerned about the will of the ruling coalition to sustain a strong strategic line: 29% of respondents believe that political stability will diminish in the near future.

Another cause of investors’ concern is the level of business transparency. 79% of respondents expressed a belief it is an area demanding special attention and improvement. They said current efforts to increase transparency are not satisfactory.

During the ICIL research “Investors’ Forum” surveyed top–level managers of 62 foreign capital companies operating in Lithuania. This was the seventh ICIL survey.