VZCZCXYZ0000
OO RUEHWEB

DE RUEHVL #0063 0320839
ZNR UUUUU ZZH
O 010839Z FEB 10
FM AMEMBASSY VILNIUS
TO SECSTATE WASHDC IMMEDIATE 4110

UNCLAS VILNIUS 000063 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON XS LH
SUBJECT: KAUNAS: OPEN FOR BUSINESS 
 
 ¶1. Summary: Ambassador traveled to Kaunas January 27 and met 
with the Mayor, local business leaders from Kraft and 
UPS-operator Elinta, and representatives from women's issue 
NGOs (septel).  Kaunas is the second largest city in 
Lithuania and is billing itself as a pro-growth, high tech 
region in Eastern Europe.  It touts one of Lithuania's two 
Economic Free Zones, where both Lithuanian and foreign 
businesses can enjoy the same growth-friendly tax structure. 
End Summary. 
 
¶2. Kaunas Mayor Andrius Kupcinskas opened the day by 
welcoming the Ambassador and highlighting the economic 
opportunity available in Kaunas.  He noted that his city is 
in a unique spot because it sits at the crossroads of the 
planned "Via Balta" highway from Tallinn to Warsaw, and the 
main highway bisecting Lithuania, from Vilnius to Klaipeda 
(A2).  Kupcinskas also called attention to the proposed 
15,000 seat basketball arena scheduled for completion in 
early 2011.  He said he hopes to attract an NBA caliber team 
to participate in a tournament celebrating its opening some 
time next year. 
 
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KRAFT 
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¶3. After meeting with the Mayor, Ambassador toured the Kraft 
facility and sat down with its leadership to discuss the 
current investment climate in Lithuania.  Managing Director 
Gintaras Rimselis and Manager of Corporate and Government 
Affairs Rasa Bagdoniene described the GOL as having good 
intentions but said more attention must be paid to laws and 
regulations already on the books.  For instance, they pointed 
out that firms operating in Lithuania must remit payment to 
raw material suppliers within 30 days.  This is well meaning 
but dis-incentivizes suppliers to operate on credit and does 
not take into account business cycles affecting the ability 
to pay. 
 
¶4. Bagdoniene said she thinks the GOL needs to empower the 
"mid-level bureaucrats" to make the necessary pro-growth 
changes called for by the GOL leadership, something not 
currently happening.  She characterized decision-making by 
the government at the local level as therefore, slow.  Both 
Rimselis and Bagdoniene expressed appreciation for Embassy's 
role in promoting business growth and corporate ethics, and 
encouraged us to continue. 
 
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ELINTA/KAUNAS ECONOMIC FREE ZONE 
--------------------------------- 
 
¶5. Ambassador also met with jack-of-all-trades entrepreneur 
Vladas Lasas and his team at Elinta, an umbrella company 
established in 1991 which serves as the UPS operator for 
Lithuania, an electronics system development company, and a 
marketing/developer for Lithuanian based e-commerce.  Lasas 
says he deftly uses his UPS business to deliver other Elinta 
developed products to European and world wide customers. 
 
¶6. Elinta is also well positioned for growth because it is 
situated in the Kaunas Free Economic Zone, a 500 hectare plot 
of land outside Kaunas, very close to the crossroads of the 
proposed Via Balta and A2 (see para 2).  There are currently 
six companies operating in this zone, though none are 
American.  These companies enjoy: 
-- Six year exemption from corporate income tax and a 50 
percent reduction during the following 10 years, if the 
company invests more than USD 1.2 million; 
-- Exemption from the real estate tax; and 
-- A 50 percent discount on land leases. 
 
¶7. Elinta also serves as the headquarters of the Kaunas Free 
Economic Zone and Lasas emphasized that he is actively 
looking for U.S. investors for the Zone. 
DERSE