Mogilev FEZ is now home to one of Lithuania’s furniture industry leaders: Vakarų Medienos Grupė. The enterprise is working with SBA Mebelain to launch production of chipboard, wood veneer furniture and plywood, with over 100m Euros invested over a two-year period, making it one of the biggest Lithuanian investors in Belarus to date. Over 1,000 jobs have been created, with exports under the globally known brand name of IKEA.In July, the President of Belarus visited the new sites and their workshops, noting that Belarus always welcomes decent investors and is ready to support them, since they make a solid contribution to the national economy, while ensuring the arrival of new technologies and global experience.
From scratch
Not long ago, the 21 hectares now occupied by VMG Industry JSC at the Mogilev FEZ were wasteland. These days, neat, modern buildings, tarmac roads and green lanes are visible, creating comfortable and spacious conditions for workers.
Viktoras Adomaitis, the General Director of Vakarų Medienos Grupė, remembers every detail of his arrival, noting, “We began thinking of investing in Belarus in 2007 but such a major project required much preliminary work. In 2010, we signed an investment agreement and, in June 2011, laid a capsule in the foundations of the site. Naturally, it was a challenge to develop the 60,000sq.m our industrial facilities occupy and we had to assemble the necessary equipment from scratch. However, we enjoyed good support from local authorities and all our problems were settled in the shortest possible time. I’m convinced that any country which creates such favourable conditions for investors must have a great future.”
Two years later, the new plant dispatched its first goods (under contract) to IKEA; among them were furniture, chipboard, and details and frames for bed bases. Mr. Adomaitis proudly tells us that his methods are unique in their use of low-grade raw materials, while ensuring efficiency. With its huge forests, Belarus is abundant in timber. “Even firewood is used,” admits the company’s Director, Giedrius Kaukas, speaking of the advanced modern technologies.
Of course, the use of high-tech equipment requires well-qualified staff; it’s sometimes a true challenge to find such personnel, as unemployment stands at just 0.5 percent in the Mogilev Region. Accordingly, the company trains its own staff, while providing uniforms and higher-than-average salaries. Next year, free meals are being introduced for staff. At present, 730 people are employed at VMG Industry, with a further 250 soon to be hired, so that the company can reach full operating capacity by 2015.
Single aim connection
It takes just 10 minutes to drive to the other wood-processing factory using Lithuanian capital: Mebelain JSC (part of VMG). It buys hardboard panels to make its wood veneer furniture, supplying shelves, tables and chests of drawers to Swedish IKEA and to the Russian market. The factory is its third investment project in Eastern Europe and is probably the greatest success, with 300 employees, 100 percent exports and extensive sales markets.
Egidijus Valentinavičius, the Deputy President at Lithuania’s SBA Concern, is pleased with the project realisation in Belarus, also appreciating the partnership of his countrymen. “In co-operating on the project, we created a system embracing all aspects of the production process: from initial processing of raw materials to final products. This is a wonderful example of how a joint activity can help Lithuanian businesses to strengthen their position on export markets, while enhancing their competitive advantages. Everything is available in Belarus: raw materials, as well as talented and smart people. We planned to come to the country long ago, launching a 16m Euro project. We’re going to move further — investing more and launching new projects,” he asserts.
Sigitas Paulauskas — the Chairman of Vakarų Medienos Grupė Board — views the project as unique, saying, “For the first time, we’ve united numerous international entrepreneurial-financial structures and institutions — jointly building one of Europe’s largest complexes of wood processing and furniture production. This is a new business page in the economic history of Lithuania and Belarus.”
Money prefers comfortable venues
Lithuania and Belarus are neighbours, so business partnerships are logical. These have been gaining momentum of late, according to Lithuania’s Ministry of Foreign Affairs: direct investments into Belarus reached almost 276m Litas last year.
Of course, more is always possible, asserts the Ambassador Extraordinary and Plenipotentiary of Lithuania to Belarus, H.E. Mr. Evaldas Ignatavicius. On the Presidential delegation visiting the facilities, he noted that Belarus and Lithuania are currently realising 15 investment projects — worth $650m. Lithuanian businessmen are showing increased interest in establishing production enterprises in Belarus, with the focus on regional collaboration. He explains, “Lithuanian investments are coming to the Grodno and Gomel regions, with businessmen interested in the advantages of the Customs Union and prospects for further exports to Russia, Kazakhstan and the Middle East. Belarus views EU technologies and investments as attractive, so our interests coincide in this respect. At present, Lithuania chairs the EU, so new co-operative spheres should open up to us.”
Investors need simple and clear laws, mutual understanding with local authorities and a stable economic and political situation in the country. While enjoying all these, Lithuanian businessmen within the ‘furniture cluster’ near Mogilev are offered a privileged regime in the free economic zone. Investors in small Belarusian towns and rural settlements enjoy similar privileges to FEZ residents, thanks to Presidential decree #6 (signed in 2012). Free Economic Zones are not the only advantageous venues in the Republic for foreign injections.
In the mid-1990s, Belarus was hardly recognized by international ‘doing business’ ratings; change has been drastic however, with Belarus now ranked 58th (among 158 states). Last year, Belarus was also among the top hundred nations for having made progress in this sphere. The top thirty is now our goal, with such facilities as those established in the Mogilev FEZ helping Belarus achieve this.
By Lilia Khlystun
