BUSINESS CLIMATE SURVEY 2012 THE BALTIC STATES

Transcription

1 BUSINESS CLIMATE SURVEY 2012 THE BALTIC STATES Stockholm, January 2013 BUSINESS SWEDEN

2 This document is not complete without oral comments of the research team from Business Sweden. Any copying or commenting is prohibited without a written permission from Business Sweden. BUSINESS SWEDEN

3 TABLE OF CONTENTS Introduction Executive summary Respondents profile Investment environment, regulations and profitability Legislation, taxation and payments Establishment, infrastructure and human capital In conclusion BUSINESS SWEDEN 3

4 INTRODUCTION The Business Climate Survey 2012 was initiated and financed by the Embassies of Sweden in Vilnius, Riga, Tallinn and Business Sweden. The study aims to present the perception of the business climate in the Baltic States among companies with Swedish capital, identify areas for improvement and outline future expectations. The survey was conducted by using closed-ended questions, yet the majority of questions allowed respondents to write comments and recommendations. The study was finalized by carrying out in-depth interviews with carefully selected respondents. The results are based on answers of 147 executives, who represent 13 percent of the possible respondents pool in the Baltic States. There are 130 active Swedish companies currently in Lithuania, about 300 in Latvia and about 700 in Estonia. The study was conducted by Business Sweden during April December Introduction BUSINESS SWEDEN 4

5 HOW TO READ THE DOCUMENT Slide structure: Indicator of expectations 1. Conclusion 2. Question as asked in the questionnaire 3. Situation is expected to improve 4. Areas of change or focus 5. Additional conclusions 6. Part of the document 6 Introduction BUSINESS SWEDEN 5

6 TABLE OF CONTENTS Introduction Executive summary Respondents profile Investment environment, regulations and profitability Legislation, taxation and payments Establishment, infrastructure and human capital In conclusion BUSINESS SWEDEN 6

7 BALTIC STATES IS A GOOD PLACE TO DO BUSINESS In general, Baltic States is a good place to do business. Swedish capital companies find qualified labor force, relatively low cost levels, good tax system and strategic location of the region as some of the most attractive aspects for business in the Baltics. Their motivation to do business in the three countries is strengthened by well-balanced salary levels, as well as positive expectations for development of the economy at large. Good quality of life, profitability of local market, easiness to start a company, excellent ICT infrastructure these are some of the other aspects which make Lithuania, Latvia and Estonia attractive for business. Attractiveness is confirmed by investments respondents planned to invest 98 MEUR in 2012 and investments are expected double during upcoming 2 3 years. The study also reveals that Nordic companies are very well perceived in all three Baltic countries. Executive summary BUSINESS SWEDEN 7

8 HOWEVER IMPROVEMENTS IN SOME AREAS ARE CRUCIAL Among many similarities between the three Baltic countries, some differences occurred in areas indicated for improvement. In Lithuania, payment morale, time consuming procedures and accessibility by air are of the most concern and need to be addressed without delay. In Latvia, more efficient enforcement of fair competition practices, improvement of roads and enhancing transparency were named as key areas for refinement of business climate. Further development of railroads are of high importance in Estonia. Swedish companies highlighted a need of more initiative and creative labor force in all three Baltic countries. Corruption is assumed to be a big issue, however very few companies have been exposed to corruption directly, the study reveals. Major improvements in this area have occurred in recent years. Executive summary BUSINESS SWEDEN 8

9 RESULTS Criteria Quality of life Good place to do business Profitability of local market Easiness of finding business partner Credibility of media Corruption Favourability of legislation Following the law Expected to improve Expected to improve Expected to increase Expected to improve Expectations unknown Expectations unknown Expected to improve Expected to improve Executive summary BUSINESS SWEDEN 9

10 RESULTS Criteria Tax system Dispute settling system Following of payment terms Easiness to start a company Salary and productivity ratio Availability of competent staff Mobile telephony and ICT Expected to improve Expected to improve Expected to improve Expectations unknown Expectations unknown Expectations unknown Expectations unknown Executive summary BUSINESS SWEDEN 10

11 RESULTS Criteria Roads Sea routes Railway Accessibility by air Access to capital Perception about Nordic companies Executive summary BUSINESS SWEDEN 11

12 TABLE OF CONTENTS Introduction Executive summary Respondents profile Investment environment, regulations and profitability Legislation, taxation and payments Establishment, infrastructure and human capital In conclusion BUSINESS SWEDEN 12

13 RESPONDENTS ARE EXPERIENCED TOP EXECUTIVES Respondents position, % Year of company s establishment, % Owner Member of board Partner 33 Managing director 28 Sales manager Marketing manager Other 46 Before Respondents profile BUSINESS SWEDEN 13

14 BOTH NATIVE CITIZENS AND SWEDISH NATIONALS, WORKING IN PRIVATE ENTERPRISES 5 Company type, % 11 Respondents nationality, % 5 47 Public Private Other 48 Native residents Swedish Other 84 Respondents profile BUSINESS SWEDEN 14

15 WITH RELATIVELY HIGH MONTHLY INCOME 60 % Average monthly income Up to 1,5 thousand EUR 1,5 3 thousand EUR 3 7 thousand EUR 7 14 thousand EUR NB: data for Latvia is not available Respondents profile BUSINESS SWEDEN 15

16 DIFFERENT AGES, PREDOMINANTLY MALE. Respondents age, % Respondents gender, % Female Male Respondents profile BUSINESS SWEDEN 16

17 RESPONDENTS POOL IS WELL BALANCED. REPRESENTING SMALL, MEDIUM AND LARGE COMPANIES Annual turnover, % Up to 0,5 MEUR 0,5-1 MEUR 1-3 MEUR 3-10 MEUR More than 10 MEUR 19 Respondents profile BUSINESS SWEDEN 17

18 WITH COMMON SERVICE FOCUS AND IN VERSATILE INDUSTRIES Industry, % Area of operations, % Production Consulting 16 9 ICT Finance Logistics Agriculture, forestry Metal industry Building materials Other 20 Service company Production company Trade company Other Respondents profile BUSINESS SWEDEN 18

19 FOCUSED BOTH ON LOCAL MARKET AND EXPORTS. What is the focus of your Baltic business operations? Sales to the Baltic market Transit / exports Swedish companies in Estonia are much more exportoriented Respondents profile BUSINESS SWEDEN 19

20 TABLE OF CONTENTS Introduction Executive summary Respondents profile Investment environment, regulations and profitability Legislation, taxation and payments Establishment, infrastructure and human capital In conclusion BUSINESS SWEDEN 20

21 THE QUALITY OF LIFE IS GOOD AND FURTHER IMPROVING Please evaluate the quality of life in the Baltic countries 70 % Very bad Poor Not good or bad Good The best Investment environment, regulations and profitability BUSINESS SWEDEN 21

22 IT IS A GOOD PLACE TO DO BUSINESS Generally, is Lithuania, Latvia and Estonia a good place to do business? 80 % We have no problems in running business smoothly with the help of local accountant Undisclosed respondent Very bad Poor Not good or bad Good The best Investment environment, regulations and profitability BUSINESS SWEDEN 22

23 LOCAL MARKET IS LUCRATIVE, THE FUTURE EXPECTATIONS LOOK EVEN BETTER Your company in Lithuania, Latvia or Estonia generates: % [ ] The Baltic Sea region is the fastest growing region in Europe. Undisclosed respondent Big loss Some loss Breaks even Some profit High profit Investment environment, regulations and profitability BUSINESS SWEDEN 23

24 IT IS NOT DIFFICULT TO FIND RELIABLE BUSINESS PARTNERS, HOWEVER THERE ARE SOME LIMITATIONS How easy or difficult is it to find a reliable business partner in this market? % The situation in finding a reliable business partner became drastically better around 2005, but the risk of being tricked still exists Undisclosed respondents Loyalty is difficult to find in former Eastern Block countries. Plus, language barrier can be an issue Very difficult Difficult Not easy or difficult Easy Very easy Investment environment, regulations and profitability BUSINESS SWEDEN 24

25 MORE INVESTMENTS ARE PLANNED. Are you planning investments? % 61% In 2012 biggest investments were planned by companies operating in production, finance, agriculture / forestry, textile and ICT industries. Yes No Within the next 2 3 years most investments are planned by production, agriculture / forestry, ICT and consulting companies. 39% 55% Investment environment, regulations and profitability BUSINESS SWEDEN 25

26 IN FACT, INVESTMENTS ARE EXPECTED TO DOUBLE. Forecasted accumulated investments, MEUR MEUR MEUR Lithuania Latvia Estonia 43 Investment environment, regulations and profitability BUSINESS SWEDEN 26

27 TRADITIONAL MEDIA FUNCTIONS AS COMMUNICATION PLATFORM Do you perceive the Baltic media to be a functioning platform for public communication about your company? % To very little extent To some extent To high extent To very high extent Investment environment, regulations and profitability BUSINESS SWEDEN 27

28 HOWEVER LACKS CREDIBILITY. Do you perceive Baltic media as a reliable source of information? % At times, competitors used owned media to gain competitive advantage. Undisclosed respondent in Lithuania Not reliable at all To very little extent To some extent To high extent To very high extent Investment environment, regulations and profitability BUSINESS SWEDEN 28

29 CORRUPTION PERCEPTION IS RATHER BIG IN ALL THREE COUNTRIES Do you assume that your competitors won a tender / contract because of corruption mechanisms involved? 21% 46% 42% When a company loses a tender, it has to explain somehow, why it lost and corruption usually becomes the best explanation. 58% 54% 79% Yes No The main subject for getting a business or a new contract is whether you pay kick back to decision makers or not. Ten years ago there was much more [corruption], so the situation has improved. Undisclosed respondents Investment environment, regulations and profitability BUSINESS SWEDEN 29

30 TABLE OF CONTENTS Introduction Executive summary Respondents profile Investment environment, regulations and profitability Legislation, taxation and payments Establishment, infrastructure and human capital In conclusion BUSINESS SWEDEN 30

31 REGULATORY FRAMEWORK IS QUITE FAVORABLE... Do you think that the country has a legislation that is favorable for your operations? % Legislation is unfavorable for our operations To very little extent To some extent To high extent To very high extent Legislation, taxation and payments BUSINESS SWEDEN 31

32 BUT LAWS ARE FOLLOWED ONLY TO SOME EXTENT. HOWEVER, IMPROVEMENTS ARE EXPECTED. To what extent the law is followed in the Baltic countries? 50 % Not followed at all To very little extent To some extent To high extent To very high extent Legislation, taxation and payments BUSINESS SWEDEN 32

33 TAXATION SYSTEM IS REASONABLE AND EXPECTED TO IMPROVE Taxation system in the Baltic countries is: 50 % I find it reasonable. But simplification is needed everywhere Undisclosed respondents In Estonia, there is a 0% company tax and 21% dividend tax with no limit on dividends. This is hard to beat Bad Poor Not good or bad Good Best Legislation, taxation and payments BUSINESS SWEDEN 33

34 DISPUTE SETTLING MECHANISMS ARE NOT TRUSTED TO FULL EXTENT Do you trust the dispute settling systems in the Baltic countries? 44% Results rather significantly differ in Estonia, where respondents express high trust in dispute settling system. 27% 29% To little extent or no trust at all To some extent To high or very high extent Lithuania Latvia Estonia Legislation, taxation and payments BUSINESS SWEDEN 34

35 PAYMENT TERMS ARE WELL FOLLOWED How are payment terms followed in Lithuania, Latvia and Estonia? By private companies, % By municipal and governmental bodies, % Lithuania Latvia 32 Estonia Not followed at all To little extent To some extent To high extent To very high extent Not followed at all To little extent To some extent To high extent To very high extent Situation differs in Lithuania, where payment terms are often not followed not only by private companies, but by municipal and governmental bodies as well. Legislation, taxation and payments BUSINESS SWEDEN 35

36 Payment culture in Lithuania is the worst in the Baltics. Delayed payments here became some kind of tradition. You have to be strict when signing contracts with people and underline the conditions under which you work. If people don t follow the contract take actions. Undisclosed respondents BUSINESS SWEDEN 36

37 TABLE OF CONTENTS Introduction Executive summary Respondents profile Investment environment, regulations and profitability Legislation, taxation and payments Establishment, infrastructure and human capital In conclusion BUSINESS SWEDEN 37

38 IT IS EASY TO ESTABLISH A COMPANY Establishment of your company (e.g. forming of the company, registration, etc.) in the Baltics was: NOT EASY or DIFFICULT Establishment, infrastructure and human capital BUSINESS SWEDEN 38

39 GOOD SALARY AND PRODUCTIVITY RATIO In your opinion, how are salaries compared to the productivity in the Baltics? 60 We have lower salary levels compared to the Nordic countries, and we are getting better results % Undisclosed respondent % Workforce structural changes in the Baltics are on the way at the moment % 3% 2% 0 Very low salary level Low salary level Well-balanced salary level High salary level Very high salary level Establishment, infrastructure and human capital BUSINESS SWEDEN 39

40 50 40 GOOD AVAILABILITY OF COMPETENT STAFF IN PRODUCTION, WORSE IN MANAGEMENT, SALES AND BUSINESS DEVELOPMENT In your opinion, how is the availability of competent local staff in regard to management, sales, development, production, job positions: % Highly qualified people with working experience are limited in the market right now. 30 Undisclosed respondent Available Less available Production Management Sales Business development Other Establishment, infrastructure and human capital BUSINESS SWEDEN 40

41 LOTS OF HARD WORK BUT LACK OF INITIATIVE Is the Baltic staff: hardworking, easy to train, loyal, creative, initiative? Percentage of answers Yes Creativeness and initiative are the most appreciated [but] missing aspects in regards of local staff Undisclosed respondent Hardworking Easy to train Loyal Creative Initiative Establishment, infrastructure and human capital BUSINESS SWEDEN 42

42 INTERNET AND MOBILE TELEPHONY IS EXCELLENT In your opinion, how does the infrastructure work in the Baltic countries in regard to mobile telephony and Internet? % Mobile telephony Internet Swedes who have never been to Estonia, tend to think that it's a third world country. Yes, it is poor, but in some ways it functions better and has better services and facilities than Sweden. Undisclosed respondent in Estonia Very well Well Not well or bad Establishment, infrastructure and human capital BUSINESS SWEDEN 42

43 BUT ALL THREE COUNTRIES FACE DIFFERENT INFRASTRUCTURAL ISSUES. In your opinion, how does the infrastructure work in the Baltic countries in regard to aviation, railroads, sea routes, roads? 40 % Estonia Latvia Lithuania -30 Aviation Railroads Sea routes Roads -27 Establishment, infrastructure and human capital BUSINESS SWEDEN 43

44 ACCESS TO CAPITAL IS RATHER DIFFICULT AND COMPANIES ARE DELEVERAGING Access to the capital / funds in the Baltic countries is: A number of respondents indicated that they did not try to access outside capital at all. NOT EASY or DIFFICULT Establishment, infrastructure and human capital BUSINESS SWEDEN 44

45 COMPETITION IS STRONG In your opinion, the competition in the Baltic market is: We have to be creative and effective for keeping our position in the market. Undisclosed respondent NOT HIGH or LOW Establishment, infrastructure and human capital BUSINESS SWEDEN 45

46 NORDIC COMPANIES ARE VERY WELL PERCEIVED How are you perceived in the Baltics as a representative of Nordic company? As a representative of Sweden, I feel friendly welcome. Undisclosed respondent in Estonia NOT WELL or BADLY Establishment, infrastructure and human capital BUSINESS SWEDEN 46

47 TABLE OF CONTENTS Introduction Executive summary Respondents profile Investment environment, regulations and profitability Legislation, taxation and payments Establishment, infrastructure and human capital In conclusion BUSINESS SWEDEN 47

48 Baltic countries will remain an exceptional area within the Eastern Europe, with a good quality of life and a good business environment. Given favorable regulations, reasonable tax system, educated and skillful workforce and well developed infrastructure, this region will continue to be an attractive place for doing business. Lithuania, Latvia and Estonia will continue to be a heavily exportdriven, profitable market, where Swedish companies are well perceived, ready to invest and expand their activities. BUSINESS SWEDEN 48

49 WE MAKE SWEDEN MORE ATTRACTIVE TO DO BUSINESS WITH Tallinn Riga Vilnius Narva mnt Tallinn Estonia Kr. Barona str. 13/15 LV-1011 Riga Latvia A. Gostauto str. 40b (floor XII) LT Vilnius Lithuania estland@businesssweden.se lettland@businesssweden.se litauen@businesssweden.se BUSINESS SWEDEN 49