Destinations » 

Eastern promise

Published: 01/05/2006 - Filed under: Archive » 2006 » May 2006 » Destinations » Features » Destinations » Europe »

• Print
• Send

Kaunas is Lithuania's second and usually forgotten city. With a population of 400,000 (Lithuania's is around 3.6 million) it has a history of living in the shadows of flashy Vilnius, the country's fast-moving capital. Vilnius has attracted a lot of recent interest from foreign investors, and a World Bank report published last September identified Lithuania as having one of the most attractive investment climates in the Baltic States. Lithuania's economy is about the size of Estonia's and Latvia's combined and this success has come largely on the back of Vilnius' advances.

These advances have included the introduction of large shopping malls, a property boom, growth in financial services, booming tourism at its cheap restaurants and bars (and often racy nightclubs) thanks to new low-fare flights, a fast-growing middle-class, and the establishment of key regional offices for accountancy firms such as Pricewaterhouse Coopers, Deloitte and Ernst & Young. Feeding on this explosion in activity, UK exports to Lithuania have increased steadily over recent years, since the country's split from the Soviet Union in 1990, with £119 million of exports from January to September last year, up nine per cent on 2004.

Now many believe it is Kaunas' time to shine. The introduction of daily non-stop Ryanair flights last autumn from Stansted, and Wizz Air's decision to start three direct flights a week from Luton, might be seen as a sign that it is time to sit up and take a look at the city. Property prices are said to have trebled, from a low base, over the past two years. And local economic output has grown by more than a third since 1999, mainly on the back of its textile industry, food and beverages, and electronics, chemical and pharmaceutical factories. The city is better located than Vilnius, in the centre of the country on the Via Baltica, the main road from Helsinki to Warsaw, and it has the biggest runway in the country, attracting cargo planes covering the Baltic region.

Low-cost flights range from "taxes only" rates of around £30 to about £130, and rooms at four-star business-class hotels start at £60-£80 a night (often negotiable) including the Best Western Santaka, the Daniela and the Kaunas, which are all centrally located. Many British business people are taking cheap reconnaissance trips to have a look at what the city has to offer in terms of property investment, imports and setting up production plants. Lithuania joined the European Union in May 2004, experiencing a burst of growth in the immediate months that followed. Many expect a similar scenario when the country joins the euro, as is expected, next year.

James McGeever, European Union project manager on the city council, believes that Kaunas' cautious approach to growth up to now is reflected in the make-up of the city. "About 80-90 per cent of the people in Kaunas are Lithuanian, whereas in Vilnius there is a more international population – Polish, Russians, Ukrainians – while about half are Lithuanian. So [Kaunas] is more traditionally minded. During Soviet times it was a 'closed city', which meant it was difficult for outsiders to visit. So it has tended to have a kind of British island mentality."

That is likely to change, McGeever says, now that more foreigners are visiting on Ryanair and Wizz Air – yet another sign of the huge economic and social impact that low-fare flights are having in cities and towns across Eastern and Central Europe. Tourism, he believes, could act as a spur for other changes in the city, although officials at city hall are still deciding on a strategy. "In Vilnius you have all the limos taking people to the gents' clubs," says McGeever. "Do we compete with that or do we go for cultural tourism? Do we accept stag weekenders with open arms or do we reject them and risk losing out on the cash coming from all those pissed-up Brits on tour?" The jury is still out.

Whoever comes – cultural tourists or otherwise – the interest will only help to bolster the already strong retail centre of Kaunas, Laisves Aleja. This pedestrianised street runs in a straight line for a kilometre and a half in the New Town, before becoming Vilniaus Gatve, which follows on to the Old Town with its Gothic churches, Renaissance town houses and Hanseatic League halls. Western brands are already apparent: Adidas, Vision Express, Sisley and L'Occitane en Provence, along with lots of boutique fashion outlets, stylish cafés and restaurants. In the summer, chairs and tables spill out from cafés along Laisves Aleja, which some describe as "the longest catwalk in the world" due to local youngsters parading up and down it. Locals tend to be both elegant and very tall – perhaps why the local basketball team, Zalgiris Kaunas, is the current champion of the national sport.

The city has other cultural offerings, notably a gallery devoted to the work of Mikalojus Ciurlionis (1875-1911), who also composed the first Lithuanian symphony. The gallery is in the Old Town at the merging of the Neris and Nemunas rivers. One of the more upmarket residential areas is on a hill above the Ciurlionis Gallery, close to the imposing, art deco-ish Christ's Resurrection Church and the primary school where Lithuania's president, Valdas Adamkus, was taught. Another must-visit sight is the Ninth Fort, a short taxi ride from the city centre, where more than 50,000 people were killed by the Nazis, including at least 29,000 Jews. There is a museum with moving tributes and a large memorial sculpture.

British interest in the region is growing fast, partly on the back of low-fare flights, but also due to low wage costs. Geoff Bersey, general director of Timber Frame Technology, which produces high grade, certified, pressure-treated wood from forests in Lithuania, Belarus and Russia, says: "Vilnius has reached a level where you can get a good deal, but it's easier to get a good deal here. You can get dream deals here, you've just got to know where to look."

Bersey employs 28 people and adds that business is "not for the faint-hearted" and that it is essential to get good legal advice, which can be offered through the British Chamber of Commerce. If all goes to plan, business can also pay big dividends. Bersey used to own a farm in Cornwall, and bought a farm outside Kaunas two years ago for £18,000. It is now worth £65,000. McGeever, also British (married to a local), said that the value of his apartment had trebled in the past 18 months.

Chris Butler, president of the British Chamber of Commerce in Lithuania and partner in charge of PricewaterhouseCoopers' Vilnius office, says: "Kaunas has a lot going for it. It was ignored when Lithuania gained independence in the early 1990s. It's an industrial city, but somehow it got overlooked – maybe because Vilnius was doing so well. Personally, I think Kaunas' time will come. It's much better located than Vilnius, which is stuck out in the south-east corner. It's just a matter of time."

Kaunas has a university with more than 30,000 students, who help to give its bars and clubs a lively feel. And the low-cost, highly-skilled workers have proved a boon for Chris Weiniger's business, Diamond Recruitment Baltic. He finds work placements for nurses, IT systems analysts in Northern Ireland and people with engineering skills. "We're not looking for mushroom pickers," he says. "There is a skilled workforce here in need of jobs. They can come to the west and learn how businesses are run there [and] then they can bring back that experience." Weiniger also works as a consultant for British companies hoping to source local textile manufacturers.

At my hotel, the Best Western Santakos – which has attracted the German and Israeli national football teams as well as the England under-19 team, and (I was somewhat surprised to learn) the Dalai Lama – I met Asif Hussain, owner of Mirfield Auto Spares, based in Mirfield, West Yorkshire. He is visiting to "do a reccie" to see what opportunities there are for buying spare parts, and also to buy vans to be sold in the UK, possibly in part-exchange for second-hand vans from Britain. He flew in on Air Baltic to Vilnius, which is about 50 miles east of Kaunas, and has conducted a tour of the country.

He says: "I expected it to be a rough country with mafia bosses walking around. But it's not been like that at all. When Lithuania joins the euro I can really see things taking off here. There are lots and lots of opportunities... all over the place."

ADD A COMMENT »