Lars Ohnemus: Lithuania needs efficient public administration system 09.12.2011, 12:08
"The government must leave no doubts with the investor over its promises," says Lars Ohnemus, head of Danish-based BPT Asset Management, the biggest real estate investor in the Baltics.
Ohnemus who is one of the 16 members of the Investment Advisory Council, a task force consisting of high-ranking representatives of Western companies that have invested in Lithuania whose goal is to advise the government on investment policies, recently gave the following interview to news2biz.
Q: Why did you agree to participate in the council?
I have been connected to Lithuania for the past 20 years, seeing it progressing to the development level that the country is at now. And I want to take part in its further development to the level of prosperity enjoyed in the Nordic countries. To achieve it, Lithuania needs policy changes and when the government came up with the council idea, I found it interesting to be part of it.
Q. Do you receive any financial rewards for your work?
None whatsoever. Everyone who is on the council has a keen interest in helping the government to improve the investment climate.
Q: What has been your experience on the council during these two years? Are you still motivated?
Yes, I still am. One reason is that we talk about specific issues. In the beginning, we identified 47 areas that need to be improved to make Lithuania a friendlier investment destination. The solid amount of feedback from the government and Seimas motivates us. There are a number of proposals authored by the council that eventually became laws and regulations, for instance, in the capital markets and private equity areas.
Q: The council's last meeting in Novem-ber was about zoning and detailed plan-ning. What did you discuss there?
These matters are important to all businesses that want to build something, and the area definitely calls for more progress. Today the process is a lengthy one, but even that is not most important. Investors operate on a certain time scale, so they must be sure that if the government says the zoning and detailed planning process will take 6 or 9 months, it must take no longer. The government must leave no doubts with the investor.
Property investors sometimes agree to provide advance funding for property development projects that we eventually will acquire. In such a case, investors want to be sure that the project will start and progress according to a set timetable. Our company BPT has been on the mar-ket for quite some time, so we have a big advantage of knowing the market in practice, not just in theory, to avoid having wrong expecta-tions.
Q: The council has a website, www.iac.lt, but the progress reports and meeting minutes are not available to the general public, only to members. How do you feel about this lack of transparency?
There are two sides to it. Transparency is important, and the coun-cil gives regular briefings about its events, it engages MPs, ministers and other officials. However, during the meetings we also discuss specific cases by individual investors who prefer their details not to be heard by the outsiders.
Q: Lithuania is at the bottom of the EU ranking by per-capita FDI stock, well below Estonia. So what is very wrong with Lithuania, or maybe very right with Estonia?
I do not want to pour more fuel into this Lithuania/Estonia debate but as I see it, Estonia implemented a major overhaul of its public administration system 10-12 years ago while Lithuania has not – here is a fundamental reason. Because investors who invest in Lithuania are impressed by the level of skills of their employees and keep reinvesting. So a major hurdle for incoming inves-tors is the public administration that each investor must deal with in a very early stage. Here Estonia definitely beats Lithuania.
Q: A cornerstone of Lithuania's FDI strategy is to become a service hub for Northern Europe by 2015. Do you think the direction is right?
We discussed it at great lengths with the government. I think it is a good direction and it has enjoyed good success. But manufacturing should deserve as much attention, and here a lot has been done too with the development of more free economic zones, fair amounts of funds being spent on research and development, and the reform of the higher education system.
Q: Let's move to your field of activity, real estate investment. Where are the Baltic markets now? How indicative is that the first investment by BPT's new vehicle Baltic Opportunity Fund was made in Estonia?
I believe the market has hit the bottom and is now rebounding, many market players are aware of that. But we will also have 2-3 de-manding years, no doubt about that. Demand for new space remains limited, banks remain reluctant to lend to anything but first-class property projects.
As for the Baltic Opportunity Fund, it is indeed indicative that the first deal was closed in Estonia. We see the demand for office and retail space clearly picking up in there. The upward movement in Lithuania is there but not as strong. In Latvia, the situation remains difficult.
Q: The new fund was conceived when the economic sentiment was much more positive from today's. How do the investors feel today?
The investors are more cautious given the current economic environment but they still believe in the long-term growth of the Baltic markets and want an alternative to equity investment. It is more difficult today but BPT's Baltic track record has demonstrated that the region is a good growth case.