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LITHUANIA


 

 
Key Economic Data 
 
  2002 2001 2000 Ranking(2002)
GDP
Millions of US $ 13,796 12,000 11,300 78
         
GNI per capita
 US $ 3,660 3,350 3,080 83
Ranking is given out of 208 nations - (data from the World Bank)

Books on Lithuania

REPUBLICAN REFERENCE

Area (sq.km)
65,200 

Population 
3,592,561 

Principal 
ethnic groups 
Lithuanians 81.3%
Russians 8.4%
Poles 7.0%

Capital
Vilnius 

Currency 
Litas

President
Valdas Adamkus

  

Background:
Independent between the two World Wars, Lithuania was annexed by the USSR in 1940. On 11 March 1990, Lithuania became the first of the Soviet republics to declare its independence, but this proclamation was not generally recognized until September of 1991 (following the abortive coup in Moscow). The last Russian troops withdrew in 1993. Lithuania subsequently has restructured its economy for eventual integration into Western European institutions. 

Update No: 277 - (01/02/04)

The Lithuanian Watergate
The Lithuanian Republic is in the throes of a political scandal, deemed the Lithuanian Watergate. It concerns the President, Rolandas Paksas. Things looked bad enough for him in November last. They now look much worse in the light of events in December.
Following a damaging report by the security forces, compiled above all by the secret service, the Lithuanian Department of State Security, the press mounted a campaign in the autumn that his office has had extensive links with organised crime, notably Russian ones. Four of the counsellors in his office had to resign.
Now he is under strong pressure to resign himself. Indeed, impeachment proceedings are already under way in parliament. A parliamentary commission prepared a report for December 1st, which confirmed various devastating allegations, at least sufficiently to justify him stepping down. If he does not, the impeachment process will gather momentum.
The investigating committee reported that the 47-year-old president was responsible for leaks of sensitive information and that he had allowed Almax, a public relations firm suspected of links to Russian intelligence, to influence his decisions. An inappropriate source, Yuri Burisov, allegedly helped to finance his presidential campaign.

Secret service allegations
The secret service made known that it has tapes of conversations between Borisov and Lithuanian Presidential National Security Advisor Remigiyus Achas. In addition, the secret service has tapes of Borisov conversing in Moscow with figures who have for a long time been suspected of connections with international criminals. These figures include Ansor Aksentyev, who is better known by his previous last name of Kikalishvili. He was the vice president of the 21st Century Association.
Aksentyev's daughter's godmother is Russian pop star Alla Pugacheva and her godfather is hockey player Pavel Bure. She resides in Lithuania. Aksentyev was recently prohibited from entering Lithuania. 
Deputy head of Lithuania's state security service Arvidas Potsyus recently said that Aksentyev's presence in Lithuania was a threat not only to Lithuania "but also a problem for the EU." In regard to Aksentyev and his ties to criminal organisations in Lithuania, Laurinkus said "[the organisations] are trying to participate in the privatization of strategic objects." Paksas has distanced himself from the accusations calling them "provocations." Achas, who was at the centre of the scandal, has been temporarily relieved of his duties. 
The scandal should get hotter in the next weeks with an urgent session of the Lithuanian parliament scheduled, investigation by the Lithuanian Prosecutor General commencing, and the creation of a special parliamentary commission, which all plan to delve further into the affair. This would indeed seem like a political provocation if the accusations came from some newspaper and not the Lithuanian Department of State Security. Inevitably, the department must possess serious facts if it has decided to undergo such a large-scale political scandal. 
The charges concern events that stretch back to when he was a highly popular mayor of Vilnius, the capital, prior to his becoming prime minister, let alone president.
The affair threatens to tarnish the reputation of Lithuania itself in the EU, just when Lithuania is about to enter the union. Premier Algirdas Brazauskas, who earlier backed the president, has now called for him to go. He has now indicated that legal procedures have to be respected and should continue in order to clear the matter up once and for all. The strong hint is that Paksas should do the decent thing and resign, with the prospect of being re-instated if he successfully clears his name.

The EU beckons
Lithuania is due to enter the EU next year. But there is a problem, which the current political scandal is highlighting.. Brussels and the West generally are deeply perturbed at the prospect of bringing into the European fold the Baltic states, because of the entrenched positions of organised crime in them with strong connections to the Russian mafia. These are likely to be 'mediated' by the local Russians in their midst. Lithuania actually has fewer Russians as a proportion of its population than the other Baltic States, some 11% compared to Latvia's 34% and Estonia's 20%. But this is still 400,000 or so in the largest of these states, with a population of 3.8 million. And Lithuania is geographically the southernmost of them, indeed actually claims to be the geographical centre of Europe.
Lithuania has long been seen as an ideal base for smuggling and counterfeiting rings between Russia, Belarus and Scandinavia. Lithuanian gangs specialise in: cigarette and amphetamine-smuggling; counterfeiting; burglaries; money-laundering; illegal immigration for prostitution; extortion; kidnapping and stolen cars, in the last instance mainly as a transit point from Kaliningrad, the Russian enclave between Lithuania and Poland, to the West.

The Norwegians come to help
Economically it is doing very well, having been given the accolade recently by The Economist of being termed 'the Baltic Tiger.' GDP growth is averaging 7% annually and EU membership beckons next year.
The process of growth has been greatly assisted by the presence of Norwegians, who have long had a special affinity with the Lithuanians. The Norwegian School of Management (NSM) is the majority owner of the International School of Management in Lithuania. It began in 1995, with seven short courses. Now it has 300 programmes and 5,000 students at any one time. Its graduates are the new business elite in Lithuania.
The President of the NSM, Torger Reve, notes "Integration of management education is the most important force in bringing the Baltics up to speed with their European Union neighbours."
In Lithuania ( also known as the "Ballistic Baltic") the speed is dazzling. It has biotech clusters and venture capitalists. The household income of the Lithuanians climbed by 8% in 2003.

Broad Western support
It is not just the Norwegians of course who have been making a big difference, but the presence of other Westerners as well. Lithuania has an international cast in a consortium running the Baltic Management Institute there. The consortium includes Copenhagen Business School, HEC in France and Belgium's Louvain School of Management, as well as, more predictably, the Norwegian School of Economics and Business Administration. 
Business schools are not the whole story. The ascent has been fuelled by Western companies coming to town. The recipe for a twenty-first century Lithuanian executive is a cross-cultural combination of examples from the West, mixed with the locals' ability to learn quickly. "They showed us how to manage properly and which systems were useful," says Virginijus Kundrotas, the president of ISM. "They gave us structure and support. But our willingness to learn was always there."
The well-educated work force often surprises Westerners. The UK director of organisational development at SBA, a furniture manufacturer in Lithuania and Latvia, John Lightfoot, has worked locally for over a decade. He says that new arrivals from the West make the mistake of thinking themselves gurus. "They are not. You'll have to prove your worth. People here are not as fragile as you think."
The process is still in its early stages. There is great scope for catching up. But there is every reason to suppose that in a generation or two Lithuania will become a prosperous Western nation.
The existence of highly educated personnel lower down the hierarchy also greatly helps. The combination of a still very cheap work force of a high quality and well-trained managers is attracting abundant foreign investment to Lithuania. The auspices are excellent.

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BONDS

Nord/LB Lietuva to issue 60m Euro in bonds


Lithuanian bank Nord/LB Lietuva plans to issue 60m Euro in Eurobonds. The bank has sent an issue prospectus to Lithuania's securities commission for registration, Aurelija Gasiuniene, who runs the commission's registration department, said. Nord L/B Lietuva plans to issue 600 three-year bonds with face value of 1,000 Euro, Interfax News Agency reported. 
It is the first Lithuanian commercial bank to make such a decision. The bank is ranked third in Lithuania by asset volume. Assets on September 30th totalled 2.389bn litas, up 33.9% year-on-year. Nord L/B Lietuva posted an unaudited net profit of 15.3m litas in January-September 2003. Norddeutsche Landesbank of Germany owns 93.09% of the bank.

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ENERGY

Lithuania, Gazprom may ink Lietuvos Dujos deal

The Lithuanian government and Gazprom may sign a sale agreement for 34% of shares in Lithuanian gas company, Lietuvos Dujos, in the near future, Interfax News Agency reported.
Representatives from the Lithuanian government and Gazprom initialled a draft sale agreement for the 34% share packet at the start of December 2003. The Russians are expected to pay 100m litas for the shares. To complete the deal the gas company and the Lithuanian government will sign an additional agreement on long-term gas supplies - until the end of 2015. Gazprom also needs to receive permission to buy the shares from the Lithuanian council on competition. 
Commenting on a Gazprom decision to increase gas prices for Lithuania from 2004, a reliable source close to the privatisation process in the republic said that the Russian concern is increasing prices only for the largest Lithuanian gas importer - Dujotekana, and the price for Lietuvos Dujos will not increase. "Prices for both companies should be equal - until now Dujotekana paid less for Russian gas than Lietuvos Dujos," the source said.
However, the Lithuanian media is reporting that Gazprom is trying to increase prices for both companies - that the price for 1,000 cubic metres of gas will increase US$6 for Dujotekana and US$3 for Kietuvos Dujos from July 1st, and for Duhotekana - from US$79 to US$82 per 1,000 cubic metres. 
The Lithuanian government currently controls 58.36% of shares in Lietuvos Dujos, and Ruhrgas and E.ON Energie - 35.49%.

Lithuanian power utility's exports up by 10 per cent in 2003

Power exports by Lithuania's national power producer, Lietuvos Energija [Lithuanian Energy], rose 10.3 per cent on the year to 7.5bn kWh in 2003, Rimantas Juozaitis, the company's director told Prime-Tass News Agency on 6th January. 
The company expects its net profit to stand at 90m litas [US$33m] in 2003, Juozaitis said without providing comparisons. Last year, the company's main export markets were Belarus, which bought 4bn kWh of electric power, Russia's Kaliningrad Region, which bought 2.43bn kWh, Latvia, which bought 553m kWh, and Poland with 489.1m kWh. 
The company plans to shut down power unit one at the Ignalina nuclear power plant, the only nuclear plant in Lithuania, and thus expects its power exports to decrease by 1.9 per cent this year. 
Lietuvos Energija's authorized capital stands at 689.5m litas, the controlling stake of which is held by the government.

VST predicts 6% profit increase in 2003

Lithuanian grid company Vakaru Skirstomiehi Tinklai (VST) planned to earn over 30m litas in net profit in 2003, up 6% year-on-year, Director General, Arunas Keserauskas, said recently, Interfax News Agency reported.
He said that the company, privatisation of which would be completed in the near future, planned to receive pre-tax profit of 35m litas, up 15% year-on-year. Sales revenue for the year was forecast at 687m litas, up 0.5%. The improvement in the company's financial indicators is due to a reduction in technical and commercial expenditure, growth in electricity consumption and effective management, Keserauskas said. VST plans to invest 96.5m litas in 2004, which is 13% less than this year. 
It is expected that the new owner of VST will be the company NDX Energija, set up by the owner of the largest retail trading chain in the Baltic - Lithuania's VP Market. If the Lithuanian government confirms a draft purchase and sale agreement for a 77% packet of shares in VST, then it is expected that the deal will be completed in the near future. The Lithuanian Property Fund initialled a contract for the sale of the state shares in VST on December 5th. NDX Energija is ready to pay 539.645m for the 77% share packet in VST.
Under Lithuanian law, minority shareholders will have to sell their shares to the new owner. If all minority shareholders sell their shares, including Germany's E.ON Energie, which owns 14.62%, then NDX Energija will have to pay about 700m litas for the grid company. The start price for the state shares in VST amounted to 358.857m litas. VST earned 20.3m litas pre-tax profit in January-September 2003, down 14.7% year-on-year. Sales revenue in the first nine months increased 7% to 496.8m litas. The company services over 656,000 customers.

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FOREIGN LOANS

EBRD promises grant for natural gas project

The European Bank for Reconstruction and Development (EBRD) will grant 12.95m Euro as partial financing of a natural gas project for the safe decommissioning of a Lithuanian nuclear power plant, for some of the plant's needs, and for the town where the plant workers live, Interfax News Agency reported.
Lithuania has pledged to put one of the Ignalina nuclear power plant's generating units out of use before the end of 2004 and the other before 2009. Gas will be the main fuel source for two large boiler rooms that are being built to guarantee the plant's secure decommissioning. The gas will come to the boiler rooms from the Lithuanian town of Pabrade via a 99-kilometre pipeline that will be launched in 2005.
The EBRD grant, promised in an agreement with Lithuanian gas supply enterprise Lietuvos Dujos, will partially fund the pipeline's construction. The rest of the money will come from Lietuvos Dujos, the Ignalina Nuclear Power Plant Decommissioning Fund, and the Danish Energy Authority. The total cost of the project will be set later.
The pipeline will be built by the winner of a round of bidding held in late October of last year. The Lithuanian government holds a 58.36% stake in Lietuvos Dujos. German companies Ruhrgas and E.ON Energie together own 35.49% interest.

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