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LITHUANIA


 

 

In-depth Business Intelligence

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)

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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


  

Update No: 288 - (01/01/05)

Adamkus, the elder statesman
Lithuanian President Valdas Adamkus, a 78-year-old former U.S. citizen, was the latest figure from central and eastern Europe to be asked to mediate in the crisis in Ukraine. He has an undoubted stature as a man of integrity in Central European politics.
Outgoing Ukrainian President Leonid Kuchma, of whom that could not be said, had urged Adamkus to act as an intermediary following November 21st's disputed presidential elections in Ukraine.
Poland's current President Aleksander Kwasniewski was also invited by Kuchma to mediate, while former president and ex-Solidarity leader Lech Walersa, of whom it certainly could, was in Ukraine on a one-day visit to try and bring the two sides together.

New coalition and programme approved 
Like the other Baltic states Lithuania's politics is based on the quicksands of coalitions among small parties, no one of which has a clear majority by itself. A new coalition has just been formed, but under the previous premier, after October elections.
The Seimas (Lithuania's parliament) has approved the new Algirdas Brazauskas-led cabinet and its programme, which aims to keep nuclear-energy production in Lithuania and set up the direct election of city mayors. The Dec. 14 confirmation comes at the end of a long, difficult series of negotiations in forming both the coalition and Cabinet of Ministers, which culminated in a standoff between the two sides of the executive branch - the Presidential Palace and the government - and the replacement of two ministerial candidates.
EU financial aid is meant to help the newest member countries, all but two of which were communist during half of the 20th century, catch up with the region's wealthier nations. ''The influx of that amount of money could change the country inside and out,'' Adamkus said. ''I want to make sure the money is properly used'' to improve roads, railways and utilities, and boost environmental standards. 
Adamkus said the need was to ensure a transparent distribution of the EU funding which was why he forced Brazauskas to replace two members of the new cabinet that was being formed after October elections. 
''The coalition was determined to push the president into a corner'' about the cabinet's composition, Adamkus said. 'But they met a tough nut who said no way'. I had to ensure the quality of the individuals'' in the government, he said.
Controversially, the programme states that the country will aim to remain a nuclear state, a provision that Prime Minister Brazauskas is keen to realize. The programme also calls for amending municipal elections so that mayors would be directly elected by local voters and for raising the average monthly wage to 1,800 litas (530 euros) from the present average of 1,140 litas.
Crucially, the programme does not mention many of the extravagant promises that the Labour Party, a coalition member, made during the election campaign, such as raising minimum tax-free income to 490 litas and the minimum wage to 600 litas in only 11 days. The new government, by contrast, promised to achieve its goals in two years. Another Labour promise - reducing heating expenses for all by 20 percent - was left out of the programme. 
As expected, the opposition Homeland Union and the Liberal and Center Union voted against the coalitional government - the Social Democrats/Social Liberals, the Labour Party and the Farmers and New Democracy Union - and strongly criticized its program. They said the document was unclear and failed to list concrete objectives, especially in the spheres of tax administration and economy.
"It is still unclear whether the government will seek to see Lithuania as a member of the eurozone until 2008 or not. It is unclear if Lithuanian will seek to become a member of the Schengen zone during the period," Andrius Kubilius, the leader of the Conservatives, said.
"The first impression is that the programme was prepared hastily. This is a compilation of nice wishes - a good life for everybody and tomorrow, but when one promises this, it means that only a handful of in-crowd would enjoy the good life," Algis Caplikas, chairman of the liberal centre faction, said.
Brazauskas dismissed the criticism, saying it was typical of the opposition. The entire government and programme-formation was gruelling - one of the slowest and most controversial in the country's post-independence history. Two ministerial candidates - Rimantas Vaitkus (Social Democrat) for the Education and Science Ministry and Viktoras Muntianas (Labor Party) for the Interior Ministry - had to be stricken from the list in favour of individuals less prone to a conflict of interest. 
Facts in the career of Gintaras Furmanavicius, the newly assigned minister of interior, were also cause for concern. He was questioned due to his ties with the EBSW concern, which is being prosecuted for squandering tens of millions litas. Conservative MP Jurgis Razma was quoted as saying that Furmanavicius, who headed a subsidiary at EBSW, had been part of the concern's policy-making team. However, the special services did not disclose any suspicious activity on the party of Furmanavicius.
Another nominee for the Education and Science Ministry, Juozas Antanavicius, who had been approved as a minister on Dec. 7, suddenly withdrew last week. The next day it was reported that the president's office received a report from the Special Investigation Service that Antanavicius might have collaborated with the KGB.
Eventually President Valdas Adamkus approved Remigijus Motuzas, former State Secretary at the Ministry of Foreign Affairs, as minister of education and science and signed a decree approving the government on Dec. 7. But the damage both within the coalition and in the public has been done. Labour leader Viktor Uspaskikh acknowledged that he did not believe the government was stable. He said it would probably not survive until the end of the term in 2008. 
"Dangers to the coalition could increase with the inception of municipal elections in two years. I am probably the first one from the coalitional partners saying this," said Uspaskikh, who decided to forego presentation of the governmental program in the Seimas and participate in the congress of the European Democracy Party in Brussels instead. One insider said that Uspaskikh disregarded many issues vital to the state and prioritised his party affairs instead of while the programme was being compiled.
Parliament's Foreign Affairs Committee approved the programme on Dec. 14, though even some members of ruling parties said it was unclear on many points, particularly on joining the eurozone and the Schengen Treaty. 
Regarding nuclear energy, the government wants to built a new nuclear power plant to replace the one in Ignalina that is being phased out pursuant to Lithuania's agreement with the European Union. Electricity exports are one of the country's most reliable sources of income. "I support the idea. Let them start the construction as soon as possible. I am clapping my hands," Brazauskas said in response to news that the French would purchase technologies for the construction of a new reactor and invest in the project as well.

The Baltic Tiger
Lithuania, the fastest-growing economy in Europe of late, will expand 7 percent a year through 2007, helped by 2.5 billion euros ($3.3 billion) of European Union aid and foreign investments, President Valdas Adamkus said. ''There are still huge untapped opportunities'' in the Lithuanian economy, Adamkus said in an interview in London. ''For the next three years, we'll continue growing at 7 percent without doubt.'' 
The former Soviet Baltic state of 3.5 million people is one of 10 nations that joined the European Union in May. Its $18 billion economy expanded 9.7 per cent last year. The rapid pace of growth and EU financial aid is helping Lithuania keep its budget deficit down, meeting a key requirement for euro adoption. 
Adamkus said there were no obstacles to switching to the euro within three years together with Estonia and Slovenia. The three EU entrants on June 27 started a two-year test of currency stability and could get the currency as soon as 2006. ''We are ready to introduce euros in an orderly and safe way,'' said Adamkus. ''Lithuanians will have euros in 2007.'' 
Lithuania already meets terms to limit the budget deficit, state debt and interest rates, and is close to the current 2.5 per cent inflation target. Annual inflation slowed to 3 per cent in October from 3.3 per cent a month earlier. 

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BONDS

Vilniaus Bankas completes 20m litas equity-linked bond issue

Vilniaus Bankas has announced the successful completion of a 20 million litas (5.8 million euro) equity-linked bond issue, the first of its kind in Lithuania, The Baltic Times reported.
Vilniaus Bankas, which is the country's largest bank by assets and owned by the Swedish financial group SEB, said private individuals purchased 86 per cent of the bond issue. 
"We anticipated that this new investment instrument would attract considerable interest in the market, but its popularity has surpassed our expectations," said Vykintas Misiunas, director of the bank's treasury and financial market department. 
The return on the bond is linked to three stock indexes: the US S&P 500, the EuroStoxx 50 and the Nikkei 225. Vilniaus Bankas explained that the equity-linked bond combines the advantages of two types of securities, allowing customers to indirectly invest in the international equity market while preserving their initial investment.
He said 40 per cent of the issue was bought in the capital of Vilnius, 18 per cent in Kaunas and 9 per cent in Klaipeda. Transactions worth 10,000 litas accounted for the largest percentage of all transactions, at 15 per cent. The average value of transactions comprised 20,000 litas.
The Vilniaus Bankas Group has raised a total of 285 million litas through bond issues since 2003 and currently holds a 25 per cent share of the domestic debt securities market.

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TELECOMMUNICATIONS

Prime Minister supports sale of Third mobile phone licence

Prime Minister, Aigars Kalvitis, said that he supported the sale of a third license on the mobile-phone market in order to boost competition, even if the sale would not raise revenues for the state, while the Transport Ministry said Denmark's TDC - owner of the Bite GSM operator in Lithuania - was interested in acquiring the licence. 
"I don't think the state will raise major gains by selling this licence. The gains the state can win are lower telephone tariffs for users amid higher competition," said Kalvitis in an interview with Latvijas Radio on Dec. 3. "The gains are unlikely, but people will benefit from higher competition."

Mobile phone use up in Lithuania

The total number of mobile telephone subscribers in Lithuania reached 2.98m at the end of September, up 8.5 per cent from late June, according to preliminary figures released by the country's Communications Regulatory Authority (RRT) recently, New Europe reported.
The aggregate revenues of the country's mobile operators edged up by 0.5 per cent to 275m litas during the third quarter. The number of active users of prepaid services made up 47 per cent of all mobile phone subscribers. The mobile phone penetration rate in Lithuania, a country of 3.5m people, reached 86.7 per cent at the end of September. In the fixed telephony market, there were 23.9 landlines per 100 people.

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