Investment Environment in Lithuania

Political stability is the main prerequisite for economic growth and attracting large scale investment.  We believe that Lithuania has in this respect adequately matured to become attractive to international investors.  The three trouble free, open, contested, democratic parliamentary elections (1992, 1996, and 2000) and two presidential in 1993 and 1997 have demonstrated this.   Furthermore, even though the governments formed in the wake of these elections had vacillated between the political right and  left, the country throughout this period did continue on steady course of privatization and restructuring of its economy according to the Western free market model.  Lithuania and its entire political establishment appear to be totally committed to gaining membership in the European Market and NATO at the earliest possible date.

External threats to the country’s stability are no longer an issue.  The Russian troops are long gone.  All border issues and other real and potential problem areas with the bordering countries have been addressed and resolved.  Lithuania, unlike other Baltic countries, does not have a large non-indigenous population and its constitutionally expressed policy of equal rights for its minorities further ensures political and commercial cooperation between Lithuania and all its neighbors.

The privatization process of state owned industrial enterprises is continuing.  Full implementation has been hindered by lack of private investment capital from overseas.  In most of the cases the industrial enterprises have been privatized with the government holding only a minority portion of the shares.  The government is attempting to sell these remaining shares; however, as most of these enterprises are not viable without substantial additional investment for modernization above the asking price and require extensive management reforms, few investors are willing to take a risk.  In a number of cases overseas investors have waited until the enterprises had gone completely bankrupt in order to take over at bargain rates.  The only sectors over which the government is still unwilling to relinquish ownership control are energy and railroads.  

The commercial and services sectors, with few exceptions, are now totally under private ownership.  The exceptions are local government-owned firms formed to provide essential services, including commercial, which otherwise would be unavailable in the localities.  In most of the cases such enterprises would be available for sale to a responsible investor.

Most of the agricultural land and resources have been transferred to private ownership through grants to past residents/workers in the collective and state farms or reinstatements of ownership right to the pre-Soviet era property owners and their descendants.  It should be noted that agriculture itself is not yet open for outside investors, as Lithuanian constitution restricts ownership of land to its citizens.  However, this is expected to change as one of the conditions to joining European Union is removal of said restriction.  Meanwhile acquisition of land use by a foreign individual or entity is through long term, up to even 99-year, leasing arrangements,

 We feel that Lithuania offers many good investment opportunities to far-sighted and imaginative investors.  While investment in existing enterprises is rather risky and troublesome, nevertheless our assessment indicates Lithuania is ripe for investment in new enterprises.  True, the local market is small, but Lithuania’s central location makes it gateway to Eastern markets.  It is easily accessed from the West via Vilnius International Airport and an excellent ice-free commercial port of Klaipeda with a direct ferry service from Germany.   From Lithuania access to the other ex-Soviet Republics and their major markets and population centers is facilitated by long established and long operating direct and integrated rail, highway and communication systems.

In Lithuania private property rights, including foreign owned, are constitutionally protected.   Body of laws have been addressing private ownership of land, assets and commerce, rights of foreign businesses and protection of their investments.  In addition, stable national currency (based on US $), large available workforce, existence of duty free zones and special tax or import/export incentives being offered to foreign companies setting up operations in Lithuania, make investment there an attractive option.