Overseas Business Risk – Lithuania

Information on key security and political risks which UK businesses may face when operating in Lithuania.

Political and Economic

Lithuania is a north-eastern European country which combines what is regarded as Scandinavian – clean, orderly, progressive, natural and attractive, as well as what is regarded as Eastern European – new, rapidly developing, on the rise, and as yet undiscovered. Sometimes called a Northern, and sometimes an Eastern European country, Lithuania is an authentic combination of Northern and Eastern features.

Lithuania covers an area of 65,300 sq. km making it the largest of the three Baltic States. It is located at the crossroads of northern and eastern Europe and bordered by Latvia, Belarus, Poland and Russia. To the west it borders the Baltic Sea along a 99 km coastline.

Lithuania has the largest population of the three Baltic States of about 3.3 million (83.5% are ethnic Lithuanians, 6.7% Polish, 6.3% Russians and 3.5% other nationalities). Today the larger part of Lithuania’s population resides in city areas: Vilnius is the capital and financial and commercial centre of Lithuania (population in 2011: 543,000). Other major cities include Kaunas (337,000), Klaipeda (178,000), Siauliai (120,000) and Panevezys (109,000).

Lithuania joined NATO on 29 March 2004 and on 01 May 2004 became a member state of the European Union. Lithuania is a member of WTO and belongs to Schengen Zone. It is also expected to join the Euro zone in 2015.

Human Rights

The Lithuanian law implies that the workers have the right to safe and healthy working conditions, and this provision is generally enforced. In addition, non-governmental organisations, such like The Human Rights Monitoring Institute (HRMI) aim to promote an open democratic society through the consolidation of human rights and freedom.

Lithuania has accessed the main international contracts regulating the protection of national and sexual minorities, freedom of movement within the country, foreign travel, emigration, and the government generally respected these rights in practice. The government has been working in cooperation with the Office of the UN High Commissioner for Refugees (UNHCR) and other humanitarian organisations in providing protection and assistance to refugees, asylum seekers, returning refugees, stateless persons, and other persons of concern.

Economic Overview

After tremendous growth since 2000, first signs of global economic crisis showed up in Lithuania in 2008 while its major impact could be noticed in 2009. The economy is currently picking up and is again among the fastest growing ones in the EU: in 2011 it grew by 5.8% compared with the same period in 2010 and totalled to EUR 30.7 billion. Various economic experts forecast economic slowdown in the coming years, with GDP growth rates accounting for 2.5% in 2012; 3.7% – 2013 and 3.4% – 2014.

Changes in the country’s economy have been closely related to changes in prices and subsequently inflation. Reaching 8% during economic boom in 2008, the annual inflation fell during economic slowdown, however it has been rising again and reached 3.4% in December 2011. The annual inflation rate was mainly conditioned by an increase in prices for food products, housing, water, electricity, gas and other fuels group of goods and services, transport goods and services, hotels, cafes and restaurants services, as well as by a decrease in prices for clothing and footwear. Forecasted growth of inflation in 2012 is 2.5% and in 2013 – 3%.

In 2011, the labour force in Lithuania totalled 1.094 million with over two-thirds employed in the private sector. Due to economic slowdown, unemployment rate started to increase in 2008 and reached 17.8% in 2010, while in 2011 the rate started decreasing to 15%. According to Ministry of Economy figures, the labour market is on the path of recovery and should make positive impact on household expenditures. However, new risks for labour market recovery can emerge from significantly slower economic growth or stagnation in the EU economies. Increased operating efficiency and labour productivity, very cautious stance on employing new people in both public and private sectors makes the labour market much more resilient than it was some years ago.

Mining, quarrying and manufacturing industry (MQMI) is one of the most important sectors of Lithuania’s economy. According to the Lithuanian Ministry of Economy, in 2011 Lithuanian industry grew up by 7.4%, whereas manufacturing that comprises 86.6% of the total industry production rose by 10.4%. Such industrial sectors as refined petroleum products, food products, chemicals and chemical products, furniture, wood and products of wood and cork comprised a significant share of the manufacturing production in 2011. Manufacture of motor vehicles, trailers and semi-trailers, fabricated metal products (except machinery and equipment production), furniture, printing and reproduction of recorded media were the highest in 2011.

Foreign trade volumes have been heavily affected by the global economic situation. However in the very end of 2009 the first signs of export recovery occurred. Currently increases in exports and imports are the main factors influencing growth of Lithuanian economy. In 2011 export of good from Lithuania amounted to EUR 20.2 billion (increase of 28.9% in comparison to 2010). In 2011, the largest share in exports was mineral products (25.6%), machinery and mechanical appliances, electrical equipment (10.3%), products of the chemical or allied industries (9.2%). The most important export partners during 2011 were Russia (it purchased 16.6% of Lithuania’s total export of goods), Latvia (10.2%), Germany (9.3%), Poland (7.0%), Estonia (6.0%).

Major import partners for Lithuania are Russia (33.8% of all imported goods), Germany (10.8%), Poland (8.8%) and Latvia (5.8%). The main products imported to Lithuania are mineral products (34.2%), chemical products (11.8%) and machinery and equipment (11.3%).

As of 30 September 2011, cumulative FDI in Lithuania amounted to EUR 10,734.4 million. Over III quarter 2011, they grew by EUR 29 million (0.3%). FDI per capita equalled EUR 3,347. The largest investment was made by the Swedish – 14.3% of the total FDI, Polish –13%, German – 9.9%, Dutch – 8.6%, Russian –6.3%, and Norwegian investors – 5.4%. Cumulative FDI in Lithuania from the EU 27 countries amounted to 75.4% of the total FDI, from the CIS countries – 6.9%. The largest investment was made in manufacturing – 31.6%, wholesale and retail trade, repair of motor vehicles and motorcycles – 13.8%, financial and insurance activities – 12.4%, real estate activities – 11.3%, and information and communication activities – 9.5% of the total FDI. In manufacturing, the largest investment was made in the manufacture of refined petroleum products, chemicals and chemical products – 52% of the total FDI in manufacturing, food products, beverages and tobacco products –11.5%. 

As of 30 September 2011, Lithuanian cumulative DI abroad amounted to EUR 1,589.3 million. As of 30 September 2011, the largest investment was made in the Netherlands – 28.3% of the total Lithuanian DI abroad, Latvia –18.4%, Poland – 8.1%, Cyprus – 8%, and Russia – 7.4%. The largest investment of Lithuanian enterprises abroad was made in professional, scientific and technical activities – 28.1% of the total Lithuanian DI abroad, real estate activities – 18.5%, wholesale and retail trade, repair of motor vehicles and motorcycles – 15.1%, manufacturing – 13.1%, financial and insurance activities – 10.2%.

Political Overview

Lithuania is a stable parliamentary democracy. On 11 March 1990 the Supreme Council declared Lithuania’s independence from the Soviet Union. Lithuania now has a multi-party democracy political system. Under the Constitution, power is vested in the citizens of Lithuania and is exercised on their behalf by deputies elected to a 141 seat single chamber Parliament (Seimas) for a four-year term. The next Seimas elections to be held on 14th October 2012.

The head of the state is the President, elected by the citizens for a five – year term. The Government, accountable to the Parliament and the President, exercises executive power. Under the new Law on the Constitutional Court adopted November 1st 1992, justice is administered by a court system comprising the Supreme Court and District Courts. In May 2009 Dalia Grybauskaite, former European Union Commissioner, was elected as the President of the Republic of Lithuania.

Lithuania is among the politically and economically freest markets in the world, as the 2009 findings of the survey Freedom in the World released by Freedom House, an independent non-governmental organization that supports the expansion of freedom in the world, show.

Information on political risk, including political demonstrations, is available in the FCO Travel Advice

Bribery and Corruption

Bribery is illegal. It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership, to bribe anywhere in the world.

In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere.

According to the NGO Transparency International’s corruption perception index (CPI) Lithuania scores 4.8 out of a total of 10 points and is in the 50th place in the ranking of 1803 countries. This is a slight decrease over the 2012 score of 5 and essentially brings the country back to level of 2007 when the score was 4.8.

Lithuanian branch of Transparency International was established in 2000. TI – Lithuania organizes training on anticorruption-related subjects, publishes on a regular basis an anticorruption publications, arranges lectures on incidents and nature of corruption in higher education institutions and secondary schools, communicates and co-operates with media and public organizations in the implementation of various anticorruption programmes, initiates and implements research aimed at diagnosing incidents of corruption in various spheres of social life, on a regular basis collects, processes/analyses and distributes analytical information on various anticorruption issues among state and civic institutions, influences public opinion and by means of various joint actions with informal groups, individuals, non-governmental organizations, state institutions, media and religious organizations to form open intolerance for corruption.

The main anti-corruption state institution is Special Investigation Service (Specialiuju Tyrimu Tarnyba). It is accountable to the President and the Seimas of the Republic of Lithuania. STT detects corruption-related offences, contributes to the development of the anti-corruption policy, carries out corruption prevention, coordinates anti-corruption activities of state and municipal institutions and agencies and encourages the public to show intolerance towards and engage in an active fight against corruption.

According to research carried out by TI Lithuania the most corrupted procedures in Lithuania are issuing necessary permissions and documentation for construction and reconstruction, permission for change of land’s usage, public procurement, employment into state institutions, restitution of ownership rights.

Visit the Business Anti-Corruption portal page providing advice and guidance about corruption in Lithuania and some basic effective procedures you can establish to protect your company from them.

Read the information provided on our Bribery and corruption page.

Terrorism Threat

There is a low threat from terrorism. But you should be aware of the global risk of indiscriminate terrorist attacks which could be in public areas, including those frequented by expatriates or foreign travellers.

Since Lithuania became a Member State of the European Union, due to its geopolitical location, Lithuania also became the Eastern border of the European Union. Most of the routes, going from East to West and from North to South on the way to Europe go through the territory of Lithuania. Flow of illegal emigrants from Asian countries, smuggling of narcotic substances and other goods has been increasing after joining the EU. The attention of various criminal structures or even terrorist organizations to the region of the Baltic countries is increasing. To prevent such threats Lithuania has set up Anti-terrorist Operations Unit ARAS at the Lithuanian Police. It is a professionally trained and equipped service that already complies with most of the requirements for the units of similar nature all over the world.

Read the information provided on our Terrorism threat page

Protective Security Advice

The Centre for the Protection of National Infrastructure also provides protective security advice to businesses

Although most visits to Lithuania are trouble-free, you should take precautions to ensure you do not become a victim of crime. There is a risk of mugging, pick pocketing and bag snatching, particularly on public transport. Avoid poorly lit streets, parks and secluded areas after dark. There has been a recent increase in pick pocketing in bars and restaurants.

Be wary of accepting food and drink from strangers in bars, nightclubs and restaurants. Some visitors have been drugged and subsequently robbed.

Car theft, particularly of/from new or expensive cars, is rife. Lock unattended vehicles: conceal all contents (and radios, if possible). Major cities have guarded car parks: use them if at all possible, especially overnight.

Intellectual Property

IP rights are territorial, that is they only give protection in the countries where they are granted or registered. If you are thinking about trading internationally, then you should consider registering your IP rights in your export markets.

In Lithuania a number of institutions are responsible for policy of intellectual property protection in their relevant spheres: The Ministry of Justice (civil and criminal legislation protecting intellectual property rights, etc.) , the Ministry of Culture (authors’ rights including computer programme and databases ), the Ministry of Healthcare (protection of pharmaceutical products and public health), Ministry of Environment (protection of biological variety), Ministry of Agriculture (protection of geographical indications), Ministry of Economy (transfer of technologies, innovations), Ministry of Finance (financial liabilities), etc.

The State Patent Bureau is the executive body carrying out the state legal protection of industrial property (inventions, designs, trademarks and service marks, semiconductor product topographies) in Lithuania and central industrial property office functions in European Union.

Read the information provided on our Intellectual Property page.

Organised Crime

According to the EURPOL Organised Crime Threat Assessment 2008, the criminal dynamics of the Baltic countries are mostly influenced by their interposition between countries supplying cigarettes and synthetic drugs and destination countries for these items.

According to Police Department under the Lithuanian Ministry of the Interior, majority of organised crime groups is involved in smuggling, stealing, robberies and crimes related to drugs. Several groups are also active in organising and controlling human trafficking and prostitution business. Those involved in transport and storage are particularly exposed when criminals seek to avail of their services

Read the information provided on our Organised crime page.

More information is available on overseas business risk in a range of markets.

Cyber crime is an evolving and new type of fraud and often involves identity theft.

Electronic communication and transactions are a key part of all businesses. However, the advantages that online transactions provide can also give rise to the risk of fraud – individuals claiming to be someone they are not and obtaining information they are not entitled to.

HMRC have made available information relating to security advice and how to make your on-line experience in dealing with them as secure as possible, see the link at

http://www.hmrc.gov.uk/security/advice.htm

Money-laundering is often a subtle crime and the UK government has developed a wider agenda of stripping the financial incentive from crime so as to reduce the harm caused by such activity.

UK Trade & Investment Contact:

ieva.binkauskaite@fco.gov.uk

Countries: Lithuania
Topics: Insurance & Risk
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