Observer "Lietuva"

WEEK 1.2005

Saturday, 8th of January

Higher gas and electricity prices may become stumbling block for euro says official of central bank
Advancing prices for electricity, gas, and other services of monopolistic suppliers may boost inflation to the extent that Lithuania will fail to meet one of the five Maastricht criteria for introducing the euro. In that case, the country would not be able to enter the euro zone until 2009 at the earliest.
"Electricity, gas, civil liability insurance for drivers, health services, and the like -- these goods and services account for a significant part of consumer spending. If prices for these goods grow, inflation increases directly. Indirectly, it will be lifted by higher prices for other goods, which go up as a result of the above soaring goods that are actually included in the costs of every company", Raimondas Kuodis, the monetary policy director at the Bank of Lithuania, told.
Kuodis pointed out that meat processors are already openly discussing how much they should increase prices. Electricity prices alone will send the inflation rate up by 0.3 percent, according to the official. Electricity suppliers this year will charge 2 centas more per kWh than they did in 2004.
The national statistics office estimates that, in November 2004, the annual inflation rate of Lithuania stood at 3 percent. This rate is close to the benchmark of Maastrict, which prevents EU member states from exceeding the average rate by more than 1.5 percent.
The analyst added that annulling the costs of currency exchange alone could increase the gross domestic product of the country by 0.25-0.5 percent.
In January, prices for natural gas in Lithuania edged up by 3 centas for a cubic metre. Kauno Diena, Lietuvos Rytas

Nuclear plant chooses German contractor for waste storage
The Ignalina Nuclear Power Plant next week is expected to sign a deal with a foreign consortium to build a storage facility for spent nuclear fuel. The contract was awarded to a consortium of the German concern GNS (Gesellschaft fuer Nuklear-Service) and the company RWE Nukem.
Viktoras Sevaldinas, the director of the nuclear plant, indicated that the project was divided into phases in accordance with the schedule for financing. The deal represents the first large project of donor countries for the shutdown of the Ignalina plant.
Lietuvos Zinios, Respublika

Unemployment drops to 6 percent at end of 2004
According to official figures, the unemployment rate of Lithuania fell to 6 percent at the end of 2004, 1.7 percentage points lower than it was a year ago.
In December, joblessness was 0.2 percentage point higher than it was in November, the Lithuanian Labour Exchange reports.
There were 126,400 registered jobless people in the country on January 1, 2005. This figure is 3.86 percent higher than it was at the beginning of the preceding month.
Since 1 January 2004, the number of jobless people has fallen by 20.4 percent.
The highest unemployment in the country could be found in the northern district of Akmene (16 percent), Mazeikiai (14.3 percent), and Druskininkai (14.1 percent). The lowest unemployment was in the districts of Elektrenai (1.9 percent), Trakai (2 percent), and Vilnius (3 percent).
The northern city of Panevezys, though, has the highest rate of joblessness (6.5 percent) among the major cities.
Respublika, Lietuvos Zinios

Friday, of January

VP Market raises sales almost 16 percent in 2004
Lithuania's VP Market, the largest retail chain in the Baltics, reported sales of LTL 4.16 billion for full 2004, a rise of 15.9 percent from the year earlier.
"Company's business was successful last year. We have hit the targets, although the results might have been better but for a decline in Latvia's lat versus euro. In terms of national currencies, the sales in Lithuania rose by 9.8 percent and in Latvia - 38.55 percent, while in Estonia our sales surged 5.5 times," Ignas Staskevicius, VP Market chairman, said.
For 2005 the retailer is projecting a 15 percent rise in sales. The company intends to pursue further active expansion in all three Baltic countries and aims to open more than 60 new retail outlets. Investments should reach LTL 300 million.
In 2004, VP Market opened its first non-food trade center Ermitazas in Vilnius. In Latvia, it changed the brand of T-Market discount stores to Saulute, while in Estonia the company's chain grew to 13 outlets, from one.
VP Market currently runs a chain of 293 stores in the three Baltic countries, of which 195 are in Lithuania, 85 in Latvia and 13 in Estonia.

Advertising grows fast in Lithuania in January-November 2004
Advertising spending increased in all Lithuanian media in the first 11 months of 2004, but the strongest growth was in television and cinema advertising, data from the market research company TNS Gallup showed.
TV channels broadcasting in Lithuania aired 22.7 percent more commercials over the same period a year ago.
Advertising time on local radio stations rose by 4 percent year-on-year.
The average daily outdoor advertising space increased by 20.58 percent year-on-year.
Advertising space in newspapers expanded by 7 percent, while magazine advertising increased by 16 percent to 6 million square centimetres.
Kauno Diena, Lietuvos Rytas

Starting price for Lithuanian Airlines fixed at LTL 9.3 million
The starting price for the absolute interest in Lithuanian Airlines (LAL), the national air carrier, has been set at LTL 9.3 million. The initial price of the stock is indicated in a new privatisation program that the Privatisation Commission approved on Thursday.
The qualifications for bidders state that, in two years after the conclusion of a stock sale-purchase agreement, the buyer must invest at least LTL 15 million in the authorised capital of the company. The new owner will also have to keep at least 70 percent of current jobs for one year.
The first try to sell the government controlled air company fell through in April of 2004, when the Scandinavian bidder SAS announced its withdrawal from the tender. Respublika, Lietuvos Rytas, Verslo Zinios

Thursday, 6th of January

Norfa retail co moves Lietuvos Telekomas out of Lithuania's business top ten
Norfos Mazmena, the fast-growing discount retailer, surged into the top ten of Lithuania's companies in terms of 2004 nine-month sales, pushing Lietuvos Telekomas, the dominant telecommunications operator, which held the third place for four consecutive years, to 11th place in the index of 500 top Lithuania's companies.
Norfos Mazmena, which posted the sales of LTL 553 million for the first nine months of 2004, moved to 10th place, from 14th in 2003.
Senuku Prekybos Centras, the top DYI chains, moved to 7th place, from 11th, with a consolidated turnover of LTL 617.2 million. Privately-held MG Baltic concern, with a turnover of LTL 574 million, rose to 9th position, from 12th a year earlier.
Lietuvos Gelezinkeliai, the state-run railway operator, ranked 5th with nine-month sales of LTL 740.8 million. Lietuvos Energija with the sales of LTL 659.5 million was the 6th in the top ten.
The top three remained unchanged, with Mazeikiu Nafta leading the rating with nine-month sales of LTL 5.481 billion. VP Market, with a turnover of LTL 2.697 billion, was the second, LUKoil Baltija with a turnover of LTL 889.9 million, ranked the third.
Achema Group was the fourth with nine-month sales of LTL 855.6 million. Omnitel, the top wireless operator, was the eighth with sales of LTL 597.8 million.
Lietuvos Rytas

Building of new gas pipe-line will cost LTL 47 million to Lietuvos Dujos
Lietuvos Dujos, a Lithuanian natural gas company, will have to pay three companies LTL 46.6 million for building of the new 63-kilometre gas pipe-line from Kaunas to Sakiai. Lietuvos Dujos signed an agreement with three gas pipe-line construction companies: Kauno Dujotiekiu Statyba, Siauliu Dujotiekio Statyba, and Energija, Valstybes Zinios.
The construction of the new pipe-line should be completed by January 1, 2006. It will allow the increase of the gas throughput to Kaliningrad.
Kauno Diena, Verslo Zinios

Social insurance fund has surplus revenues last year
The social insurance contributions to the State Social Insurance Fund (SoDra) last year reached LTL 5.42 billion. The figure excludes the government allocations to pension reform. The benefits paid amounted to LTL 5.31 billion, including the money transferred to the voluntary pension saving funds as part of the reformed pension savings scheme.
In 2004, SoDra bettered its revenue estimate by 5.9 percent or LTL 301 million.
Based on provisional data, the surplus revenues of the fund, compared to benefits paid, amounted to LTL 105 last year.
Lietuvos Zinios, Respublika, Verslo Zinios, Kauno Diena

Wednesday, 5th of January

Heritage Foundation ranks Lithuania 23rd most free economy in 2005
Lithuania has been ranked the 23rd freest economy in the world by US think-tank, the Heritage Foundation, which, jointly with The Wall Street Journal, released its 2005 Index of Economic Freedom Tuesday.
Hong Kong has remained at the top of freest global economies for the 11th consecutive year in 2005.
Lithuania, however, moved lower by 1 position, although its economic freedom index improved by 0.01 point, to 2.18 points.
Estonia, meanwhile, moved higher by 2 steps, to rank 4th freest economy in the world. Latvia climbed to 28th place, from 29th last year.
The Index of Economic Freedom ranks the world's economies according to the level of trade restrictions, tax policies, government intervention in the economy, monetary and banking policies, capital flows and foreign investment, price and wage regulation, real estate, and black market.
Kauno Diena Respublika, Lietuvos Rytas, Lietuvos Zinios

Vilnius furniture co raises sales 13.5 pct in 2004
Vilniaus Baldai (Vilnius Furniture), one of Lithuania's leading furniture manufacturers, reported sales of LTL 100.419 million for full 2004, a rise of 13.5 percent from the year-earlier figure.
Initially the company forecast full-year sales of LTL 105 million, however, before the year-end company's management admitted that the target would not be achieved. Vilniaus Baldai predominantly sells produce to the Swedish concern Ikea.
Lietuvos Zinios, Verslo Zinios

Bite wireless co sees mobile penetration above 100 pct in Lithuania in 2005
Lithuania's wireless operator Bit_ GSM predicts that mobile penetration in the country will reach 105 percent in 2005.
"The growth will result on the rising number of private customers and a surge in popularity of telemetry services", Jesper Theill Eriksen, the CEO of Bite GSM, said.
Data from the Communications Regulatory Authority suggest that, at the end of the third quarter of 2004, penetration amounted to 86.7 percent. Mobile service providers in Lithuania had 2.98 million users.
According to Darius Montvila, deputy CEO for corporate clients in Bite, the number of users of telemetry services will triple this year.
Bite GSM forecasts that price wars, so frequent in 2004 will continue in 2005 too, but the decrease of tariffs will not be that notable.
Montvila says that two operators will have similar shares in the market of corporate clientele this year. Omnitel's share will be about 49, and Bite's, 40 percent. Tele2 though will stay in this market with only 7 percent large share.
Montvila maintains that at the end of the third quarter last year, the companies shared the corporate clientele as follows: Omnitel had 59.1 percent corporate clientele, followed by Bite with 33.9 percent and Tele2 with 4.3 percent.
Respublika, Verslo Zinios, Lietuvos Zinios

Tuesday, 4th of January

Allegations loom over Russian owner of Snoras
Konversbank, a small Russian commercial bank that controls Snoras Bank in Lithuania, is facing allegations of Russia's authorities over suspected violations of a privatisation deal.
On December 30, the Russian Audit Chamber announced that management of the state owned interest in Konversbank was "ineffective". According to its conclusions, in 2002-2003, no dividends were paid for the government owned shares, whereas the private holders of privileged shares in the same bank did receive dividends.
In the summer of 2003, the government controlled stake in Konversbank was transferred to private holders. The portfolio was worth LTL 3.9 million at current prices.
The panel of the house said it was handing over the dossier regarding Konversbank to the relevant law enforcement authorities of Russia.
Through Conversgroup Holding Company based in Luxembourg, Konversbank owns 49.9 percent of Snoras in Lithuania. The Russian bank is expected to increase this stake in the near future.
At the beginning of 2004, Konversbank owned LTL 1 billion worth of assets, or almost half the assets of Snoras. The Lithuanian commercial bank earned net gain of LTL 14.8 million in the first nine months of 2004, 2.4 times the profits earned in January-September of 2003.
Lietuvos Rytas, Kauno Diena, Respublika

Profit of Klaipedos Nafta
Klaipedos Nafta (Klaipeda Oil), the state-run oil product terminal operator, posted preliminary pretax earnings of LTL 29.3 million on revenues of around LTL 118 million for 2004.
Klaipedos Nafta was projecting a net profit of LTL 11 million for the year.
"Most importantly, all of last year's profit was from main activities, while in 2003, it was just around LTL 13 million," Jurgis Ausra, CEO of Klaipedos Nafta, told.
The terminal handled 6.6 million tons of oil products last year, compared with 6.6 million tons in 2003.
The company reported a net profit of LTL 22.529 million for 2003, a decline of 49 percent over the previous year. Its annual revenues reached LTL 115.929 million.
Klaipedos Nafta paid out LTL 9.012 million in total dividends from its 2003 profits. Ausra said the company is planning to allocate around LTL 11 million for dividend payment this year, of which some LTL 8-9 million will go into the state's coffers.
In early 2004, the company expected to increase annual oil product turnover up to 7.1 million tons, but construction of new ports in Russia prevented it from achieving this target. Ausra said that it was only in late December that Russia resumed oil product exports via the Klaipeda port, as its own ports were struggling to cope with export shipments.
Mazeikiu Nafta (Mazeikiai Oil), the only crude refinery in the Baltics, supplies more than half of oil products shipped through the Klaipeda terminal, with the rest coming from the Mozyr refinery in Belarus.
The government controls a 70.63 percent stake in Klaipedos Nafta, while the remaining shares are in the hands of small shareholders.
Respublika, Verslo Zinios

Diesel fuel prices surge past prices of 95 brand gasoline at Lithuania's LUKoil gas stations
After the rise in wholesale prices of diesel fuel, the retail prices of that type of fuel at the gas stations of Lithuania's LUKoil chain exceeded the prices of 95 gasoline brand by LTL 0.06.
The retail prices of diesel fuel at LUKoil stations in Vilnius currently stand at some LTL 2.45-2.46 per liter.
Retail prices of 95 gasoline brand range from LTL 2.4 to LTL 2.41 per liter at LUKoil stations in Vilnius.
Verslo Zinios, Lietuvos Rytas, Respublika

Monday, 3rd of January

Lithuania's gaming tax revenues surge by one-third in 2004
Lithuania's gaming tax revenues totalled LTL 11.7 million in full 2004, a surge of 32.3 percent from the year-earlier figure of LTL 8.842 million, preliminary figures released by the State Gambling Control Commission have shown.
Budget revenues on lottery tax made up additional LTL 5 million.
"The tax collection schedule was fulfilled. We have had only one new name appearing on the market this year. Other gambling operators pursued active expansion," Ceslovas Blazys, the commission's chairman, told.
In 2005, budget revenues on gambling and lotteries should reach some LTL 15 million and LTL 5 million respectively, he predicted.
Early in 2004, the control commission forecast that annual revenues on gaming tax would reach some LTL 11 million. The ministry of finance set a more modest target of LTL 10 million.
According to preliminary estimations, the revenues of gaming operators would reach some LTL 370 million in full 2004, a surge of 2.1 times from the year-earlier figure of LTL 176.99 million. In 2005 the revenue figure is expected to grow to some LTL 400-450 million.

Unit I of Ignalina n-plant has been shut down
In pursue of its commitment to the European Union, Lithuania shut down Unit I of Ignalina Nuclear plant on Friday.
Lithuania has pledged to the European Union to shut down unreliable RBMK reactor, which has been in operation for 21 year, before joining the bloc. This unit is one of the two most powerful nuclear reactors in the world, both of which are at Ignalina n-plant in east Lithuania. Unit II is expected to be closed by the end of 2010.
Now, about 80 percent of the electricity demand in Lithuania is generated at Ignalina plant.
Lietuvos Rytas, Respublika, Lietuvos Zinios, Verslo Zinios

Lithuania waives import quotas for textiles in 2005
On January 1, Lithuania and the other member states of the World Trade Organisation (WTO) plan to lift import quotas for textile products. This move is a result of the expiration of a ten-year agreement among the members of the organisation concerning the textile trade.
The lifting of the textile quotas is expected to boost the flow of cheap produce from China.
In 2005, import quotas will also be annulled for other goods produced in China: footwear, ceramics, and porcelain.

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