Observer "Lietuva"

WEEK 2.2005

Saturday, 15th of January

Foreign direct investment increase in Lithuania
Accumulated foreign direct investment (FDI) in Lithuania reached LTL 14.976 billion as of October 1, 2004, rising by 9.3 percent during the first nine months of last year, the country's Statistics Department reported on Friday. FDI per capita went up by 9.8 percent or LTL 388, to LTL 4,364 during the January-to-September period of 2004.
In terms of FDI, the top investor was Denmark with 15.8 percent of the total. It was followed by Sweden with 15.4 percent, Germany with 9.6 percent, Estonia and Russia with 8.7 percent each, Finland with 8.4 percent, and the US with 6.5 percent.
The manufacturing industry received the biggest portion of the total FDI, at 33.9 percent, followed by wholesale and retail trade with 17.1 percent, financial intermediaries with 15.4 percent, and transport, storage and communications with 15.3 percent.
FDI flows into Lithuania totalled LTL 1.320 billion in the first half of 2004, up by 40 percent or LTL 374.7 million from the same period in 2003.
Lietuvos Zinios

Car leasing
A total of 8,594 new and used cars were bought through lease-purchase arrangements in Lithuania in 2004, up by 13.4 percent from 7,578 vehicles bought this way in 2003.
The number of brand new cars acquired through lease-purchase rose by 16.1 percent to 6,847, while the number of used cars went up by 3.9 percent to 1,747 last year.
Lietuvos Rytas

SBA expects EU support to build a plant
The concern SBA says it will be forced to consider investing in a new furniture plant somewhere in Russia or the Ukraine if it fails to get financial assistance from EU Structural Funds to build a factory in Visaginas. The concern wants to get about LTL 30 million from the EU.
"If we fail to get the money from the Structural Funds, we will implement this project outside Lithuania - in Russia or the Ukraine - where labour and raw materials are considerably cheaper," Arunas Martinkevicius, president and the major stockholder of SBA, said on Friday.
The facility, which is expected employ 750 workers, will manufacture frame and honeycomb furniture.
Lietuvos Zinios

Friday, 14th of January

Giriu Bizonas to receive EU assistance
Giriu Bizonas, a company controlled by timber group Vakaru Medienos Grupe, and the Lithuanian Enterprise Support Agency have signed an agreement under which Giriu Bizonas will receive an assistance of LTL 45.6 million from EU Structural Funds to build a new chipboard factory.
The total value of the project is LTL 168 million. The other investments will be made by partners in this project: furniture maker Vilniaus Baldai, company Baltijos Baldu Grupe and some commercial banks.
The construction should get underway in the first quarter of 2005, with the first test batches of produce expected at the end of next year. The yearly output of chipboards at the facility is projected at 300,000 m3.
Lietuvos Zinios, Lietuvos Rytas

Bank of Lithuania gets refund for faulty litas notes
The Bank of Lithuania will destroy faulty litas banknotes, issued in 1991 and 1994 and never put into circulation in Lithuania, after celebrating victory in litigation with US Banknote Corporation (later renamed into American Banknote Company) and getting the refund of some LTL 6 million.
"After the conclusion of peace treaty with banknote producers, which was later approved by the court, we have received a reimbursement of USD 2.274 million and have withdrawn all our claims. Thus, after the end of litigation, we have ruled to destroy the banknotes and clear our depositories for euros," Reinoldijus Sarkinas, central bank governor, told.
The Bank of Lithuania lodged a claim against the US company concerning the poor quality of 100, 500 and 1,000-litas denomination banknotes printed out in 1991 at the Arbitration Court in Paris back in 1997. The central bank won the case both in Paris and at US Bankruptcy court in November 2004.
Kauno Diena, Respublika, Verslo Zinios, Lietuvos Rytas

Romanov gets go-ahead to buy 20 pct of Ukio Bank
The Bank of Lithuania has given the go-ahead for Vladimir Romanov to buy 20 percent of shares in Ukio Bankas, the country's fifth-biggest commercial bank by assets. The central bank said in a statement that the permission to acquire one-fifth of the stock capital in a bank gives the person concerned the right to increase his or her stake to 33 percent. Further permission is required from the regulatory authority to reach or exceed this limit. Romanov, 57, is the board chairman and the largest single shareholder of Ukio Banko Investicine Grupe (Ukio Bankas' Investment Group) and of Universal Business Investment Group Management (UBIGM), a Lithuanian investment company.
Kauno Diena, Respublika, Lietuvos Rytas, Verslo Zinios

Thursday, 13th of January

Lithuania will increase taxes to cut deficit
Lithuania is committed to boost taxes in a bid to cut the fiscal deficit, reads the revised Convergence Program. The document has been updated to pave the way to the preparations for entrance of the country to the European Economic and Monetary Union on January 1, 2007. The program was on Wednesday urgently approved at the national government. The executive body revealed the content of the paper just a day before discussing it at the cabinet. Once approved, the program is to be submitted to the European Commission and ECOFIN (Council of Economics and Finance Ministers).
Under the program, the national tax revenues will amount to 20.4 percent of the gross domestic product in 2005-2006, and reach 20.5 percent of GDP in 2007. Because of intended waiving of the road tax in the middle of 2005, about 0.4 percent of GDP revenues will be lost, additional taxation measures will be introduced to enhance the share of tax revenues by some 0.6 percent of GDP to 20.4-20.5 percent of GDP, the Convergence Program reads.
Kauno Diena, Lietuvos Rytas, Respublika

Government approves peace agreement for Alytaus Tekstile
The Lithuanian government voted to back the draft of a peace agreement with Asean Interests, a bankrupt company. The agreement was drafted to settle legal disputes concerning the failed privatisation of the local textile company Alytaus Tekstile, which the national government is committed to salvage. The approval of this agreement means that the State Property Fund, as official representative of the interests of the state, gives up a claim of LTL 1.54 million against the foreign company. The national cabinet moved to bless the peace deal with Asean Interests in order to prevent disputes of this kind in the future.
Asean Interests lost its stake of 47.3 percent in Alytaus Tekstile, earlier acquired from the government, in 2004. The Lithuanian Economy Ministry now holds 66.29 percent of the stock in the domestic textile company. The Estonian company Tolaram Investments has 22.16 percent of the interest.
Respublika, Lietuvos Zinios, Verslo Zinios, Lietuvos Rytas

Sales of Senukai grow 50 percent in 2004
Senukai, the operator of the largest retail network of construction, repair, and household goods in the Baltic States, reported that its sales last year increased 50.5 percent to reach LTL 1.019 billion.
According to data supplied by the Finnish concern Kesko, the holder of the controlling stake in Senukai, the December sales of Senukai went up to LTL 105 million, 13.7 percent higher than sales made in the same month of 2003.
Verslo Zinios, Respublika, Lietuvos Zinios, Lietuvos Rytas

Wednesday, 12th of January

Lietuvos Draudimas has one million contracts
Lietuvos Draudimas, Lithuania's leading insurance company, signed 1.004 million insurance contracts in 2004, 10.7 percent more than it signed in 2003. More than half of the contracts were for driver's liability insurance, and 27 percent were for individual and corporate property insurance.
Kestutis Serpytis, the CEO of Lietuvos Draudimas, said that his company is the first insurer in the Baltic States that has signed over 1 million insurance contracts. Based on written premiums in the first eleven months last year, Lietuvos Draudimas held one-third of the life insurance market in the country.
Lietuvos Draudimas is controlled by the Danish company Codan, a member of the international insurance group Royal & SunAlliance.
Lietuvos Zinios, Lietuvos Rytas, Respublika

Exports does not offset imports
Lithuanian exports grew by 18.6 percent in the first eleven months of 2004 from the same period last year, while imports rose by 16.2 percent, the Statistics Department has reported. Exports for the January-through-November period totalled LTL 23.214 billion, while imports reached LTL 30.917 billion. The country's foreign trade deficit widened by 9.7 percent year-on-year to LTL 7.704 billion.
In November exports rose by 24 percent year-on-year to LTL 2.391 billion, while imports increased by 19.8 percent to LTL 3.138 billion. In month-on-month terms, however, exports fell by 5.7 percent, while imports were up 1.4 percent.
Intermediate goods accounted for 53 percent of total exports and 58.5 percent of total imports in the eleven-month period. Consumer goods made up 26.8 percent and 17.6 percent, respectively. Gasoline accounted for 8.8 percent of total exports.
Lithuania's main export partners included Germany with 10.4 percent of total exports, Latvia with 10 percent, Russia with 9 percent, France with 5.7 percent and the United Kingdom with 5.4 percent.
Respublika, Lietuvos Zinios, Verslo Zinios, Lietuvos Rytas

Vilnius wants Rail Baltica
Vilnius has been left off the route of the high-speed European railway Rail Baltica, which is to connect Helsinki, Riga, Kaunas, and Warsaw. However, in a letter addressed to the Lithuanian government, Vilnius Mayor Arturas Zuokas requested that special attention be paid to Vilnius when making the plans of the railway, which should satisfy the interests of the state, the public and the EU.
The mayor of Vilnius has proposed a couple of alternatives for discussion. One could go through Kaunas and Siauliai and have a linking section between Kaunas and Vilnius. The other could run through Alytus, Vilnius, and Panevezys.
According to the original plan, the Rail Baltica is supposed to be built along the eastern fringe of Kaunas.
Verslo Zinios, Respublika, Lietuvos Zinios, Lietuvos Rytas

Tuesday, 11th of January

Producers of Siauliu Tauras are flourishing
Lithuania's TV set producer Siauliu Tauro Televizoriai (STT) reported sales of LTL 335.458 million for full 2004, a surge of 55.5 percent from the year-earlier figure of LTL 215.757 million. The company, which exports almost all of its products abroad, said its sales by volume soared by 83.9 percent year-on-year to LTL 1.256 million TV sets last year. Sales on domestic market made up some 15,000 TV sets. In pursue of stronger sales on domestic market, the company introduced 11 new models, including flat-screen TV sets, LCD-screen sets and TV sets with integrated DVD players.
Lietuvos Zinios

Country’s beer market grew by 5.4 percent
The Lithuanian beer market grew by 5.4 percent, to 254.62 million litres in full 2004, from 241.48 million litres in 2003, the Lithuanian Brewers' Association reported on Monday. In December alone, the country's nine major breweries, which are members of the association, reported domestic beer sales of 20.61 million litres, an increase of 3.2 percent from the year-earlier figure of 19.97 million litres.
Svyturys-Utenos Alus raised full-year sales by 2.4 percent, to 120.15 million litres, from 117.37 million litres a year ago. Its share of the domestic beer market, however, slipped to 47.19 percent, from 48.6 percent in 2003.
Kalnapilis-Tauras Group ranked the second with full-year beer sales of 61.14 million litres, a rise of 9.7 percent, year-on-year. The brewery's market share climbed by 0.94 percent from 2003, to 24.01 percent.
Ragutis raised its sales by 12.4 percent, to 25.93 million litres, while the brewer's market share grew to 10.18 percent, from 9.55 percent in 2003.
Beer sales by Gubernija eased by 1.1 percent, year-on-year, to LTL 24.76 million, while the company's market share declined to 9.72 percent, from 10.37 percent a year ago.
Lietuvos Rytas, Respublika, Verslo Zinios

Consumer prices increased by 2.9 percent last year
Consumer prices in Lithuania rose by 2.9 percent in 2004 (in December versus December 2003), the country's Statistics Department reported on Monday. The rise was the first in three years, as in December 2003, compared with December 2002, the consumer price index (CPI) declined by 1.3 percent, and in 2002 consumer prices eased by 1 percent.
The rise in consumer prices in 2004 was largely the result of 4.8 percent increase in prices of foodstuffs and soft drinks, a 7.7 percent rise in transport prices, and a 11.1 percent surge in healthcare tariffs. However, the rise in prices was partially offset by a 2.7 percent decline in leisure and culture prices, a 2.8 percent drop in household equipment and daily housing maintenance prices, and a 1.2 percent decline in communications' prices. In December, compared with November, consumer prices eased by 0.1 percent. Monthly deflation was also registered in February and August, at 0.2 percent and 0.4 percent respectively.
Respublika, Verslo Zinios, Lietuvos Rytas, Lietuvos Zinios

Monday, 10th of January

Administrative fees bring down pension assets
The Lithuanian State Social Insurance Fund (SoDra) transferred LTL 127.48 million to second-pillar pension funds during the first nine months of 2004, but the amount of money left in pension accounts after deductions was LTL 127.03 million. Insurers explain that the negative change was due to deductions for fees and expenses. Pension fund managers deduct their fees as soon as the money from SoDra flows in and only then invest the remaining amount. This brings down the fund's profitability and accumulated assets.
The pension funds of Commercial Union Lietuva Gyvybes Draudimas, which holds a large share of the private pension market, registered a 5.44 percent profitability during six month. The company deducts 7 percent of contributions for expenses. Small funds managed by Finasta Investiciju Valdymas achieved the highest profitability levels among all pension funds. Pension funds of the Hansabankas Group, which has the biggest market share, performed best among large funds, achieving profitability levels of 7.7 percent and 7.52 percent.
Kauno Diena

Lithuania's jobless rate falls 1.7 pts to 6 pct in 2004
Lithuania's unemployment rate reached 6.0 percent in December, rising by 0.2 percentage points from November, but falling by 1.7 points from the same period a year ago, the Labour Exchange has said. The number of officially registered unemployed people was 126,400 as of January 1, 2005, an increase of 3.8 percent, or 4,700 jobless, from early December. The annual decline was 20.4 percent or 32,400 jobless. Analysts tend to attribute the shrinking of the unemployment level to the continued growth of the national economy and emigration of the residents.
"Emigration in Lithuania is becoming a major threat. The emerging shortage of labourers is slowing down economic development. Lithuania will therefore not overcome its economic backwardness, which will continue to spur on emigration and, in several years' time, lead the country to the brink of economic collapse," Rimantas Rudzkis, the senior analyst of the commercial bank NORD/LB Lietuva, said.
The analyst recommended that the government conduct "a serious sociological survey" of the residents to estimate the scale of emigration.
Verslo Zinios, Respublika, Kauno Diena

The number of e-banking users increased 45 percent
There were 925,330 people in Lithuania using the services of banks via the internet at the end of 2004. The clientele of such services grew about 45 percent. The two leading providers of internet banking services are the country's major commercial banks - Vilniaus Bankas and Hansabankas - although their combined share of e-clientele narrowed a little in 2004. At the outset of this year, the two banks controlled 86.2 percent of the e-banking market.
The active users of the internet service hanza.net - those who use the service at least once every three months - account for 40 percent of all the users of the service. The total clientele of hanza.net advanced 22 percent to 420,700 users during the period.
Vilniaus Bankas increased the number of clients of its internet services by 54 percent, from 245,000 to 377,000 users. Snoras reported a rise of four times in the number of its e-customers (27,000) last year. NORD/LB Lietuva tripled the number to 65,819 users, and the ranks of Sampo's internet banking customers grew from 4,890 to 11,428.
Lietuvos Rytas

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