Observer "Lietuva"

Lithuania Business News: Archive 2003-

WEEK 3/2009

Saturday, 17th of January

flyLAL is not going to fly
Crisis-struck Lithuania's flagship carrier FlyLAL-Lithuanian Airlines will suspend operations with the effect from Saturday, January 17, amid failure of its buyer, Swiss-registered SCH Swiss Capital Holding, to fulfill its obligations. The company admits it may have to declare bankruptcy. The carrier announced it terminated a preliminary contract on the purchase and sale of shares signed with the Swiss company. "We have not yet addressed the court on starting bankruptcy proceedings. However, such an option cannot be ruled out unless the situation improves," Gintare Rimkuviene, FlyLAL Group Services communication director, said. By signing a contract on the purchase of shares SCH Swiss Capital Holding confirmed its intentions to invest into the Lithuanian carrier, however, it violated the contractual terms by defaulting on payment, FlyLAL CEO Vytautas Kaikaris said. "We believe that the decision we have taken, i.e. to suspend the operations of the company, is the most appropriate at this moment. We are doing this in a bid to stem further losses and prevent further deterioration in creditors' situation," Kaikaris said in a statement.
Lietuvos Zinios, Respublika, Lietuvos Rytas

Minister of Economy backs the Leo LT project
Economy Minister Dainius Kreivys is of positive opinion of new operating strategy of Lithuania's national energy company Leo LT. Although the discussion of the strategy has not yet been finished and will continue next week, the minister praises the determination of Leo LT management to build a new nuclear power plant. "Their [Leo LT board's] analysis is rather deep and comprehensive, based on what we have seen. Certain decisions will be discussed further, yet we see clear determination to build a nuclear power plant. Alongside that, the strategy deals with the creation of common [Baltic] energy market, integration into UCTE - that question, as well as the construction of nuclear facility, is our priority, these are the questions of our energy security," Kreivys said.  Financing of projects had not been discussed as yet, he added.
Lietuvos Rytas

Hunt for millions again
The partners of Lithuania's ruling coalition will decide in a week how to tackle an approximately LTL 300 million budget shortfall, which emerged as the parliament rejected a proposal to tax corporate cars. The Cabinet would probably avoid introducing any new taxes, Prime Minister Andrius Kubilius said. Instead, the government was considering various belt-tightening and cost-saving measures, including, first of all, the trimming of investments, he added. The Liberal Union proposes to cut the administration costs, the National Resurrection Party - to reconsider the aspects of real estate tax, and the Liberal and Center Union - to cut investments and perhaps to tax all private cars. On Thursday the parliament turned down the government's proposal to impose a LTL 150 monthly tax on company cars. By taxing corporate cars the new government aimed to collect some LTL 300 million in budget revenues in a year. The amount was included into the 2009 budget law, as passed by the parliament, as the tax was assumed to come into effect on January 1. Lietuvos Rytas

Friday, 16th of January

Will borrow one billion
Lithuania's government is close to wrapping up its talks with the European Investment Bank (EIB) on an approximately EUR 1 billion loan to the country, Finance Minister Algirdas Semeta told the MPs on Thursday. He would not specify the amount of the loan, however. Sources in the government claim that the amount would reach some EUR 1 billion. "The negotiations with the European Investment Bank are approaching completion," Semeta said. The loan would be used for the co-funding of the EU structural support projects, he added. The loan terms should be "rather favorable", minister said.
Lietuvos Rytas, Respublika

Submitted a claim to court
MG Baltic Investment, the investment holding of the leading Lithuania's concern MG Baltic, demands about LTL 5.9 million in damages from Latvia's businessman Valdis Kalnozols for the provision of erroneous information in the contract on the purchase and sale of shares in MTK Construction company. The claim was submitted to court as the Lithuanian company failed to reach an agreement with Kalnozols, MG Baltic vice-president Raimondas Kurlianskis said. "We failed to settle the dispute by ourselves, and we hope that this will be done by the third party, i.e. the court," he said. MG Baltic Investment claims to have sustained damages of about LTL 5.9 million due to incorrect information about the situation of the company sold by Kalnozols and exaggeration of its value.
Lietuvos Rytas, Verslo Zinios

Positive variation in balance
Lithuania's current account deficit reached LTL 638.8 million last November, down by LTL 87.5 million, or 12.1 percent, compared with October, the central bank reported on Thursday. Year-on-year, the current account deficit shrank by LTL 911.4 million, it said. The Bank of Lithuania attributed the narrowing of the current account deficit to a decline in the foreign trade deficit.
Respublika, Verslo Zinios

Thursday, 15th of January

Unemployment rapidly grows
Lithuania's unemployment rate may rise to 8-10 percent this year, Vidas Slekaitis, the head of the Labor Exchange, said on Wednesday. "Currently, the situation in the labor market is tense," Slekaitis told the parliament's Social Affairs Committee. The country's official unemployment rate stood at 5.7 percent as of January 1, 2009. The worst situation in the labor market was in April 2002, when the jobless rate was 13.2 percent. The number of registered job-seekers reached around 122,000 in early January, of whom 80,000 were registered in the fourth quarter of last year.
Verslo Zinios, Lietuvos Rytas, Lietuvos Zinios, Respublika

25 percent of Lithuanian export
Mazeikiu Nafta (Mazeikiai Oil), the sole Baltic oil refinery controlled by Poland's PKN Orlen, produced and sold approximately 9.1 million tons of petroleum products, including gasoline, diesel fuel, liquefied gas, HFO and jet fuel, a rise of 63 percent from the 2007 volume sales of 5.6 million tons. The company exported about 7.3 million tons of products or 80 percent of total output last year. In 2007 the exports made up 3.9 million tons accounting for 70 percent of the output. In 2008 the value of company's exports came close to LTL 13 billion, which would comprise about 25 percent of total Lithuania's exports, Mazeikiu Nafta said in a statement. PKN Orlen owns 90.02 percent of Mazeikiu Nafta.
Verslo Zinios

Line of economic freedom
Lithuania dropped four places over 2008 to rank 30th out of 179 countries worldwide in the 2009 world economic freedom ranking released by the US-based think tank Heritage Foundation. With an overall economic freedom score of 70 points, Lithuania remained in the group of "mostly free" countries this year. In 2008 Lithuania ranked 26th out of 162 countries worldwide with the economic freedom score of 70.8 points. This year the ranking of world's freest economies is again topped by Hong Kong and Singapore, while Australia changed places with Ireland to rank the third. Estonia dropped one place to rank 13th while Latvia moved down from the 38th place to 45th in the 2009 ranking.
Verslo Zinios

Wednesday, 14th of January

Lietuvos Energija confirmed the plans
Lietuvos Energija (Lithuanian Energy), the power transmission subsidiary of Lithuania's national investor company Leo LT, has confirmed officially that it will seek to keep this year's investments at the average level of several last year, i.e. some LTL 120-140 million. The investment plans of 2009 would be reviewed later, yet the amount of investments should remain similar to last year's level, Lietuvos Energija CEO Darius Masionis said during a news conference on Tuesday.
Verslo Zinios

Settled debts
After Vilnius International Airport (VIA) has toughened its stance toward debtors, two of its three key customers -- Latvia's Airbaltic and Lithuania's charter airline Aurela -- have settled their debts. VIA spokesman Arunas Marcinkevicius confirmed that Airbaltic and Aurela had no outstanding debts to the airport. However, the biggest debtor, FlyLAL-Lithuanian Airlines, still owes the airport around LTL 20 million, he said. In an effort to make FlyLAL, Airbaltic and Aurela pay off their debts, the airport last year sued the three air carriers and asked the court to freeze part of their assets.
Respublika, Lietuvos Rytas

The government does not know what to do about Klaipedos Nafta
Lithuanian Prime Minister Andrius Kubilius said on Tuesday that the government had not yet decided whether or not to sell a stake in the oil product terminal Klaipedos Nafta (Klaipeda Oil) to Poland's PKN Orlen, but confirmed that he would discuss this issue with his Polish counterpart during his visit to Warsaw on Wednesday. "There is no decision either to sell or not to sell. Discussions are ongoing. Tomorrow those discussions will take place in Warsaw. And that's all I have to say," Kubilius said. "We are aware of Mazeikiu Nafta's logistics problems and are ready to help solve them in an efficient way. We do not think that the sale of Klaipedos Nafta shares should be the key issue," he said. Kubilius repeated that the government saw no link between solving the refinery's logistics problems and selling the shares in the oil product terminal. Mazeikiu Nafta, which is owned by PKN Orlen, wants to build a product pipeline from Mazeikiai to Klaipeda and seeks operational control of Klaipedos Nafta. The refinery says that its investment in the project will depend on the government's decision whether to sell the shares.
Lietuvos Rytas, Lietuvos Zinios, Respublika, Verslo Zinios

Tuesday, 13th of January

Prices decreased
Consumer prices rose by 8.5 percent in Lithuania in December year-on-year, the country's Statistics Department reported on Monday. Twelve-month inflation average was 10.9 percent last month. Compared with November, the consumer prices shrank by 0.1 percent in December as the prices of fuel, clothes and footwear declined. Month-on-month, the prices went down for the second consecutive month in December. Earlier the department projected that the annual inflation and the twelve-month inflation average would total 8.6 percent and 11.1 percent in December, respectively, and the consumer prices would remain unchanged month-on-month. In December, the monthly consumer price index was the most affected by the declines of more than 3 percent in the prices of transport goods and services, clothes and footwear. Meanwhile, the prices of housing, water, electricity, gas and the goods and services in other fuel group increased by 2.6 percent, month-on-month, while the prices of various goods and services climbed by 2.1 percent, food and soft drinks - by 0.3 percent.
Lietuvos Rytas, Verslo Zinios, Lietuvos Zinios, Respublika

The market fell by one third
Lithuania's real estate market, one of the main victims of ongoing financial crisis, plunged by more than one-third on average last year, the Center of Registers reported citing preliminary estimations. The downturn affected all segments with the demand in cottages showing the steepest decline. Some smaller towns reported zero real estate sale transactions for some months of 2008. According to the data made available by the Center of Registers, house sales dropped by 32.7 percent in Lithuania last year compared with 2007. Apartment sales shrank by 35.8 percent, non-residential buildings and premises - by 38.7 percent and 20.1 percent, respectively, cottages - 50.4 percent and land parcels - 33.9 percent.
Lietuvos Rytas, Verslo Zinios

Evaluated the bank
The international business and finance magazine Global Finance has named SEB as the best trade finance bank in Lithuania for the second year in a row. The SEB Group's banks in the Nordic region, Sweden and Latvia have also received this award, Lithuania's SEB Bankas has said in a press release. This year the magazine selected the best trade finance providers in 68 countries. The selection criteria included the volume of transactions and market share, as well as the quality of services, pricing policy and innovative technologies. Global Finance, which has been published since 1987, has 50,000 subscribers and more than 180,000 readers in over 158 countries.
Lietuvos Rytas, Verslo Zinios

Monday, 12th of January

Reserves increased
Lithuania's official international reserves increased by LTL 960 million or 6.5 percent in December from November, to reach LTL 15.8 billion, the central bank reported on Thursday. The rise mostly resulted from a LTL 978 million increase in the deposits of other monetary financial institutions with the central bank. However, the overall increase was partially offset by a LTL 148 million decline in the deposits of central authorities with the central bank, the Bank of Lithuania said.
Verslo Zinios

Deficit decreased
Lithuania's exports grew by 31.3 percent in January-November 2008 from a year earlier to reach LTL 51.9 billion, while its imports rose by 19.3 percent to LTL 67.3 billion, the Statistics Department reported on Friday. In November compared with October, however, exports and imports declined by 12.8 percent each group. In November year-on-year, exports rose by 17.2 percent, while imports fell by 7.2 percent. The country's foreign trade deficit for January-November narrowed by 8.9 percent year-on-year to LTL 15.4 billion, according to preliminary data based on customs declarations and Intrastat reports.
Verslo Zinios, Lietuvos Zinios, Respublika

Foreign direct investment (FDI) in Lithuania reached LTL 33.48 billion as of October 1, 2008, down 5.7 percent compared with the start of the year figure of LTL 35.5 billion, the Statistics Department reported on Thursday citing preliminary estimations. FDI per capita slid to LTL 10,000, from LTL 10,500 as of January 1. Sweden was the largest investor in Lithuania with LTL 5.15 billion or 15.4 percent of the total FDI in the reporting period.

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