More competitiveness with currency repeg
FINANCE PREPARATIONS FOR EU MEMBERSHIP HAVE BOOSTED INTERNAL REFORM IN LITHUANIA, PLACING THE COUNTRY IN AN INCREASINGLY COMPETITIVE POSTION FOR EXPORTS AND EASING THE WAY FOR INVESTORS

PETRAS CESNA Lithuanian Minister of Economy: believes internal reform has been accelerated by EU support

Due to the unfavorable structure of the Lithuanian economy, the country's slowdown after the 1998 Russian crisis was prolonged in comparison with the other Baltic countries. Of the three Baltic states, Lithuania had maintained the strongest trade links with Russia, Belarus, and the Ukraine. However, ongoing restructuring of economic agents, mainly involving an export reorientation towards EU markets, has led to sustainable export growth. As a result, Lithuania expected a 5% increase in GDP in 2001 and the country's medium-term economic outlook, due to the upturn in the Russian economy and an increase in domestic demand, is for relatively brisk growth. Minister of Economy Petras Cesna believes that these upward trends will be reinforced by the economic reforms that Lithuania has been undertaking in order to meet EU membership requirements. He states, "In order to join the EU, we have to comply with certain requirements and so we have been carrying out our internal reforms in accordance with these. Consequently, as the very prospect of EU membership involves the technical, as well as financial, support of the EU, the process of internal reform in Lithuania is accelerated."

DALIA GRYBAUSKAITE Lithuanian Minister of Finance: pegging the litas to the euro will benefit exports

One of the most important steps taken by the government this year was the February re-pegging of the country's currency, the litas, from the dollar to the euro. Chairman of the Board and Governor of Lithuania's Central Bank Reinoldijus Sarkinas elaborates on this move, "As far back as 1994, our currency was pegged to the dollar. However, as things later developed, especially after 1998 and the increasing trade with EU countries, we made the decision to shift from the dollar to the euro." Mr. Sarkinas notes that as the country's foreign debt is already in euros, the re-peg will mean fewer losses for the government with regards to debt servicing. Furthermore, as Lithuania's exporters will now be using the same currency as that of the majority of their markets, he believes that the re-peg will further boost the Lithuanian economy. Minister of Finance Dalia Grybauskaite adds that the re-peg will undoubtedly raise the competitiveness of Lithuania's export products, as the country now maintains 50% of its trade with EU countries.

Lithuania's privatization program has been at the core of the country's economic reforms and is currently in its final stages. The country's private sector now accounts for 70% of GDP. Still, the State Property Fund has 3,500 state-owned enterprises yet to sell and the combined value of the assets is estimated at US$1 billion. President and Chairman of the Management Board of the National Stock Exchange of Lithuania, Rimantas Busila, advocates a pragmatic approach in the sale of these remaining assets and has been encouraging the government to make fuller use of IPOs. He states, "In our opinion, it is extremely important how these companies are going to be privatized and we believe that a certain percentage of shares should go through the stock exchange, which would provide the opportunity for investors to acquire them. If this is not the case, we will have problems with market liquidity and a lack of share free-flow. We have submitted specific proposals to the government and I think we are making considerable progress."

On another note, Mr. Busila remarks on the strong support of America's Lithuanian community in the country during the last 10 years. He explains, "The first business contacts that emerged for us after independence in many spheres were with Americans of Lithuanian origin. Thanks to these connections, we were able to build a relationship with the U.S. Securities and Exchange Commission when we were starting our capital market. This greatly assisted us in building up the legal framework." Recently, Omnitel, which was established by Americans of Lithuanian origin, has grown into a technology giant in Lithuania, dominating 70% of the market.