Lithuania Business Review. 25 Years of Independence

THE JOURNEY CONTINUES Dear Reader, This exclusive issue of the Lithuanian Business Review which you are now holding in your hands is intended for the anniversary of the Lithuanian independence. It covers a 25-year period from March 11, 1990, the day when the country's parliament – then the Supreme Council – proclaimed the restoration of an independent Republic of Lithuania.

Lithuania is a small country with a population of about 3 million – comparable to the number of people living in Madrid, Mongolia or Iowa State, USA. Like the country itself, its economy is not large. Last year, the GDP of Lithuania amounted to 36 billion euro occupying according to IMF, the 83th place in the list of global economies.

Meanwhile, Lithuania enjoys a far higher GDP per capita (depending on the ranking method), occupying the 41st place, and according to the quality of life indicator it stands still higher – in place 27 – in the list of world countries.

Through historical reviews covering a broad spectrum of Lithuanian infrastructure, business, agriculture, education sectors as well as political and legal systems we tell you how this little part of the former Soviet empire became what it is today. These reviews are only a small part of what could be told about the dramatic historical period marked by significant breakthroughs and contradictions, rigidly referred to as the “transition period” by analysts. However, I believe that you still feel the pulse of the epoch and the stormy waves that

shivered the timbers of the Lithuanian ship in recent decades.

After all, Lithuania had to deal simultaneously with a multitude of complex jigsaw puzzles: first, separate the country's economic infrastructure from energy, transport, communications and other systems centrally controlled from Moscow – this achievement spanned 10 to 25 years for the country, while in some areas the work is only midway to the goal. Read more about it in the articles The Ship Called Independence and the Lithuanian corridor. Simultaneously, the country had to create entirely new “rules of the game”, shifting from the state-planned economy to a market-based and competitive economy, stepping through “shock therapy” and other painful methods of reforming and their consequences (article Escape from the Collective Farm). At the same time, the country had to deal with global and regional crises with short breaks between them (Lithuanian business: a wavy path uphill).

One of the overviews is completed by the optimistic phrase: “The ship of the Lithuanian power industry is finally mooring in a quiet harbour, which name is Independence”.

Nevertheless, it is clear that it is too early to summarize – the 25-year journey of independent Lithuania continues.

Wish us fair winds and following seas.

Valdas Kaminskas

EDITOR-IN-CHIEF Valdas Kaminskas

TRANSLATION Ilona Žukienė

EDITORS Vida Dauderienė Arnas Jozonis

DESIGN Danutė Šmitienė

FEATURES WRITTEN BY Dr. Lauras Bielinis, Dr. Darius Beinoravičius, Dr. Milda Vainiutė, Rima Rutkauskaitė, Dr. Algirdas Šakalys, Dr. Vaclovas Miškinis, Dr. Gerda Žigienė, Dr. Vytautas Petras Knašys, Dr. Bronius Kaulakys, Dr. Dalia Bardauskienė, Lidija Bajarūnienė

ADVERTISING Arvydas Kvietkus Email arvydas.kvietkus@leidybosidejos.lt Tel. +370 602 23176

PUBLISHER VšĮ Leidybos Idėjų Centras Gedimino g. 47–219, LT-44242 Kaunas, Lietuva Tel. 8 (37) 20 02 72 PRINTING-HOUSE UAB BALTO print Circulation 4000 egz.

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COMMENTARY

KAZAKHSTAN – OUR RELIABLE PARTNER

Prime Minister Algirdas Butkevičius about increasing economic ties with Kazakhstan LBR: How do you see bilateral economic relations with Kazakhstan? Is it possible to call them exceptional in the context of the Central Asian region?

Kazakhstan is, without a doubt, the key partner of Lithuania in the Central Asian region. Trade between Lithuania and Kazakhstan totals to 75 per cent of the Lithuanian trade turnover with the entire Central Asian region. In 2014 it amounted to 956.2 million euro.

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For the sake of justice it should be noted that in 2014 Lithuania’s exports to Kazakhstan have slightly diminished.

However, the decline in export is related to changes in the geopolitical environment and, as a result, among other factors, to currency fluctuations. Due to changes in exchange rates products of Russian and Belarusian manufacturers which, by the way, are not subject to customs duties as these countries are members of the Eurasian economic union, became cheaper for Kazakhstan consumers. In this way, our

exports, or more exactly re-exports (which account for nearly 90 per cent of exports to Kazakhstan) decreased by 6.7 per cent in 2014. In terms of individual sectors, the decreased traffic of goods mostly affected our carriers. But there are positive signs – noteworthy is the activity of our food industry. In 2014, food exports to Kazakhstan increased by about 130 per cent.

LBR: Of what areas of cooperation you are happy, and where would you like to see more progress? What “huge” cooperation projects could you highlight?

Without a doubt, the greatest input with Kazakhstan has been made in the field of transport and logistics. Transport services account for as much as 75 per cent of Lithuania’s total services exports to Kazakhstan.

Lithuania and Kazakhstan develop joint railway projects and two container trains Saulė and Baltijos vėjas shuttle regularly to and from Kazakhstan. Klaipeda seaport attracts a lot of cargo from Kazakhstan. I should also mention the decision of Kazakhstan railways of building a terminal of goods in Klaipėda seaport. I have no doubt that the Klaipėda seaport, with a well-developed infrastructure, will become a reliable gateway for the exports of Kazakhstan products to the EU market, which will also contribute to the growth of bilateral trade turnover.

We also enjoy very close cooperation with Kazakhstan in the medical field. Kazakh doctors and nurses have been upgrading their qualifications in Kaunas Clinics and Vilnius University Hospital for many years. Medical personnel from Lithuania

go to Almaty and other regions of the country to provide consultations to Kazakhstan colleagues. Worth mentioning is the input of Prof. Rimantas Benetis in Kazakhstan, where the professor performs the most complex cardiac surgeries.

Close cooperation is going on in the field of education.

Perhaps eight higher education institutions, including the University of Vilnius, Kaunas University of Technology, Vytautas Magnus University and others, have entered into a consortium for dissemination of higher education in Kazakhstan. The country’s youth is invited to obtain a diploma of the European Union, and plan postgraduate studies in Lithuania. I am glad that the Presidential International Scholarship Foundation of the Republic of Kazakhstan Bolašak has included four Lithuanian institutions (Lithuanian University of Health Sciences, Kaunas University of Technology, Vilnius University, and Vilnius Gediminas Technical University) on the list according to which postgraduate students abroad are awarded scholar­ ships. Since 2010, more than 1,000 students from Kazakhstan have graduated from studies in Lithuania.

With regard to the areas where we would like to see more progress, we should mention the tourism sector. In 2014 we hosted over 60 thousand of tourists from the Central Asian region. In comparison with 2013, the growth is 38 percent.

However, there is a lot of untapped potential in this field.

We really have something to show in Lithuania to tourists from Russia. We have a large recreational and medical potential. However, the lack of direct air routes to Vilnius or Kaunas limits our ability to attract more tourists. This field requires greater input.

Lithuania and Kazakhstan develop joint container shuttle trains to and from Kazakhstan

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Strenghtening cultural ties: the play Spell of Korkyt directed by the master of Lithuanian theatre Jonas Vaitkus was recognized as the best theatre play at the festival „Theatre Spring 2015“ in Alma-Ata, Kazakhstan

LBR: How do you assess the efforts of diplomatic and other executive structures of the two countries to develop economic co-operation, to reduce the economic, organizational and informational barriers?

Klaipėda port on June 5–6 “New Silk Road – reliable connection between Europe and Asia”. It is another great opportunity for the businesses of our two countries to meet and discuss further successful cooperation projects.

In the field of economic cooperation the objective of the two countries remains unchanged – to develop and strengthen trade and economic relations, as is provided for in the agreement of 1997 between Kazakhstan and Lithuania on trade and economic cooperation. There is a necessary legal base – the countries have signed most important economic cooperation contracts – on investment promotion, on the avoidance of double taxation of capital, and on economic cooperation.

We constantly develop bilateral economic relations and strengthen cooperation at the level of heads of our governments. The visit of government and business representatives to Kazakhstan in May might be very significant.

This is a record large mission with over 50 business representatives in it. I believe that meetings with the president of the Kazakhstan, Prime Minister, leaders of the Majlis and the Senate and the signed intergovernmental agreements will strengthen ties between our countries.

Two Lithuania – Kazakhstan business forums will be organised in Astana and Almaty – it’s a great opportunity for closer mutual cooperation and subsequent implementation of initiated projects, as well as for negotiating new contacts.

Along with other measures entrepreneurs will have the opportunity to meet with the Kazakh authorities and present their proposals on the reduction of economic barriers and on enhancing cooperation. These proposals will be included in the agenda of another important format of bilateral relations – Lithuanian and Kazakhstan economic cooperation commission.

Another event very important for the development of bilateral relations is a huge international transport and logistics conference of Lithuania and Kazakhstan that will be held in

LBR: What kind of feedback or, perhaps, comments, or requests do you receive from our country‘s entrepreneurs, corporate leaders on further development of relations?

The interest of Lithuanian businessmen in the market of Kazakhstan is huge. The country applies a principle of the rule of law, favourable tax environment, and the opportunity to convert local currency. I can say that Lithuanian business is mature and familiar with the specifics of the market. It has no unreasonable expectations, which might have been expected a decade ago, and penetrating the market is well weighed and deliberate. Both in a domestic market and abroad, stability and red tape reduction is very important for business.

Specifics of the region is close relation between the government and business, therefore, there is a natural interest of businessmen not only to build relations of business but also relations with the representatives of the country’s state institutions – in order to obtain initial information about the legal framework of the country governing business and business practices. This is why, in addition to official meetings, we attempt to organise meetings between Lithuanian business and government or representatives of different institutions.

LBR: How the bilateral economic cooperation was affected by the political changes of 2014 and increase of political tensions in the Eurasian region?

In fact, changes in currency exchange rates and declining oil prices have a negative impact, but I hope that this situation will change for the better, and I sincerely wish success to Kazakhstan.

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COMMENTARY

A SMALL AND OPEN ECONOMY CAN THRIVE ONLY WITH EXPORTS Interview with Minister of Economy Evaldas Gustas LBR: Lithuania has always emphasised that openness of its economy and its strategically favourable position between the East and the West significantly influences rapid economic growth. How the country's economic situation and its key indicators are affected by the recent geopolitical developments, and rise of the confrontation between the East and the West?

Although sanctions imposed by Russia on goods imported from Lithuania and the European Union (EU) have slowed the pace of development of the Lithuanian economy, it has remained one of the fastest-growing in the entire EU, and increased by 2.9 per cent last year. Gradual recovery in domestic consumption after the economic crisis and investment helped the economy grow and partly offset the slower increase of export.

The country's exports of goods in 2014 was 0.7 per cent less than in 2013, and to the large extent it was a result not only of the Russian embargo but also marked decline of oil exports due to the unfavourable situation in the global oil market.

It is very likely that adverse economic and geopolitical context of the Eastern markets may lead to medium-term structural changes in Lithuanian exports. It could be seen in the statistics of the last quarter of 2014. Lithuanian exports to the EU in the fourth quarter of 2014 grew by 5.5 per cent, while in the CIS countries it decreased by 4.3 per cent.

This was especially affected by the decline of exports to Russia and Belarus, by 7.9 per cent and 8.5 per cent, respectively.

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Lithuanian production industry (especially food) and companies engaged in international trade and haulage were affected by the Russian embargo and had to react quickly to changing external circumstances.

LBR: What actions did the Ministry of Economy take to minimise the negative consequences of the Russian embargo and other economic barriers to the Lithuanian economy?

Last year, the Ministry of Economy, together with other ministries and state institutions, has developed an action plan – recommendations for Lithuania to diversify exports and reduce losses in 2014–2015 due to Russia’s embargo. The envisaged measures were focused on three main objectives: help entrepreneurs find new markets and business partners, improve access to financing sources and strengthen economic representation of Lithuania abroad.

The Ministry of Economy together with the Ministry of Foreign Affairs attempt to exploit all possible bilateral relationships by going to trade missions in foreign countries, making intergovernmental cooperation commissions and business forums, and organising individual bilateral meetings.

In addition, the Ministry of Economy together with the export promotion agency Enterprise Lithuania has organized a project, which will help Lithuanian entrepreneurs to introduce Lithuanian products in foreign trade networks with the help of foreign dealers. For example, currently we have signed one specific contract with Oman in the IT sector, and two Lithuanian food producers begin to operate with their

Lithuanian exports to the EU in the fourth quarter of 2014 grew by 5.5 per cent, while in the CIS countries it decreased by 4.3 per cent largest shopping centres. It is expected to commence exporting in the near future. Also, while strengthening economic representation abroad, areas of activities of the Lithuanian Commercial Attaché are expanded.

In 2015, the list of recommended tasks for institutions has been supplemented by new measures, the implementation of which will help businesses to find new markets and will facilitate the search for business partners.

LBR: How is the country's economy influenced by the support from the EU structural funds in the current geopolitical context?

A small and open Lithuanian economy can thrive only by exporting part of its goods and services, as domestic demand is too low to ensure further economic and technological development, productivity and the well-being of the population.

In 2014, in response to threats to businesses exporting to Russia and in order to create the conditions for effective export diversification and search for new market participants, there was additional call for tenders according to the facility “New Opportunities”. This facility is designed to support businesses and their presentation in foreign international exhibitions, and is very popular among businessmen: during the period of 2007–2013 as many as 1063 support contracts for 40 million euro were signed.

The new programming period of 2014–2020 is characterized by exceptional focus on increasing the competitiveness of small and medium-sized businesses and promotion of internationalization. Based on the facility “New Opportunities LT”, it is estimated to invest 29 million euro support from EU funds, while 4.63 million euro should be distributed according to the currently announced calls for tenders.

“Invest LT-2” facility also contributes to export promotion.

While the main objective of this facility is to encourage direct inward investment and creation of jobs, but it indirectly contributes to export promotion, as supported activities are geared toward start-up and development of high value-added production and (or) high added value services.

It is also planned to implement three new facilities: “Expo Certificate LT”, “Expo Consultant LT”, and “Business Cluster”. These facilities will enable companies to finance certification costs of products and services, get the necessary counselling and other assistance on matters of support for exports and search of potential markets, to include themselves in international networking chains in order to find new export markets for their produce.

LBR: Business, especially providing goods and services in the retail segment, often emphasizes the decline in the number of users because of the massive emigration of population. What is your perception of these processes,

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COMMENTARY

STAYING UNITED IS OUR BIGGEST STRENGTH

Interview with Minister of Foreign Affairs of Lithuania Linas Linkevičius LBR: It became necessary to redirect exports to other markets after Russia imposed an embargo on Lithuanian food and some other goods in 2014. Does the Ministry have an action plan on export re-orientation and how is its implementation progressing? What regions and what markets do you see as most promising for Lithuanian products?

To open opportunities for Lithuanian exports into new markets and to strengthen positions in already traditional markets is an important task for this Government. This task involves many relevant ministries, as well as a close cooperation with the business community. The Economic Diplomacy Council (established in 2013) serves as a key instrument to strengthen the Lithuanian business positions abroad. The Economic Diplomacy Council confirmed a list of 27 countries as a priority for Lithuanian economic relations. Lithuania has a different agenda with each listed country – with some countries we should enhance official contacts, establish or expand economic treaties, get sanitary and phitosanitary certificates, in others – promote specific business sectors and/or pursue other economic interests.

The Russian embargo for EU food and agricultural pro­ ducts forced us all to pay more attention not just to traditional trade partners but also to other potential markets – Japan, China, USA, Canada, Brazil, Arab states of the Persian Gulf and the African Continent. With our partners we organize Economic diplomacy visits with business missions that are led by the President, the Prime Minister or Ministers. Our diplomatic corps is instructed to help Lithuanian expor­ters to set up initial contacts with key importers and supermarkets chains. The latest and very successful visits with the 12

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business delegations were made to Saudi Arabia, United Arab Emirates, Australia, Georgia, and Armenia. A very big part in the formation of business missions is taken by the Enterprise Lithuania, business associations and Lithuania food exporters associations, and, of course, the Lithuanian diplomatic corps contribute significantly to the success of these missions.

LBR: Energy security, diversification of the energy resources supplies is one of the most import challenges that Lithuania faced for decades. How close to full resolution of the problem are we now?

The Baltic nickname “energy islands” will soon change.

Already at the end of last year LNG ship called Independence sailed into Klaipėda‘s port bringing the first ever alternative gas supply to our region. Klaipėda‘s LNG terminal (fully operational from the 1st of January 2015) is the specific contribution of Lithuania to strengthening the region’s energy security.

With the aim of enhancing security of supply, we strive to speed up building missing gas and electricity interco­ nnections. The Gas Interconnection Poland-Lithuania (GIPL) pipeline project, which is expected to be done by 2019, will help the Baltic States diversify their sources of natural gas supply and connection to wider EU gas market; with the Balticconnector between Estonia and Finland region’s the gas market will expand by connecting Finland and Scandinavia with Continental Europe. Together with the gas interco­ nnections, gas storages, LNG terminal and full transposition of EU legislation Baltic market will be fully integrated and functioning within the EU gas market.

PRESENTING LITHUANIA AND ITS VALUES

Ask Lithuania how to present country in a creative way „IF NOBEL PRIZES MARK THE STEPS OF SCIENTIFIC AND SPIRITUAL EVOLUTION OF MANKIND, THEN WORLD EXPO FAIRS MAKE CERTAIN OF TRUST IN THIS PROGRESS”, SAYS ROMAS JANKAUSKAS, COMMISSIONER GENERAL OF THE LITHUANIAN PAVILIONS IN A NUMBER OF THE RECENT WORLD FAIRS. TODAY HE IS MANAGING THE LITHUANIAN EXHIBITION TEAM IN MILANO, ITALY, WHERE THE EXPO 2015 JUST STARTED.

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ithuania has always been a noticeable participant in world exhibitions. Even when the country was occupied, the name of Lithuania was mentioned among prominent independent states.

The country returned back to the world exhibitions arena in 1992, two year after restoration of the independence. It happened at the exhibition in Seville, Spain, where Lithuania participated with its Baltic sister Estonia. Time for preparation was short, so it was decided to exhibit only those values that had always been recognised as Lithuanian: a collection of amber and wooden statuettes of Sorrowful Christ.

COMMENTARY

The world exhibition in South Korea was held a year later, in 1993. Again, the time to prepare was limited, and the chosen theme of the exhibition was predetermined: the Challenge of a New Road to Development. Lithuanians took to South Korea, objects that brought them pride at that time – objects made from amber and bone china and… drill bits, carpets, tapestries which then were exported widely by the country.

The Koreans liked amber very much, and there was always a line of people standing at the souvenir kiosk who wanted to buy some, so amber was successfully sold.

Lithuania surprised the public at the exhibition in Portugal in 1998. One of its main exhibits of the exposition was kurėnas – an old flat wooden sailing vessel made by Curonian (region of the seashore) fishermen. The 150-year old kurėnas was placed on plates of Lithuanian glass that radiated blue light and symbolized the sea. The visitors were allowed to touch this old artefact – that caused lots of interest. Every guest who came to the pavilion wanted to touch it – that was an opportunity of a lifetime.

In 2000, in Hanover, Germany Lithuania shocked the Germans who thought they had seen everything. The so called Yellow Pavilion built by Lithuania became famous and was represented on every cover of the advertising publication material. There were so many people who wanted to get inside that the flows of visitors had to be regulated.

Furthermore, after entering the Yellow Pavilion, the visitors were in no hurry to move on – most of them decided to make it their main stop. The film A Flight across Lithuania or 510 Seconds of Silence became the main event of the exhibition and was recognized as one of the three best films shown at the EXPO as well.

The Yellow Pavilion appeared not only on the pages of the German press – it remained in the memory of the Lithuanians who associate the EXPO exhibitions with the Yellow Pavilion.

In 2005, in Aichi, Japan, Lithuania presented itself via smart construction of the DNA double helix. On screens placed on two constructions representing DNA helix, visitors could watch views of the country’s nature and culture moving from one screen to another every second. The last screen showed conversation between Fumito Tomoi, residing in Lithuania, and TV star Algis Ramanauskas – made in Japanese. Guests were also surprised by the pavilion guides who spoke Japanese.

The Japanese, who, according to Romas Jankauskas, are curious as children, gladly treated themselves to Lithuanian beer and snacks that were served with beer: boiled peas with pork slices, boiled beans, fried bread with garlic, cheese and smoked meet. Many of them learned to say the Lithuanian words labas (hello) and ačiū (thank you).

The most important thing is that after seeing the Lithuanian island, visitors love to share their impressions with others. “In Japan two million people visited our pavilion

If Nobel prizes mark the steps of scientific and spiritual evolution of mankind, then world EXPO fairs make certain of trust in this progress, maintains Romas Jankauskas, Commissioner General of the Lithuanian pavilions in a number of the recent world fairs though the population of the country is 130 million. However, those two million told others and this figure increased by several times”, spoke Romas Jankauskas.

Then Saragossa, Spain, another successful expo for Lithuania, came in 2008. In Saragossa which suffers from heat and drought Lithuanians decided to present the good that country has in infinite quantities – its rain. “Lithuania’s pavilion does not need any advertising. The name of the country has been echoed throughout the entire territory of Expo Zaragoza 2008 exhibition, and, most likely, not solely within this territory. After visiting the Lithuanian pavilion once, people, especially children, came back and brought their friends”, wrote the Spaniard paper covering Expo Zaragoza issues. “As soon as they enter the Lithuanian pavilion, children already know what they are going to do there – they just rush straight to the main installation called the Rain House.

This is a cube with walls of running water simulating rainfall. From time to time the walls are opening and afterwards closing. More cautious visitors run quickly inside the Rain House, where they can admire pictures of Lithuania. But children did not mind being sprinkled. Screaming, they

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Lithuania invited visitors to have a glance at the world from inside a large piece of amber at EXPO 2012 in Yeosu, South Korea

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ran into the Rain House and back out of it, crossing its water walls, so very often they came out of the pavilion completely wet, although with bright smiles and shining eyes on their faces.”

That was a tremendous success: the Lithuania’s Rain House during three months was visited by about 820,000 guests, a third more than planned for.

The Lithuanian pavilion again ranked among the most visited at the exhibition in EXPO 2010 Shanghai, China. In total, during the six months it was visited by 6 million people,

Participation in world fairs is a perfect way to fill the gap in knowledge about Lithuania, says Minister of Environment Kęstutis Trečiokas

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or double of what was expected. By popularity it outperformed pavilions of large countries such as Great Britain and Turkey.

At the exhibition with main theme “Better City, Better Life”, Lithuania emphasised that one-third of its territory is covered by forests, and cities originally blend architectural solutions and green areas. These accents were conveyed through the impression of a hot air balloon flight over towns, therefore the pavilion was equipped with an enormous balloon decoy with the basket alone occupying 10 square meters.

All information was then provided via hands-on screens in games, movies and other attractive visual forms. Lithuania's stand was nominated for the international EURO-PRIX Multimedia Awards for unique content presentation and management.

Exhibitors were overwhelmed by the performance of the mighty Lithuanian Žydrūnas Savickas when he pulled a 15-tonne bus for 20 meters.

“This is a wonderful pavilion with a strong accent of human life in the city”, Zhou Hanmin, deputy director of the World Expo 2010 Executive Committee, expressed his admiration.

Lithuania was presented as an amber country at EXPO 2012 in Yeosu, South Korea. Its exhibition invited visitors

COMMENTARY

Lithuanian pavilion with the huge decoy of the hot air balloon in the

to have a glance at the world from inside a large piece of amber, while people entering the pavilion would feel themselves like inclusions in the golden monochrome glowing amber.

The International Exhibitions Bureau expert commission offered the silver award to the Lithuanian pavilion for the creativity of exposition – the first such high award after regaining independence.

And then, Expo Milano 2015 has just started. Lithuania decided contribute to the theme of this Expo: Feeding the Planet, Energy for Life both as a country with rich agricultural traditions, and as a country focused on developing innovative technologies for industrial food production. “It is these characteristics which are helping it to carve out a prominent position amongst the countries of the so called “New Europe”, says Romas Jankauskas, Commissioner General of the Lithuanian pavilion.

The concept of the Pavilion, designed by a group of young architects from Kaunas, is composed of two cubic buildings joined by a series of interconnecting walkways, covering a total of 1,147 square meters. In its essence the design brings to mind the image of a set of scales (the title of the pavilion is Balansas/The Balance) and is intended to represent the balance between tradition and innovation, both key characteristics of the country’s agri-food sector.

Visitors to the Pavilion enjoy high-quality cheese, pancakes, rye bread, traditional cakes and many other typical

centre was ranked among the most visited at the exhibition in EXPO 2010 Shanghai, China

products from cooperatives, family farms, and small food businesses. Again, they can also enjoy the beauty of the many handcrafted objects made from natural materials such as linen, wool, wood, clay and amber.

“We seem to believe that we are already known as European Union member. But it is not the case. We are still a blank spot for many people in the world. So participation in world fairs is a perfect way to fill the gap in knowledge about Lithuania”, says Minister of Environment of Lithuania Kęstutis Trečiokas.

Lithuanian team at the just started Expo Milano 2015

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Skyscrapers of business centres in the heart of Vilnius Photo by D.Labutis, ELTA

“I decided to dive headlong into an unfamiliar area. Of course, it was scary and risky, but we survived,”, Visvaldas Matijošaitis, at the beginning of the independence – a policeman – and currently a co-owner of one of a largest Lithuanian businesses, says

Speaking of Lithuanian businessmen, R. Dargis distinguishes four types. The first type are restless people, who had different ideas in Soviet times and wanted to act, but were squeezed into the “frames”. Creation of own capital then was subject to criminal liability – as anti-socialist elements, such businessmen were imprisoned. When they were permitted to act, they were the first to offer services and goods. This type of entrepreneur, according to R. Dargis, is best illustrated

by Augustinas Rakauskas, the developer of Senukai trade network, now the largest store chain in the Baltic market of building, DIY and household supplies.

The second type, according to R. Dargis, is representatives of technical intelligentsia, who privatised enterprises and became entrepreneurs, although previously they never considered making business. For example, Bronislovas Lubys, a former chief engineer of Jonava Azotas factory, later – its CEO, succeeded to privatise the entire company and become one of the strongest business persons in Lithuania.

R. Dargis identifies himself to the third type. These are people who never thought about the business and started it from scratch, using their education and work experience.

While working in a large company as a deputy director, R. Dargis was responsible for the entire construction process and knew it very well. But he had to leave the job, and having no other choice, R. Dargis then set up his own construction company. Now UAB Eika is one of the largest real estate development and construction companies in Lithuania.

The fourth type of entrepreneur is people who graduated studies in the West, knowing what business management, marketing, and corporate finances are. They are persons of about 35 years old with their own business attitude, or working as executives of foreign corporations in Lithuania.

“Every type of entrepreneur has evolved in their own way, each of them has their own understanding, and now everyone is caught in different positions. Business has been changed not only by government decisions, but also an understanding that it is not enough to just produce, and that a product or a service has to be presented and sold. I think we are still in the early stage of this understanding,” said the leader of the Confederation of Lithuanian Industrialists.

1991: THE VOUCHER PRIVATISATION “We bought investment vouchers, purchased real estate for them, sold it and bought again for the money earned.

Dizzying opportunities and big money. I remember these times nostalgically,” T. Karosas speaks about the voucher privatisation. Currently, he is the owner of a leading pizzeria network Čili Pica, several restaurants and an e-commerce portal pigu.lt.

The history of the largest Lithuanian retail chain Maxima also started from investment vouchers in 1992. Then medical graduates founded start-up, which used vouchers to acquire a small alcoholic beverage shop in Vilnius. Later they bought more vouchers and used these to acquire wholesale warehouses in Vilnius, and four years later, in 1996, opened their first store in the regional town of Marijampolė. Today it is the largest retail chain in Lithuania and one of the largest in Eastern Europe. At the beginning of 2014 there were 230 Maxima stores in Lithuania, 144 in Latvia, 71 in Estonia, 42 in Bulgaria, and 21 in Poland. The shopping network employs about 30,000 people in Lithuania and abroad.

In 1991 –1993 foreign businessmen carefully started investing in Lithuania. According to the Lithuanian Department

HOW DID THE VOUCHERS WORK? The so-called investment, or privatisation vou­ chers were issued in early 1991 for all citizens of the Republic of Lithuania, depending on their age, from 1 to 5 thousand vouchers per person.

They have been used to purchase own housing and to privatise state assets. In total, more than 2.5 million investment accounts were opened in Lithuanian banks.

Originally, the sale and transfer of vouchers were not allowed, but later restrictions were lifted, therefore individuals and all private Lithuanian entities could buy and privatise state assets by redeeming their vouchers.

When acquiring the assets according to the Law on Initial Privatisation, only 25.1 per cent (in the initial stage – 5 per cent) of the purchase price of the privatised entity had to be paid for in cash, and while buying apartments – only 20 per cent.

The rest of the price could be paid in investment vouchers. The circulation of investment vouchers and their use to acquire the privatised assets had been discontinued only at the end of

1995.

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of Statistics, in 1991, foreign direct investment in Lithuania amounted to almost 10 million euro. Although at that time the political situation was unstable, and not all necessary laws were adopted yet, privatisation with cash attracted investments, as foreign companies could participate in it. Giants such as tobacco company Philip Morris and food giant Kraft General Foods International, Inc. invested in Lithuania during the first phase of privatisation. In 1993, a total of 48 facilities were sold for 21 million U.S. dollars.

1994–1998: UPS AND DOWNS The temporary money – coupons – used during first years of the restoration of independence, called vagnorkės after the name of the Prime Minister Gediminas Vagnorius who introduced them, were replaced by the national currency – the litas in 1993.

The introduction of the litas had a stabilising effect on the economy. By fixing the exchange rate of the litas and pegging it to the U.S. dollar, local and foreign investors gained more confidence. Such confidence is illustrated by the numbers: in 1995, after launching the second phase of the state property privatisation, at the beginning of the following year, 1996, foreigners had invested 306 million U.S. dollars in Lithuania and in 1997 the amount of investment had grown to 510 million U.S. dollars. In the same year, reading the annual report to the Parliament, the President of the Republic of Lithuania Algirdas Brazauskas stated that the most difficult economic period is in the past.

However, Lithuania still had to go through the Russian financial crisis in 1998.

Until 1998, Lithuanian industry export to Russia accounted for 35.7 % of total Lithuanian exports, therefore the Russian financial crisis caused an economic shock in Lithuania. However, this accelerated the deployment of new technologies and refocusing to much more demanding Western markets. In business, this has been implemented at an amazing pace: already a year later, in 1999, exports to Russia accounted for only 18.2 % of total Lithuanian exports. The rapidly strengthening Western economy, unlike in Russia, also contributed to this sudden change. It was a time of the growing popularity of the Internet, expansion of telecommunications, information technology, computer manufacturing and other businesses related to these areas.

However, not all Lithuanian companies managed to restructure and adapt. The Russian financial crisis was painful to the food, pharmaceutical, spirits producers, as well as the

The State Property Fund was founded in 1998 and started operating at full capacity in 1998–2000 34

LITHUANIAN BUSINESS REVIEW / 2015

oil industry. Companies began to dismiss people or forced them to take unpaid leave.

In order for the state to collect enough taxes, the Prime Minister G. Vagnorius instructed business controlling authorities to tighten the supervision of businesses. Even those who were indebted to the budget just over a thousand litas were threatened with various penalties. The press soon called such instruction a “cruel campaign”. For unpaid taxes alcohol production and trade enterprises have had licenses withdrawn, accounts of undertakings were frozen etc.

Inspectorate attacks and threats turned the business environment into a battlefield.

On the other hand, the Russian crisis provided some very valuable lessons. One of them was that companies learned to diversify their activities, and sales areas in the markets.

The lessons learned proved valuable when experiencing a more difficult crisis in 2009. The State Property Fund was founded in 1998 and started operating at full capacity in 1998 –2000. Within three years, more than 2,500 privatisation contracts were signed. Privatisation bailed the sugar industry out from bankruptcy: 4 companies were sold to Danish and Lithuanian investors.

The state-owned telecommunications monopoly Lietuvos Telekomas was privatised for the massive amount in those days, 500 million U.S. dollars. Moreover, the investor, the Scandinavian telecommunications giant TeliaSonera has committed to invest another 500 million U.S. dollars to the modernisation of the company. This massive sale of state property stabilised the country’s finances and overall macroeconomic situation.

2000–2007: THE GROWING TIGER In these seven years the Lithuanian economy has been characterised by consistent and rapid growth. This way, for instance, in 2003, GDP compared with 2002 increased by 9.7 %. Lithuania, together with two other Baltic states, Latvia and Estonia, has been called the Baltic Tigers in the world’s press. This, perhaps, was one of the best advertisements for Lithuania over the past decades.

The GDP growth was driven by export volume rising like yeast: Lithuanian goods could easily compete with similar quality products of other countries because of their cost, for relatively cheap labour and electricity was lower than in other countries.

In 2000, Lithuania started negotiations for membership in the European Union (EU). Optimistic expectations related to the country’s accession to the EU, drove higher consumption in Lithuania. On 1 May 2004 Lithuania became a member of the EU. Not only a market with 500 million consumers was open for business – Lithuania began receiving much-needed assistance from the EU structural funds.

Lithuanian goods easily compete with similar quality products of other countries because of their cost, for relatively cheap labour and electricity

In two years, more than 290 million euro was assimilated for the development of production. Effective use of EU funds has led to more rapid economic growth and creation of jobs.

There was no business that would not enjoy increased turnover and after 2005 profits, in particular.

However, chronic ulcers of economy, not treated from the very beginning, also opened up. Companies not financing research could not develop unique products, no investments were made in employee training, therefore the country started to experience a sharp shortage of professionals, while low wages encouraged emigration of unskilled labour who could earn more in Ireland or England.

Unreasonable solutions began: sensing the demand, business owners started to borrow recklessly for investment, guaranteeing with personal property to the banks. In order to deter people from emigration, salaries were increased rapidly.

With increasing incomes, people rushed to buy real estate, taking bank loans for several decades ahead for this purpose.

Following the purchase of housing, while it is still only in the drawings, the real estate bubble began to swell. Consumer expectations also increased and it seemed that the feast will go on endlessly.

2009–2012: TIGHTEN THE BELT In 2008 only very few would have predicted that the golden age will end so abruptly, and that the fall will be so sudden.

Although in the first half of 2008 bad news started spreading from the United States, Lithuanian CEOs still counted growing sales and profits. Only Lithuanian logistics companies began to receive fewer orders, and tried to warn about the approaching crisis.

“It seemed like someone turned off the lights everywhere at the same time,” businessman Petras Narbutas described the beginning of the crisis. Taking advantage of European

support and a big bank loan, the entrepreneur built a modern furniture company UAB Narbutas ir Ko, but suddenly all orders were gone, nobody needed furniture anymore, and there was no money to pay salaries to people.

In order for a business to survive while receiving one-third of what it used to get, and in some enterprises even two-thirds less than the income of the previous year, the company executives cut their employee salaries by half or even more.

People have been dismissed or discharged for temporary unpaid leave, corporate parties and other entertainment came to an end, and investment projects have been pushed deep in the drawers. The great time of belt-tightening began. At a time when the help of banks was needed most, they cut off funding almost completely. In 2009, the manufacturing industry created almost 25 % less (in terms of current prices) value added than in 2008. The government created a business rescue plan, providing for the renovation of residential housing, expecting to give more orders for construction materials industry and construction companies, which in turn, might reduce the unemployment, but it failed.

While economists, analysts and politicians were drawing graphs and guessing whether the downturn will be shaped in them as a letter W or L, and prophesising of how long it might take, entrepreneurs took practical steps.

The global crisis has had little effect on Russia, therefore Lithuanian food industry again took note of it, and the export of food products to Russia increased significantly. Producers also began to actively look for other markets in developing countries, such as Brazil, Mexico, South Africa, and United Arab Emirates. The result of these efforts: in 2010, with the stagnating domestic market, two-thirds of all manufactured products in Lithuania were sent abroad. If in 2009 the recorded decline in gross domestic product was 14.3 %, so in 2010, the gross domestic product grew by 1.3 %. Recession lasted a total of six quarters in Lithuania.

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“During recent crisis Lithuanian entrepreneurs have learned an important lesson – in order to achieve results, it is necessary to find a common language with employees”, states Robertas Dargis, President of the Lithuanian Confederation of Industrialists

Nevertheless, it is clear that many things have not yet been done within 25 years. Some manufacturers failed to establish their own brands and remained the contractors for somebody else’s orders; energy costs still make up an excessively high part of product costs; Lithuania still has to catch up with Western manufacturers by labour productivity, a considerable problem is that a lot of products and services are still focused on Russia.

2014: BUSINESS IN THE GRIP OF SANCTIONS Russian politicians previously have also used import restrictions on Lithuanian cottage cheese, Latvian canned products or Estonian sausages as leverage to the Baltic countries, but producers, not willing to lose a profitable market, used to wait until the ban is over, and once again took on export.

However, in 2014, the Russia-EU relations have become much more difficult. The European Union imposed sanctions to Russia for invading the Crimea and for ar­ ming and supporting the separatists in the eastern regions of Ukraine. They made a blacklist of officials who are refused entry into the European Union, suspended trading in shares of several Russian banks, and restricted the sale of certain technologies.

Russia responded to the countries that have adopted sanctions by imposing an embargo on food: for one year it banned the imports of milk, meat, fish, fruit, and vegetables from the European Union to Russia. This way, at the end of 2014, the Lithuanian business again had to engage in the same exercise performed many times before: looking for new sales markets beyond the huge, but highly risky Russian market.

CONCLUSION: 74 PER CENT OF THE EU AVERAGE Recent data of the European Union’s statistical service Eurostat inspire optimism. Given the cost differences, the gross domestic product of Lithuania per capita reached 74 % of the average EU’s gross domestic product and actual individual consumption expenditure in terms of the purchasing power parity increased to 78 % of the EU average last year.

Based on these figures, Lithuania left not only its neighbours Latvia and Estonia far behind, but also some of the old members of the European Union.

Switching to hi-tech: Prime Minister Algirdas Butkevičius (second from right) visits Biotechpharma, one of the leading biopharmaceutical

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companies in the Baltic region

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Lithuanian export prize awards in 2015

These events were of great interest to Lithuanian companies and the members of the Hanseatic Parliament.

From the beginning of 2008 Kaunas, Vilnius and Klaipėda Chambers of Commerce, Industry and Crafts are members of the Enterprise Europe Network, the biggest business support network in the world. The Kaunas CCIC was a project coordinator and was responsible for project implementation in Lithuania together with the other core partners: Vilnius and Klaipėda CCICs and Lithuanian Innovation Centre.

The network provides services according to the following objectives: development of internationally competitive companies, stimulation of innovations, promotion of EU policies and programmes and connecting companies in particular SMEs to EU policy making; building and promotion of an integrated network of excellence.

Since 2008, more than 15000 clients participated in the events organized by network partners with the aim to improve their knowledge and skills. Network experts answered more than 5600 enquiries received from the companies, consulted 3124 clients on business internationalization, innovations, access to finance, etc. Almost 1500 Lithuanian companies took part in matchmaking events and company missions, organized by the network partners. The network in Lithuania also helped more than 1000 companies to produce and disseminate their profiles. As a result of these activities, the network helped 125 companies to reach business and technology transfer agreements with foreign companies.

After finalization of the framework partnership agreement of 2008–2014 the EC evaluated project implementation as very good. In 2014, the consortium has won a call for tenders and will continue providing business support services to entrepreneurs till 2020. If Lithuanian or other companies are interested in the network services, the information is available on the websites www.paramaverslui.eu or een.ec.europa.eu.

Lithuanian chambers actively participate in projects of Eastern partnership. A good example is the project East Invest managed by the East Alliance consisting of 84 partners from the EU, Turkey and Eastern Partnership countries and led

by EUROCHAMBRES. Šiauliai CCIC is a member of this alliance.

East Invest is a regional investment and trade facilitation project for the economic development of the Eastern Neighbourhood region, launched in the framework of the European Eastern Partnership initiative. It targets the business support organisations and SMEs from the 6 Eastern Partnership countries (Armenia, Azerbaijan, Belarus, Georgia, Republic of Moldova, and Ukraine), who have potential for developing mutual cooperation and investment relations with the European Union.

Members of the East Alliance are not simply the ‘beneficiaries’ of the programme, but they are also ‘actors’ delivering an important part of the activities, based on capacity and interest.

Lithuanian chambers successfully organized the East Alliance Annual Conference in the period of Lithua­nian EU presidency on 27 November 2013 and in line with Partnership-oriented events in Vilnius, Lithuania. There were 95 participants: partners, associate partners and third parties.

LITHUANIAN EXPORT PRIZES FOR THE MOST SUCCESSFUL “National Export Prizes are awarded to companies generating tremendous value and not only contributing directly to the growth of the Lithuanian economy but also of creating hundreds of jobs, developing infrastructure in the regions, being socially responsible and taking care of their residence. These companies deserved such awards”, said Rimantas Šidlauskas, General Director of the Association.

These awards are being given to enterprises in Lithuania since 2001.

In 2014, the Lithuanian export prizes were awarded to UAB “Šviesos konversija”, UAB “Liuks”, UAB “Orion Global Pet”, UAB “Kalnapilio-Tauro grupė”, UAB “Diab”. In 2015, prizes were awarded to UAB „Ekobana“, UAB „Eoltas“, VĮ „Klaipėdos valstybinio jūrų uosto direkcija“, UAB „AQ Wiring Systems“ ir UAB „Kalvis“.

ASSOCIATION OF LITHUANIAN CHAMBERS OF COMMERCE, INDUSTRY AND CRAFTS Vašingtono sq. 1–63a, LT-01108 Vilnius, Lithuania Tel.: (+370) 5 261 21 02 www.chambers.lt, info@chambers.lt

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BUSSINESS

Opening of the BOD Group High Technology Centre L.I.G.H.T. WING

Visit of United Nations Secretary-General Ban Ki-moon at the BOD

on 15 October 2013

Group building L.I.G.H.T. WING on 17 November 2013

the useable area of the plant by almost 400 square meters.

The total value of the building construction is over 14.5 million euros. Another nearly 5,8 million euros were invested in the equipment servicing the manufacturing processes – air and water purification, process gas and chemical distribution, compressed air, deionized water treatment, and other systems. Total investment in new lines of business will reach 43.5 million euros by 2015.

The new building in Visoriai, Vilnius, together with the production center of solar cells and modules, will also host the high-tech research laboratory of German solar cell manufacturing equipment supplier Singulus Technologies. They will perform research and improve solar cells with the combined activities of Lithuanian business and scientists, by patenting inventions and competing with global industry leaders.

HISTORIC AGREEMENT SoliTek is the company of the BOD Group dealing in renewable energy sector. Annual production capacity is 16.7 million solar cells (70 MW). This number of solar cells would be sufficient for 50 solar plants of medium power. 95 % of products are exported.

In September 2014 in Malaysia the BOD Group signed an agreement of historical significance with Majuperak Energy Resources Sdn Bhd from the Development Corporation of Perak State. According to the agreement, the BOD Group will develop a pilot solar energy project near the capital city Ipoh in Perak State. The project will cover the production of the latest generation of glass-glass solar modules. This project is the first step in developing the long-term strategy of BOD Group development in the South-East Asia region, aimed at the construction of 100 MW glass-glass solar modules plant in Malaysia.

PROGRESSIVE OPTICAL LENSES In spring 2014, the manufacturing company UAB BRD of the BOD Group signed a contract with one of the leading German manufacturers of ophthalmic optical

Signing the contract with Perak State, Malaysia, on 17 September 2014

equipment – Schneider GmbH & Co. Kg for the supply of the latest generation of equipment. At the end of the same year BOD Group launched the production of the latest generation of progressive optical lens. At the beginning of 2015, near Vilnius, in Guobstai village, Trakai district, the company opened the Free Form RX progressive eyeglass lenses production laboratory Baltic Optical Dimension (BOD). The new laboratory is one of the largest and most modern in Europe.

Its production capacity is 4000 progressive lenses per day. It also makes single focal and bifocal lenses.

“No matter how good machinery is, it is nothing without people. We meticulously brought together a strong team of personnel who can turn this idea into reality. And we have ideas for the next 15–20 years. People who believe in the company's success, work in good faith, and are not afraid of difficulties will always have work at the UAB BOD Group,” says Vidmantas Janulevičius.

A high level of professionalism, dedication, respect for customers, and focused pursuit of targets are factors that make the BOD Group always one step ahead.

BOD GROUP Mokslininku str.6A LT-08412, Vilnius Tel.: +370 5 263 8777 www.bodgroup.com, office@bodgroup.com

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KODMEDA. STATE-OF-ART TECHNOLOGIES INTRODUCING PROFESSIONALS NEVER STOP SEEKING PERFECTION “I CAN SAY WITHOUT HESITATION: TODAY, LITHUANIA DOES NOT LAG BEHIND THE ADVANCED WORLD TECHNOLOGY IN THE AREA OF MEDICAL EQUIPMENT”, - ASSURES JONAS VOLUCKIS, HEAD OF THE “KODMEDA” CLOSE JOINT-STOCK COMPANY DEALING IN RADIOLOGY EQUIPMENT. HIS CERTAINTY IS NOT ACCIDENTAL: IT IS “KODMEDA” WHO HAS BROUGHT AND INTRODUCED THE LATEST TECHNOLOGIES AND X-RAY DIAGNOSTIC SYSTEMS INTO A NUMBER OF MAJOR HEALTH CARE INSTITUTIONS IN LITHUANIA IMPROVING THE WORKING CONDITIONS AND THE QUALITY OF WORK DONE BY THEIR STAFF. OVER 18 YEARS OF ITS EXISTENCE “KODMEDA” HAS NOT ONLY FORTIFIED ITS POSITION IN THE MEDICAL EQUIPMENT BUSINESS BUT HAS ALSO GOT HIGH APPRECIATION AMONG PRESTIGIOUS WORLD BUSINESS CIRCLES.

ELEVATED BY EVER CHANGING area presenting the latest and most-needed TECHNOLOGIES production”, – says J. Voluckis.

Remembering the beginnings of busiCurrently, “Kodmeda” co-operates with ness, head of “Kod­meda” J. Voluckis told more than 13 foreign manufacturers, inthat the company entered the area of cluding several with whom not a single other Lithuanian supplier works, and suphigh technology and radiology as if by accident; on the other hand, the move ocplies equipment to public and private health curred in conformity with natural laws. care institutions, providing training to staff Critical attitude towards the reform in and offering warranty and post-warranty medici­ne encouraged the owner of physiservices. cian’s dip­loma to quit his state officer’s poUPDATING THE RADIOLOGICAL sition in order to seek an interesting and Jonas Voluckis, owner and CEO promising occupation a number of years of JSC KODMEDA EQUIPMENT OWNED BY HOSPITALS ago.

“Kodmeda” head J. Voluckis notes that As an authorized representative of X-ray film and radiolin spite of the economic crisis having frozen numerous busiogy equipment manufacturer “Kodak Health Imaging” in ness areas for a number of years, the technological progress Lithuania, the company was naturally forced to be continually at Lithuanian hospitals has not gone stale: millions from interested in new products and technologies which changed EU project funds have gone for the acquisition of modern in the area of radiology at a stunning rate. Having started in equipment.

1997, “Kodmeda” traded in X-ray films, X-ray film developFor several years Lithuanian hospitals, one after anothers, and radiology equipment 7 years, eventually becoming er, have kept modernizing their radiology units. Into more the lea­der in the area of this business. than one such institution “Kodmeda” introduced state-ofIn 2004, the company reached a new stage of its operation art technologies and X-ray diagnostic systems dramatically taking the road to digitalized image processing technologies, changing both the working conditions of radiologists and the most promising novelty at the time. A search for reliable the quality of their work. and widely recognized manufacturers of the superb quality INVESTMENT INTO EMPLOYEES YIELDS PROFIT equipment covered the entire world. Relations with the heads, specialists and experts of major corporations were established.

There are no more than eight employees at “Kodmeda”.

World radiology shows and congresses were attended many Professionals in their particular areas of operation, they are times in order to find the most suitable world level medical engaged in their favored activities which challenge their equipment and technologies, and optimal software. “This is knowledge and skills on going basis. hard work requiring a high level of expertise. However it is the Launching a piece of complex equipment means that at only possible way to become a standard-bearer in one’s own least several company engineers have had to go for training 48

LITHUANIAN BUSINESS REVIEW / 2015

According to J. Voluckis, only this type of environment contributes to the emergence of innovative and professional

solutions

sessions organized by manufacturers in Europe or USA – it is these specialists who later have to supervise and maintain complex machinery, and to train medical staff to use it. However, knowledge and skills which must be refreshed constantly is not all there is to it.

Being a leader is a hard, demanding yet especially interesting occupation. Very well trained specialists of “Kodmeda” not only accumulate their knowledge during their distant trips but also find time to enjoy the landmarks of the world.

The company educates and trains its staff in the atmosphere of respect and freedom. According to J. Voluckis, only this type of environment contributes to the emergence of innovative and professional solutions. This is one of possible answers to the question how the company has managed to save its core of like-minded people practically unchanged for almost two decades.

TECHNOLOGICAL CHANCES – NOT YET EXHAUSTED In 2008 it became especially evident that “Kodmeda” has gone on the wide and high seas of international business. That year the company head J.Voluckis had to go to the ancient European cities of Paris, Berlin, Rome, and Geneva to receive prestigious international award as much as four times.

The number of recognitions, prizes and awards won by “Kod­meda” grows with each year. However the company of

highly qualified and work-loving professionals is not going to rest on its laurels, the more so that the chances offered by digital technologies are far from exhausted: it is highly probable that in future even patient record cards will be digitalized at health care institutions; this means that world manufacturers of medical equipment will inevitably launch novel products.

“From the point of view of medical staff’s professionalism, amount of investment into the latest equipment, and the level of mastered technologies, Lithuania has long been equal to the most developed western states. It is fine that the business environment and the tender procedures have become more transparent. So, we shall not give up working, seeking perfection, and introducing latest technologies which markedly outstrip the expectations of our clients – in order to go proudly to international awards galas also in future”, – promised the head.

The company represents world-renowned manufacturers: “Carestream Health – Canada, “Gierth” – Germany, “Vidar corporation” – USA, “Fluke Biomedical” – USA, “Giotto” – Italy, “CAWO” – Germany, “NDS” – Surgical Imaging” – USA, “Image Information Systems” – Germany, “Intermedical” – Italy, “UltraViol” – Poland, “Oniko” – Czech Republic, “Protec” – Germany, “Roesys” – Germany, “Stephanix” – France, “VacuTec” – Germany.

AWARDS GIVEN BY THE WORLD CONFEDERATION OF BUSINESS: • “WORLD BUSINESS LEADER” nomination award, “THE BIZZ” prizes, and “INSPIRATIONAL COMPA­ NY” gold medal in 2014.

• Head and owner of the enterprise J. Voluckis is the winner of “WORLD LEADER BUSINESSPERSON” and “EX­CE­LLENCE IN MARKETING MANAGEMENT” no­minations; sales manager of the company owns the “EXCELLENCE IN BUSINESS LEADERSHIP” nomination award, while engineer of the company has the “EXCELLENCE IN QUALITY MANAGEMENT” award.

• The World Confederation of Business awarded “Kodmeda”: for innovative technologies and quality service provision; for impeccable operation; for the best trading operation; for the quality meeting of client needs; the company has been distinguished as the most outstanding enterprise of the kind in the region.

• In 2011 and 2014 “Kodmeda” was issued “Stipriausi Lie­ tuvoje” (Strongest in Lithuania) certificates.

JSC “KODMEDA” Kareivių str. 11, LT-09109 Vilnius, Lithuania Tel. +370 5 270 08 77, tel/fax. +370 5 277 25 29 www.kodmeda.lt, info@kodmeda.lt

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BUSSINESS

In 2013, the people of the region were presented with a special gift —

Lifosa's production is exported to 45 countries

a multifunctional sports and entertainment center.

The company offers favorable conditions for financial and spiritual self-expression of employees by paying a fair salary, making investments into improvement of professional qualification and personal competences of personnel. Great attention is also paid to social activity.

Over five decades, “Lifosa” has become an integral part of the community of Kėdainiai town and residents. The nice relation is cherished through close cooperation of the company with the community supporting a range of activities and initiatives of population, municipality and non-governmental institutions.

In 2014, the amount allocated by the company for different public projects totaled 90 000 euros.

On the 50th anniversary, “Lifosa” made to Kėdainiai region a valuable present of the multifunctional sports and entertainment center “Kėdainių arena”, where all major sports competitions, cultural events and conferences take place.

Construction cost is estimated to 6.4 million euros.

AB “Lifosa” never tolerated any corruption and together with partners initiated the project “Baltoji banga” (The White Wave) that is the first ant the only one thus far known initiative of transparent business labeling in Lithuania, the goal whereof is to promote transparent and responsible business practice in the country.

PRODUCTION The main production of AB “Lifosa” is diammonium phosphate (DAP), a nitrogen-phosphorus fertilizer. Production of the product highly appreciated in the Lithuanian and global market was started by the company in the year 1998.

Monocalcium phosphate, a raw material for feed production, is another product offered by AB “Lifosa” since 2002 and being in great demand by European, American and Asian farmers.

New production line of monocalcium phosphate installed in 2010.

Furthermore, AB “Lifosa” produces thousands of tons of aluminum fluoride that was exported to seven countries in 2014.

Each year, the company produces hundreds of thousands of sulphuric acid and phosphoric acid of technical grade. The aforementioned production is used within the company as an industrial raw material.

In 2003, the Quality Management System in compliance with the requirement of ISO 9001:2001 was introduced at AB “Lifosa”. In 2012, the system was certified repeatedly for the 4th time. The certificate testifies that activity of AB “Lifosa” in the field of quality complies with the requirements of international quality management system standards.

Production of AB “Lifosa” twice received the highest award by the Lithuanian Confederation of Industrialists “The Product of the Year”. In 1999 and 2005, gold medal of the “The Product of the Year” was granted to diammonium phosphate and monocalcium phosphate respectively.

ENVIRONMENT PROTECTION They say that we borrow the world from our children rather than inherit it from our forbearers. This is the attitude

“Lifosa” made to Kėdainiai region a valuable present of the multifunctional sports and entertainment center “Kėdainių arena” 2015 / LITHUANIAN BUSINESS REVIEW

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BUSSINESS

The containers installed were granted “Product of the Year 2012” Award by the Lithuanian Confederation of Industrialists

I

represented by the motto of AB “Lifosa”: Let's preserve nature for future generations. The company has been continuously taking care of the environment we live and work in.

Each year, about one third of investments is allocated by the company for environment protection through making investments into new projects, improvement of technologies and rational utilization of natural resources. Since 2007, investments into environmental measures amount to 18.7 million euros. With production volume growing every year, emissions to air and discharges to surface water remain unchanged.

Environmental impact monitoring and control at AB “Lifosa” are ensured by an experienced team of professionals from the Environmental Department. At the company, laboratories equipped with the latest technologies have been operating. The company has been closely cooperating with all state institutions and offices that supervise activity of economic entities, safety and environmental friendliness thereof.

In 2003, the Quality Management System in compliance with the requirement of ISO 14001:2004 Standard was introduced at AB “Lifosa”. The company has been executing honestly the environmental policy, i.e. an obligation to apply the best available production methods and strive for high environment protection level. The same approach is expected by AB “Lifosa” from the partners, therefore, preference is given to suppliers and contractors who focus on mitigating the negative impact of their operation on environment.

The striving of the company to protect nature was appreciated for a few times: in 2005 and 2008, AB “Lifosa” was granted “Environmental Achievements” Nomination by the Lithuanian Confederation of Industrialists. In 2009, the company received “Ecological View” Award from “Europos burės”.

In 2010, a warehouse for the main raw material, i.e. apatite, was constructed. Capacity of the warehouse is 100 thousand tons of this material that is an amount sufficient to complete one month of production. Close to the warehouse, the railway loading unit and transporter system enabling to supply raw materials directly to the production lines were installed.

In 2011–2013, a new phosphogypsum landfill of the company was constructed. Here, the non-hazardous industrial waste will be stored for the nearest 15 years. Extending the landfill, an absolutely watertight protective screen of moraine clay was installed at the depth of 3–4 m below ground surrounding the entire landfill.

In 2012–2013, four spherical containers for ammonia were positioned in the ammonia warehouse. Construction and installation of the containers required complex technological solutions and the most advanced work techniques. The project is considered one of the most sophisticated tasks of this type realized in Lithuania after restoration of Independence.

The amount allocated for project implementation totaled 10.4 million euros. The containers installed were granted “Product of the Year 2012” Award by the Lithuanian Confederation of Industrialists.

In 2013, an integrated automated system enabling to control movement of personnel and vehicles and to carry out account of working time was introduced. The technological solution adapted for AB “Lifosa” is unique: the project of such a level of integration between different control systems was implemented for the first time in Lithuania.

In 2013–2014, a new contact device for the sulphuric acid department was installed. (Contact device is a system wherein sulphur dioxide (SO2) gas under the impact of the catalyst is converted to sulphur trioxide (SO3) gas). After installation of the new device, emissions for the sulphuric acid department

INVESTMENTS Each year, AB “Lifosa” implements about 30 investment projects that increase operation efficiency of the company and ensure competitiveness thereof in the global markets.

Especially great investments are made into protection of environment and improvement of working conditions.

Due to targeted and continuous investments, today AB “Lifosa” is one of the most modern plants in both Lithuania and Europe.

Over five recent years, the company has realized particularly significant projects. In 2009–2010, a new production line of feed phosphates with the design capacity of 150 thousand tons per year was constructed.

Spherical ammonia containers installed in 2013

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LITHUANIAN BUSINESS REVIEW / 2015

CEO of Lifosa is awarded by Lithuanian Confederation of Industrialists

hardly reach the contaminant levels stipulated in the EU Directive applicable for newly constructed departments. The project was acknowledged by the Lithuanian Confederation of Industrialists the “Product of the Year 2013”.

In 2012, AB “Lifosa” was granted “Investor of the Year” Award by the Association of Lithuanian Investors’ Forum PERSONNEL Experienced, highly skilled and open-minded personnel are the guarantee of the Company's success. Therefore, along with the great focus made by AB “Lifosa” on production process efficiency and production quality, personnel issues including safety, health, good working conditions and public needs are also strongly highlighted.

First of all, respect to employees is expressed by a fair salary. In 2014, salary paid by AB “Lifosa” was the highest average salary in the industrial sector of Lithuania.

At the company, regular medical examinations of personnel and continuous monitoring of working conditions are carried out. Chemical, physical and ergonomic, manual and psychosocial factors of the working environment are analyzed.

Employees of the company are provided with only the highest quality protective equipment. For all coworkers, health insurance at the company’s expense is offered, and starting from 2011, they are additionally covered with life insurance for the period of 10 years.

Since 2007, the Occupational Health and Safety Management System complying with the requirements of BS OHSAS 18001:20007 Standard has been operating at the company.

On 28 December 2012, a new collective agreement at AB “Lifosa” was signed that stipulates better conditions for personnel training and qualification improvement compared to former ones as well as provides for more extensive social guarantees. Employees are eligible to benefits at starting a family, birth of a child, death of a family member, etc. Initiative of coworkers in the professional field is promoted and evaluated financially.

AB “Lifosa” encourages public spirit of employees: favorable conditions and financial support are available for establishing sports and leisure clubs (at the company, “Lifosietis” Veteran Club, the Club of the Young Experts, Fishing Club, Club of Auto Sports, etc. are operating). Different events, e.g. Interdepartmental Olympics, “Mind Battle” Quizzes, Chemist’s Day are organized as well as excursions to concerts and performances are arranged.

AB “LIFOSA” Juodkiskio str. 50 LT-57502, Kedainiai Phone +(370 347) 66 483, fax +(370 347) 66 166 E-mail: info@lifosa.com

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INFRASTRUCTURE

I FROM SUBORDINATION TO MOSCOW TO LITHUANIAN JURISDICTION In order to refocus the transport sector for the needs of the restored state, first of all it was necessary to take over from the Soviet Union’s governance structures the Lithuanian transport companies of the so called union-subordination, and their management.

For this purpose, the divisions of rail, water and air trans­port were established in the Ministry of Transport and Communications. Their executives and specialists had tough negotiations with the relevant structures of the Soviet Union till the August putsch in Moscow in 1991.

The Ministry leaders also attempted to establish and maintain business relations with the management of Vilnius and Šiauliai railway districts, Klaipėda maritime trade and sea fishing port, as well as shipping companies, and the Lithuanian branch of Aeroflot. An attempt was made to appeal to their civic consciousness, all the while taking care that the assets of the former Soviet enterprises in the registers of the Soviet Union were not sailed or flown from Lithuania.

At that time, central management structures in Moscow reacted very negatively to the communication from managers of companies subordinate to the Soviet Union with the independent Lithuanian authorities. Therefore, some managers of companies subordinate to the Soviet Union, avoiding trouble, often ignored meeting invitations from the then minister Jonas Biržiškis.

STEP BY STEP Negotiations on the railway transport were the most difficult. Moscow’s central management structures flatly opposed

the secession of the Lithuanian railways. It was one of the more conservative Soviet systems, with everything finely regulated and closely bound. Railway connections, the legal framework, marketing, cargo transport documentation were merged into a single, strictly centrally regulated system. Lithuania had to be very cautious and diplomatic because in case of complete cessation of relations with centralised Soviet structure, we could use rail to travel only to Latvia and Estonia at best.

During the first years of independence Lithuania could not even technically link the rail networks with the West because of a different width of the gauge (1520 mm in the Soviet Union and 1453 mm in the continental Europe), as well as different rolling stock, signalling and communications system parameters and standards. Therefore, the country had to regain its positions in the field of railway transport using a “step-by-step” approach, balancing at their limits to maintain the rail links with its eastern neighbours beneficial to the country’s economy.

Meanwhile, it was easier to make contact with the West by sea and by air. Even if links with our eastern neighbours in these areas would be temporarily broken, it would have been a lesser loss for the Lithuanian economy compared to the railway locomotives and wagons halted at the eastern Lithuanian border.

After the restoration of Lithuanian independence the transport situation was aggravated by the large number of Lithuanian independence opponents employed in all levels of company management ranging from top-level mana­gers to ordinary staff. There have been cases where they were not limited with accusations but resorted to strikes against Lithuanian independence, aimed at paralysing the transport system. On 27 April 1990, in order to disrupt the transport of passengers, food and fuel supplies, the personnel

Negotiations on the railway transport were the most difficult, as it was one of the more conservative Soviet systems, with everything finely regulated and closely bound

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of Vilnius 3rd and 8th motor companies managed by proRussian “Yedinstvo” movement members, blocked the main streets and bridges of Vilnius. “Yedinstvo” was particularly active and arrogant in the railways. On January 8–10, 1991, backed by the Soviet military, they took control of Vilnius railway station and stopped the movement of trains. A total of 34 passenger trains with 20 thousand passengers were stuck in the station and its approaches.

The Ministry of Transport and Communications succeeded to quickly mobilise buses for the transportation of train passengers, and supply them with meals. At the same time, Vilnius aviators loyal to Moscow also went on strike.

Genadiy Liakhov excessively supportive of Lithuania in the opinion of strikers, was fired from the chief manager’s office of the Lithuanian Civil Aviation Directorate, and replaced by Nazirjev Chusnudinev, a fierce opponent of the Lithuanian independence, appointed by Moscow. In addition, the Soviet Union armed forces were deployed in the strike-hit railway and civil aviation structures. It should be noted that the Lithuanian Ministry of Transport and Communications was intolerant about the actions of managers opposed to Lithuanian independence and dismissed eleven of them in 1990.

Prime Minister Jonas Biržiškis later wrote of that period: “We were quite well prepared for surprises, for example, we had special headquarters in place, to deal with various situations. During the strikes, streets echoed with shots, and people were on duty at the Ministry around the clock. Then we could see who the reliable employees were – the majority of them were.”

WINDOW TO EUROPE During the drafting of the national transport policy, it was very important for the restored state of Lithuania to establish strong links with the European countries, to take over as soon as possible their best practices in the efficient management and development of the transport systems.

Back in 1990, the Baltic Transport Cooperation Council adopted the key provisions of mutual cooperation in the field of rail transport and relations with the Ministry of Transport of the Soviet Union. The core aspect of the document was the requirement to provide the Baltic countries with the exclusive right to the railway network and fleet facilities and their management in their territory. It was also required to disband the central Baltic rail system, restoring independent railways of the Baltic countries.

After taking over the water, air and rail transport from the Soviet Union to the control of the Republic of Lithuania, their integration into a unified transport system of Lithuania and to the European transport area proceeded quite quickly. In December 1991 the Lithuanian Airlines flight took off for the first international flight to Copenhagen, as well as cooperation

between the Polish and Lithuanian railways began. In the same year 1991, the Lithuanian National Road Carriers Association Linava was established. It supplied Lithuanian trucking companies with permits for international freight transport. On 12 October 1991 Lithuania joined the main conventions of the International Maritime Organisation and proclaimed itself a member of the International Maritime Community.

On 26 August 1991 the Lithuanian division of the Soviet airline Aeroflot was decentralised, reforming it into seven public special purpose enterprises (aviation, airports and air traffic control services). This principal structure of a transport system developed in the beginning of independence still functions to this day.

VIA BALTICA: A LONG WAY TOWARD THE HIGHWAY In 1994 the National Transport Development Programme until 2010 was approved. As a strategic transport policy challenge, it established the target of integration into the European transport network and the transport service system.

A favourable environment to implement this task was created by the approval of two priority corridors (out of nine), crossing the territory of Lithuania, in the Pan-European transport conference in Crete (Greece), in 1994. This was the so-called the first European transport corridor TallinnRiga-Kaunas-Warsaw, and the branch of the ninth corridor Helsinki-Plovdiv: Klaipėda-Vilnius-Minsk-Kiev-Odessa.

The main idea of the railway line Rail Baltica was to link the Baltic

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region with the Visegrad countries and Western Europe

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The major passenger transport weakness is that Lithuania does not have a solid base air carrier and its central air gate – Vilnius International Airport – being in an urban area, has no opportunities for intensification of flights

The main idea of the first European corridor having two components – the Via Baltica highway and the railway line in the same direction (later renamed Rail Baltica) – was to link the Baltic region with the Visegrad countries and Western Europe with modern highways.

It should be noted that due to financial constraints the Via Baltica project could not move out of the starting blocks for a long time. Lithuania could dedicate from 2 to 3 million euro per year for this project, although the first phase of the project in the Lithuanian territory required more than 58 million euro. The financial situation in Estonia and Latvia was no better (if not worse). The situation was further complicated by the underdeveloped infrastructure of border crossing points, imperfect and imbalanced procedures between the neighbou­ ring countries, causing a negative reaction of international carriers, resulting in part of traffic to be directed to other corridors.

Things started to move when Via Baltica was recognised as a priority project both nationally and internationally, and when a new and effective international coordination centre for it was established. The so-called High Level Working Group (HLWG) of Via Baltica project including representatives of international financial institutions (European Investment Bank, Nordic Investment Bank, European Bank for Reconstruction and Development) and the governments of the countries participating in the Via Baltica project were included in it..

Thus, eventually, the practical problems of border crossings in the region were addressed. In March 1995, at the meeting of the representatives of Belarus, Estonia, Latvia, Lithuania, Russia, Finland and the European Commission, the issues of the harmonisation of customs procedures, customs computerisation, training of customs officers and physical infrastructure development of border points finally moved from the standstill.

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Rail Baltica, i.e. the project of Tallinn-Riga-KaunasWarsaw railway line, was further delayed. The preparatory work on the project is still in progress.

TINA NETWORK – FOR THE EU CANDIDATES In 1999, the European Commission developed a plan on the expansion of the European transport corridors in such a way that they meet the transport needs of the candidates of the accession of the European Union.

The Lithuanian integrated multimodal network TINA, with modernisation and development scheduled for 2015 consisted of: • 1,617 km of roads; • 1,100 km of railways; • 278 km of inland waterways; • Vilnius, Kaunas and Palanga airports; • Klaipėda sea port.

The demand of investment funds for the implementation of the TINA network share in Lithuania by 2015 amounted to 2.3 billion euro.

The negotiations with the European Commission on the transport policy unit in 2000–2001, seeking the Lithuanian membership in the European Union, were not complicated.

Instead, they went very smoothly, because back in 2000 the transport sector legislation has been successfully adapted in the Lithuanian legal framework.

PASSENGER TRANSPORT: THE ACHILLES HEEL Passenger transport is probably the “Achilles heel” of the system. The major passenger transport weakness is that Lithuania does not have a solid base air carrier, while the geography of the Lithuanian international airport flights is inferior to the neighbouring airports. Therefore, access to

Ignalina Nuclear Power Plant, control room, 1990

succeeded to extract 12 thousand tons of oil of the three wells, and deliver it for processing – it was a significant event and contribution to the country's fuel reserves at that time.

TIME FOR REFORM Favourable conditions for substantial reforms in the power industry sector in Lithuania was the restoration of independence coinciding with the emergence of substantially new energy management principles in the Western economies in the last decade of the twentieth century. The experts of the World Bank, the European Bank for Reconstruction and Development and the European Commission insistently recommended to refuse from vertically integrated monopolies replacing them with independent power generation, transmission (transportation) and distribution companies, and wherever possible, creating conditions for free competition and introducing modern management principles. Foreign experts together with Lithuanian specialists developed a number of important studies recommending implementation of the principles of energy industry restructuring, introduction of modern management techniques, and resisting state ownership wherever it is appropriate. Based on these studies, in 1994 the Lithuanian government endorsed the trends of the power industry reforms and developed the outlines for the organizational and legal framework.

INCOMPLETE CONSIGNMENT OF RBMK REACTORS As already mentioned, Lithuania inherited from the Soviet Union the hypertrophied electricity generation capacity, therefore, for quite a while it was a country exporting electricity, while Ignalina Nuclear Power Plant with two of the most powerful in the world RBMK-1500 reactors at the time, has become a source of such export.

Unlike other energy facilities, Lithuania took the plant for its jurisdiction only after one and a half year, on 27 August 1991, after the failure of the Moscow coup. Until then, the power plant was protected by the military and KGB forces of the Soviet Union. Lithuania, which became the 31st state in the world using nuclear fuel for electricity production, made commitments to operate Ignalina NPP without causing threat to humanity and the environment, and using nuclear materials and technologies only for peaceful purposes.

Today we can be confident that all of these commitments have been successfully met.

The year 2002 was a turning point on the road for both Lithuania's accession to the European Union, as well as making significant decisions regarding the Ignalina NPP. In order to receive an invitation to join the European Union, the Lithuanian government was faced with scepticism prevailing then in Europe towards nuclear energy and in particular the RBMK reactors. During the negotiations for accession to the EU Lithuania was required to close the nuclear power

Ignalina Nuclear Power Plant once generated 70 –88% of all the country's electric power. During the difficult transition to the market

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economy, it significantly helped to Lithuania

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Currently, about 76% of urban dwellings in Lithuania are heated by district heating systems. Gariunai combined heat and power plant which heats Vilnius, the capital of Lithuania

TRANSFERRED INTO THE HANDS OF CITIES Lithuanian cities have developed district heating systems, closely related to the electric power system. In 1994, regional companies covering heat networks and boiler plants were created. Many boiler plants were heavily worn out, some were fuelled by expensive diesel and heating oil, others with coal, peat, or sawdust. With massive escalation of imported fuel prices, heat prices for industries drastically increased. At that time, prices for heat supplied to population and from the heat supply networks, along with prices of natural gas for home heating in households, were subsidized. But even that did not help – many low income families were unable to afford to pay for heat in time. Consumer insolvency resulted in the sharp lack of funds for equipment and piping upgrades, while disconnection to some of the consumers, especially industrial enterprises, further exacerbated the losses of district heating companies.

In 1997, based on the law on restructuring of AB Lietuvos Energija, all activities related to district heating and combined heat and power plants in Vilnius, Kaunas and Klaipėda were transferred to urban municipalities.

This reform has helped to attract private capital to the centralized heat supply area and was significant in many respects: modernisation of heat production sources, replacement of worn pipelines with new ones (better quality and satisfying declining consumer needs), significant improvement of thermal sector management and accounting, which allowed for the reduction in losses in the heat networks by half. In 1996, transmission losses amounted to 5,061.7 GWh, i.e. as much as 29.8 % of the total heat supplied to the grids, while in 2013 these losses decreased to 1,479.5 GWh, or by 15.7 %.

Comparative fuel cost per one MWh of heat decreased from 101.7 to 92.1 kgoe during this period.

Currently, about 76 % of urban dwellings in Lithuania are heated by district heating systems. This method is essentially smart, offering good opportunities: wider use of local

and renewable energy resources; employing the advantages of modern technology, producing combined electricity and heat. Centralized systems also allow the use of polluting, yet cheaper fuel (sorted municipal waste, peat, wood, etc.), treating smoke and successfully solving environmental problems.

However, one has to admit that the possibility of reducing heat production price in Lithuania is under-used. Little progress has been made in modernizing buildings and refurbishing domestic heating systems of end users. The vast majority of users are unable to individually control their heat consumption, while more than 80 % of apartment buildings consume heat very inefficiently due to poor thermal insulation of buildings.

In the background of very high prices of natural gas, which has so far dominated in the balance of fuel for heat production, the population bills for heat consumption are very high, too.

Therefore, one has only to hope that in the future, effectively using the EU structural funds, district heating systems will be upgraded and will become even more efficient.

OIL: HOW RUSSIA WAS CLOSING VALVES In 1990, after the restoration of the country's independence, the government of the country had a lot of concerns with uncertainty about the stability of oil supplies to Mažeikiai oil refinery from Russia. This oil refinery, the only one in the Baltic states, with a capacity of 10–11 million tons per year, was one of the most modern plants in the former Soviet Union. Unfortunately, supplies of raw material to the refinery were very unstable, in 1992–1996 the factory operated irregularly, processing only 3.5 to 5.0 million tons of oil per year. Due to lack of working capital the company has been unable to acquire large quantities of oil.

In order to avoid the dominance of Russian companies in the Lithuanian oil business, the controlling stock of Mažeikių Nafta was sold to the U.S. company Williams International in 1998. Other reasons for such a choice were the need to

Mažeikiai Oil Refinery, the only one in the Baltic states, with a capacity of 10–11 million tons per year, was one of the most modern

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plants in the former Soviet Union

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The device for very small air (gas) flow measurements

Solid fuel and high-calorie waste samples preparation

Laboratory of Materials Research and Testing complies with the requirements of LST EN ISO/IEC 17025:2006 and is accredited to perform testing of constructional grouts, tile adhesive, daub, plastic tubes, isolated tubes, thermoisolated materials and heat resistant items.

LEI provides over a hundred various services for national and foreign partners. In addition to above mentioned Institute provides research and services: • Research of physical-chemical properties of solid biofuel, its mixtures and retrieved fuel; • Increase of the efficiency of combustion processes, development of burners; various transfers, visualization and simulation of combustion processes; • Formation and synthesis of various types of catalytic, insulation, tribological coatings; disposal of hazardous waste by extracting valuable syngas; • Plasma technologies and diagnostics; • Synthesis and analysis of properties of metals and their alloy hydrides designed for hydrogen storage; modelling of energy systems and networks and assessment of operational issues; • Preparation of strategies regarding economic, technical and engineering issues in energy systems and networks and renewable energy sources; • Nuclear fission and fusion: safety of nuclear power plants, reliability, decommissioning and storage of spent nuclear fuel; • Analysis and research in hydrology issues.

Close co-operation and provided services to the industry in Lithuania earned the awards at the Lithuanian Industrialist Confederation competition “Lithuanian product of the year” in the recent years: • In 2011 for the “Jet-type heavy-fuel-oil atomizer heads Y-3000.1”, a golden medal was granted. The special fuel oil jet nozzles allowed better mixing and spraying the fuels and reducing the emissions of NOx and CO and particular matter to normative values when burning fuel oil.

• In 2012 for the “Facility of critical jets to verify/calibrate gas and flow meters and make experiments at varied temperatures” a golden medal was granted. Unique equipment, which combines a traditional standard air volume flow meter and a unit, required for the measurement and testing of air parameters (temperature and humidity), together with the control support system. As the nozzle has no moving parts, they do not wear away.

• In 2013 for the “Identification of thermal conductivity of thermal-isolated tube” a silver medal was granted.

Developed methodology and equipment for circular pipes thermal conductivity determination by the guarded end method in accordance with the LST EN 253 and LST EN ISO 8497 standards.

• In 2014 for the “Complex of works for the reduction of the emissions in JSC “Vilniaus energija” thermal power plant No. 2 a” golden medal was granted. Developed flue gas recirculation system for water boiler enabled considerable NOx reduction.

We are always glad to see you at the LEI, where we will provide R&D services for your business suggest innovations or have intellectual discussion on energy-related topics.

Smooth and detailed information about LEI activities can be found in the new LEI video – Short video about LEI at http://www.lei.lt.

Institute researchers actively participate and are successful in a number of international programmes. In EU Research and Innovation programme Horizon 2020 2014 calls, 7 out of 23 project proposals are financed (success rate ~30.4 %). In European Research and Technological Development Programme FP7, 24 projects with involvement of the Institute’s researchers were financed (success rate ~36.9 %). We are active in other R&D programmes as well: FP6 with 14 projects, Intelligent Energy Europe programme with 31 projects, Baltic Sea Region programme 2007–2013 with 3 projects, COST with 15 projects, etc.

LITHUANIAN ENERGY INSTITUTE Breslaujos g. 3, LT-44403 Kaunas, LITHUANIA http://www.lei.lt, e-mail: rastine@lei.lt Fax: +370 37 351271, phone: +370 37 401805

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FINANCES

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A

fter the announcement of the independence of Lit­huania, in the initial stage of development of the financial system, it was also dominated by the banking system. It seemed more credible; the ope­ rating principles of the banks were clearer to the public. However, in the long term, the value of the capital market for economy has increased significantly, especially in recent years. The global financial crisis has forced structu­ ral change to the global financial markets over the past five years, and it became obvious that in the future, increasing of funding will be carried out within the country, based on local financial system and resources.

BANKS: DOMINATED BY SCANDINAVIANS The Lithuanian experience in reforming the banking sector was similar to the experience of other countries with economies in transition. The first commercial banks were established here in 1989. After four years, in 1993, Lithuania already had 27 banks, however, inconsiderate and unfair operations of bank managers, lack of skills and supervision resulted in the collapse of the banks, and by 1995 their number had shrunk to 13. The country also had to establish a bad loans management company. Fortunately, at the time the banking sector was not highly developed, therefore, although the consequences of bank bankruptcies were hard, their impact on the country’s economy has not been severe.

At the end of 2001, Lithuania had nine countrywide banks, four foreign bank branches and two representative offices of foreign banks. Bank assets amounted to 32 per cent of the

Since 2001 the bank assets have been growing at a rate of 20 per cent every year

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gross domestic product. The banking sector was characterised by a high degree of concentration: three banks held 79 per cent of the total banking assets market. After privatisation of the Lithuanian Agricultural Bank, the banking sector became dominated by foreign investors.

Over the past 10–15 years, the banking sector grew intensely together with the whole of the economy, and since 2001 the bank assets have been growing at a rate of 20 per cent every year.

The growth particularly intensified after Lithuania’s accession to the European Union: flourishing economy boosted the expectations of the population and business, and their appetite to borrow. There have been years when the credit market would rise by as much as 70 per cent. This growth in 2008 was suddenly slowed down by the global economic crisis, however, despite the decline in the Lithuania’s GDP by almost 15 per cent, the banking sector withstood.

Lessons learned after the banking collapse in 1995 and conservative credit risk management helped to cope with this challenge. Even the collapse of two banks in two years (in 2011 Snoras, and in 2013 Ūkio Bankas) did not derail the banking sector.

Today, the banking sector remains a key player in the financial sector of Lithuania, and is dominated by capital of Scandinavian origin. Currently Lithuania has a total of 9 commercial banks licenced by the Bank of Lithuania, 8 branches of foreign banks, a financial company controlled by the foreign bank licensed by the European Union), 2 foreign bank representative offices, Lithuanian Central Credit Union, 68 credit unions, 226 European union banks (which operate

Analysts urge Lithuanian pension funds to invest more in local companies

in the Republic of Lithuania without establishing branches) and 3 financial companies controlled by European Union licensed foreign banks (they operate without establishing a branch in the Republic of Lithuania). More than half of the total banking assets is concentrated in the hands of three banks – SEB, Swedbank and DNB. All of them belong to the Scandinavian banks with similar names. 

More than half of the total banking assets is concentrated in the hands of three Scandinavian banks

CAPITAL MARKET WAS BUILT FROM SCRATCH Unlike the banking and insurance sectors, with star­ ting positions already based on existing state structures, the western type capital market in Lithuania has to be created from scratch within a few years. Although this is a small and still developing market, it has all the typical features of deve­lo­ped markets, infrastructure, potential and diversity of participants.

An important event in the history of an independent Lit­ huania – the establishment of a stock exchange. The first trading session took place on 14 September 1993. The Lithuanian central securities depository was founded along with the stock exchange. Today, Vilnius Stock Exchange is a member of the global exchange operator NASDAQ OMX Group. After Lithuania’s accession to the European Union, financial market development has gained a new momentum, and market participants were offered new perspectives and opportunities.

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Lithunian, Latvian and Estonian officials demonstrating euro banknotes withdrawn from ATM few minutes after midnight January 1, 2015

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was growing intensely before the crisis of 2008. From the pension system reform in 2004 when in addition to the traditional pay-as-you-go of the state, the private pillar II and III pension regulation system was created, before 2008 there were good conditions for the development of the new pension system and the capital market. Due to the rapidly growing economy and increasing number of workers paying taxes, this led to the increase of budget revenues, the number of the participants of the pillar II pension funds and the number of market participants.

Unfortunately, during the economic downturn state social insurance contributions to private funds were reduced – it was chosen as a partial solution to the problem of public finances.

This decision negatively affected fund assets and the number of market participants, while the confidence of participants cannot be restored until today.

The Lithuanian capital market requires new issues of both state-owned and private company securities, or new issues of already existing companies, because a higher stock market capitalisation and a number of shares in free circulation increase the attractiveness of the stock exchange to institutional investors. On the other hand, analysts state that even the existing stock liquidity should not be an obstacle for pension 88

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funds to invest, as pension funds are long-term investors. At the end of 2013, from about 5.2 billion litas accumulated in pension funds for future retirees only 38.6 million litas have been invested in shares in Lithuanian and other Baltic States companies, or mutual funds that invest only in this region.

EURO: GREAT EXPECTATIONS On January 1, 2015, Lithuania introduced the single Eu­ ropean Union currency. Analysts expect that the increased attractiveness of local financial markets will be one of the most obvious advantages of the introduction of the euro.

Reduction of transaction costs and elimination of exchange rate risk will improve the investment climate and the reputation of Lithuania as an attractive business environment.

However, it is worth noting that not only patience, but targeted efforts will be required in order to achieve positive results. We might see positive impact if we could develop the capital market, i.e. if companies might go beyond the moral barrier and try to borrow not only by taking loans from the bank, but also by issuing debt securities.

Positive effects of the introduction of the euro are likely to be seen over the long term, but the process will not overpower the effects of the global macroeconomic situation on the economy of Lithuania. It is important not to suppress natural economic processes in order to meet the Maastricht criteria, thus delaying the impact of some economic factors for a further period. 

PRIVATE EQUITY AND VENTURE CAPITAL: START-UPS Activities of private equity funds in Lithuania began after the restoration of independence, and the country had no venture capital funds at all up until 2010 – only then were the first ones established.

In 1989, the US Congress adopted the Eastern European Endowment for Democracy Act, authorising the establishment of funds which help to create private markets of Central and Eastern Europe. From 1989 to 1994 the US Congress through the International Development Agency awarded 1.3 billion U.S. dollars for investment of ten investment funds in Eastern Europe and post-Soviet countries. The foundation of the Baltic and the American companies was founded to promote the private sector in the Baltic countries in 1994.

Message to New Yorkers and guests of the city from Nasdaq Exchange on January 1, 2015

It operated by developing and funding primary and secondary mortgage financing market, and providing capital for growth-oriented businesses. The foundation has contributed to more than 4,000 real estate loans and funded more than 100 companies.

Another source, from which help came to the newly established free market, was the European Bank for Reconstruction and Development. In the initial stage, Lithuanian small and medium businesses have benefited from consulting services and business initiatives, as well as the participation of Baltic equity funds. Private equity funds came to the Baltic countries later than to Central Europe.

As mentioned, the first hybrid venture capital funds were only established in 2010, after the implementation of the financial engineering program JEREMIE initiated by the European Union and Lithuania. In 2009, after the establishment of the Lithuanian Private Equity and Venture Capital Association, the European Venture and Private Equity Asso­ ciation started recording the history of the Lithuanian venture capital sector. There has been no demand for this type of capital products in the country up to now, and it is still is not high enough.

According to the JEREMIE program, a total of 27.6 million euro were invested in Lithuania benefitting 56 companies (including investments made at the beginning of 2014) – almost half a million euro to each company. For comparison: during the same period the neighbouring Latvia invested 17.6 million euro in 40 companies. In 2012, the Baltic Innovation Fund was established with 100 million euro. It will promote the development of small and medium enterprises in the Baltic countries. Over the next year, the Fund will invest in private equity and venture capital funds in Lithuania, Latvia and Estonia and thus encourage venture capital investment in small and medium-sized enterprises. The said fund is an excellent example of how the three Baltic countries can implement a joint initiative and, working together, increase the attractiveness of their small capital markets to investors.

However, private venture capital funds by themselves cannot ensure the funding of new innovative businesses. This requires government involvement in the problem of funding innovative business.

CREDIT UNIONS The turmoil in the banking system in 1995 created conditions for the establishment of credit unions. This process was quite intense. Until 2001 Lithuania had 41 credit unions, although their assets under management amounted to only about 0.2 per cent of assets held by banks. Currently, Lithuania has 74 credit unions and Lithuanian Central Credit Union, with assets under management of about 3 per cent of banking assets.

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Credit unions are a small but important part of the financial system, especially for regional development. In Lithuania, their services are used by up to 5 per cent of the population, and, for example, in Ireland – up to 70 per cent of population. In recent years, credit unions in Lithuania were subject to rumours, disagreements with supervisory authorities, and bankruptcies. This part of the financial market can be a competitive counterweight to major financial market participants, keeping in mind that the development of small and mediumsized business sector is increasingly promoted; meanwhile the credit union sector is facing funding problems.

INSURANCE: THERE IS STILL POTENTIAL The insurance sector in Lithuania is almost a quarter century old. Compared to insurance sectors in Western countries, it is relatively young and developing. Although the sector’s growth has been enormous in the past two decades, it still has the potential to expand.

In terms of the global financial situation in the last decade, the Lithuanian insurance market can be divided into three main periods: the rapid growth period (up to 2008), the critical period (2008–2010) and the rapid recovery period (from 2011 onwards). During the first period, the growth, before the crisis, the Lithuanian insurance market grew rapidly (about 125 per cent), however, has shrunk affected by the

global economic downturn (to 25 per cent). It was the biggest drop in the sector, for which some market participants did not stand and prices of insurance services declined. In 2011, the insurance market recovered rapidly, and already in 2013 the growth was about 300 per cent, compared with former growth in 2011 (up to 550.7 million euro of gross premium volume). In 2013, the growth rates have stabilised at a level of 7–9 per cent. The profitability indicator of insurance companies is a significant difference between premiums and benefits. For example, in the pre-crisis period, the difference was double and then fell to 40 per cent.

In many Central and Eastern European countries, unlike Western countries, the structure of the insurance portfolio is dominated by non-life insurance services: the ratio between non-life insurance and life insurance is 70/30, while in Western European countries, this ratio is almost opposite.

Historically, banks are the main players in the financial system. They are strong in Lithuania, too, but recently we observe the trend that banks seek for other financing tools (especially for the financing of long-term projects), in addition to providing loans, therefore, eventually we will see increasingly more banks to offer certain types of bonds. One may also expect that in the future the state will be more interested in the development of the domestic capital market through appropriate instruments and mechanisms.

Historically, banks are the main players in the Lithuanian financial system and they seek even more

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AGRICULTURE

I COLLECTIVE FARMS: THE SHOW MUST GO ON Lithuania, reinstated on 16 February 1918, created a homogenous democratic state, with the key feature – a strong middle class. Successful agricultural activity and the growth of exports laid the foundation for the industrialization of the country. A pro-active, public-spirited, lively rural community had a favourable attitude toward new cultural traditions and the formation of the Lithuanian intelligentsia.

During the Soviet period, Lithuanian rural areas almost lost the old traditions and the fundamental cultural values.

The most diligent, most gifted, able and patriotic farmers, professionals, academics, luminaries of arts and culture were exiled to Siberian gulags; farmers were deprived of their land and other property, and, with the use of brute force were herded into collective farms.

The collective farm system, difficult to understand from a common sense perspective, characterised by impersonal

property and work, was in fact based on state despotism and was unable to survive on its own. 50–70 percent of the majority of livestock product prices were comprised of state subsidies. Constantly drowning in debt, non-viable socialist farms had to be bailed out by periodically writing off their debts.

Despite the apparent ineffectiveness, the Lithuanian agrarian nomenclature that has formed in Soviet times believed in its importance. Lithuanian agriculture was producing a lot of animal food products compared to the rest of the Soviet Union. 1.5–1.8 million tons of grain imported from the West was delivered to Lithuania annually. Not all of this was used by public agricultural farms, much of it was being stolen.

True, even snatched feed provided profit for the public economy. Animals bred by hardworking rural population, dairy products were sent to processing factories from collective farms, and would apply a surcharge from 50 to 100 per cent for mediation. Many farm leaders established a comfortable

Even the leaders of the first government (1990) were convinced that collective farms should exist for no more than another 20 years

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In Soviet times Lithuanian agriculture was producing a lot of animal food products compared to the rest of the Soviet Union

lifestyle for themselves and their loved ones. Although occasionally they would superficially criticize the collective farm system and even improve it, but did not propose to reform it in substance. Even the leaders of the first government (1990) were convinced that collective farms should exist for no more than another 20 years.  PASSION FOR LAND REDISTRIBUTION The soviet rural nomenclature, with its influential patrons in Government leadership confronting parliament, decided to oppose agricultural reform. In autumn of 1990 in Vilnius they organised the so-called “congress of the representatives of all rural people”. It was attended mostly by the politicians not supporting the then parliament’s agrarian policy. The most important provision of this congress: land (and other property located on it) should belong to those who work it.

The participants expressed their opposition to the return of land to former owners and restitution ideas.

Meanwhile, the Lithuanian farmers' movement representing the reformist line in spring of 1991 brought together likeminded people in the congress, and declared that “the land reform is aimed at returning the land or selling it as private property to citizens, leaving only the farming or homestead lands to the ownership of the state, as well as the areas which the state might use and preserve more appropriately”. It was proposed to grant the right to private property only to citizens of the Republic of Lithuania; reinstate the ownership of land based on the rational use of land (not necessarily within the limits of land previously in possession); to allow persons who did not inherit any land, or were willing to expand their farm, to buy land in instalments (over a period not exceeding 25 years); to pay compensation in cash to land owners or heirs not establishing any farms or entitle them to acquire any other state assets (an investment allowance).

PEASANT FARMS: MANY SMALL FARMS The law On the Peasant Farm of the Lithuanian SSR that came into force back in 1989 legalized private land ownership (allowed to get from 10 to 50 ha of land for free, for eternal use, with inheritance), but it was only declarative, because it immediately was forbidden to manage it: buy, sell, exchange, mortgage or donate.

Things improved only in 1991 after adoption of the Law on the Procedure and Conditions of the Restoration of the Rights of Ownership to the Existing Real Property.

The Law on the Peasant Farm, despite its limitations and shortcomings, however, freed the hands of those who were “on a crouch start” long enough, waiting for an opportunity to establish a private farm. Some have already purchased or otherwise “organised” various agricultural machinery for themselves, and were growing livestock. Based on this “slanted” law, a total of 5139 farms were set up, with a total area of 86,387 ha (the average farm size was 16.8 ha).

Much land of former collective farms had common agricultural crops and was cultivated centrally. After assigning homestead plots in a permanent location, a number of people had to become self-sufficient and determine how to cultivate the land or collect harvest. True, the initial law only allowed for the temporary use of land. However, the political left stubbornly resisted such a division and after taking power in the country, when the reform had already started to move forward toward restitution, rushed to allow the privatisation of this land. The privatised homestead land plots later called the “green zones”, has become a battlefield between the legitimate heirs and its users.

And yet – homestead land plots in Lithuanian villages served as a social “shock absorber” of its time. This practice has gained momentum in other post-communist countries as well.

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agricultural producers, but the extent of support remained quite high, and transformations took place without sudden jumps, therefore the decline of agricultural production was not painful.

Russia and other countries of the Commonwealth of Independent States, and the Baltic countries, where the “frost” of socialist farming was much deeper, due to the disintegration of the socialist macroeconomics and ravaging inflation, a sharp decline in support for agriculture and comprehensive agricultural system reform, experienced a major transformational downturn of this industry.

In 1990, nearly all prices including agricultural products declined in Latvia and Estonia, meanwhile in Lithuania the liberalization of the purchase prices of agricultural products in 1991 was artificially stopped, seeking to mitigate the price shock to consumers at least a little.

Out of all Baltic States, Lithuania had the highest compensation level of food prices for consumers, although, because of severe inflation and loss of savings customers did not feel it much. However, it had the worst consequences for farmers: products were purchased at much cheaper prices and did not cover production costs. This devastated producers economically, they began to reduce production volumes, and liquidation or bankruptcies of agricultural companies accelerated.

It lasted for as much as 4 years. 

The price liberalization of agricultural products in 1991 was artificially stopped, so products were purchased at much cheaper prices and did not cover production costs

WITH THE SUPPORT OF THE EUROPEAN UNION Consequently, until 1997, Lithuanian agriculture was reorganised from the planned Soviet economy to a market economy. 1997 the policy shifted and began promoting the establishment of private farms and adaptation of agriculture to market relations. Particularly successful was the Rural Support Fund (RSF) and the Agricultural Credit Guarantee Fund (ACGF). At the time, Lithuania had 47 thousand farms registered. In 1997–2000 the country was gradually migrating from subsidies for purchased agricultural products to direct payments to farmers from the national budget for crops or livestock.

Preparations for membership in the European Union intensified at the end of the period. In 1991–2004 Lithuania was receiving financial support from the European Union through the PHARE programme. The community support to agriculture and rural development for the European countries seeking accession to the European Union was provided according to the Special Agricultural and Rural Development Programme (SAPARD). The European Commission was allocating 30 million euro every year until 2006 to implement In 1997–2000 the country was gradually migrating from subsidies for purchased agricultural products to direct payments to farmers from

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the national agricultural and rural development programme, increasing this amount by 1.7 per cent every year.

Unfortunately, the aid of the special agricultural and rural development support programme was used inefficiently.

Farmers lacked own funds which were required according to the programme to cover part of the investment project, a lot of money was wasted without estimating the opportunities and failing to perform extensive research. Financial scams and crime flourished in the distribution of these funds, and prominent investigations of illegal misappropriation of funds were initiated.

After Lithuania’s accession to the European Union in 2004, the most relevant measures for support for rural development and agriculture recommended by the European Union were launched. They were more focused to the modern agrarian sector and increase of the attractiveness of rural life. During the period of 2007–2013 of the European Union programming, almost 7.9 billion litas was spent for the implementation of rural development programmes.

The experience of many countries of the European Union has shown that some of the economic problems relevant to local population can be solved by joint actions of the rural community, with efficient use of local natural and human resources, and organising joint business. For these purposes, the LEADER approach has proved its worth in the European Union's rural policy. The organizational approach in the implementation structure of the LEADER method consists of Local Action Groups (LAG), which are represented by three groups of society: rural communities, local government and the business community. This strategy is chosen taking into account the needs of local residents and based on the strategy priorities, support is provided for community projects.

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During the programming period of the year 2007–2013, a total of 51 local action groups implemented the LEADER approach in Lithuania. The number of implemented local development strategies rose to 5, and funding increased by as much as 50 times. At the same time, the number of rural communities was growing rapidly – in 2013 Lithuania had 1,700 communities. LEADER support has been used rather effectively to enhance human capacity and activity, renovation of villages, establishment and expansion of business, transition to non-agricultural activities, rural tourism, and development of international and inter-regional cooperation.

OUTLINES OF THE TIMES: CONCERNED ABOUT THE CONSOLIDATION OF LARGE FARMS In 2013 top ranking state officials received a statement signed by the signatories of the Act of Independence, former agriculture ministers, writers and others, a total of 40 prominent public figures. They expressed a concern about the prevalence of large farms in agriculture and deterioration of rural Lithuania.

“In the restored Lithuania, especially after the accession to the European Union and using its financial assistance, a number of large and modern farms, agricultural companies and concerns were established in Lithuania. These types of farms comprising less than a couple of per cent of all agrarian operators now already own more than 40 per cent of agricultural land”, the statement claimed. “Subsistence or semisubsistence farming accounts for the majority (98 per cent) of the Lithuanian rural people, who were not able or failed to benefit from the EU support for expansion of production, and increasing the size of farms. According to the estimates

New generation of farmers grew up – educated, unfettered with old relations and open to innovation

of 2010, the investment support for the owners managing up to 30 hectares of farms per capita was more than 10 times lower than those with over 100 hectares. Small farmers are paid significantly lower prices for the same type and quality of production. (The price difference for milk is one and a half to two times). This has affected about 150 thousand rural homesteads”.

TIME FOR NEW SOLUTIONS The year 2014 will be recorded in history as the starting point of decisions in determining a different quality level. A new financial period began – support of family farms, preservation of environment and local community initiatives. A new generation of farmers grew up – educated, unfettered with old relations and open to innovation.

However, unexpected external factors for the entire agricultural industrial sector, from manufacturers to the highest government offices, was like a cold shower, leading to review everything that’s been done before. At the same time, not only Lithuania, but also the entire region has faced two serious threats.

In January, the African swine fever virus from feral pigs was first recorded and the dangerous disease was noted in swine farms in summer. Nearly a third of the country's lands have been designated as infected and high-risk areas, with the introduction of more or less restrictive limitations to pig keepers. The pig sector, already shrinking, now faced a matter of survival. Another threat came from Russia, when on

Lithuanian dilemma 2014: what to do with the 1,400 tonnes of raw milk, previously used for production of products later delivered to the Russian market every day

7 August 2014 it banned food imports from “unfriendly” countries of the European Union, Norway, the US, Australia and Canada. The Lithuanian agri-industrial sector was most affected by the embargo. On the same day it faced the problem of what to do with the 1,400 tonnes of raw milk, previously used for production of products later delivered to the Russian market every day. Dairy producers have been warned: purchase prices will be reduced. Milk price fell in all markets. Meat and vegetables sectors also faced a serious threat.

Processors and manufacturers, linked by the same chain, in this extreme situation had to sit at a round table for difficult discussion. The event scenario seems to expect that the painful lesson given by Russia to Lithuania will come out good.

It is said, that when one door closes, another opens.

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AGRICULTURE

UAB DOJUS AGRO Twenty years ago DOJUS agro was a small import-export company with a dozen employees – today it is the largest supplier of agricultural machinery in Lithuania and neighboring countries: Latvia, Belorussia and the Kaliningrad region of Russia. The company's success has been built on its relationship with many well-known brands, foremost of which is John Deere, a famous, high-quality brand known around the world by its green and yellow livery. Their tractors, harvesters, tillage, forage and other machinery have contributed to the development and prosperity of modern Lithuanian agricultural.

When Lithuania joined the European Union, opportunities for Structural Fund support became available to thousands of farmers encouraging them to expand and modernize their farms and invest in new production potential. DOJUS agro offered the most modern and advanced agricultural machinery to large farming enterprises and became a leader in the field.

THE HIGHEST SALES IN LITHUANIA Representing the world's largest producer of agricultural machinery – Deere & Co – DOJUS agro has rapidly grown into a strong international company. Sales of John Deere equipment make up about 80 percent of all DOJUS agro turnover, with about seventy percent of the income the company receives generated in Lithuania. In 2007, alone, when celebrating its fifteenth anniversary, the company's turnover reached nearly 58 million euros, increasing, by 2012, to 80 million euros. Twenty years ago, the company employed thirteen people – today over two hundred of the highest qualified professionals serve our clients in four counties looking after almost five thousand of the most powerful and efficient agricultural machines in the world.

ALL THAT IS MOST MODERN – ALREADY IN LITHUANIA Today, while ensuring that the most modern and up to date agricultural machinery in the world is also available in Lithuania, DOJUS agro also successfully sells used tractors 100

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and combine harvesters not only in Lithuania, but also in Western European countries. This area was developed in response to the EU decision to support only new and advanced equipment funding, which the chairman of the company, P. Dailidė, believes is just, as he says: In the past, the technology was changing every three to four years, but now some manufacturers are able to introduce revolutionary solutions in just one year. The progressive farmer who wants to compete in Europe cannot buy products which do not meet the standards of the modern market.

OPERATION AND MAINTENANCE – FROM A DISTANCE The company is continually searching for new solutions to provide services to farmers faster and better using the most advanced technology. Thirty-two technical maintenance vehicles, carrying spare parts for all seasons, operate in Lithuania with the approved equipment required to provide diagnostic and repair services. However, often, there is no need for us to go anywhere; the most modern equipment available – the JDLink telematics and RFID system – allows us to connect to the machine remotely, see its location, scan interfering codes, record certain parameters and update the control unit software.

INVESTING IN NEW GENERATION DOJUS agro promotes a close dialogue with curious and inquisitive young people by cooperating with Aleksandras Stulginskis University (ASU), other agricultural schools and agricultural associations. We also participate in student career days and are involved in various social projects, many of which are directed toward education: supporting rural and small town schools, educational activities, and the activities of the Foundations.

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Worldwide customers rank high Lithuanian made lasers

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At the laboratory of Šviesos konversija, well known laser and light technology company. Like many other leading Lithuanian high-techs, ir emerged from the former soviet science and research centres

D

uring the period of independence the Lithuanian system of science and education has gone a long and complicated path of evolution and continuous reforms. Even before the restoration of Lithuania’s independence the debate on education and the curriculum, the role of education for the development of the country, institutional affiliation, improvement of management and structural reforms began. In 1989 the Lithuanian Scientific Society (LSS) was established. It was mainly engaged in the search and validation of advanced organisational principles of the scientific and education system. Vytautas Magnus University was restored with the efforts of Lithuanian scientists living abroad.

CONSIDERABLE POTENTIAL INHERITED At the moment of restoration of Independence Lithuania had 12 institutes of higher learning (universities) and the Academy of Sciences with 17 research institutes: Lithuanian Language, Lithuanian Literature and Folklore, Lithuanian History, Culture and Arts, Philosophy, Sociology and Law, Economics, Mathematics and Computer Science, Theoretical Physics and Astronomy, Physics, Semiconductor Physics, Chemistry and Chemical Technology, Biochemistry, Botany, Ecology, Immunology, Geography and Physical and Technical Problems of Energy, Library of the Academy of Sciences, Kaunas Botanical Garden, departments of Foreign Languages and Philosophy, and about 30 union subordination, departmental, 32 business and 10 higher education schools and institutes.

The number of research and development staff in Lithuania in 1991 was 29,000. At that time, the level of the Lithuanian research potential was quite high according to a standard of the time, ahead of the EU average with its 8 researchers per thousand employees (5 researchers per 1,000 employees in the EU).

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Many of these institutions have been quite large, and included test plants and design offices. Later, some of them developed into high-tech companies, for instance, about 10 laser and light technology companies involved from the Institute of Physics, biotechnology companies Fermentas, Biofa which later became Sicor Biotech developed from the Institute of Applied Enzymology. Šviesos konversija emerged from the Laser Research Centre of Vilnius University, and some of now leading IT companies – from the university’s Institute of Mathematics and Informatics.

The inherited science and education system had features characteristic of the Soviet period: fundamental and applied research has been concentrated in research institutes and was separated from the studies in higher education establishments.

After the collapse of the Soviet Union, Lithuania’s economy and science had suffered a tremendous shock. During Funding of science and technology development, per cent of GDP. Approximate estimates in 1988 –2013 (Fig. 1) 2,0

1,5

1,0

0,5

0,0 1988

■ BVP proc.

1990

1992

1995

1999

2006

2010

2012

the first few years of independence, the real gross domestic product (GDP) of Lithuania decreased by approximately half, and only in about 2005 reached the levels of 1989, but with a completely different structure – a large share of GDP was created by services. Funding of research and development, even expressed as a percentage of GDP, fell three times (Fig. 1).

Despite poverty, Lithuania still managed to save the basic science and research potential that remained after the restoration of independence, albeit reduced. In about 1995, the number of university students, scholarly articles in prestigious international journals (Fig. 2) and other scientific output began to grow.

In the first decade the Lithuanian scientific community could still boast of research in the Lithuanian language and other fields related to the homeland: ranging from the Lithuanian language, literature, folklore, history, botany and geography to land and water management, food and ecology. One can mention the 20 volumes of the Dictionary of the Lithuanian Language (from 1941 to 2002) and its electronic version (2005), a large number of specialized multilingual dictionaries, reference books, encyclopaedias, textbooks, maps, digests of plants and animals, monographs and other publications.

Lithuania also has relatively well-developed publication of scientific magazines. Currently, almost 30 Lithuanian scientific journals are included in the prestigious Web of Science database. By comparison, neighbouring Latvia and Estonia publish only a few magazines that are included in this database. In 2013, based on scientific publications and articles published in 68 most prestigious scientific magazines, Lithuania ranks 52nd in the list of Nature Index 2014 Global, ahead of other neighbours – Latvia, Bulgaria, Moldova, and Belarus. The Lithuanian position in the ranking is mostly due to the natural sciences, materials science, quantum electronics, laser science, theoretical physics, biotechnology, chemistry, but it is modestly represented in the life sciences, too – practical medicine prevails in Lithuania.

SCIENCE AND EDUCATION REFORMS: MANY OF THEM Science and education system reforms and activities are based on the innovative Law on Research and Higher Education (adopted on 12 February 1991) which was valid without any amendments till 2002. Based on it, a uniform education and learning system was established. It consisted of higher university schools, research institutes, Lithuanian Academy of Sciences (LAS), Lithuanian State Science and Studies Foundation and other research establishments.

The new law was aimed at the integration of research and study.

In 2000 the Law on Higher Education, and in 2002 a new version of the Law on Research and Studies was adopted. All institutes retained considerable autonomy and the status of

Number of undergraduate and graduate students in Lithuanian higher schools, thousands 150

120

90

60

30

0 1965

1980

1990

1993

1907

2005

2010

2013

■ VF – funded by the state, ■ SL – studying at their own expense (Fig. 2)

a legal person. A two-stage system of doctoral studies based on the US model was established where not only the supervisor but also a special committee took care of each doctoral student from his accession for studies to the defence of the doctoral dissertation. Such a unified science and education system was optimal for the small state of Lithuania.

In the first decade of independence, funding for research and higher education was allocated to individual institutions depending on the number of researchers and other data.

About 75–78 per cent of the budget appropriations for research and study were allocated to higher university schools, 16–18 per cent for research institutes and 6–9 per cent for general research and study purposes. On the other hand, unending education and education reform has been going on for 25 years and still continues. In particular, it intensified after the creation of various groups of education system experts, science and education reforms.

Over the years, 10 systems of study funding replaced each other: until 1995 there were almost no students who paid for tuition but later universities set a price for studies, and from 2000 it was regulated by law. On 7 December 2000 the Seimas adopted the Law on Long-Term Funding of Studies and Research, which since 2004 guaranteed no less than 2 per cent of the GDP from the budget for research and studies and on 21 December 2001 the amendment of the Law on Higher Education prohibited enrollment into the universities for those who were willing to pay for studies at their own expense. Since 2003, it again allowed acceptance of students paying full price for studies to the first cycle programs. Some students were studying for free, some of them received scholarships, some paid the registration fee, and the rest paid full price. In 2008 the government approved the reform plan of

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After the reduction in budgetary funding of research and study, currently more than half of the students pay the full price for studies (Fig. 2). About 15–20 per cent of young people can use the state-funded places at universities. The same number can study for free in colleges. Others, willing to pursue higher education, are leaving to study in other countries or pay the full cost of education in Lithuania.

Vilnius University, one of the oldest and most prominent high schools in Central and Eastern Europe, was founded in 1579. In the photo – Faculty of Philology

the system of research and education. After merging research institutes or centres, or joining them to universities, the country now had 14 universities and 13 state research institutes, 5 so-called research centres, and the total number of academic institutions declined.

SCIENCE AND BUSINESS Lithuanian business is insufficiently engaged in research and it’s financing. Only a few companies publish their research results in international scientific journals. Other companies are mostly engaged in applicable sciences.

We are proud of our scientists applying their theoretical knowledge and practical experience and significantly contributing to the knowledge economy. Among them is the research and production company UAB Šviesos konversija, the pioneer and global leader of multicoloured femtosecond laser manufacturing. It’s TOPAS, ORPHEUS series of collinear

One of the most modern in Eastern Europe is the semiconductor laser laboratory of Brolis Semiconductors company. It’s client list consists of more than 160 companies ranging from Japan to the United States

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optical parametric amplifiers and PHAROS laser system, absorption and fluorescent spectrometers are world famous and cover about 80 per cent of the world market.

Biotechpharma research and development centre is the first company of its kind not only in Lithuania, but also in Eastern Europe. It provides all biotechnological pharmaceutical services – from outsourcing scientific expert examinations to the production of test compounds for preclinical and clinical testing. Main clients of this service centre are international biotechnology and pharmaceutical companies, universities and other academic institutions.

UAB Ledigma is a company founded by scientists and young researchers in the Lighting Systems and Electronics sector of the Institute of Applied Sciences of Vilnius University.

The purpose of this company is to commercialize the results of more than 10 years of research and experience in the research, development and optimization of solid-state lighting and other optoelectronic systems.

One of the most successful high-tech companies in Lithuania is Ekspla, producing advanced lasers, laser systems and components, and proud of successfully occupying yet another segment of the international market. The company was first in the world to start selling the new generation of femtosecond fiber lasers.

UAB Brolis Semiconductors is a high-tech enterprise engaged in the application of semiconductor technologies in electronics and optoelectronics. The company was founded in 2011 by three brothers: Augustinas, Kristijonas and Dominykas Vizbaras, specialising in long wave semiconductor lasers and molecular beam epitaxy.

GROUPS OF SCIENTISTS MOVE MOUNTAINS Close communion and cooperation of researchers could be an excellent model for all Lithuanian institutions. Some scientists or groups of scientists have earned recognition not only in Lithuania, but also globally. Below are some examples to illustrate what mountains creatively working groups of scientists can move.

• The group performing spectral and electrochemical research of heme containing biomolecules and synthetic compounds brings together the scientists working in the fields of spectroscopy, molecular biology, organic and inorganic chemistry, immunology, electrochemistry and protein engineering sciences: R. Meškys, V. Laurinavičius, V. Razumas, J. Kulys, J. Valinčius (Institute of Biochemistry), G. Niaura (Institute of Chemistry), A. Šetkus (Semiconductor Physics Institute), D. J. Čitavičius, E. Butkus (Vilnius University). The group represents cross physical, biomedical and technological sciences, its research interests range from the use of biospectroscopy for structural molecular

studies, development of bioanalytical methods, enzyme biotechnology, bioelectrochemistry, structural genomics, and biomolecules with heme and pyrroloquinoline quinone.

• Parameter measurement of semiconductor crystals, their structures and defects, and studies of charge carrier dynamics. Research work of this group of scientists borders between natural and technological sciences and represents the sciences of semiconductor physics, materials and structural engineering. Core of the group consists of the following researchers: E. Gaubas, V. Kalesinskas, V. Kazlauskienė, V. Kažukauskas, J. Miškinis, S. Sakalauskas, J. Storasta, J. Vaitkus, E. Žąsinas. Lithuanian scientists collaborate with colleagues from research institutes in Lithuania and abroad, e.g., CERN, Glasgow and Surrey (UK), Hamburg (Germany), Helsinki (Finland) and Tokushima (Japan) universities.

• The nano-biotechnology group consists of scholars from several research institutions. It’s specialization is electrodeposition of thin, nano and microstructurised conductive polymers and transition metals on the surface of the electrodes and their investigation, and analysis of electrocatalytic and electrochemical processes that take place on modified electrodes, the use of those layers for the development of sensors, biosensors and immunesensors, as well as the development of nanostructurised biocomposites and their application for bioanalytical purposes. The leader of this group Academician Albertas Malinauskas is one of the foremost experts in the field of chemistry. Over the last 20 years his articles have been cited most from among all chemists of Lithuania. In 20 years, he has published 105 scientific publications cited by researchers around the world more than 2.2 thousand times. The professor published at least three articles cited more than a hundred times, one of which concerns the electronic processes occurring on conductive polymers, mentioned nearly 200 times.

Academician Albertas Malinauskas is one of the foremost experts in the

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field of chemistry

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Lithuanian chemist, Habil.

Dr. Prof. Juozas Gražulevičius is one of those who has published the highest number of articles in the ISI Web of Science publications with a citation index

• The core of the optoelectronics group consists of physicists and chemists from Vilnius University, Kaunas University of Technology, and Institutes of Semiconductor Physics and Physics. In carrying out interdisciplinary research they are assisted by the mathematicians and psychologists of Vilnius University, Vilnius Gediminas Technical University, and the Lithuanian Institute of Horticulture.

• Improvement of intensive care technology of human brain trauma to reduce the mortality and post-traumatic disability of patients brought together scholars from technology and medical fields. They represent a cross-disciplinary research and high-tech development area, with main subjects of medicine, biophysics, biochemistry, physiological measurements and monitoring, information technology, mechatronics, electronics and various disciplines of physics.

• The group was formed in 2003 and brings together researchers from five institutions: Vilnius University, Insubria and Pavia University’s (Italy), the Institute of Theoretical Physics (France) and the Polytechnic University of Madrid (Spain).

It has established links with the University of Arizona (USA) and the Institute of Technology of Crete (Greece).

Scientific interests of the group in natural sciences include laser physics, nonlinear optics, optical parametric light amplification, optical solitons, and optical technologies.

• The microwave strip fluctuations study group of the Institute of Semiconductor Physics was one of the first in the world. Research is carried out in collaboration with scientists of Cornell (USA) and other US and European universities, results are presented at international conferences, seminars at universities and industrial companies.

The interests of the group of researchers representing physical sciences and technology (semiconductor physics and condensed matter sciences) include fundamental and applied research of high-speed semiconductor devices and semiconductor nanostructure fluctuation phenomena.

• In the natural sciences of mathematical modelling and its applications, the core of the group of numerical modelling 108

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of biological sensors consists of scientists from Vilnius, Kaunas Technology and Gediminas Technical universities and several other institutes. The group specialises in the analysis and application of nonlinear mathematical and computer modelling and data analysis methods and tests.

• The Faculty of Philosophy of Vilnius University hosts the informal joint research team “Effect of social transformations on individuals, family and society: risk factors and coping resources”. It’s core consists of researchers and professors from the Swedish, Norwegian, Hungarian, Slovenian and Turkish universities. The research interests of this group is the analysis of society groups responding differently to social transformations.

• The old Lithuanian writings are digitalised and their database is created in the Lithuanian Language Institute by the Ancient writings database group established in 1996. It is composed of scientists from several Lithuanian scientific and educational institutions: Lithuanian Language Institute, Vytautas Magnus University, Vilnius University and Šiauliai University. Areas of interest of scholars representing humanities (philology, linguistics) and informatics groups are the history of the Lithuanian written language, philological analysis of ancient texts, analysis of ancient Lithuanian written language, and computational linguistics.

• Since 2001, the research group of strong magnetic fields of Vilnius includes the representatives of several academic bodies. Together with the University of Applied Sciences of the German city of Gelsenkirchen, the researchers have established a joint training programme for students. Their loyal partners abroad are also the US Military Space and Missile Defence Department in Huntsville (Alabama) and the French-German Research Institute of Saint Louis (France). Fields of research interests of these groups include quick switching processes in semiconductors, light and electric field induced phase transitions in thin layers of hightemperature superconductors, effect of strong magnetic and electric fields and shock waves on magnetic materials.

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Construction and architecture in 1990–2015

ON THE ROAD OF SUSTAINABLE DEVELOPMENT Dr. Dalia Bardauskienė, Adakras Šeštakauskas, distinguished Lithuanian engineer

URBAN DEVELOPMENT

LITHUANIAN ARCHITECTURAL, CONSTRUCTION AND URBAN DEVELOPMENT IS CLOSELY LINKED TO WESTERN EUROPE. THE LITHUANIAN CONSTRUCTION SECTOR IN THE SECOND HALF OF THE TWENTIETH CENTURY WAS DOMINATED BY THE PRINCIPLES OF THE SOVIET ADMINISTRATIVE ECONOMY. AFTER THE RESTORATION OF LITHUANIA'S INDEPENDENCE IN 1990, THE PREREQUISITES FOR THE IMPLEMENTATION OF THE NATIONAL CONSTRUCTION AND ARCHITECTURAL AND SPATIAL PLANNING SYSTEM WERE FINALLY CREATED. THE HISTORY OF THE CONSTRUCTION SECTOR SHOULD BEGIN WITH THE FACT THAT LITHUANIA WITHDREW FROM THE RUSSIAN EMPIRE IN THIS IMPORTANT AREA ONLY ON 19 MARCH 1996. THAT WAS THE DAY OF ADOPTING THE LAW ON CONSTRUCTION OF LITHUANIA – THE FIRST LAW REGULATING THE CONSTRUCTION SECTOR IN THE HISTORY OF LITHUANIA. BEFORE THE RESTORATION OF INDEPENDENCE, LITHUANIA HAD SEVERAL HUNDRED LEGISLATIVE ACTS OF THE SOVIET UNION RELATING TO CONSTRUCTION AND SIMILAR FIELDS. AND BEFORE THEM IT WAS APPLYING A SLIGHTLY MODIFIED BUILDING CODE OF THE RUSSIAN EMPIRE.

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I WAVES OF CONSTRUCTION Lithuania inherited a sufficiently large manufacturing potential of building and construction materials. In 1990 the country's construction sector employed about 170 thousand people. It had 29 contractor construction and assembly trusts and 281 construction and installation companies.

In addition, 46 primary reclamation and water facility construction companies and 234 building cooperative organizations where performing contract work. In 1989, there were 10 design companies.

After the restoration of independence, state-owned construction trusts and associations became independent stateowned enterprises and after privatization were turned into public limited and private limited liability companies. These processes of change took place rapidly, because the goals of reform coincided with the companies’ expectations to be completely self-sufficient.

Over time, the construction organization and management principles changed, new technical and process solutions

were introduced and the building materials and construction industry was transformed. In fact, in the course of privatization companies become smaller, although independent.

From the large companies, only AB Kausta (former Kaunas housing building factory), AB Panevėžio statybos trestas, AB Montuotojas and a dozen of others that were important for the construction of large objects, remained.

Meantime, a number of problems inherent to all construction organizations emerged. There was no one to summarize them and forward for public institutions and authorities.

Therefore, in spring of 1993, the managers of 24 companies established the Lithuanian Builders Association. Its statute stated that its purpose is “to bring together the efforts of the members of association in search for the markets of construction, design and building, so that the generated funds are used to purchase material resources.” This paragraph of the statute like no other reflects the major challenges in the construction sector at the time: lack of metal, pipes, electrical materials, as well as lack of energy, oil and gas, not to mention the company's financial capacity. A lot of effort had to

Lithuania inherited a sufficiently large manufacturing potential of building and construction materials

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The first modern residential area – Freda town (2007, awarded with the prize For Sustainable Development)

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I SIGNS OF NEW URBANISTICS The crisis of the real estate market (2008–2009) slowed the suburban development and provided an opportunity to evaluate the results. Despite some problems and imbalances, many single-family and multifamily residential buildings of higher quality and excellent architecture emerged in cities and around them. A number of projects testifying the new quality in the relations of the developer, the builder and the architect to achieve the best results, appeared. Such, for example, is the town of Freda in Kaunas, where a large, unattractive area acquired a complete, urban aesthetic – architectural image. Creativity and quality of construction work penetrated into the interiors of buildings and the way of life, with people getting along just like residential houses and public spaces of different types.

Valleys of culture and knowledge economy rising in Kaunas and Klaipeda Free Economic Zones (FEZ) and Visoriai Science Business Park in Vilnius mark the transition of the country's economy from the industrial to the knowledge economy and information society. Their buildings are significant for the development of the country's urbanism and architecture, they are characterised by creativity, construction excellence and quality, creating an opportunity to attract foreign investment, expand cooperation with international companies and researchers from other countries and to raise the country's competitiveness.

EU structural support gave impetus to the development of the construction of sports and cultural facilities. Sports arenas

Science and Technology Centre in Kaunas, in Santakos Valley, 2014 (general contractor LitCon construction company was awarded the prize of the Government of the Republic of, 2014).

were built in Vilnius, Kaunas, Klaipėda, Šiauliai, Panevėžys, and Kėdainiai (Fig. 3 a). Former buildings of factories and printing houses in Vilnius, Kaunas, and Klaipėda were adapted for the needs of the culture industry. Cities were embellished with modern signs, claiming to become the symbols of the time. Reconstruction of County Library in Panevėžys surprised the public with its exceptional architecture in 2006 (Fig. 3b). The turning point in the construction of commercial buildings began with the rapid development of national commercial networks and shopping centres. The fact that usually unattractive commercial spaces became warm and human was due to successful cooperation of architect G. Jurevičius, a famous architect of Lithuanian shopping centres, with network developers and builders (Fig. 3 c.).

In the future the challenges of construction, urban development and architecture will be addressed in a more consistent manner,

to give meaning to people's dream to live in a city-garden

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PROSPECTS To summarise the results, one can say that Lithuania went through an amazing time, accumulated considerable creative and technical expertise, contemplated upon errors, realized that faceless modernism is aging faster than the ancient cultural heritage that creates a local spirit and added value.

It is likely that in the future the challenges of construction, urban development and architecture will be addressed in a more consistent manner, and cosy towns will find a place in the vicinity to major cities, to give meaning to people's dream to live in a city-garden.

Demographic factors will force improvements to urban planning and public infrastructure management, fun­ damentally changing the principles of town planning: transition from the external, the quantitative development to the internal, high-quality development. Unlike Western countries, many land parcels in Lithuanian cities have infrastructure and can meet the needs of the public and the real estate market. First of all these are the areas of warehouses and factories, to be converted to new eco-friendly multifunctional neighbourhoods.

Over the next period of using EU structural funds (2014–2020) we can accelerate the upgrade of integrated urban areas, increase the energy security of buildings and use the existing infrastructure more efficiently. After implementing this, towns will become more attractive places for living than suburbs, and will compete in the regions for investment.

Sustainable urban development is unthinkable without a strong self-governance and communities. We want to believe that local governments will become the real owners of the development of towns and cities, with the means to address the issues of life quality. Sustainable development results are achieved in a long way; they depend on both the region's economic growth, state policy and consistent efforts of architects, designers, builders, developers and their related professional communities. There is no stagnation in sustainable development horizons, unlike in the market, as the accelerating pace of civilization, abundance of new ideas, better technological and architectural solutions forces everyone to shape up, to exchange information, knowledge, to have a vision and consolidate resources for its implementation.

Kaunas Žalgiris arena, the most modern in the Baltic states,

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Kaunas, 2011

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TOURISM

I CHANGING HABITS, CHANGING MARKETS: FROM EAST TO WEST After the restoration of independence, the establishment of tourism organizations and associations in Lithuania quickly gained momentum. The first associated tourism organizations were founded in 1991: Lithuanian Tourism Association and the Lithuanian Union of Travellers. The start-up of new private tourism companies was particularly rapid: as many as three thousand companies that included tourism as part of their business in their statutes were registered in 1992. On the other hand, the number reduced to 352 after starting to issue licences in 2004.

The legal and institutional framework was created in 1992.

The government of the country recognised tourism as a priority area of economic development, which enabled operators to receive grants, concessional loans, etc. In the same year the National Tourism Service, currently the State Department of Tourism, was founded. Moreover, in the same year the first publication to promote an independent Lithuania was released – Besuchen Sei Litauen. Welcome to Lithuania in the German and English languages.

The year 1993 was the year of lively international activities. Agreements were signed on co-operation in the field of tourism between Lithuania, Latvia and Estonia, between Lithuania and the Ukraine, and an informal tourism organization of the Baltic countries was established. In order to promote the flows of tourists, the focus was aimed at the German market – Lithuania was for the first time presented in one of the world's largest international tourism exhibitions ITB in Berlin. In the same year the first Lithuanian Tourist Information Centre in Berlin was founded. Eventually, the network of Lithuanian tourism information centres expanded: tourist information centres were established in Moscow, Warsaw, Paris, Helsinki and elsewhere.

Revenues from international (inbound) tourism to Lit­ huania in these years grew faster than in the EU countries.

However, it has to be conceded that the amount of revenue

Preparing of bread loaf for cooking at the Žaliūkai rural homestead

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State focuses on the development of entertainment and leisure tourism infrastructure, Vice Minister of Economy Rasa Noreikienė says

generated remained low: in the estimates of 2001, the EU average was 2.5 times higher than that of Lithuania and as much as 7.9 times higher per capita. One of the main reasons for low income indicators per capita and per tourist was still weakly developed, poor entertainment and leisure infrastructure and inefficient national tourism marketing. Moreover, tourism agencies mainly provided outbound tourism services. Only 20 per cent of agencies were engaged in in­bound tourism, and only 18 per cent were focused on local tourism.

However, the industry continued to take root and stren­ g­t hen its positions. The National Tourism Development Programme until 1998 was approved in 1994. The first international tourism exhibition Vivattur presenting tourism opportunities of both our and other countries was held in 1995.

The Lithuanian resort development concept was prepared at the initiative of the Ministry of Economy in 2000. The next year, resort status was granted to 4 Lithuanian towns: Birštonas, Druskininkai, Neringa and Palanga. These actions were aimed at preserving the traditions of Lithuanian resorts, engaging in research of resorts, and transitioning to a new level – to provide high quality health tourism services and offer more new attractions and entertainment, in addressing the sensitive problem of seasonality in the countries of the Baltic Sea region.

In 2003 Lithuania was the first of the Baltic States to join the World Tourism Organization; it also approved a National Tourism Development Programme for the year 2003 –2006 and began to develop the Lithuanian tourism information system.

MEMBERSHIP IN THE EU: SPACE FOR NEW DEVELOPMENT Lithuania's accession to the European Union in 2004 brought many positive changes in the growth of tourist flows, development of tourism infrastructure and dissemination of favourable information about Lithuania as an attractive travel destination. Membership had a positive impact: it facilitated

Pažaislis monastery – one of the most visited heritage sites of cultural tourism

travelling by simplifying border procedures. First low-cost airlines included Lithuania in their routes. With rapidly growing interest in our country, new services and entertainment were offered to foreign and local tourists. Many public and private museums were opened; Vilnius and Druskininkai water amusement parks were welcoming visitors; first golf clubs were offering to test the accuracy of your swing and tempting to try out a new type of entertainment; rural tourism homesteads were invited to have a different look at the countryside.

According to the Deputy Minister of Economy Rasa No­­ reikienė, state attention was paid to the development of entertainment and leisure tourism infrastructure. Much funds were invested in the facilities of cycling, hiking, water trails, beaches, recreation areas, camping, parks, sports and recreational equipment, ski slopes, yacht marinas and other public sports facilities, stadiums, amusement parks, and spas.

Recreated heritage objects (manors, water mills, abandoned buildings) were converted and adapted for the tourism infrastructure – conference halls, exhibitions and craft centres, information, culture and recreation facilities. This created favourable conditions to organize various events in Lithuania, to improve the country's image and promote tourism.

Tourism infrastructure and resorts have been developed.

High value to the active development of tourism was added by the Seaside Cycle Route of more than 200 kilometres, stretching along the entire Lithuanian seaside from Būtingė in the north to Nida in the south, and along the Curonian Lagoon from Klaipeda to Rusnė Island. Special plans of national automotive tourism and water tourism routes were developed.

They contained design proposals and priorities for tourist developments with particular focus on tourist routes with most abundant resources of cultural heritage (manors, mills and others), and opportunities to use them for cultural tourism.

“During the period of 2007–2013, more projects to promote tourism have been funded under the EU structural assistance facilities, receiving a total of 251 million euro. Reconstructed old objects again attract the attention of tourists, and newly opened facilities created more new tourism opportunities”, said Deputy Minister of Economy Rasa Noreikienė.

Every year, the number of rural tourism homesteads was also growing. In 2006, the record rise in the number of rural tourism homesteads – 33.4 per cent – was marked. It was a result of 21 million euro granted for the development of rural tourism in 2004 –2006. The growing interest in rural tourism is shown by the number of visitors. In 2004, a total

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Local tourism among Lithuanian residens flourishing – from 2004 to 2008 it rose 3 times

of 90 thousand Lithuanian residents decided to stay at these homesteads, and in 2008 this figure rose more than 3 times, up to 288 thousand.

More changes were brought by the year 2007, when Lit­ huania joined the Schengen area. In 2008 the British newspaper The Guardian chose the Curonian Spit the second among the best ten beaches in Europe.

Unfortunately, the economic downturn has affected nearly the entire Lithuanian economy, including tourism. The bankruptcy of Lithuanian Airlines and the reduction of flights to Vilnius contributed to the decline of the industry (other airlines offer only 11 destinations from Vilnius). However, these events did not overshadow other developments important for Lithuania that have contributed to the promotion of tourist flows. We celebrated the millennium of the Lithuanian state, and Vilnius has become the Lithuanian Capital of Culture.

In 2011, one of Europe's largest indoor ski slope complexes was opened in Druskininkai. Investment in the construction of the complex which is one of the best examples of using private and public funds totalled 30 million EUR. The year 2012 was record high for the Lithuanian tou­ rism sector: there were 1.9 million trips of foreign tourists to Lithuania, or 7 per cent more than in 2011 and 27.8 per cent more than in 2007. According to the information from the Bank of Lithuania, in 2012 Lithuania’s income from inbound tourism was 1,117 billion euro or 13 per cent more than in 2011 and 28.8 per cent more than in 2007. According to the European Travel Commission, in that year Lithuania was the second in Europe in terms of growth of foreign tourist trips.

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Asso­ciation rated the conference tourism opportunities in 180 cities and announced that Vilnius is 26th, well ahead of the neighbouring Baltic capital cities: Tallinn in 34th place, and Riga in 37th place.

In 2013, Lithuania continued to enjoy good results in the tourism sector: growth of foreign tourists amounted to 8 per cent. According to the European Travel Commission statistics, in 2013 Lithuania was the leading in Europe by hotel occupancy growth (about 9 per cent) and nearly 4 times exceeded the average growth (2.4 per cent).

In conclusion to this brief overview of the tourism sector, it is safe to say that in 25 years of independence Lithuania has become the leader in inbound tourism growth in Europe, and a country offering a wide range of complex tourism services.

In 2012 Lithuania was the second in Europe in terms of growth of foreign tourist trips

DR. TAUTRIMAS AŠTRAUSKAS CLINIC: DECADES DEDICATED TO THE CREATION OF BEAUTY AND SELF-ESTEEM THE INNOVATIVE, CUTTING-EDGE TECHNOLOGIES AND APPROACHES TO PLASTIC AND RECONSTRUCTIVE SURGERY CONFORMING TO THE BEST GLOBAL PRACTICE HAVE BEEN APPLIED AND DEVELOPED IN LITHUANIA SINCE THE FIRST DAYS OF ITS RE-ESTABLISHED INDEPENDENCE. DR. TAUTRIMAS AŠTRAUSKAS HAS BEEN WORKING IN THE FIELD OF PLASTIC AND RECONSTRUCTIVE SURGERY AND CONTRIBUTING TO ITS DEVELOPMENT AND PROMOTION FOR MORE THAN TWO DECADES. HAVING SPENT TWENTY YEARS WORKING FOR THE HOSPITAL OF THE LITHUANIAN UNIVERSITY OF HEALTH SCIENCES KAUNAS CLINICS, THE HIGHLY SKILLED AND EXPERIENCED SURGEON FINALLY EXCLUSIVELY DEDICATED HIMSELF TO HIS FAVORITE AREA OF EXPERTISE, WHICH IS BREAST RECONSTRUCTION SURGERY. DR. AŠTRAUSKAS ALSO RUNS A PLASTIC, RECONSTRUCTIVE AND COSMETIC SURGERY CLINIC WHICH USES ONLY THE MOST ADVANCED TREATMENT METHODS.

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hile working at the Hospital of the Lithuanian University of Health Sciences Kaunas Clinics, Dr. Tautrimas Aštrauskas performed over two thousand plastic and reconstructive surgeries and about 8 thousand surgeries of the kind during his entire career. He has published over twenty scientific articles and research papers, and has dedicated all of his scientific expertise and creative energy to the development of cosmetic surgery in Lithuania.

One of the first private plastic and reconstructive surgery clinics in Lithuania, the Plastic Surgery Center, was also founded by Dr. Tautrimas Aštrauskas in 1992. Today Dr. Aštrauskas is a prominent surgeon with world-recognized expertise, and Dr. Tautrimas Aštrauskas Clinic provides premium quality services in the field of plastic and reconstructive surgery.

EXPERIENCE IN THE CREATION OF BEAUTY One of the time-tested truths is that people care about their appearance not only to be liked by others. Most frequently, self-confidence and positive emotions are the first priority. Although the possibilities of plastic surgery are not

TOURISM

unlimited, the skilled specialists can help people to overcome their problems and gift a new look that could entirely change the approach to life and increase the self-respect.

“The purpose of my work is to lift the spirits of my patients and boost their self-esteem. Emotional wellness brightens the colors of life and inspires for great deeds,” says Tautrimas Aštrauskas.

In 1986 when the young doctor Tautrimas Aštrauskas graduated from Kaunas Institute of Medicine (presently known as the Lithuanian University of Health Sciences or LSMU) and chose to become a plastic surgeon, plastic and reconstructive surgery in Lithuania was a relatively new but perspective field of medicine.

Having completed his internships and taken professional development courses in Moscow, Zurich, Oslo, Berlin, Paris and other major European cities, Dr. Tautrimas Aštrauskas returned resolute to open a private clinic for plastic, cosmetic and reconstructive surgery.

In 1992, Dr. Aštrauskas founded the Plastic Surgery Center. Ten years ago, the clinic was relocated to the peaceful Žaliakalnis District in the very heart of Kaunas. The brand new building was custom-designed and adapted to suit all the needs of a plastic surgery clinic. In the spring of 2012, Tautrimas Aštrauskas Clinic opened its doors to patients.

BRINGING BACK THE JOY OF LIFE While working at Kaunas Clinics and Kaunas Oncology Hospital, Dr. Tautrimas Aštrauskas focused on breast reconstruction surgery and related problems. He has performed several hundred breast reconstruction surgeries on the women who had one of their breasts removed due to cancer. In many instances, a single surgery can combine the removal and reconstruction of a breast.

These surgeries are very complicated and very significant to the patients. Breast reconstruction helps women to regain their self-confidence, mental strength and joy of life after the loss of the symbol of their femininity.

Today Dr. Tautrimas Aštrauskas successfully combines his experience gained in the reconstructive and cosmetic surgery to perform miraculous breast reconstruction procedures.

IN STEP WITH GLOBAL TRENDS Dr. Tautrimas Aštrauskas is undoubtedly considered one of the pioneers of the minimally invasive endoscopic facial surgery in the Baltic States. His clinic employs groundbreaking treatment methods which ensure the safety of the patients and natural-looking results with least possible trauma.

The fat grafting procedures performed at the clinic are a perfect choice for breast augmentation, facial rejuvenation, correction of post-traumatic injuries or congenital anomalies, reconstruction of breasts after cancer treatment and treatment of chronic wounds.

Dr. Tautrimas Aštrauskas performs as many fat grafting procedures as his colleagues all over the world.

“The use of own tissue in reconstructive surgery is the gold standard featuring many advantages if compared to synthetic implants. Human body reacts better to own tissue, eliminating the possibility of transplant rejection. The results are long-term and the surgery leaves practically no scarring,” – says the specialist.

Adipose tissue-derived stem cells are yet another innovation in the world of medicine, which has a very promising future. The clinic also offers many other plastic, reconstructive and cosmetic procedures (face lift, buttock augmentation, body contour correction, rhinoplasty, eyelid correction, otoplasty, etc.).

TEAMWORK IS THE BIGGEST ASSET Our friendly staff consists of carefully selected experienced physicians who have been successfully working with Dr. Aštrauskas for the third decade. Tested by time and circumstance, reliable and qualified team of doctors, nurses and administrators is a huge asset to the clinic. Our professional, attentive and devoted staff is united by common respect to patients and aspiration for the highest performance standards.

“The great results of the clinic are achieved though responsible decisions of our doctors, they constantly strive for perfection and ability to professionally counsel the patients who only need a word of encouragement and confirmation from a specialist to realize that they look gorgeous,” says the beauty specialist.

Ph. +370 37 73 32 02, mob. +370 685 03095 info@tautrimas.com, www.tautrimas.com fb. Tautrimas Astrauskas clinic C. Sasnausko str. 19, Kaunas, Lithuania

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