Doing Business in Lithuania
The Country Commercial Guide (CCG) presents a comprehensive look at Lithuania's commercial environment using economic, political, and market analysis. Here are excerpts from Lithuania CCG.
Market Overview
Market Challenges
Market Opportunities
Market Entry Strategy
Market Overview
Entrance into the European Union in 2004 made Lithuania part of one of the world's largest markets, with 456 million consumers, and increased Lithuania's appeal as a destination for American goods and services. Lithuania's proximity to markets of the Community of Independent States (CIS), the country's excellent infrastructure, competitive living and operating costs, and highly-skilled workforce offer opportunities for U.S. producers and suppliers to expand into global markets.
Lithuania has been a member of the WTO since 2002 and joined the EU and NATO in 2004. Lithuania‟s determination to join the EU and NATO accelerated improvements in Lithuania's legal and banking systems and tax and customs regimes; the fiscal restraints the government imposed in order to meet EU accession commitments spurred dramatic economic growth and business development.
Until the last quarter of 2008, Lithuania was a rapidly growing economy. Gross domestic product rose by 7.6% in 2005, 7.4% in 2006 and 8.7% in 2007. Average annual growth for the five-year period ending in 2007 exceeded 8.3%, and analysts forecasted that GDP growth would be 5.3% in 2008, but negative growth in Q4 reduced the annual GDP growth rate to 3.2% and in 2009 GDP shrank by 15%. The global financial crisis hasn't spared Lithuania. Business bankruptcies have risen and unemployment is increasing. Nonetheless, the Government of Lithuania has been implementing a stimulus plan to help the country recover its economic footing. GDP stabilized in Q3 of 2010, with estimates of 1.3% for the year overall.
Lithuanian exports in 2010 (ten months) totaled 18.77 billion USD, and imports reached 21.29 billion USD. Compared to 2009 (ten months), exports and imports increased by 12.7% and 14.6% respectively.
In 2010 Lithuania’s major export partners by percentage of exports were Russia (15.4%), Germany (10.0%), and Latvia (9.4%). Lithuania's main import partners by percentage of total imports in 2010 were Russia (32.7%), Germany (11.0%) and Poland (8.9%).
As of January 2010, the leading foreign investors in Lithuania were Sweden (11.7% total), Poland (10.4%), Denmark (10.4%), Germany (10.4%). U.S. investments accounted for 2.6% of total FDI inflows in 2010.
A wide range of economic and demographic statistics is available on Lithuania’s Department of Statistics website: http://www.stat.gov.lt/en
Market Challenges
Inefficient government bureaucracy, corruption, and lack of regulatory transparency, continue to discourage some investors. Lithuania, however, has made progress in addressing these problems, and they do not represent significant obstacles to U.S. trade and investment in Lithuania. Demographic trends, like an aging population, emigration of the workforce towards higher-wage countries within the EU, and a shrinking domestic market, pose challenges that may be more difficult to overcome.
Market Opportunities
In the period of 2007-2013 Lithuania expects to receive approximately 9.7 billion USD in EU Structural, Cohesion, and other funds to implement infrastructure projects. U.S. companies are able to compete, directly and/or as subcontractors and partners, in tender offerings backed by EU funds.
Major infrastructure projects currently pending or underway include: decommissioning of the Ignalina nuclear power plant; construction of a section of Rail Baltica line to connect the Baltic countries to the rest of Europe; expanding and modernizing the Klaipeda sea port facilities; construction of electric power transmission lines to Poland and Sweden; building a natural gas storage facility; LNG terminal; a new nuclear power plant; and upgrading existing combined heat and power (CHP) plants.
The Lithuanian Government has privatized nearly all major state assets. Remaining state-owned assets planned for privatization include Lithuanian Railways (Lietuvos Geležinkeliai) and Lithuanian Post (Lietuvos Paštas).
Market Entry Strategy
There are no laws regulating the relationship between a foreign company and its distributors or agents in Lithuania. The provisions of a given distribution agreement define the terms of the relationship.
A joint venture with a local partner is usually the best way for a U.S. company to start a business in Lithuania.
