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This publication is available at https://www.gov.uk/government/publications/overseas-business-risk-lithuania/overseas-business-risk-lithuania
Information on key security and political risks which UK businesses may face when operating in Lithuania.
1. Political Overview
Lithuania is a stable parliamentary democracy. On 11 March 1990 the Supreme Council declared Lithuania’s independence from the Soviet Union. Lithuania now has a multi-party democratic political system. Under the Constitution, power is vested in the citizens of Lithuania and is exercised on their behalf by deputies elected to a 141 seat single chamber Parliament (Seimas) for a four-year term. The next Seimas elections are to be held in 2020.
The head of the state is the President, elected by the citizens for a five - year term. The Government, accountable to the Parliament and the President, exercises executive power. Under the Law on the Constitutional Court adopted November 1st 1992, justice is administered by a court system comprising the Supreme Court and District Courts. In May 2014, Dalia Grybauskaite, former European Union Commissioner, was re-elected as the President of the Republic of Lithuania for a second term. Lithuania is among the most politically and economically free markets in the world, as demonstrated by the findings of the 2015 Freedom House (an independent non-governmental organization) survey “Freedom in the World”.
Information on political risk, including political demonstrations, is available in the Foreign and Commonwealths Office Travel Advice.
2. Economic Overview
Since the collapse of the Soviet Union in the 1990s, the Lithuanian economy has gone through a process of market liberalisation and reform. The Lithuanian economy is the largest of the three Baltic States and its GDP exceeds that of Latvia or Estonia. Even though the GDP per capita expressed in purchasing power standards stands at 75% of EU average, it has been rapidly growing over the last years and is having a positive impact on Lithuanians’ standard of living, and subsequently is influencing consumers’ behaviour. Lithuania has benefited from 180 million EUR per year of EU assistance and development funds since it joined the EU in 2004. This has helped modernise the country’s economy. The EU financial support for Lithuania in 2013-2020 will reach 6.8 billion EUR to further contribute to the country’s social, economic and business infrastructure development.
The Lithuanian economy has not escaped the global economic slowdown in 2009, however the country has managed to get out of recession rather quickly and currently is among the fastest growing economies in the EU: it grew by 2.3% in 2016 and growth is expected toreach 2.7% in 2017. Average annual inflation in 2016 was 1.7%. In 2016, the economy grew mainly due to growing internal consumption (fuelled by higher wages), lower unemployment and successful continuous reorientation from Russian to mainly EU markets for export.
Due to the economic slowdown Lithuania’s unemployment rate started to increase in 2008 and reached 17.8% in 2010. As the economy has been getting back on track, the unemployment rate has also been decreasing and is forecasted to do so in the foreseeable future. As of 1 January 2017, the unemployment rate in Lithuania was 7.9%.
As of 31 December 2015, cumulative FDI in Lithuania amounted to EUR 13.5 billion. The largest investments in Lithuania were made by investors from the following countries: Sweden (23.1%), the Netherlands (12.5%), Germany (9.2%), Norway (6.1%), Poland (5.1%) and Estonia (5.1% of total FDI). Cumulative FDI in Lithuania from EU countries amounted to EUR 11.1 billion (82.5%), from CIS countries — EUR 350.3 million (2.6% of total FDI). The largest investment was made in financial and insurance activity — 26.2% of total FDI, manufacturing — 20.5%, real estate activity — 14.4%, wholesale and retail trade, repair of motor vehicles and motorcycles —11.9%, information and communication activity — 8.6%.
As of 31 December 2015, Lithuania’s cumulative DI abroad amounted to EUR 2.4 billion. Over 2015, their amount increased by EUR 197 million Lithuania’s cumulative DI in EU Member States amounted to EUR 2.1 billion (90.1%), in CIS countries — EUR 215 million (8.9% of Lithuania’s total DI abroad). The largest investment was made in The Netherlands (20.1%), Poland (12.2%), Latvia (12.2%), Estonia (8.9%) and Cyprus (8.1 per cent of Lithuania’s total DI abroad).
The largest investment abroad by Lithuanian investors was made in financial and insurance activities (EUR 758.08 million), manufacturing (EUR 443.0 million), professional, scientific and technical activities (EUR 416 million), wholesale and retail trade, repair of motor vehicles and motorcycles (EUR 348.7 million).
|Nominal GDP (billion EUR)||29.7||30.9||31.9||33.1||33.6|
|GDP growth rate, %||6.0||3.9||3.4||3.5||1.7|
|Average annual inflation rate, %||3.4||2.8||0.4||-0.3||-0.1|
|Unemployment rate, %||15.4||13.4||11.8||10.7||9.1|
|Accumulated FDI (billion EUR)||11.0||12.1||12.7||12.8||13.5|
Table 1. The main economic indicators for Lithuania (2011-2015)
Source: Lithuanian Department of Statistics*
Lithuania has the largest and most diversified economy of the three Baltic States. Companies specialise in electronics, chemicals, machine tools, metal processing, construction materials and food processing. Light manufacturing includes the production of textiles, ready-to-wear clothing, furniture and household appliances, although the textile sector is starting to suffer from competition and have been forced to lower their cost bases.
The Lithuanian economy is open, and Lithuanian exports tend to have a high import content - which means that Lithuania is an attractive market for foreign exporters of intermediate and investment goods. In recent years, Lithuania has also been an attractive destination for foreign exports of retail goods due to increasing consumption.
In 2016, Lithuanian exports accounted for EUR 22.6 billion a decrease of % compared to 2015 exports. Of Lithuania’s total exports, mineral products accounted for 14.7%, machinery and mechanical appliances (8.2%), , chemicals (10.9%), furniture (7.7%) and plastics (6.6%). In 2016, Lithuanian imports accounted for EUR 24.8 billion and, as compared to 2015, decreased by 2.2%.
The UK is Lithuania’s 8th largest export market with a 4.3% market share (equivalent to exports worth 962 million EUR) and 13th largest import partner with a 2.7% market share (equivalent to 675 million EUR) of imports from the UK.
According to World Bank Economy Rankings 2016 Lithuania takes 7th place in the ease of doing business index. Lithuania ranked 36th in the recent Global Competitiveness report for 2015-16 by the World Economic Forum, a move upwards of 7 places (published August 2014).
3. Human Rights
Lithuanian law is aligned with EU law that provides workers with the right to safe and healthy working conditions, and this provision is generally enforced. In addition, non-governmental organisations, such as the Human Rights Monitoring Institute (HRMI), work in Lithuania to help promote an open democratic society through the consolidation of human rights and freedoms. The Executive Summary of their most recent report from 2013-14 can be found here (in English):
Lithuania has signed up to the main international agreements regulating the protection of national and sexual minorities, freedom of movement within the country, foreign travel, emigration, and the government generally respects these rights in practice. The government has been working in cooperation with the Office of the UN High Commissioner for Refugees (UNHCR) and other humanitarian organisations in providing protection and assistance to refugees, asylum seekers, returning refugees, stateless persons, and other persons of concern.
4. Bribery and Corruption
It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership, to bribe anywhere in the world.
In addition, a commercial organisation carrying out business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere.
According to the NGO Transparency International, Lithuania scored 59 points out of possible 100 and ranked 38th out of 175 countries in their 2016 corruption perception index (CPI). This is a slight decrease over 2015, when Lithuania scored 61 points. This index is one of the most well-known corruption perception indicators in the world, showing how various states fare in dealing with corruption. The existing situation is evaluated with a concrete number on a hundred point scale, where a 0 indicates a country that is absolutely corrupt while a 100 represents a thoroughly transparent state.
The Lithuanian branch of Transparency International was established in 2000 and is active at raising awareness and providing information to groups across Lithuanian society on how to fight corruption. The main state institution charged with tackling corruption is the Special Investigation Service (STT - Specialiuju Tyrimu Tarnyba). It is accountable to the President and the Seimas of the Republic of Lithuania. STT detects corruption-related offences, contributes to the development of anti-corruption policy, instigates prevention measures and raises awareness.
Visit the Business Anti-Corruption profile that provides advice and guidance about corruption in Lithuania and some basic effective procedures you can establish to protect your company from them. More information can be found on the gov.uk Bribery and corruption page.
5. Terrorism Threat
There is a low threat from terrorism in Lithuania, but you should be aware of the global risk of indiscriminate terrorist attacks which could be in public areas, including those frequented by expatriates or foreign travellers.
Since Lithuania became a Member State of the European Union, due to its geopolitical location, Lithuania also became the Eastern border of the European Union. The flow of illegal migrants from Asian countries to Europe via Lithuania, smuggling of narcotic substances and other goods,and the trafficking of human beings from and via Lithuania, has been increasing. The attention of various criminal structures or even terrorist organisations in the region of the Baltic countries is increasing. To prevent such threats Lithuania has set up an Anti-terrorist Operations Unit (ARAS) located within the Lithuanian Police. It is a professionally trained and equipped service, and is comparable with other units of a similar nature all over the world.
More information on terrorism can be found on our gov.uk Terrorism threat page.
6. Protective Security Advice
Although most visits to Lithuania are trouble-free, you should take precautions to ensure you do not become a victim of crime. There is a risk of mugging, pick pocketing and bag snatching, particularly on public transport. Avoid poorly lit streets, parks and secluded areas after dark.
Be wary of accepting food and drink from strangers in bars, nightclubs and restaurants. Some visitors have been drugged and subsequently robbed.
Car theft, particularly of/from new or expensive cars, can occur. Lock unattended vehicles: conceal all contents (and radios, if possible). Major cities have guarded car parks: use them if at all possible, especially overnight.
7. Intellectual Property
IP rights are territorial, that is they only give protection in the countries where they are granted or registered. If you are thinking about trading internationally, then you should consider registering your IP rights in your export markets.
In Lithuania a number of institutions are responsible for policy of intellectual property protection in their relevant spheres: The Ministry of Justice (civil and criminal legislation protecting intellectual property rights, etc.), the Ministry of Culture (authors’ rights including computer programme and databases ), the Ministry of Healthcare (protection of pharmaceutical products and public health), Ministry of Environment (protection of biological variety), Ministry of Agriculture (protection of geographical indications), Ministry of Economy (transfer of technologies, innovations), Ministry of Finance (financial liabilities), etc.
The State Patent Bureau is the executive body carrying out the state legal protection of industrial property (inventions, designs, trademarks and service marks, semiconductor product topographies) in Lithuania and central industrial property office functions in European Union.
Read more information on our Intellectual Property page.
8. Organised Crime
According to the EUROPOL Organised Crime Threat Assessment 2013, the criminal dynamics of the Baltic countries are mostly influenced by their interposition between countries supplying cigarettes and synthetic drugs and destination countries for these items.
According to the Police Department under the Lithuanian Ministry of the Interior, the majority of organised crime groups are involved in smuggling, stealing, robberies and crimes related to drugs. Several groups are also active in organising and controlling human trafficking and prostitution business. Those involved in transport and storage are particularly exposed when criminals seek to avail of their services.
Read more information on our Organised crime page.
Cyber crime is an evolving and new type of fraud and often involves identity theft. The Lithuanian government reported a large-scale cyber attack that mainly affected government institutions in April 2016. Lithuania have set up a National Cyber Security Centre to address and tackle the threats from cyber-crime and cyber attacks.
Electronic communication and transactions are a key part of all businesses. However, the advantages that online transactions provide can also give rise to the risk of fraud - individuals claiming to be someone they are not and obtaining information they are not entitled to.
HMRC have made available information relating to security advice and how to make your on-line experience in dealing with them as secure as possible.