Transcript Slide 1

Lithuania in downturn:
Before, during, after
Prime Minister Andrius Kubilius
November 13, 2009
The reasons of downturn
Volume of export of goods and services (2007Q1=100, seasonaly adjusted),2005Q1-2009Q2
The consequences of downturn:
stability at the level of 2006
LT
LV
EE
20
09
Q
3
20
03
Q
01
20
03
Q
03
20
04
Q
01
20
04
Q
03
20
05
Q
01
20
05
Q
03
20
06
Q
01
20
06
Q
03
20
07
Q
01
20
07
Q
03
20
08
Q
01
20
08
Q
03
20
09
Q
01
Changes in LT, LV, EE GDP
6000
5500
5000
4500
4000
3500
3000
2500
2000
1500
1000
20
03
Q
01
20
03
Q
03
20
04
Q
01
20
04
Q
03
20
05
Q
01
20
05
Q
03
20
06
Q
01
20
06
Q
03
20
07
Q
01
20
07
Q
03
20
08
Q
01
20
08
Q
03
20
09
Q
01
Changes in GERMANY GDP
DE
580000
570000
560000
550000
540000
530000
520000
510000
500000
490000
DE
After the downturn:
signs of optimism
120
110
100
90
80
70
60
Rgs.08
Spl.08
Lap.08 Grd.08 Sau.09 Vas.09 Kov.09
DK
DE
EE
ES
FR
Bal.09
Geg.09
LV
Bir.09
LT
Lie.09
FI
Rgp.09 Rgs.09
SE
Changes in LITHUANIAN GDP compared with the PREVIOUS QTR
8,0
6,0
4,0
2,8
6,0
2,7
2,3
1,6
2,0
0,5
-0,1
-0,7
0,0
-2,0
-4,0
I ketv.
II ketv. III ketv. IV ketv. I ketv.
2007
II ketv. III ketv. IV ketv. I ketv.
2008
-1,2
II ketv. III ketv.
2009
-6,0
-7,7
-8,0
-10,0
-12,0
-11,3
After the downturn:
Fiscal challenges
Crisis of a double nature
危机
The Chinese use two brush strokes to
write the word CRISIS. One brush stroke
stands for danger; the other for
Opportunity. In a crisis, be aware of the
danger – but recognize the Opportunity.
John F. Kennedy
危险
机遇
Government’s action plan –
Challenging the Crisis

Fiscal consolidation package

Economic stimulus plan

National agreement
Fiscal consolidation package


Fiscal consolidation worth 8% of GDP – 2009
+5% of GDP – 2010
Comprehensive tax reform:
• Value Added Tax, Excise Duty, Personal Income Tax, Profit Tax

Substantial cuts in budgetary expenditure:
• Public sector wages
• Social benefits
• General public expenditures
Getting back to the track
The Lithuanian Government has taken the absolutely right steps and
measures to fight the recession.
European Commission, November 2009
The Economy encouragement plan which is being implemented in Lithuania
is very good. I think it has very good prospects.
European Industry Commissioner Mr. Guenther Verheugen,
September 2009, Vilnius
Lithuania‘s economic stimulus package is one of the best in Central and
Eastern Europe.
Erik Berglof, Chief Economist of the European Bank for Reconstruction and Development
Economic stimulus package

Stimulus package worth 5% of GDP

Credits for businesses:
- Small credits
- Open credit fund
- Credits for SMEs
- State guarantees for loans
- Partial compensation of loan interest
- Risk capital fund and business angels fund

Export promotion and export credit insurance

Renovation (public buildings and apartment
blocs)

Absorption of EU support

Addressing the “red tape”
Economic stimulus through EU structural funds
14.000 Lt
12.481 Lt
12.000 Lt
10.102 Lt
10.000 Lt
8.000 Lt
6.000 Lt
5.205 Lt
3.570 Lt
4.000 Lt
1.284 Lt
2.000 Lt
629 Lt
0 Lt
Plan 2007-2009
2007 - 2008
Contracts signed
Funds disbursed
2009
National agreement

Signed on October 29, 2009
Signatories representing more than 350,000 individuals and 5,500 companies agreed to the
plan of fiscal discipline and economic stimulus

Parties agreed:

- to bring the fiscal deficit back below the euro-adoption limit of 3% of GDP as soon as
possible and prevent an excessive build-up of public debt
- to reduce civil servant wages by an average of 10% and streamline or eliminate many
state institutions
- to reduce pensions and maternity benefits
- to increase the social security tax by 2%
- to reduce the corporate profit tax from 20% to 15%
- to launch a large-scale, high-value public-private partnership to build and renovate
public buildings and infrastructure throughout Lithuania and thereby to create or
maintain more than 30,000 jobs
- to simplify and shorten administrative procedures for companies to get EU structural
funds and construction permits
- to offer low-interest loans for start-up companies, and to initiate public projects to
employ workers from distressed companies
Speedily recovering economy
2009q3/Q2 – HIGHEST IN EU
8
6
6,0
4
2,8
2,7
2
2,3
1,6
0,5
0
IQ
IIQ
IIIQ
IVQ
IQ
IIQ
-2
-4
-6
-0,1
IIIQ
-1,2
IVQ IQ
IIQ
-0,7
2007
2008
GDP change %
2009
-7,7
-8
-10
-12
-14
IIIQ
-11,3
BACK TO THE FUTURE
Global Information Technology Leadership
• World’s fastest upload Internet
• World’s 4th best-quality Internet
World’s Internet TOP 5
9,01
LITHUANIA
7,24
6,71
6,28
Japan
EUROPE
NORTH AMERICA
1. South Korea
2. Japan
5,06
4,77
4,73
4,45
Hong Kong
Sweden
Russia
ASIA
3. Sweden
4. Lithuania
3,2
South Korea
2,02
SOUTH AMERICA
0
2
4
6
8
5. Bulgaria
10
Global leadership in mobile telephone subscribers per 100 population and Europe’s
2nd greatest mobile penetration
152%
149%
142%
129%
122%
121%
121%
120%
119%
Italy
LITHUANIA
Luxembourg
Germany
Austria
Netherlands
UK
Denmark
Ireland
0%
20%
40%
60%
80%
100%
120%
140%
160%
Sources: www.speedtest.net; Study by University of Oxford (England) and University of Oviedo (Spain), 2009; European Commission
Talent pool
40% of population with university education –
one of the best-educated human resources in the world
90% of Lithuanians speak at least one foreign language
and every second speaks two foreign languages (mainly Russian, Polish
and/or English)
22 universities and 28 colleges
Among most multilingual Europeans
(foreign language studies in 2008)
Professionals of diverse specializations
(Most popular BA studies)
4% 4%
Business & Administration
9%
English
Teaching & Education
German
Russian
Engineering
Social Sciences
15%
Law
French
Other
19%
25%
Architecture & Construction
67%
Humanities
Other
15%
6%
6%
8%
9%
11%
Competitive operational costs
Highly competitive wages
(average monthly gross wages, EUR, 1st Q 2009)
Low electricity cost for industries
(EUR cnt per kWh when 2000 MWh/year are
consumed)
18
4506
16,5
4.078
15,4
16
4006
14,9
3.108
3506
14
2.825
3006
2006
1.408
1506
629 667
1006
752
765
776
10
870
8,0
8
8,3
8,2
8,4
9,9
9,1
9,0
287
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Office space among the cheapest in EU
(rent rate EUR psqf pa)
D UK
en
m
G ark
er
m
an
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6
6
S
506
11,7
12
2506
Competitive fuel prices
(diesel, EUR liter incl. taxes)
1,30
75
1,25
65
1,20
55
1,18
1,15
1,11
1,09
1,12
1,10
1,00
0,90
C
Source: The Global Competitiveness Report 2009-2010 by World Economic Forum; ww.resolution.lt; www.energy.eu
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0,80
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A
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5
0,87
0,88
0,85
LI
TH
15
1,03
1,01
1,00
0,93
0,95
tv
i
25
0,97
Es
35
1,05
La
45
Doing business 2010

Lithuania rated 26th among 183 countries

Objective to be in top 10 next year
Homework already being done:
- Decrease the number of procedures to start a business from 7 to 4
- Decrease the period of time necessary to start a business from 26 to 11 days
- Improvement of the necessary planning procedures for development
- Decrease costs of business registration
- Ease and simplify payment of taxes and business regulation procedures
Special incentives for investors
The best thing about investing in Lithuania is
that Lithuania is truly interested in attracting
foreign investment, and a wide range of special
incentives and state’s support are offered for a
foreign business entering the market.
Hernández Vergara, CIE LT Forge
Tax
Regular rate, %
Taxes in special industrial
areas
Corporate
profit tax
15 (Jan. 2010)
no corporate tax during the first
6 years and only 50% of
corporate tax over the next 10
years
Dividends
0* to 20
no tax on dividends for foreign
investors
0.3-1
no real estate tax
Real estate tax
*Dividends paid or received are not taxed when an investor controls at least 10% of voting shares in the enterprise for the period of at least 12 months.
Strategic investment projects: nuclear power
plant

Project objective: new nuclear power
plant construction and infrastructure
development

Project duration: to launch the new plant
in 2018-2020 and to operate it for next 60
years

Project value: EUR 3-5 bn; largest
greenfield investment in the country

International participation: Latvia,
Estonia, Poland
Strategic investment projects: liquid
gas terminal

Project objective: liquid gas
terminal construction

Project duration: 2012-2018

Project value: EUR 620-670 M
Strategic investment projects: outer seaport
construction

Project objective: Klaipėda
outer seaport development

Project duration: 2012-2018

Project value: EUR 600 M
Strategic investment projects: Rail
Baltica & Via Baltica

Project objective: Rail Baltica
railway line construction; Via
Baltica road line reconstruction

Project duration: till 2014-2015

Project value: EUR 269 M;
EUR 145 M