Development of an Environment Favourable for Business and Investment

If we want to identify the ways and measures of improving business conditions we should regularly survey all the processes that are taking place in every area of our lives. With this in mind, the Department of Statistics and the Ministry of Economy make regular surveys of business opinion about existing business conditions, the impact of law enforcement, customs and tax authorities on business and the key directions of business support.

One of the key strategic objectives of the Lithuanian Government is to ensure the substantial improvement of conditions for business development.

The Permanent Commission for Solving Issues Related to the Improvement of Business Conditions continues its work along with eight working groups that are developing specific proposals and measures for improving business conditions.

With a view to ensuring further economic development of the state and increasing economic activities, it is essential to promote both domestic and foreign investment into the economy, create more favourable legal and economic conditions and use new, non-traditional forms of investment.

In 2003, foreign direct investment (FDI) in Lithuania increased by 3.9 per cent. According to preliminary data provided by the Statistics Department, on 1 January 2004 FDI amounted to 13.7 billion litas. The main countries investing in Lithuania included Denmark (17.3 per cent of total FDI) and Sweden (14.7 per cent). The biggest investment was in the processing industry (31.1 per cent of total FDI), trade (17.9 per cent), financial intermediary companies (15.7 per cent), postal and distant communication services (13.8 per cent).

More and more Lithuanian companies are investing in the country. Lithuanian investors procured the stock of Stumbras AB and Vakaru skirstomieji tinklai AB. If these had been foreign investors, FDI would have increased by 9.2 per cent in 2003 (according to Ministry calculations), which is a positive indicator.

To promote investment, the Ministry of Economy developed draft laws amending and supplementing laws on Investment and Concessions, adopted by the Seimas on 24 June 2003 .

The purpose of the Law Amending and Supplementing the Law on Investment is to expand the areas of investment supported by the state, focusing on investment into the measures that provide for the renewal and modernisation of technologies of prospective industries, small and medium-sized business development, assistance to territories that have certain specific social and economic problems, and also measures targeting free economic zones, science and technology parks, innovations, nuclei of knowledge economy (clusters), etc.

In addition, the law provides for the promotion of investment when the state (municipality) in part or fully covers the expenses related to maintaining the infrastructure outside the limits of the land plot provided to the investor and when expenses related to the retraining of employees are partially or fully covered by the state in compliance with the procedure established by the Government. This is the way to increase human working capacities and reduce unemployment. These provisions should be closely linked with the provisions of the Law on State Aid to Economic Entities that limit the aid, and the opportunities of resorting to the EU structural funds should be taken into account. Another legal act which is related to the Law Amending and Supplementing the Law on Investment is the draft Law on Supplementing the Law on Supporting the Unemployed.

Concessions are a widespread form of investment in the world when private capital is used for funding infrastructure projects. This form of investment is not yet popular in Lithuania . Having this in mind, we developed a new version of the Law on Concessions, which lists the criteria for a successful project of concessions, including: a fair provision of concession, clear-cut powers of the body providing concessions, precise taxation and licensing rules. Moreover, the law ensures effective implementation of the obligation of the concessionaire's creditors, a state or municipal body is allowed to assume liabilities to creditors, and parties may agree on the law to be followed and the way of solving disputes. A legal regulation of concessions should provide more clarity and stability to investors and financiers, lay down the right of the investor or a state or municipal authority to regulate by contract the body related to a private investment into the site of infrastructure, i.e. obligations of the parties in relation to the project, financial settlements, ensuring performance of duties, and relations with creditors. The aforementioned Law on Concessions came into effect on 1 October 2003 .

In 2003, major work was done in improving and updating legislation related to company law. Seimas adopted a new version of the Law on Public Limited Companies, the Law on State and Municipal Companies, the Law on Partnerships, and the Law on Sole Proprietorships. These laws were harmonised with EU directives and the Civil Code. Redundant legal norms were abandoned, problems related to practical application of the laws were solved, and legal norms were presented in a clearer and simpler manner. Bearing in mind the changed legal environment, the Ministry of Economy suggested that the Company Law , the Law on Company Register and the legislation amending the latter be declared null and void.

The Law on European Economic Interest Grouping was drafted and adopted ensuring implementation of the Council Regulation on the European Economic Interest Grouping . After Lithuania 's entry into the EU, new opportunities will open up for Lithuanian businessmen to work together with partners from the other member states within a European economic interest group of their choice. Such a grouping is a legal form for a legal entity which is regulated by common EU rules.

Within its terms of reference the Ministry of Economy took part in developing the Lithuanian position concerning draft legislation submitted by the European Commission to the Council for consideration, and as an observer, participated in respective working groups in the EU Council and European Commission.

While implementing the OECD Guidelines for Multinational Enterprises, the role of the National Co-ordination Centre was further increased. In early 2003, the Articles of Association of the Centre were approved, laying down that the National Co-ordination Centre is a tripartite collegiate body operating on the basis of mutual agreement. A representative of the Ministry acted as an observer in the meetings of the national co-ordination centres, international investment and multilateral enterprise committees.