Industry and Strengthening Its Competitiveness

In 2003, the sales volume of the mining quarrying and manufacturing industry (MQMI) increased 13.9 per cent, and excluding refined oil products, by 16 per cent. In recent years, the industry sales volume has been steadily growing (with the exception of 1999) (see Fig. 2).

Figure 2

Changes in Sales Volume of the MQMI (compared to previous years), per cent

The whole industry, including electricity, gas and water supply, accounted for 25 per cent of GDP. This indicator is similar to the EU average.

Lithuanian industry production is more oriented towards foreign markets (Fig. 3). Over the last three years, the sales volume abroad was about 59 per cent.

Figure 3

MQMI Sales structure by trends, per cent

Growing exports shows that our production position is improving. In 2003, the export volume of Lithuanian products increased 14.3 per cent.

Development of Industrial Sectors

The year 2003, as in previous years, saw a steady increase in company sales, primarily manufacturing wood and wood products (an increase of 23.9 per cent), furniture (24.2 per cent), rubber and plastic rubber (55.4 per cent), electrical devices and machinery (57.9 per cent). High-tech industry sales also rose (the volume of radio, television and communications equipment for sale increased 35.5 per cent; or in quantitative terms, television production doubled and manufacturing and kinescopes increased 13 per cent). The construction materials industry adopted more active approach in production and sales, with sales growing 32.6 per cent. In quantitative terms, production of prefabricated construction elements increased 12.3 per cent.

In 2003, as compared to 2002, the food and beverage industry developed at a more rapid pace (in 2002, sales increased six percent, whereas in 2003 – they were up 10.1 per cent). Similarly, apparel manufacturing (in companies, where the main activity focused on producing clothing and currying and dyeing fur, sales volume increased 6.5 percent and 11.7 percent respectively).

For changes in sales volumes of major industries see Fig. 4.

Figure 4

Changes in Sales Volumes of the Major Industries (In 2003, as compared to 2002), %

The contribution of each industry to the aggregate value added created in the extraction and processing industry is not always proportionate to the structure of sales. In 2003, according to the sales volume, oil products comprised 20 per cent of the total products sold, while its value added accounted for 9.3 per cent. In contrast, the value added share of the sectors manufacturing wood, paper, furniture, machinery and equipment (including radio, television and communication equipment) was larger than the sales volume of sold production (Fig. 5).

Figure 5

Mining, Quarrying and Manufacturing Industry in Lithuania According to the sales volume and total value added (TVA) 2003, %

Last year, as in previous years, the lion's share of sales by the country's industries lay with foodstuffs and beverages, refined oil products, wood and wood products, paper, furniture, apparel and textiles.

However, the major difference was the increase in sales of the high and medium high technology sectors, including electrical devices, machinery, radio and television equipment, in parallel with the growing production of wood, furniture, publications, rubber and plastic products.

The importance of some low technology industries decreased, including foodstuffs and beverages, textile, apparel, leather and leather goods. The reason for this was decreasing prices as well as smaller production volume.

The sales volume of industries using higher technologies and labour (i.e. companies producing pharmaceuticals, radio, television and communications equipment, computers, machinery and devices, aircraft parts, shipbuilding and ship repair) increased with regard to processed production, though still remaining insignificant (preliminary statistical data indicate that these sectors account for 9 per cent of total industry sales).

The use of information technologies in companies increased. According to the survey carried out by the Department of Statistics, in early 2001, computer technologies were used by 80.2 per cent of processing and services companies; in early 2003, this rose to 84.8 per cent. As in previous years, computers were used less often by small companies (the percentage of companies with 10–49 employees using computers was 81.9, with 50–249 employees was 95.3 and with more than 250 employees was 99.5).

The development of industry and increase in competitiveness was well facilitated by investment. In 2003, FDI into the processing industry increased by 10.3 per cent. The most rapid rate of FDI development was in the wood and furniture industry (24.6 and 67.0 per cent respectively), paper products (22.0 per cent), and production of computers, electrical devices (68.2 per cent), and motor vehicles (62.6).

Sadly, investment into high and medium high technologies decreased. In 2003, FDI into radio and television equipment, communication devices and electronics grew by only 0.7 per cent. Less investment was attracted by the sectors of great importance in Lithuania , including the production of apparel and chemical products, fur currying and dyeing, and oil refining.

With a view to exploiting natural resources more effectively, creating employment, and attracting foreign investment, a project on building a wood-pulp factory in Lithuania was further pursued. Negotiations took place with the Swedish-Finnish company Stora Enso, the biggest wood-pulp company in Europe , requesting it to participate in the project. Under the project, the Ministry of Economy developed a provisional environmental impact assessment of building the wood-pulp factory in selected construction sites.

To promote investment in Lithuania , a few projects were implemented by the Lithuanian Development Agency (LDA).

Further reduction of the negative impact upon the environment by separate industrial sectors was pursued by a hazardous waste management system. With a view to finishing development of a regional hazardous waste management system, more regional waste management sites were established in Klaipeda , Alytus and Vilnius . In 2003, after approval of the adjusted sanitary protected zone, a regional hazardous waste management site in Klaipeda was acknowledged suitable for use. The site in Vilnius was eventually established and acknowledged suitable for use.

On 10 March 2003 , the Government adopted Resolution No 298 whereby approving the Development Programme for Processing Recyclable Waste for 2003–2004 and implementation measures. To facilitate implementation of the Programme, information centres were established in Vilnius and Kaunas that meet the programme requirements by selecting advanced technologies for processing recyclable waste and disseminating information about waste processing. A cycle of seminars on funding environmental projects was conducted for representatives of waste processing facilities.

Competitiveness Enhancement

EU enlargement means bigger competition. With a view to competitiveness enhancement of the Lithuanian trade, the Ministry of Economy seeks to implement various measures to attract investment, make preparations for the use of the EU structural funds, create better conditions for business, train specialists and modernise products and technologies. These measures can help to ensure good quality of products, increase productivity, etc. Implementation of some measures is supported by the state.

On 15 July 2003 , the Government adopted Resolution No 911 whereby approving the revised Programme for Innovations in Business and its measures for 2003–2006. The main objective of the programme is to increase the competitiveness of Lithuanian industry and business, create conditions for modernisation of the companies already in operation and promote the establishment of modern start-ups that would make use of Lithuanian and international scientific and technological potential. The aim is to create high value added and the ability to compete on the international market. The programme was developed taking into account the European Commission Communication, Innovations Policy: Renewal of the Community Approach to the Lisbon Strategy, of 11 March 2003 and the World Bank report, Lithuania on the Road to Knowledge Economy, of March 2003.

While implementing the programme measures, we further strengthen the national innovations system, and support development of the necessary infrastructure and innovative activities of enterprises. In 2003, while promoting innovations in enterprises, 16 enterprises (17 innovation projects) received a subsidy of 50 per cent of the project's value for its implementation.

While strengthening the infrastructure of innovation support and developing public business support services, significant attention is paid to science and technology parks and the Lithuanian Innovations Centre. On 18 July 2003 , the Government of the Republic of Lithuania issued Resolution No. 963 whereby approving the Concept Paper on Science and Technology Parks . On the basis of the concept paper, decisions were made on the more rapid application of innovations, and promotion of closer co-operation between students, businessmen and the academia. Presently, there are six parks of the kind in Lithuania , providing a place for more than 80 companies, employing around 400 people.

Many international programmes, projects and expert advice help to strengthen innovation capacities and innovation support. In 2003, the Ministry pursued further implementation of a Phare project of economic and social cohesion Innovation Capacities. The project established a regional innovation support network. The co-ordination centre is in Lithuania , with offices in Alytus, Kaunas , Klaipeda , Panevežys and Šiauliai. The purpose of the network is to promote the need for innovations in companies, and advise companies on how to start and implement innovation projects using Phare pre-structural funds and personal funds effectively and efficiently. .

While implementing the project, Innovations Transfer Centre in Lithuania, funded by the European Commission and the Ministry of Economy, the Lithuanian Innovations Centre was included in the European Network of Innovations Transfer Centres covering over 250 organisations from 30 European countries. This is a free opportunity for Lithuanian companies to take part in the process of transferring innovations or technologies, and to communicate with their foreign partners.

The year 2003 saw the beginning of a project supported by the Danish Government and the Ministry of Economy, Support to the Innovation Structure in Lithuania (SINO) . The main objective of the project is to encourage creativity, risk management, search for partners and raise public awareness in the area of innovations. Under the SINO project, the plan was to train 35 experts in innovations, and develop 10 innovation projects that would be implemented in co-operation with the Danish partners. This would enable the stakeholders to gain theoretical knowledge, establish and maintain contacts between the Lithuanian-Danish companies and business support institutions.

Increasing competitiveness relates to improvement of production quality and implementation of environmental management systems. The measures implemented under the National Quality Programme contributed to the development of a quality control infrastructure ensuring the supply of safe and quality products to the market. Companies are encouraged to implement quality and environmental management systems. At present, more than 400 enterprises in Lithuania have quality management systems complying with the ISO 9001 standards. About 80 companies have environmental management systems certified according to the ISO 14001 standard requirements. Seeking to motivate enterprises to seek a ‘business excellence' model, the Ministry of Economy and the Quality Council organised the 6 th National Quality Prize competition.

Implementation of the Programme for the Development of Conformity Assessment Infrastructure (test laboratories and certification bodies) helps to enhance the competitive capacity of Lithuanian industry. In 2003, in addition to accreditation bodies, 15 test laboratories and three certification or control bodies were established. Ten new test laboratories were set up, complying with the requirements of the standard LST EN ISO/IEC 17025, along with two new certification or control bodies that were accredited in compliance with the standard LST EN 45011 requirements. Having implemented the programme, the total number of accredited and due to be accredited conformity assessment bodies is now 36. This will help to assess the compliance of products with the EU standards targeted for both domestic and other markets and increase their export potential.

Together with the other stakeholders, the Ministry of Economy took part in a Phare programme, Networking Project: Quality Infrastructure. The project is designed for Central and Eastern European countries and is carried out by the Danish Technological Institute. One of the main objectives of the project is to enhance the level of competence in test laboratories operating in candidate countries, increase the level of qualifications of employees, encourage co-operation between laboratories and market surveillance bodies and ensure better use of laboratory capacities. This will help the candidate countries to develop a quality infrastructure capable of operating on equal footing with the infrastructures of the member states of the EU and the European Free Trade Association (EFTA) and ensure smooth functioning of the common market. The project covers the following fields: metrology, accreditation, tests, certification, conformity assessment, and market surveillance.

The year 2003 saw the completion of a Phare project co-ordinated by the Ministry of Economy, Administrative and Technical Capacity Building in the Promotion of Free Movement of Goods. The purpose of the project was to create better conditions for the free movement of goods and to harmonise Lithuanian legal acts with EU legislation. The project conducted a number of meetings and seminars on the EU directives inviting producers, importers, and other interested parties (32 seminars with 900 participants). Two seminars were on environmental management systems, inviting 48 company representatives. The project funded the translation of 2,000 pages of harmonised EU standards into the Lithuanian language. In addition, the project published 1,000 copies of the document, Directives and Related Standards , as well as other publications covering directives on individual safety measures and machinery safety. The contacts established between the stakeholders and business representatives will help to implement EU directives more effectively.

The year 2003, following the priorities established by the Government, saw the implementation of the special programme of the Export Development and Promotion Strategy. The purpose of the programme was to create favourable conditions for export growth. The means for achieving the goal were the following: create an environment favourable for export, train exporters, increase competitiveness of goods and services, create a better image of Lithuania, its economic entities and their goods and services, encourage companies to look for new trade and co-operation partners, play a more active role in penetrating new markets. In addition to six positions of commercial attaché, two more positions were established, one in the Netherlands and the other in Russia ( St. Petersburg ). The Lithuanian Government co-financed the expenses related to the participation of Lithuanian companies in 100 international exhibitions, organisation of 15 business missions, participation of foreign experts in six events in Lithuania and creation of the Lithuanian information stand in 3 international exhibitions in St. Petersburg . Moreover, it covered part of the expenses related to the certification of the quality and environmental management system of 31 companies, publishing expenses of 29 publications promoting Lithuania and its image and organisation of 15 conferences and seminars. The Government also co-funded the refurbishment of the Lithuanian Room in the United Nations Office at Geneva .

An important role in promoting export development and attracting foreign investment is played by the Lithuanian Development Agency (LDA). The LDA has established its offices in Italy and Germany and assists entrepreneurs in finding new business partners, is actively involved in organising fairs, exhibitions and business missions and contributes to the creation of a positive image of Lithuania .