news2biz lithuania, 12 october 2005, no 198,...

news2biz LITHUANIAb u s i n e s s n e w s t o p r o f e s s i o n a l s s i n c e 1 9 9 6

n o 1 9 8 1 2 O c t o b e r 2 0 0 5s e e p r e v i o u s i s s u e s a t w w w . n e w s 2 b i z . c o m

Audimas sportswear makeropens sewing unit in Prienai

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SEB puts Lithuanian CEO incharge of eastern expansion

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Lithuania mulls pig quota,Saerimner still hopeful

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Jysk operator starts up asfull-scale retail developer

6

Lithuanian, US partners eyeBaltic merchandising market

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US Bentley acquiressoftware rights from Alna

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Austrian ECE debuts inLithuania with LTL 1bn projectHOUSING In what is going to be the biggest single new housingproject in Lithuania to date, two Lithuanian partners teamed upwith Austrian ECE to develop by 2008 a whole new residentialdistrict in Vilnius for LTL 1bn.

6

Government works out practicaleuro introduction planEURO Confident about Lithuania's fast-track euro introductionprospects, the government has adopted a plan on how thechangeover will take place. news2biz analyses and spells outconsequences for you - in relation to rates, prices, inflation etc.

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Slower growth but stable pricesSEB's forecast for Lithuania's GDP and CPI

1%2%3%4%5%6%7%

2005 2006 2007

GDP Inflation

MACROECONOMY Lithuania should remain theslowest-moving member of the three-some Balticsisterhood in short term, according to a forecast bySwedish SEB. However, the stable and low infla-tion should also help the country to lead the packin the euro introduction race.

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MANUFACTURING FINANCE FOOD & AGRICULTURE PROPERTY & CONSTRUCTION RETAIL & SERVICE IT & MEDIA TRANSPORT ENERGY & ENVIRONMENT ECONOMY

Copyright This newsletter may not be redistributedor placed on any internal or externalnetwork. To check the status of yoursubscription please [email protected] +45 33 33 07 20

LTL versus 100 USD

283

284

285

286

287

288

289

290

28 S

ep

29 S

ep

30 S

ep

3 O

ct

4 O

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5 O

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11 O

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Looking for subcontractors in the Baltics?

Finding a new subcontractor for you business in the Baltics has neverbeen easier. The countries offer capable and competitive priceswithin wooden products, electronics, metal, plastics and textiles at afraction of the labour cost rate in Western Europe. Enjoy the new ad-vantages of Baltic EU membership: Contact us and we will supplyyou with the information needed for entering the Baltic markets.

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news2biz LITHUANIA no 198 12 October 2005 Copyright © NORTHROUP NEWSLETTERS2

M A N U F A C T U R I N G

Audimas sportswear makeropens sewing unit in PrienaiGOING INTO REGIONS Audimas, thebiggest sportswear producer in the Bal-tics, has opened up a new sewing plantin Prienai, 30 km south of the com-pany's base in Kaunas.

The plant now employs over 100staff, bringing the company's total tonearly 800. In Prienai, Audimas hasmoved into a textile plant deserted byBritish E.Walters (see no 83 page 2)which has now relocated to China.

"We still need to grow to satisfy de-mand for both own-brand productionand subcontracting orders," says Rim-vydas Povilaitis, board chairman ofAudimas, to news2biz LITHUANIA.

"Next year we will raise our em-ployee count in Prienai, Kaunas, andalso our second regional unit in Jonava[northeast of Kaunas, ed.]."

Presently, a quarter of Audimas' salescomes from own namesake brand, therest is subcontracting for major interna-tional brands. The company is nowmoving from traditional to laser-basedsewing technologies (see no 186 page2) that should be employed in massproduction from 2006-2007.

In H1 2005, the management-controlled Audimas raised sales by 23%

to LTL 39m but expects a 10% full-yeargrowth to LTL 90m.

We have talked toRimvydas Povilaitis [email protected]

Chipboard plant projectgranted LTL 100m loanNEW PLANT Two Lithuanian banks haveagreed to bankroll Lithuania's biggest todate furniture industry project.

The construction of a new chipboardplant in Kazlu Ruda, 40 km southwestof Kaunas, will be co-funded by a LTL100m syndicate loan built by SEB Vil-niaus Bankas (70%) and Nord/LB Li-etuva (30%).

The seven-year loan will roughlycover half of the project's total costs.Giriu Bizonas, the furniture maker be-hind the new plant, has already securedLTL 46m of EU co-funding. The remain-ing money will come via Giriu Bizonasitself.

The chipboard plant, thought to endLithuanian furniture industry's worriesover the lack of raw materials, will openin the second half of 2006 to create 100direct, and another 750 indirect jobs.

Giriu Bizonas is part of the VakaruMedienos Grupe furniture and timbergroup. Earlier, Lithuanian Vilniaus Bal-dai acquired a 25% stake in Bizonas toparticipate in the chipboard project.

Producers brush offoil price impactINDUSTRY The renewed advance of oilprices on the global market have pushedLithuania's producer price index to a 12-month high in September.

Producer prices advanced by a yearly15.5% in September after having accel-erated for a fourth running month.

But no worry: producer prices for in-dustry except oil products continued tohead down and landed on a 2.0%growth, thus repeating the lowest 12-month advance reported in July 2005.

This means that no matter how muchoil products have appreciated (by 57%from September 2004, and by 78%since end-2004), Lithuanian producershave managed to tap their reserves tokeep their final costs low and attractive.

Producer price yearly change in %last 12 months

0%

5%

10%

15%

sep

04

nov

04

jan

05

mar

05

may

05

jul 0

5

sep

05

All industry Excl. oil

Source: Lietuvos Statistikos Departamentas

The PPI reading for locally sold outputadded a yearly 7.5% in September(3.0% without oil). Meanwhile, export

prices (where oil is a much heavier in-gredient) jumped by 22% (a meagre0.7% without oil).

IN BRIEF

• Freda, one of the numerous Lithuanian suppliersof furniture and household goods for Swedish Ikearetailer, has voiced the idea of setting up a nationallogistics centre to jointly service the furniture retailgiant. This would ensure more flexible deliveries andcut delivery costs.

F I N A N C E

SEB puts Lithuanian CEO incharge of eastern expansionBANKING The Swedish SEB bank hasfound a new job for its Lithuanian bankSEB Vilniaus Bankas' CEO: to leadthe group's business in Ukraine andRussia.

Julius Niedvaras, 53, has headed Vil-niaus since its foundation in 1990 toturn the country's first post-Soviet pri-vate bank into the country's biggest fi-nancial institution. As of 1 January 2006he will work in SEB's Eastern Europeanbranch.

In Vilnius Mr Niedvaras will be re-placed by Audrius Ziugzda, 34, now incharge of SEB VB's retail banking busi-ness.

Mr Niedvaras' appointment for thejob could only be expected: a year agoSEB VB acquired a bank in Ukraine (see


news2biz LITHUANIA no 198 12 October 2005 Copyright © NORTHROUP NEWSLETTERS 3

no 176 page 4) to provide bankingservices to SEB's Scandinavian and Bal-tic customers.

"Competence, knowledge and expe-rience – these are the main reasons be-hind our choice in favour of Mr Nied-varas," says Mats Kjaer, head of theSwedish banking group's Eastern Euro-pean division, to news2biz LITHUANIA.

"He has built a strong bank in thepost-Soviet Lithuanian environment,knows the Russian language and alsosome old connections in this market –all this should help him to build a soundbusiness for us in the CIS region."

How Baltic banks help Nordicparents penetrate CIS market

Banks and their CIS activity

SEB Estonian Uhispank bank ventures into Russia in1997 (not yet under SEB ownership) to set up aleasing company in Saint Petersburg. In 2004, SEB'sLithuanian bank purchases a peer in Ukraine. In2005, SEB Vilniaus Bankas CEO appointed to leadSEB's expansion in the CIS, with a banking licenceexpected in mid-2006.

Swedbank The group's Estonian bank Hansabank buysa bank in Moscow in 2004. In 2005, LithuanianHansabankas sets up leasing company for the groupin Russia's Kaliningrad region (no 181 page 4)

Nord/LB The German banking group's Lithuanian leas-ing company starts offering leasing services in theKaliningrad region (no 193 page 4).

Sampo In Oct 2005, the Finnish finance group appointsits Latvian bank's board chairman (with previousexperience at SEB) to lead the group's entry intoRussia where banking services are to be launchedby end-2006.

Source: banks, media

Through its Estonian bank SEB EestiUhispank the Swedish bank alreadyowns a leasing company in Saint Pe-tersburg.

"In Moscow we have a rep office andhave now applied for a banking licencethat we expect to receive in mid-2006,"says Mr Kjaer.

Apart from the Baltic countries andUkraine, SEB has a bank in Poland. Witha 34% of the market, SEB VB is thestrongest local bank within SEB's East-ern European business.

We have talked toMats Kjaer [email protected]

Bank sees no bottomfor housing loan issuanceHOUSING The growth of demand forhousing in Lithuania will be one of thefastest in Eastern Europe for another10-15 years.

Such is the optimistic forecast ofHansabankas, the biggest local bankby issued mortgage credits, announcedin the time when residential propertyprices continue rising by adding a fewpercentage points almost every month.

Hansabankas says even in thoseEuropean countries where demand forhousing matches supply volumes,housing prices normally add ten per-centage points annually.

Of course, when someone speaks ofthe Lithuanian housing market, it is al-most always about Vilnius – by far the

most dynamic location in this respect. Inthe Lithuanian capital, housing appreci-ated by 20-30% for newly built and by25-40% for old-construction flats in H12005 – faster than in Riga (especiallyfor old construction), and incomparablyfaster than in Tallinn (5% for both typesof housing).

For startershousing credits, as % of GDP

0%

5%

10%

15%

20%

25%

30%

Lithuania Latvia Estonia

2004 2005*

*) expectedSource: Hansabankas

Local banks get thumbsdown from customersCUSTOMER SATISFACTION Lithuanianbanks can boast the most satisfied bankcustomers in the Baltics – in spite of adramatic satisfaction rate fall this year, aregional industry survey has found.

After a drop of six points to a cus-tomer satisfaction rate of 79 (on the 0-100 scale, the higher the figure, thebetter) in 2005, Lithuania is still aheadof Latvia (72.6) and Estonia (73.5), ac-cording to a study by EPSI Rating.

Customer loyalty is at its Baltic high-est in Estonia which stole the title from

Lithuania after the latter's marked fall.In Estonia and Latvia, bank loyalty is ona slight rise.

Among major banks, Swedish SEBholds sway in Lithuania (also in Latvia)but is second to Swedbank's Han-sabank in Estonia (just like Hansa is therunner-up in Lithuania and Latvia). InLithuania, Hansa is even outsmarted bysmaller competitors in certain areas.

Whom do they trust then?Bank customer loyalty index change

-10

-8

-6

-4

-2

0

2

Lithuania Latvia Estonia

SEB Hansa Other

Source: EPSI Rating

Unfortunately, the study does not revealthe reasons why Lithuanians do nottrust their banks as much as they did ayear ago.

To be fair, commercial banks havenever been Lithuanians' best friends: aSeptember public trust survey placedthem the ninth among 20 public institu-tions (with the central bank, Church,and military defence system holding toppositions) – in spite of a booming mort-gage and consumer credit market.

Further info: www.epsi-baltics.org


http://www.epsi-baltics.org/


Avestis private equityfirm eyes first dealPRIVATE EQUITY Lithuanian business-men are discovering the delights of pri-vate equity investment: a new player inthe field is about to conclude its firstdeal.

Lithuanian Avestis is now close toacquiring Klaipedos Kartonas, theBaltic region's only raw material supplierfor corrugated cardboard makers.

Avestis was set up in June by SarunasKliokys whose former jobs include toppositions in the biggest drug storechain, Lithuania's oil refinery, and big-gest mobile telecom.

The shareholder structure now alsoincludes Prime Partners, a US offshorelinked to Lithuanian Prime Invest-ment (an investment firm), ArvydasAvulis (head and owner of the Hannerproperty developer), Marius Dvareckas(from Prime Investment), and a Londonbanker.

According to media reports Avestis'joint venture with Sanitex, Lithuania'sbiggest FMCG wholesaler, is offeringLTL 10m for a 25% stake in KlaipedosKartonas and will later seek full controlof the company.

"We cannot comment on the dealbefore it is completed," says Mr Dvarec-kas, Avestis' CEO, to news2biz LITHUA-NIA. "But our general interest lies with

Lithuania's manufacturing companiesthat generate healthy cash flows."

Mr Dvareckas would not specify whatother companies may be targeted next.

Klaipedos Kartonas raised its H12005 sales by 20% to LTL 42m but seesa modest full-year growth of 5% to LTL80m. Exports, mainly to Poland, Ger-many, Latvia and the Czech Rep. ac-count for 70% of sales.

We have talked toMarius Dvareckas [email protected]

See also: Klaipedos Kartonas gets ISO certificates,eyes EU aid (no 186 page 3)

Apranga retailer moves ontoVilnius bourse's catwalkSTOCKS Apranga, the leading clothingretailer in the Baltics, will start tradingits stock on the Vilnius bourse's main listas of 24 October.

Apranga will become the first everretailer to make it onto the stock ex-change's now eight-strong main list(which now features seven manufacturersand one telecom). It will also be the firstnew entry after the Vilniaus Baldai fur-niture maker was included into the listtwo years ago (see no 151 page 3).

The Apranga stock has gone fromstrength to strength in the past year,rising in value by 179% to LTL 33.85, asthe company kept opening new own-brands and franchised stores throughoutthe Baltics but first of all in Lithuaniaand Latvia.

Apranga key figures in LTL m

0

50

100

150

200

1999 2000 2001 2002 2003 2004 2005*

0

3

6

9

12

Turnover, left Profit, right

Note: sales including VAT*) plan, profit before taxesSource: Vilnius stock exchange, Apranga

The company is controlled by theLithuanian MG Baltic holding (52.5%),and investors represented by EstonianHansapank (14.3%) as well as Swed-ish SEB (7.3%). The latter two repre-sent, among others, foreign funds, in-cluding Swedish East Capital (see no164 page 3, and no 179 page 4).

Inevitably, when on the main list,Apranga will be compared to the onlyother similar-profile stock on the Balticstock list, Estonian Baltika (which isalso involved in clothing manufacturing).

Baltika has a bigger number of stores(80 in six countries versus Apranga's 46)but a weaker retail clout (Jan-Sep 2005sales: EUR 24m, +29% y/y versusApranga's EUR 40m, +55%).

See also: Apranga to issue LTL 20m bond for re-gional expansion (no 190 page 8), Apranga ushers inSpanish Zara into Baltics (no 169 page 8)

IN BRIEF

• Hansabankas, Lithuania's second-biggest bank,will increase its share capital by LTL 84m to LTL

570m. The new share issue will be acquired bySwedbank's main Baltic banking vehicle, EstonianHansabank, for LTL 169m (LTL 20 per LTL 10 facevalue share).

• The Polish-owned PZU Lietuvos GyvybesDraudimas life insurance company will raise itsauthorized capital by LTL 5m to LTL 15m. The com-pany hopes to finish the year with 4% of the market.

F O O D & A G R I C U L T U R E

Lithuania mulls pig quota,Saerimner still hopefulPIGS The grand plans of Danish inves-tors to turn Lithuania into a paradise forpig-breeders could be derailed by thegovernment.

A special governmental commissionmulls setting a national pig-breedingquota that, according to preliminary es-timates, could be set at 1.8m heads – asmany as there were pigs in Soviet Lithua-nia, according to the Lithuanian ministryof environment. The present figure is1.1m heads.

But why such a fuss? It seems to havebeen triggered by Danish-owned Sae-rimner's plans to invest LTL 40m (andseek EU co-funding from Lithuania's ac-count) to build 11 pig farms in Lithuaniato produce 150,000 pigs per year (see no184 page 5).

These could be added to Saerimner'sfour existing farms which are to raisepig output from 75,000 heads in 2004to 125,000 this year.



But Saerimner's CEO Claus Baltser-sen remains hopeful: "We have ob-tained the permits for building the newfarms, so we have no problem there.Regarding the pig breeding quota, oursources say that there were 4m pigs inLithuania at the end of the Soviet era."

"Of course we have to adhere to lo-cal norms, but I think it would be shameif Lithuania limits production at thatlevel. Lithuania is an agricultural country– we can buy grain at very low prices,so also grain grower would welcomemore pigs," says Mr Baltsersen.

Fuller stys, fuller mouthsLithuania's pig industry statistics

0

20

40

60

80

'97 '98 '99 '00 '01 '02 '03 '04

Pig purchasing, 000 tons

Per capita pork consumption, kg

Source: statistics departament LSD

Lithuania's environment protectionministry (involved due to popular fearsthat Saerimner's new farms will pollutesurrounding areas and ruin countrytourism perspectives) says it will not ex-amine Saerimner's request to okay firsttwo new farms – only all 11 at one go.

Saerimner has managed to pass thefirst hurdle of getting all permits fromlocal authorities – according to media,

not always in the most transparentmanner.

According to earlier forecasts byLithuania's pig-breeders' association,sales of locally raised pigs should growby 20% annually to reach 2m in 2012.That was predicted before Saerimnerannounced its plans – and Mr Baltser-sen left the association's council(though the company stayed) over thedisagreement on the industry's devel-opment vision.

We have talked toClaus Baltsersen [email protected]

Viciunai readies pastry plantin Estonia for regional marketPASTRY The Lithuanian Viciunai foodproducts group plans to invest LTL 12mby end-2005 to fully equip its new Esto-nian production unit, Viciunai Nordic,opened this June.

While Viciunai's main business isbreaded fish and crab sticks, ViciunaiNordic is involved in frozen pastry prod-ucts.

Eventually, the 4,000 sq.m plant nearTallinn should reach its design monthlyoutput capacity of 600 tons, employingup to 90 staff. It is now producing pan-cakes sold on the Baltic and Nordicmarkets. Dumplings, pizzas and otherpastry products should come online byyear-end. 70% of the plant's output willgo for export.

Together with the running fish proc-essor Paljassaare Kalatoostus, in EstoniaViciunai employs a total of 400 staff.

Leading vodka makersunleash marketing warVODKA WARS Lithuania's vodka markethas become too small for the country'sthree recently privatised main players.

At the end of September, the marketleader Stumbras accused AnyksciuVynas (controlled by Stumbras' main ri-val Alita) of trying to piggy-back on thesuccess of one of its brands.

The bone of contention is what iscalled 'original Lithuanian vodka' andwhich, due to its popularity, has a spe-cial status and quality requirements un-der the Lithuanian regulations.

Stumbras has filed a legal suitclaiming that Anyksciu has copiedStumbras Lithuanian vodka's label andhas departed from the vodka's produc-tion and quality requirements. Naturally,Anyksciu calls this slander.

The court imposed an arrest on allAnyksciu's Lituanica output, believed tostand at 12,000 litres.

Of course, Stumbras is only trying todefend its turf, not to police its com-petitors: Stumbras' Lithuanian vodka isthe most popular vodka in the country.

The winners of the vodka war haveso far been the printed media, runningcompeting ads on whose vodkas are ofbetter quality. This has triggered a simi-

lar reply from Vilniaus Degtine, thecountry's fourth vodka maker, owned byFrench Belvedere.

Strong alcohol sales, in m litresH1 2005, y/y growth on columns

+25%

+33% -5%

+27%

01234567

Stumbras VilniausDegtine

Alita AnyksciuVymas

Source: Lithuania's food industry association LMP

Meat products lead non-EUfood exports in Jan-SepFOOD TRADE Lithuania's non-EU foodexport in Jan-Sep 2005 did not changemuch in volume but a major reshufflingamong product groups took place.

The country exported 77,500 tons ofmeat products outside the EU, down by5% year on year.

The neighbouring Russia took thelion's share, accounting for nearly twothirds of meat exports, 74% of dairy,and 64% of fish. Other major exportmarkets are Belarus, Ukraine, the US.

In general, third-country meat ex-ports jumped seven-fold to 8,500 tons,dairy products advanced by 13% to36,000 tons, while fish product exportcontracted to just 69% of the Jan-Sep2004 level (33,000 tons).



69 Lithuanian food processors holdRussian export certificates – as many asin Latvia and Estonia put together.

IN BRIEF

• Russia lifted a ban on meat products transit viaLithuania to Russia and other CIS markets. The banwas imposed a few weeks ago after Lithuanian cold-storage companies breached transit procedures (seeno 196 page 5).

P R O P E R T Y &C O N S T R U C T I O N

Lithuanian and Austrian part-ners to build LTL 1bn districtFLATS Why build a house or two whenLithuania's bottomless new housingmarket calls for more?

Lithuanian and Austrian partners areabout to launch the development of awhole new residential district in Vilniuson the capital city's north-western lim-its. Worth LTL 1bn, the project safelyoutruns any similar projects imple-mented so far in the country.

The partners are Lithuanian Ranga IVInvesticijos (part of the Ranga IV con-struction company) and Hermis Capital(private equity investor), as well as Aus-trian ECE European City Estates.

"The project is headed by Ranga IVInvesticijos whose financial input will ac-count for 50% of the total. The two otherpartners will chip in at 25% each," says

Dita Purliene, marketing director atRanga IV, to news2biz LITHUANIA.

"Lithuania is a new and promisingmarket to us with a high potential anddecent regulatory environment," saysDejan Rupnik, CEO of ECE, to news2bizLITHUANIA. "We are starting from resi-dential construction here but will defi-nitely explore the possibilities in othersectors in the future."

When completed, the new districtwill boast a total of 0.3m sq.m of prop-erty area on 99 ha of land. Of these, athird will be devoted to housing; an-other third for shopping, entertainment,and education facilities; the rest willhouse infrastructure.

New flat construction by regionstotal living area in '000 sq.m on columns

18982198

523

01.0002.0003.0004.0005.0006.000

Vilnius Kaunas Klaipeda Rest ofLithuania

H1 2005

2004

Source: the statistics office LSD

The first 2,000 flats will be built by theend of 2006 at a cost of LTL 500m. Thewhole district with some 4,000 flatsshould be completed by mid-2008.

"4,000 flats is close to what thewhole Vilnius' market adds annuallynow, so the new district's demand-

cutting impact should be quite visible,"Ms Purliene says. Flats will sell foraround LTL 3,400 per sq.m.ECE's main business in Eastern Europe isoffice properties (in Prague, Budapest,and Tallinn). In Estonia, ECE also holdsa controlling stake in Narva Elek-trivork, the power grid network aroundthe country's third-largest city Narva.We have talked toDita Purliene [email protected] Rupnik [email protected]

Norwegian developer ridesLithuania's property boomFLATS Sektor, previously known as theproperty division of Norway's VW dis-tributor and retailer Moller Gruppen,is taking long strides into Lithuania'sapartment market.

The Norwegians are willing to investLTL 100-110m into building 300 apart-ments on a 0.8 hectare lot just off Vil-nius' new City on the right bank of theNeris River.

The development will be in 5-6 sto-ries with a built-up area of 4,000 sq.m.

"We will go for apartments from 40to 70 sq.m, preferably with two bed-rooms, which is what buyers prefer ac-cording to the information we have,"says Kjetil Hanssen, manager of Sektorin Lithuania, to news2biz LITHUANIA.

Selling prices for the apartments, thatare to be ready for the market in 2.5years, will range from LTL 3,500 to LTL6.500 per sq.m.

On a more luxurious note, Mr Hans-sen is waiting to put the bulldozers towork any day now in order to build a60-apartment building in Vilnius' OldTown. The average size of apartmentswill be 90-100 sq.m, but the penthousedeck will be sold on luxury chunks of300 sq.m. Here, prices range from LTL7,500 to LTL 11,500 per sq.m. Thisproject is carried out in co-operationwith a compatriot, M2 Invest (seemore on M2 in no 196 page 7).

The contract for this developmenthas just been awarded to the Lithuanianconstruction company Constructus.

Sektor, created in 2002 following asplit between the two owning families inMoller Gruppen, has assets of NOK4.1bn and total rented area of 300,000sq.m, mostly shopping centres in Nor-way.

We have talked toKjetil Hanssen [email protected]

Jysk operator starts up asfull-scale retail developerRETAIL SPACE Rumfatalagerinn, theIcelandic operator of the Danish house-hold goods provider Jysk in the Baltics,Iceland and Canada, is firing up to be afulltime retail developer.

First of all, they will take over a16,000 sq.m shopping centre built byLithuania's Hanner in Klaipeda (seepage 8).





"For the moment Jysk and the Fin-nish-Swedish Rimi Baltic food retailerwill be anchor tenants, but another an-chor is on the way, but I cannot disclosethe name right now. Otherwise, wehave signed contracts for 70% of theretail area," says Nils Stora, propertymanager at Rumfatalagerinn, tonews2biz LITHUANIA.

The centre is solely focusing on retail,with one or two restaurants to cater forhungry consumers.

Otherwise the Icelanders have pur-chased lots in Kaunas and Siauliai alsofor the construction of retail property.

"In Kaunas we have started the proj-ect leading up to a building and zoningpermit, while the plans in Siauliai arenot quite as developed," says Mr Stora.

We have talked toNils Stora [email protected]

Litigation delays Lithuanianhotel plans in RigaINHOSPITALITY With a marketing cam-paign well underway and thousands ofadvance bookings under its belt, Lithua-nian Europa Group Hotels hasdropped its 3-star hotel project in Lat-via's capital Riga.

"In plain language we would call itracketeering: our site neighbours in Rigademand huge compensation from us forthe right to build a hotel there, andhave even won the first court battle,"says Martynas Kaciulis, CEO of the

Lithuanian hotel group, to news2bizLITHUANIA. "But we have startedbuilding it with all relevant permits inhand!"

Mr Kaciulis says they have decided towaste no time and look for a partner inRiga willing to build and manage an-other tourist-class hotel.

"The litigation will take a while –even the city of Riga has sued our siteneighbours for fighting against the city'sdecision to allow us to develop a hotel.However, we will be willing to return tothe project if we eventually win thecase," ads Mr Kaciulis.

"On the other hand, it is not that Lat-via is something special – we've seensimilar litigation cases in Lithuania aswell."

The delayed 80-room Europa CityRiga was to be opened in March 2006after a LTL 17m investment by theLithuanians and their franchising partnerin Latvia N un B.

"Advance bookings amounted toaround 30% of the hotel's annual occu-pancy rate," complaints Mr Kaciulis.

The setback, however, will not ruinEuropa Group's plans to debut in Rigawith a LTL 24m, 60-room, 4-star EuropaRoyale Riga, scheduled for opening thisDecember.

The hotel group's next opening willbe in 2006 in the Druskininkai spa re-sort (fourth Europa location in Lithua-nia). Future expansion plans include a

few Eastern European countries (see no187 page 7).

We have talked toMartynas Kaciulis [email protected]

Bakery plans entertainmentcentre in PanevezysENTERTAINMENT After a shoppingmarathon, it is time to have some fun.And please, in downtown.

No later had the smell of fresh paintfaded away at the newly opened the LTL60m shopping and entertainment centreBabilonas in Lithuania's fifth biggest cityPanevezys (see no 195 page 8), than alocal investor is pushing through withplans to build own entertainment facility.

The difference between the two istheir locations: Babilonas is situated onPanevezys western outskirts (close to anational-scale motorway) and exerts itspulling power to the city as well as tothe whole surrounding region, whereasthe planned facility would be located indowntown Panevezys.

The project developer, JungtinisDuonos Centras, plans to turn a 125-year-old former cannery building into a7,800 sq.m facility with a 3-4-star hotel,eating outlets, cinema, club, and aconference centre – the latter is inrather scarce supply in the city now.

The whole undertaking is to cost 'afew dozen of million of Litas'. It shouldopen in spring 2007.

The company's present main line ofbusiness is bread baking.

The Panevezys city municipality alsomulls building a EUR 29m sports arena inthe city, partly financed by EU funds. Theplan could be ruined by the difficultiesLithuania's other major municipalities arefacing in building and maintaining suchpublic facilities (see no 194 page 9).

IN BRIEF

• Construction prices in Lithuania grew by a yearly6.6% in August and by 5.2% since the beginning ofthe year. The price growth in residential and com-mercial construction exceeded the average.

R E T A I L & S E R V I C E

Lithuanian, US partners eyeBaltic merchandising marketMERCHANDISING If you are not quitecontent with the speed your goods aremoving in the Baltic retail market, somehelp is forthcoming.

Lithuanian Rinkos Skatinimo Sis-temos (RSS), one of the first firms tooffer merchandising services (in-storeproduct samplings, 'mystery shopper',proper display of goods on shelves etc)for branded products on the market, isto set up a JV with the US counterpartSpar Group.

"The partnership will help us to startoffering our services in the other two




Baltic countries from next year via rep of-fices," says Irena Kairiene, general man-ager of RSS, to news2biz LITHUANIA.

Spar RSS Baltic, to be 51% ownedby the US company, will introduce newservices and products not offered in theBaltic market before. The Lithuanianpartner's input will be the knowledge ofthe local retail market.

That should be good news to someof RSS' present partners who alreadyoperate throughout the region, likeNorwegian Statoil (motor oils) orSwedish Tele2 (mobile telecom).

"In Lithuania, we have passed theinitial phase when merchandising serv-ices were viewed with some suspicionand also as something rather needless.At first we were literally creating thedemand for our services, now customersthemselves come knocking on our door.Latvia is moving in the same directionbut in Estonia we see more work to bedone," explains Ms Kairiene.

Rollingannual retail turnover change in %

0%

5%

10%

15%

20%

2001 2002 2003 2004 H1 05

LT LV EE

Source: national statistics offices

The Lithuanian joint venture will be thefourth European location for the US com-pany after Greece, Romania, and Turkey.Spar is also present in Canada, South Af-rica, India, China, Japan, and Australia.

"Our main goals are to establish aworldwide business based on using thetechnology, proven in the US, in all de-veloping markets and eventually the de-veloped markets such as WesternEurope," says Robert Brown, CEO ofSpar Group, to news2biz LITHUANIA.

Spar Group's losses deepened to USD12m last year from USD 0.5m in 2003as net revenues slimmed by 21% toUSD 51m "due to a loss of a major cli-ent," according to Mr Brown. Mean-while, Spar's international sales nearlydoubled in H1 2005 to USD 7m.

In September 2004, Spar Group de-buted on the Nasdaq SmallCap Market.

Lithuanian RSS nearly tripled sales toLTL 1m last year and plans a 40%growth this year.

We have talked toIrena Kairiene [email protected] Brown [email protected]

Two big retail centres toopen in Klaipeda by year-endRETAIL This December, the retail mar-ket of Lithuania's port city of Klaipedawill make a major jump forward by wit-nessing the opening of two big retailproperties.

On 1 December, the retail market willexpand by another 16,000 sq.m (netarea) built at one of the city's maincrossroads.

The anchor tenant will be the Nordic-owned Rimi Baltic's Rimi Hypermarket(the chain's fifth hypermarket in Lithua-nia) which will occupy 4,000 sq.m.

The second biggest inmate will bethe Danish-owned Jysk householdgoods chain on 2,500 sq.m, for which itwill be the first outlet in the westernpart of Lithuania (see no 174 page 8).

The shopping and entertainmentcentre will all in all house 38 shops plusa restaurant, beauty parlour and a gym.

The property is being developed byLithuanian Hanner which earlier saidthe project will be worth LTL 40m. Theshopping centre will be later sold to Jysk(see a separate story on page 6).

Akropolis for everyone

A much, much bigger opening is sched-uled for the end of December when themarket leader VP Market will open aLTL 200m, 54,000 sq.m (net) Akropolisshopping centre.

Naturally, Akropolis' main tenant willbe VP Market's Hyper Maxima (13,600sq.m), surrounded by another 160stores, eating and entertainment out-lets, including a 1,400 sq.m ice arena, abowling club (biggest in the Baltics),and Klaipeda's first multiplex cinema.

"100% of the area is already rentedout," says Donatas Vilimas, marketing

director at the Vilniaus Akropolisproperty management company behindthe project, to news2biz LITHUANIA.

"Like in Vilnius, we plan to have aseparate adjacent building for the Er-mitazas DIY store [see no 179 page 8,ed.], but not earlier than next year."

8m shoppers are expected to visit theKlaipeda Akropolis annually, comparedto 11m boasted by the first and so faronly Akropolis centre in Vilnius.

Maximum retail area rentrates, LTL per sq.m per month

City Location Rate

VilniusOld Town

Centre, ground floorCentre, other floors

240220120

KaunasOld Town

Centre, ground floorCentre, other floors

50130 25

KlaipedaCentre, ground floorCentre, other floors

100 60

SiauliaiCentre, ground floorCentre, other floors

80 45

PanevezysCentre, ground floorCentre, other floors

100 30

Source: Ober-Haus

The next Akropolis, costing LTL 275m,should open in Kaunas in autumn 2006.

We have talked toDonatas Vilimas [email protected]

See also: Akropolis operator mulls stock exchangelisting (no 195 page 3), banks build LTL 640m syndi-cate loan for Akropolis (no 188 page 5), Lithuania,Latvia expand retail area, still lag Estonia (no 168page 7)





Norfos retailer to launchforeign expansion in 2006RETAIL Following in the footsteps of itsbigger competitors, Lithuania's thirdbiggest food retailer Norfos Mazmenawill venture into foreign markets nextyear.

The Lithuanian-owned company tookthe occasion of the opening of its 100thNorfa store in Lithuania to announcethat the year 2006 will see the end ofthe chain's rapid expansion at homeand first moves into a foreign territory,starting from Latvia, Estonia, andscouting Russia and Ukraine.

"We are now collecting informationon the market, evaluating our chancesand entry strategy," says Darius Ryliskis,Norfa's spokesperson, to news2bizLITHUANIA. "The decision on how wewill map out our Baltic expansion willcome no sooner than in six month."

Growing steadilySales of Norfos Mazmena, in LTL m

0

200

400

600

800

1.000

2001 2002 2003 2004 2005*

*) planSource: Norfos Mazmena

And it is not completely new, either:back in 2002 Norfa opened its first store

in Moscow (see no 137 page 6). Themove, however, proved premature, andthe store was later sold.

The Norfa chain plans to grow to 120locations by the end of 2005 from 87 itfinished last year with. The chain's grossretail area now totals 150,000 sq.m.

Both of Norfa's bigger competitors athome – the VP Market and Iki chains –are already present abroad: VP Marketin Latvia, Estonia, Bulgaria, and Roma-nia (130, total 315), and Iki in Latvia (3,total 142).

The chain expects to generate overLTL 1bn in sales this year, up from LTL784m in 2004 when it grew by a re-spectful 48%.

We have talked toDarius Ryliskis [email protected]

Retailers maintain highgrowth pace in AugustRETAIL In August, Lithuania's retailsector maintained the yearly turnovergrowth tempo it achieved in July.

The sector reported a 19% jump tojust above LTL 2bn. The motor sector(cars, repairs, fuel) enjoyed a 26% rise,while all sector minus motor reported arespectful 15%.

In January-August, the annualgrowth rate stood at 12% to LTL14.2bn, the statistics office LSD says.

Reporting one of the few recent in-stances of growth for small companies,retailers with fewer than 10 staff lifted

sales by 4%, those with 10 to 49 em-ployees enjoyed a 17% rise. Big fish (50staff and above) did not surprise with a20% growth.

The restaurant, hotel, and public ca-tering sector pushed up sales by 23% toLTL 485m in January-August.

As analysts of the NORD/LB Lie-tuva bank have noted, at least part ofrecent gains in retail is thanks to thediminishing share of shadow economyin the sector, courtesy of Lithuania's taxinspectors.

Swedenhouse becomes Swe-dish Chamber of CommerceORGANISATIONS Swedenhouse, thenon profit business assistance organisa-tion which was inaugurated in Vilnius inFebruary, has decided to change nameto Swedish Chamber of Commerce -Swedenhouse.

"Local businesses have called uponus to be clearer about what we do alsoin our choice of name. Even Swedishchamber of commerce in Latvia and Es-tonia have been calling upon us tochange our name," says Jan Hansson,chairman of the board of Swedenhouse,which remains the official name untilthe new name and statutes have beenregistered with the Lithuanian authori-ties.

Mr Hansson underlines that in addi-tion to the name, nothing else changesin the organisation and the scope of

Swedenhouse. The office is staffed by aSwedish-speaking Lithuanian manager.

"We represent Swedish business inLithuania, but we also work with Swed-ish authorities and local governments.Our funding is based on members' feesand on clients taking advantage of ourservices," says Mr Hansson.

Swedenhouse, soon to be SwedishChamber of Commerce - Swedenhouse,has app 40 members.

We have talked toJan Hansson [email protected]

Further info: www.swedenhouse.lt

IN BRIEF

• The Latvian-Swedish Baltic Cosmetic Holdingis in talks to acquire an unnamed hairdresser chain inLithuania. Last year BCH bought Lithuania's biggestcosmetics chain Sarma (see no 178 page 8).

• Estonia's major furniture maker Viisnurk is mull-ing opening a Skano furniture and life-style store inVilnius, following a successful debut in Tallinn andan upcoming opening in Riga.

I T & M E D I A

US Bentley acquiressoftware rights from AlnaIT Lithuania's attempts to realise itsmuch talked about software develop-ment potential received a boost througha major (by local standards) softwarerights sale deal.

Alna Software, part of the Alna ITgroup, has sold for LTL 1m the rights for



http://www.swedenhouse.lt/


seven software products to US BentleySystems.

Bentley specialises in supplying soft-ware solutions to mostly engineeringcompanies, turning over around USD300m annually. Alna's products will beintegrated into Bentley's existing docu-ment management suites.

Both companies have cooperatedsince 1997. In 2002, the two signed afour-year deal to allow Alna retain itsname on finished products distributedvia Bentley's sales channels (see no 132page 7).

The cooperation is expected to gen-erate LTL 4m in sales this year – aquarter of Alna Software's expectedturnover.

See also: Lithuania's IT industry launches 'outsourceto Lithuania' campaign (no 163 page 9)

Sonex restructuresIT business in LatviaIT The Lithuanian Sonex IT group hasexpanded its presence in Latvia by set-ting up a business management solu-tions firm.

Latvian Softex Sonex Systems(SSS) is owned by one of the group'sLithuanian companies, Sonex Siste-mos. The name Softex has been bor-rowed from Sonex's existing Latviancompany Softex Latvija.

"Essentially, we are restructuring ourLatvian business so that it correspondsto our Lithuanian structure," says Arvy-

das Balcius, Sonex Holding's spokesper-son, to news2biz LITHUANIA.

SSS employs 11 people from SoftexLatvija who were dealing with the busi-ness solutions sector in their previousfirm. The latter is now responsible onlyfor software development.

"Ideas and experience move morequickly between two specialised firms,creating a sound foundation for fastgrowth," explains the move Mr Balcius."Besides, we need to offer a set ofservices similar in quality to interna-tional clients who operate in differentcountries."

In Riga, the Lithuanian holding alsoowns Sonex Riga, involved in IT infra-structure services.

Sonex Holding turned over LTL 231mlast year. The Latvian branch accountedfor 12% of the total. The group is alsopresent in Estonia, Russia, and Belarus.

We have talked toArvydas Balcius [email protected]

Finnish Alma Media launchesCity24 property ads portalREALTY PORTAL Sticking to its promise(see no 186 page 6), Finnish Alma Me-dia Interactive in October launched itsCity24.lt portal for classified propertyadvertising.

The company has only one aim – tobecome the market leader in the firstyear of operations, which means that it

will have to outsmart 20-odd local ri-vals.

That looks quite achievable – in Es-tonia, from where the Finns started theBaltic City24 business, the portalclaimed the title in six months, in Latviait took even less – four months. TheLithuanian unit already claims dealswith 30 local property brokers.

In Lithuania, Alma Media will alsolaunch a national free-of-charge prop-erty classifieds monthly.

IN BRIEF

• Lithuanian Elsis has landed a LTL 7m deal tosupply radio stations and antennas for the Lithuanianarmy.

• Lithuanian Senukai, a group of companies in-volved in construction and DIY retail, acquired ZiniuRadijas, the only news-only radio station in thecountry, from an American-Lithuanian media entre-preneur. The latter earlier also owned the BaltijosTV channel, now controlled by the Achema indus-trial holding.

• Lithuania's print media market has welcomed an-other localised version of a foreign magazine, Ger-man Axel Springer's Auto Bild. Like the Germanpublisher's first localised Lithuanian magazine, Com-puter Bild, the car bi-weekly is published by the Vei-das publishing house.

FAIRSInfobaltMain annual ITT industry eventLatest data (2004): area 11,000 sq.m (first fallsince 2000 ), 184 participants, 56,000 visitorsDate: 27-29 October 2005, VilniusOrganizer: Infobalt assoc., Litexpo, Visus PlenusContact: Kastytis Balciunas, [email protected]: +370 5 213 63 26

T R A N S P O R T

Air Lithuania expandsintra-EU route networkAIR TRAVEL Lithuania's regional airlineAir Lithuania has expanded its intra-EU route network to include the Neth-erlands.

As of 17 October, the airline will ex-tend its daily Palanga-Hamburg serviceto Eindhoven, 100 km from Amsterdam.The Hamburg-Eindhoven link will alsobe serviced by a separate daily flight.

Besides, under a deal with the Ger-man budget airline Deutsche BA, theLithuanian carrier will connect Hamburgwith Munich, Stuttgart, and Nürnbergvia daily flights.

Until now the Kaunas-based Lithua-nian-owned carrier operated Oslo-Gdansk and Billund-Warsaw routes (seeno 187 page 10).

The airline owns three ATR 42-300460-seaters. From Kaunas it flies toOslo, Billund, and Hamburg – all viaLithuania's seaside resort Palanga.

In January-September 2005, thecompany increased its passenger volumeby 11% to 43,000. Sales jumped by33% to LTL 40m in 2004.

LAL demands fairer treatment

Lithuania's freshly privatised nationalflag carrier LAL is demanding an equaltreatment for all airlines in the country.




The company is expecting an answerfrom the transport ministry on why theIrish Ryanair no-frills' newly openedKaunas-London route is being subsi-dised by LTL 0.4m per year.

Ryanair has promised to carry100,000 passengers on the route – justabove LAL's annual result on the Vil-nius-London link last year.

See also: Amber Air starts competition for SAS fromPalanga (no 192 page 12)

Car dealers raise pressureto reclaim VAT exemptionNEW CAR SALES Lithuania's car dealershave found a solid partner in their so farfruitless struggle with the governmentto scrap VAT from corporate passengercar purchases.

The country's car dealers' associationLAA says it has teamed up with two in-fluential business lobbies – the industri-alists' and business employers' confed-erations LPK and LVDK to try once againto convince the government to removethis legal obstacle.

"We now that some Lithuanian com-panies operating in Latvia buy and reg-ister new passenger cars VAT-free inLatvia but drive them in Lithuania," saysLukas Vosylius, head of LAA, tonews2biz LITHUANIA.

Lithuania introduced VAT on corpo-rate passenger cars in mid-2002 "be-cause the then finance ministry simplyneeded to patch a hole in the budget",

according to Mr Vosylius. Since thenLithuanian companies' spent an addi-tional LTL 110m on VAT while new carsales have been seriously dented.

"In July 2005, new car sales rose bya yearly 28% in Lithuania, 85% in Lat-via, and 31% in Estonia," says Mr Vo-sylius.

Tired tyresPassenger car fleet by age, end-2004

10 year and older

91% 5-9 year old5%

2-4 year old2%

Up to 1 year old

2%

Source: Lithuanian car dealers' association LAA

Lithuania's finance ministry argues VAT-exemptions on corporate-use passengercars is not widely spread in the EU, be-sides any new VAT exemptions (nowapplied to drugs, periodicals) are unde-sirable.Until FinMin gives way to businessmen(if ever), companies in Lithuania willkeep registering cars in Latvia, ormasking their passenger cars as com-mercial vehicles for cargo or passengertransportation (these are VAT-free).

New car sales rose by 19% in Jan-Aug 2005 in Lithuania to 9,809. Volks-wagen, Peugeot and Renault were themost popular brands.We have talked toLukas Vosylius [email protected]

Lithuanians to buildlogistics centre near RigaLOGISTICS Lithuanian Invalda and MGBaltic, active players in the home prop-erty market, will together invest up toLTL 35m to develop a warehousing fa-cility near Latvia's capital Riga.

The joint venture set up for the pur-pose will start work on the project inspring 2006 to open it before the winterof the same year. The 30,000 sq.mcomplex will also offer office area. Theproject may still attract Latvian capitalas well.

The main reason behind deciding todo business in the neighbouring countryand not in Lithuania is that the Latvianwarehousing market shows a healthygrowth both in terms of prices and de-mand – something that Lithuania can-not offer.

"This is because in Lithuania the con-struction boom of new warehousing fa-cilities started a couple of years earlierand the market got filled up ratherfast," Raimundas Silys, CEO of MGValda, sums up the situation fornews2biz LITHUANIA. "Therefore inLatvia, we see more room for such proj-ects."

The two companies are not the firstones to spot the difference: at the endof 2003, Lithuanian Ranga IV opened20,000 sq.m of what then was the big-gest warehousing complex in Latvia (seeno 155 page 5).

MG Valda is the property arm of theMG Baltic manufacturing, trade, mediaand property holding. At the end of2004, the company managed 80,000sq.m of real estate worth LTL 250m.

We have talked toRaimundas Silys [email protected]

See also: Estonian Jungent's second thoughts aboutLatvia as a Baltic logistics centre (news2biz LATVIAno 196 page 11)

Warehousing area rent rates, EURper sq.m per month, October 2005

City Location Rate

Vilnius

New construction (class A)Renovated, good condition (B)Old construction, average-poorcondition (C)

15-2012-16 8-10

Riga


12-18 9-12 4-9

Tallinn


12-17 8-12 5-8

Source: Ober-Haus

IN BRIEF

• Vilnius' municipality-owned public bus lines op-erator Vilniaus Autobusai will spend LTL 10m topurchase 60 city buses, 8 to 10 years old, to replace15-22-year-old Hungarian Ikaruses'. Under an earlierdeal, the company purchased 90 Volvo buses for LTL70m, to be supplied by end-2006.




E N E R G Y & E N V I R O N M E N T

Kazakhs promise 12m tonsof crude for LithuaniaOIL Kazakhstan's state run oil and gascompany, claims it may secure a steadyand ample supply of crude oil to Lithua-nia for refining and export.

KazMunaiGaz says shipping oil toLithuania has become possible after thesigning in the beginning of October of a10-year oil transit deal with the operatorof Russia's oil pipeline network Trans-neft.

The Kazakhs are among those inter-ested in the sale of Russian Yukos'54% stake in the Lithuanian oil concernMazeikiu Nafta, and guaranteedcrude supply is seen as an unbeatableadvantage for bidders.

Meanwhile, it seems that KazMunai-Gaz is out of the game regardless of itsoil supply news: according to Lithuania'sPM Algirdas Brazauskas, only RussianLukoil and Russian-British TNK-BPstand chances of snatching Lithuania'sindustrial gem.

The government is pushing throughlaw amendments that would allow it tobuy out Yukos' stake, add the govern-ment's own holding of 41% and thensell the 93% stake, valued at LTL 5bn,at one go.

Lithuania to start lookingfor N-plant investors in 2006NUCLEAR ENERGY In spring 2006Lithuania will announce its terms andconditions to attract investors for build-ing a new nuclear power plant in thecountry.

These will cover legal, economic, andfinancial aspects of what Lithuania'scurrent government sees as an entirelycommercial project.

The state will only participate in theproject by pledging to provide relevantinfrastructure and human resources:construction site, power relay grid,roads and employees.

Preliminary, the new nuclear powerplant could be built in 2015-2017 nearthe Ignalina nuclear plant that is to beclosed for good in the final hours of2009 for safety considerations (providedBrussels helps Lithuania to cover billionsof Litas of these costs).

The idea is supported by both Estoniaand Latvia which now buy Ignalina'soutput, as well as Europe's nuclearpower champion France whose state-owned power engineering companiescould potentially expect huge contractsin Lithuania.

It is believed that Finland, soon to belinked with the Baltic electricity grid,would drop the idea of building its sixthnuclear unit should Lithuania remain anuclear power country.

Lietuvos Energija announcesfourth wind power tenderGREEN ENERGY Lithuania's nationalpower grid operator Lietuvos Energijahas announced a fourth tender to buildwind mills in western Lithuania for 6-40MW capacity.

Bids must be submitted by 24 No-vember. However, the winner, to be an-nounced on 15 December, will only beguaranteed the right to apply for per-mission to install new wind power gen-erating capacity – not permission itself.

The main bid evaluation criterion willbe the price offered to the grid operatorfor plugging the new facility into thenational power grid (no less than 60%of actual costs, otherwise the higher,the better).

Types of renewable power in 2009by share in total renewables' output

Wind30%

Other*36%

Biomass19%

Hydro14%

Solar & waste1%

*) excludes wind power mills with installed capacity of up to250 kW (installed tender-free), and the Kaunas hydropowerplant

Source: Lithuanian government

Another four tenders should be an-nounced by end-2006 (two of them al-ready this year). Renewable energy

should account for no less than 7.4% ofLithuania's total power production(12,630 GWh) in 2009 – twice as muchas it accounts for today.

Out of all five renewable energytypes (wind, hydro, biomass, solar &geothermic, and waste), the wind powergenerating capacity should have 50% ofthe total installed renewable energy ca-pacity of 316 MW.

E C O N O M Y & P O L I T I C S

Government adoptseuro transition planEURO In just over a year, on 1 January2007, Lithuania plans to drop its na-tional currency for good and become aeuro-zone country. To get ready for thetransition, the government has adopteda plan for the euro introduction.

The final decision on whether Lithua-nia will actually introduce the EU cur-rency will be announced in mid-2006 byBrussels, and the only major hurdle nowin the way is Lithuania's inflation indi-cator that could be just a bit too high toqualify.

Nevertheless, here are the mainpoints of the government's plan whichwill be set in motion once a go fromBrussels is received. The plan is still tobe approved by the Seimas.


Introduction: The euro will becomelegal tender in Lithuania in the firstminutes of 1 January 2007.

Exchange rate: The present ex-change rate (under the LTL peg to EUR)should be preserved at EUR 1 = LTL3.4528.

Exchange: All commercial banks willhave to exchange LTL into EUR free ofcharge for 60 days; the central bank willbe doing it for unlimited period of time.LTL bank accounts will be converted intoEUR free of charge.

Cash settlements: Till 15 January2007 cash settlements will have to beaccepted both in EUR and LTL butchange will only be given in EUR. Themeasure, together with the need toadapt cashiers and accounting systemsto process two currencies simultane-ously, is believed to cost Lithuania's re-tailers' association members LTL 10m.

Prices: All prices will have to beshown in both LTL and EUR from 2 No-vember 2006 to 1 March 2007. Pricerounding will have to be advantageousto the customer.

Retail: To maintain as much pricetransparency as possible during thechangeover, retailers are recommendednot to organise sales campaigns. Retail-ers will be urged to sign an ethics codeto commit themselves not to use theEuro introduction to own advantage.

Shares: All Lithuanian stock compa-nies will have to hold general share-

holder meetings to change the nominalvalue of shares from whole LTL to EUR(rounded up to the whole cent). Shouldshareholders fail to pass such a change,EUR rounding will be done by simplydeleting the EUR value's surplus digits(e.g., the present LTL 1 nominal valuewould translate into EUR 0.2896 butactually will be set as EUR 0.28 – notEUR 0.29).

Inflation: During November 2006-February 2007, statistical inflation datawill be announced more often than oncea month (the way it is done now).

Costs: The central bank estimatesthe euro introduction will cost it aroundLTL 100m.

Constitution: Lithuania mustamend its Constitution by May 2006 togrant the European Central Bank tohave the right to issue currency inLithuania, along with the country's CB.This will require at least 94 'yes' votes inthe Seimas, compared to the ruling ma-jority's 82. If the amendment fallsthrough, the Parliament will be able toreturn to it no earlier than in one year.

See also: Inflation accelerates in August, euro entrydebate heats up (no 196 page 14), Lithuania joinsERM II, euro-zone entry forecast for 2007 (no 171page 14)

FinMin cuts average annualinflation forecast to 2.5%INFLATION A the end of September,Lithuania's finance ministry cut its aver-

age annual inflation forecast for 2005 to2.5% from the earlier 2.7%.

The news emerged just two days af-ter the government passed the euro in-troduction plan – quite a coincidencehaving in mind that the average annualconsumer price inflation is seen amongthe biggest obstacles for the country toget next year a go from Brussels to in-troduce the EU currency in 2007.

The ministry, however, did notchange its annual inflation (December toDecember) forecast of 2.2%, and alsoleft other macroeconomic indicators(this year's GDP growth rate, all indica-tors for the 2005-2008 period) intact.

The ministry bases its move on thefact that prices did not rise as much asexpected earlier, in fact by 0.7 percent-age point less, to 2.5% in August.

However, some analysts predict thatrising oil prices will force certain sectors,like transportation, to raise their prices.Inflation could be further boosted by afast wages rise brought about by theeconomic development and labour mi-gration.

CPI adds momentum in September

Lithuania's consumer price index con-tinued to climb in September to reach2.6% - still well below the indicator'stop post-EU accession reading of 3.3%.

Food products (28% of the consumerbasket) went up in price by 2.5%, whileanother heavy-weight – housing and

utilities – reported a slightly lower ap-preciation.

The appreciation of transport servicesbroke into a two-digit zone (11.5%)both due to rising fuel prices and raisedpublic transport ticket prices in Vilnius.

Month on month, prices added 0.9%in September – the highest growth sinceApril's 1.0%. The most noteworthychange was that in clothes and foot-wear where prices reverted from theirusual deflation to a high 5.6% inflation.

SEB sees slower GDP rise forLithuania, quick euro entryMACROECONOMY Swedish economicalanalysts predict that out of all threeBaltic countries, only Lithuania mightmanage to introduce the euro in 2007.

However, Lithuania's GDP growthwill be the slowest in the region duringthe 2005-207 period.

In its latest Eastern European econ-omy overview, the Swedish SEB banksays domestic consumption – one of themain GDP growth driving forces, willcurb in Lithuania from H2 2006 follow-ing an anticipated interest rate rise bythe European Central Bank. This willmake mortgage and consumer loansmore expensive.

"True, the first stage of the incometax cut to 27% from 33% will takeplace in mid-2006 [see no 192 page 13,ed.] but this will not influence con-sumption as the level of disposable in-


come will stay on the previous level,"says Alge Budryte, chief analyst at SEBVilniaus Bankas, to news2bizLITHUANIA.

In the longer term, SEB also sees aslower unemployment fall rate butwarns that it has not yet bottomed out.

We have talked toAlge Budryte [email protected]

Wages in Lithuania tocontinue rising fastest in EUWAGES For the third year running, in-ternational remuneration experts seewages in Lithuania rising the fastest inEurope and almost fastest in the wholeworld.

But for investors operating in Lithua-nia's peculiar labour market that shouldbe of secondary importance: wages inLithuania are still low compared tothose in the 'old EU' (Lithuania's mainsource of FDI and biggest export part-ner), and there's a growing lack ofavailable skilled labour force due to theinternal market development and labouremigration.

In its latest forecast, the human re-source unit of the US Mercer consul-tancy says wages will increase by 5.5%in Lithuania in 2006 (after inflation,predicted at 3%), the third fastest riseafter India and Egypt.

With 5.0%, Estonia follows right be-hind Lithuania by the predicted pay rise– both well above the Netherlands

whose 2.2% rate will be the highest in-dicator among the 'old EU' memberstates.

Mercer's forecast for Latvia is 3.5%(after a 5.3% inflation).

Annual wages changein %

FM***LSD**

Mercer*

0%

2%

4%

6%

8%

10%

2004 2005 2006 2004 2005 2006

*) Mercer's forecasts (salary rise minus inflation);**) statistics department's 2004 data (real earnings rise);***) finance ministry's forecast for 2005-2006 (gross wagerise minus inflation).

Source: Mercer, Lithuania's statistics dept. LSD, FinMin

New chief tax man promiseshigher service standardsTAX MAN The new head of Lithuania'stax inspectorate VMI says businessesdeserve better treatment to be achievedby organising the agency's work aroundmajor tax-payer groups.

Stepping into his new capacity, Mo-destas Kaseliauskas, 30, formerly incharge of VMI's business in the Siauliaicounty, hinted that he would encouragetax inspectors' specialisation to workwith three major customer groups: SMEs,big tax payers, and new tax payers.

The state budget's biggest headacheis VAT collection, chronically behind theplan (see no 179 page 14) but some-what improving as of late.

Mr Kaseliauskas' predecessor VioletaLatviene left the public job for the postof finance director at Achemos Grupe,Lithuania's biggest industrial concern.

See also: Tax inspectorate weaves thicker mesh forVAT payers (no 180 page 12)

Scandinavian Club in Klai-peda: a haven for investorsINVESTMENTS The Scandinavian Club inKlaipeda, an initiative launched twoyears ago for Scandinavians to rely oneach other for assistance in Lithuania,has become a haven for large investors.

"We have a number of new membersin the club who are foreign investors inLithuania's booming real estate sector.They get all the assistance through thecompany that runs the club and in thisway they do not need a local organisa-tion to take care of their investments forthem," says Niels Melchiorsen, presi-dent of The Scandinavian Club andowner of the wind energy developerBaltic Natural Energy, to news2bizLITHUANIA.

"For local expats and guests we fo-cus on cultural events, on wine eve-nings, brandy evenings and jazz music,as this is the best basis for making busi-ness. In Klaipeda, we are far away fromdecision making in Vilnius and in order

to succeed here, you need a local net-work. We are very well connected lo-cally, so you can say that the Scandina-vian club is a ready-made network forlocal Scandinavians," says Mr Mel-chiorsen

We have talked toNiels Melchiorsen [email protected]

Further info: www.scanclub.lt

IN BRIEF

• The registered unemployment in Lithuaniareached another all-time low on 1 October, 4.1%,the national labour exchange reports. This representsa contraction of 0.2 percentage point month onmonth and 1.9 pp year on year.

• Lithuanian exports swelled by 24% to LTL 19.8bnin Jan-Aug 2005, imports rose by 18% to LTL25.8bn. Trade deficit edged up by 3% to LTL 6bn.

EVENTSEducation and Business CooperationA business luncheon of the American Chamber ofCommerce in Lithuania on Lithuanian ministry ofeducation's role in promoting education and busi-ness cooperation. Guest speaker: minister of educa-tion and scienceDate: 21 October 2005, VilniusOrganizer: American Chamber of Commerce,www.acc.ltContact: [email protected], phone: +370 5 261 11 81

Transfer pricing in LithuaniaA technical briefing of the British Chamber of Com-merce in LithuaniaDate: 26 October 2005, VilniusOrganizer: British Chamber of Commerce,www.bccl.ltContact: Diana Jarmalaite, [email protected]: +370 5 269 00 84



http://www.scanclub.lt/

http://www.acc.lt/


http://www.bccl.lt/


news2biz LITHUANIA no 198, 12 October 2005

Copy r i gh t © NORTHROUP NEWSLETTERST h i s n e ws l e t t e r m a y n o t b e p h o t o c o p i e d o r r e d i s t r i b u t e d i n an y w a y

15

W A G E S

Average monthly wages in LTL and indices

SectorGross wage*

Q2 2005Jan 1996

= 100Q2 2002 = 100

Q2 2004 = 100

Industry 1,256 203 115 109Agriculture, hunting, forestry 992 434 124 107Textiles 979 174 109 109Wood 988 176 118 114Paper 1,530 212 113 106Machinery 1,299 180 122 106Water, heating, gas, electricity 1,847 255 125 112Construction 1,273 176 122 102Retail and repair 1,237 171 115 110Transport and communications 1,416 196 114 111Government 1,986 275 124 105

National average 1,332 209 120 109

*1) Excluding the employer's legally fixed social tax (31%), which must be paid to Sodra(Valstybinis Socialinio Draudimo Fondas), which in its turn pays 3% of this sum to the healthinsurance fund Valstybines Ligoniu Kasos.

Source: The Lithuanian statistics office, Lietuvos Statistikos Departamentas.

R E A L E A R N I N G S

100

110

120

130

140

150

160

170

180

190

200

210

220

3rd

Q 0

1

4th

Q 0

1

1st

Q 0

2

2nd

Q 0

2

3rd

Q 0

2

4th

Q 0

2

1st

Q 0

3

2nd

Q 0

3

3rd

Q 0

3

4th

Q 0

3

1st

Q 0

4

2nd

Q 0

4

3rd

Q 0

4

4th

Q 0

4

1st

Q 0

5

2nd

Q 0

5

0,8

0,9

1

1,1

1,2

1,3

1,4

1,5

1,6

1,7

1,8

1,9

2 Real earnings index (right axis) Money wage index Consumer price index

Note: The diagram shows the developments of the average national gross wages and infla-tion. The difference between the two graphs may be read as the average improvement of thereal earnings compared to January 1996. The columns show an index of the real earnings. Ifindex is above 1, the wages have increased more than inflation compared to January 1996.

T R A D E

Lithuanian exports and imports according to commodity groups

EXPORTS in LTL m IMPORTS in LTL m

(according to SITC)Jan-Aug

2005Share

Jan- Aug2004

Share 2004 ShareJan- Aug

2005Share

Jan- Aug2004

Share 2004 Share

Food and live animals (0) 2,030 10.2% 1,549 9.7% 2,610 10.1% 1,752 6.8% 1,408 6.5% 2,236 6.5%Beverages and tobacco (1) 208 1.1% 97 0.6% 180 0.7% 260 1.0% 201 0.9% 320 0.9%Crude materials except fuels (2) 1,098 5.5% 967 6.1% 1,532 5.9% 933 3.6% 792 3.7% 1,266 3.7%Mineral fuels and lubricants (3) 5,281 26.7% 3,865 24.3% 6,457 25.0% 6,385 24.8% 3,859 17.7% 6,424 18.7%Animal and vegetable oils (4) 32 0.2% 23 0.1% 44 0.2% 120 0.5% 124 0.6% 211 0.6%Chemical products (5) 1,771 8.9% 1,183 7.4% 2,055 8.0% 2,999 11.6% 2,619 12.0% 4,010 11.7%Manufactured goods (6) 2,119 10.7% 1,704 10.7% 2,795 10.8% 4,140 16.1% 3,767 17.3% 6,036 17.6%Machinery and transport equipment (7) 4,030 20.4% 3,580 22.5% 5,618 21.8% 7,363 28.6% 7,213 33.2% 11,098 32.3%Miscellaneous manufactured articles (8) 3,225 16.3% 2,961 18.6% 4,522 17.5% 1,704 6.6% 1,591 7.3% 2,539 7.4%Not classified commodities (9) 2 0.0% 6 0.0% 6 0.0% 108 0.4% 179 0.8% 244 0.7%

TOTAL 19,796 100% 15,935 100% 25,819 100% 25,764 100% 21,753 100% 34,384 100%

Lithuania's ten largest export markets (in LTL m)(ranked according to 2004)

No CountryJan- Aug

2005Share 2004 Share

1 Germany 1,884 9.5% 2,634 10.2%2 Latvia 1,935 9.8% 2,588 10.1%3 Russia 2,127 10.7% 2,342 9.1%4 France 1,416 7.2% 1,624 6.3%5 UK 932 4.7% 1,370 5.3%6 Sweden 1,003 5.1% 1,299 5.1%7 USA 795 4.0% 1,280 5.0%8 Estonia 1,161 5.9% 1,277 5.0%9 Netherlands 704 3.6% 1,242 4.8%

10 Poland 1,063 5.4% 1,242 4.8%

Lithuania's ten largest import markets (in LTL m)(ranked according to 2004)

No CountryJan- Aug

2005Share 2004 Share

1 Russia 7,311 28.4% 7,616 22.3%2 Germany 3,936 15.3% 5,760 16.9%3 Poland 2,061 8.0% 2,579 7.6%4 Netherlands 983 3.8% 1,345 3.9%5 Latvia 941 3.7% 1,295 3.8%6 Denmark 793 3.1% 1,207 3.5%7 Finland 718 2.8% 1,157 3.4%8 Sweden 864 3.4% 1,142 3.3%9 Italy 735 2.9% 1,095 3.2%

10 Estonia 725 2.8% 1,093 3.2%

Source to all tables: The Lithuanian statistics office, Lietuvos Statistikos Departamentas.



16

M O N E Y S U P P L Y

Money supply in LTL m

Apr 05 May 05 June 05 July 05 Aug 05

Monetary base 7,150 7,341 7,553 7,672 7,816M1 12,814 13,249 13,708 13,884 14,071- Currency outside banks 5,242 5,292 5,463 5,648 5,655- Demand deposits 7,572 7,957 8,245 8,236 8,416M2 23,362 23,830 24,561 25,203 25,603- Time deposits 5,400 5,381 5,476 5,556 5,714- Foreign currency dep. 5,148 5,200 5,377 5,763 5,817

Monetary base encompasses Lithuanian currency emitted by the central bank and money (do-mestic as well as foreign currencies) on accounts held with it.M1 encompasses currency outside banks as well as demand deposits.M2 encompasses M1 and time and savings deposits as well as deposits in foreign currencies.

Source: Lithuania's central bank, Lietuvos Bankas.

C R E D I T

The financial sector's net lending* in LTL m

Type of loan 2nd Q 04 3rd Q 04 4th Q 04 1st Q 05 2nd Q 05

Loans to customers 14,120 15,310 16,898 17,798 19,766- to private companies 9,839 10,216 11,064 11,602 12,541- to individuals 3,334 3,859 4,449 5,154 6,085

Consolidated balance ofthe banking institutions 25,108 26,350 29,151 30,807 33,617

*) by the end of period.


I N F L A T I O N

Inflation year-on-year, last two years

-1,5%

-1,0%

-0,5%

0,0%

0,5%

1,0%

1,5%

2,0%

2,5%

3,0%

3,5%

sep

03

nov

03

jan

04

mar

04

may

04

jul 0

4

sep

04

nov

04

jan

05

mar

05

may

05

jul 0

5

sep

05

Source: The Lithuanian statistical office, Lietuvos Statistikos Departamentas.

I N T E R E S T R A T E S

Average weighted annual interest rates on credits

Term / currency Mar 05 Apr 05 May 05 June 05 July 05 Aug 05

Up to 1 year (LTL) 5.02% 4.93% 5.04% 4.75% 4.80% 4.63%Up to 1 year (EUR) 4.37% 3.91% 3.62% 3.67% 3.67% 3.63%

Over 1 year (LTL) 6.09% 7.90% 8.08% 7.68% 7.05% 6.35%Over 1 year (EUR) 4.86% 4.15% 4.57% 4.61% 4.50% 4.49%

Note: credit term duration refers to the initial rate fixation period. For example, a 5 - yearloan with floating interest rate, revised every 6 months, is classified as 'Up to 1 year'

Vilnius Inter Bank Offered Rate (VILIBOR) as of 11 October 2005

Overnight 1 week 1 month 3 months 6 months

2.15% 2.16% 2.22% 2.31% 2.40%


C O N S U M E R P R I C E I N D E X

Consumer price index 100 = current 12 months

Product/service (share in price basket) Jan 2002 Jan 2003 Jan 2004 Jan 2005 Apr 2005 May 2005 June 2005 July 2005 Aug 2005 Sep 2005

Food and non-alcoholic beverages (28.4%) 107.6 92.7 98.5 105.0 105.9 104.6 103.8 101.1 101.9 102.5Alcohol and tobacco (7.6%) 101.6 101.6 104.7 101.5 100.1 99.7 99.6 99.8 100.2 99.7Clothes and footwear (8.6%) 94.9 96.3 97.6 97.8 97.7 97.1 98.9 97.9 98.6 99.5Housing, water, electricity, and gas (12.4%) 103.1 100.4 100.4 103.7 104.6 104.0 103.9 105.0 105.2 104.9Household items and furniture (5.7%) 97.3 98.0 96.4 97.0 97.6 97.5 97.7 97.9 98.0 98.2Transport (10.4%) 97.2 107.8 98.5 105.4 107.7 103.3 104.9 108.4 109.2 111.5Communications (5.0%) 113.9 104.3 85.4 99.0 97.6 97.5 97.4 97.4 98.5 95.9

Gross consumer price index 103.2 98.0 98.7 102.9 103.2 102.0 102.0 101.8 102.3 102.6Inflation year-on-year 3.2% - 2.0% - 1.3% 2.9% 3.2% 2.0% 2.0% 1.8% 2.3% 2.6%

Consumer price index 100 = previous month

Product/service (share in price basket) Dec 2004 Jan 2005 Feb 2005 Mar 2005 Apr 2005 May 2005 June 2005 July 2005 Aug 2005 Sep 2005

Food and non-alcoholic beverages (28.4%) 101.2 100.3 100.6 100.8 101.8 100.8 99.4 99.0 99.8 100.3Alcohol and tobacco (7.6%) 99.9 100.1 100.1 99.7 99.8 99.8 99.9 99.9 100.1 99.9Clothes and footwear (8.6%) 98.4 94.3 96.9 102.6 95.7 100.3 100.2 96.6 99.7 105.6Housing, water, electricity, and gas (12.4%) 100.2 103.1 100.3 100.5 104.1 100.4 100.3 99.6 100.2 100.6Household items and furniture (5.7%) 99.3 99.9 99.9 99.9 99.7 99.9 100.0 99.9 99.9 100.2Transport (10.4%) 97.2 99.7 101.9 100.9 103.7 99.2 101.9 102.8 101.2 103.0Communications (5.0%) 99.9 99.8 99.9 99.0 98.2 99.7 99.6 99.9 99.2 99.8

Gross consumer price index 99.9 100.0 100.2 100.5 101.0 100.3 100.1 99.8 100.1 100.9Inflation month-on-month - 0.1% 0.0% 0.2% 0.5% 1.0% 0.3% 0.1% - 0.2% 0.1% 0.9%

Source: The Lithuanian statistical office, Lietuvos Statistikos Departamentas.



17

C U R R E N C Y

LTL exchange rates as of 11 Oct 2005(transfers)

SEB Vilniaus bankLithuania's

central bankBuying Selling Average

100 USD 284.65 289.31 284.58100 EUR 344.42 346.14 345.28100 GBP 498.64 507.05 501.07100 CHF 221.32 224.91 222.69100 CAD 241.02 246.65 242.081,000 JPY 24.84 25.41 25.04100 DKK 45.71 46.73 46.28100 SEK 36.55 37.38 36.95100 NOK 43.38 44.37 43.62100 EEK 21.89 22.25 22.07100 LVL 489.15 500.55 494.96100 RUR 9.95 10.16 10.00100 PLN 87.99 90.20 88.61100 CZK 11.53 11.80 11.65

Nordic currencies (100 units)against LTL over the last 12 months

36373839404142434445464748

14 o

ct

15 n

ov

14 d

ec

12 ja

n

10 fe

b

15 m

ar

14 a

pr

13 m

ay

13 ju

n

13 ju

l

11 a

ug

12 s

ep

11 o

ct

DKK NOK SEK

Note: The average exchange rates of Lithuania's central bankare fixed one day before the actual date.

EUR and USD (100 units)against LTL over the last 12 months

250

260

270

280

290

300

310

320

330

340

350

14 o

ct

15 n

ov

14 d

ec

12 ja

n

10 fe

b

15 m

ar

14 a

pr

13 m

ay

13 ju

n

13 ju

l

11 a

ug

12 s

ep

11 o

ct

EUR USD


S T O C K E X C H A N G E

Vilnius Stock Exchange

Main list(in alphabetic order)

Price11 Oct 05

Change27 Sep 05

Changeend of 2004

Ekranas 1.80 + 5% - 75% Lietuvos Telekomas 2.74 + 2% + 27% Pieno Zvaigzdes 4.77 - 1% - 16% Rokiskio Suris 71.50 + 2% - 6% Snaige 17.05 - 2% - 4% Utenos Trikotazas 10.65 0% + 20% Vilniaus Baldai 37.00 + 6% 0% Vilniaus Vingis 4.72 - 9% - 39%

OMX Vilnius index 520.72 + 1% + 77% Baltix index 581.90 + 2% + 38%

Source: The Vilnius stock exchange, Vilniaus Vertybiniu Popieriu Birza.

VILSE index over the last three months

400

420

440

460

480

500

520

540

11 ju

l 05

18 ju

l 05

25 ju

l 05

1 au

g 05

8 au

g 05

16 a

ug 0

5

23 a

ug 0

5

30 a

ug 0

5

6 se

p 05

13 s

ep 0

5

20 s

ep 0

5

27 s

ep 0

5

4 oc

t 05

11 o

ct 0

5

Note: VILSE index shows changes in all the prices of shares on the central market. Indexvalue is assumed to be equal to 100 on 1 January 2000. VILSE replaced its predecessor Litin-G on 27 September 2004.

P R I C E S

Prices of selected goods and services in LTL

Food Oct 05 Non-food Oct 05

Milk, 1 l 2.11 Cigarettes, Marlboro, pack 4.25Butter, 82%, 200g 2.69 Aspirin, Bayer, 100 tablets 19.95Bread, loaf 1.99 Verslo Zinios, business daily 2.50Beef, 1 kg 14.89 Photo film, Kodak, 24/200 11.89Chicken, 1 kg 4.79 Taxi, per km 2.00Tomatoes, 1 kg 1.99 Local phone call, 1 min. 0.12Apples, 1 kg 1.49 Int'l phone call, 1 min., to EU 1.39Bananas, 1 kg 5.59 Local letter, up to 20 g 1.00Eggs, 10 pieces 2.69 Electricity, kWh 0.31Sugar, 1 kg 2.88 Water, cb.m 4.12Coffee, Jacobs, 250 g 5.99 Natural gas, cb.m 0.74Beer, Carlsberg, 0.5 litre 2.58 Petrol 95, 1 litre, Statoil 3.27Mineral water, Vichy, 0.5 litre 1.29 Diesel, 1 litre, Statoil 3.25

Note: prices are in Vilnius, for popular brands at popular shopping locations; rates are peakin Vilnius for households.

Source: news2biz LITHUANIA survey.

R E T A I L T R A D E

Relative retail trade performance

Period May 05 June 05 July 05 Aug 05

Turnover in LTL m 1,899.1 1,863.8 2,029.4 2,024.7

Index 100 = previous month * 103.7 99.4 105.7 101.8

Index 100 = same month prev. yr * 114.9 114.6 118.4 118.8

Index 100 = previous month ** 105.6 100.7 105.7 102.1

Index 100 = same month prev. yr ** 113.3 113.5 114.2 114.8

Year 2001 2002 2003 2004

Turnover in LTL m 13,977.5 15,639.7 17,641.2 19,612.8Index 100 = previous year 107.4 112.4 114.3 109.3

*) total **) without motor vehicles and motorcycles

Note: Retail trade turnover is shown above at current prices whereas retail trade develop-ment indexes are calculated by the statistical office at constant (1995) prices only.

Source: Lithuania's statistical office, Lietuvos Statistikos Departamentas.



18

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I N D U S T R I A L O U T P U T

On monthly basisFeb

2005Mar2005

Apr2005

May2005

June2005

July2005

Aug2005

Index 100 = Previous month 99.6 103.7 95.8 105.5 95.7 95.8 106.6Index 100 = Same month previous year 100.1 109.3 101.6 118.5 105.2 101.9 108.7

Year 2000 2001 2002 2003 2004 Jan-Aug 2005

Index 100 = Previous year 102.2 116.0 103.1 116.1 110.8 106.0

Note: Industrial output equals industrial production, adjusted for seasonal factors.


P R O D U C E R P R I C E S

On monthly basisMar2005

Apr2005

May2005

June2005

July2005

Aug2005

Sep2005

Index 100 = Previous month 103.1 102.6 99.0 102.1 102.3 102.4 102.9Index 100 = Same month previous year 110.0 111.8 107.6 111.7 112.3 113.0 115.5

Year 2000 2001 2002 2003 2004 Jan-Sep 2005

Index 100 = Previous year 102.6 92.2 101.9 99.8 106.8 118.5

Note: Producer prices are prices of industrial goods excluding VAT and other taxes.Source: Lithuania's statistical office, Lietuvos Statistikos Departamentas.

G D P

PeriodReal growthyear on year

GDP in LTL mat current prices

GDP percapita in USD

2nd quarter 2005 * + 8.0% 17,425 1,8591st quarter 2005 * + 4.6% 14,644 1,6274th quarter 2004 * + 7.3% 16,935 1,8463rd quarter 2004 * + 5.6% 16,566 1,7062nd quarter 2004 * + 7.8% 15,480 1,5731st quarter 2004 * + 7.2% 13,276 1,3994th quarter 2003 + 11.6% 15,139 1,5093rd quarter 2003 + 10.8% 14,887 1,4042nd quarter 2003 + 9.0% 14,017 1,3311st quarter 2003 + 10.9% 12,491 1,1232006 ** + 6.5% 71,850 n/a2005 ** + 6.8% 66,039 n/a2004 * + 6.9% 62,257 6,5232003 + 10.6% 56,533 5,3672002 + 6.8% 51,643 4,0792001 + 6.4% 48,379 3,474

*) Preliminary data or estimates **) forecast by SEB Vilniaus Bankas


C U R R E N T A C C O U N T

excerpts shown in LTL m 2002 2003 2004 June 2005 July 2005

Trade balance - 4,868 - 5,141 - 6,452 - 449 - 509Services 1,988 1,888 2,558 186 267Direct investments, net 2,604 436 1,421 246 18Current account balance - 2,671 - 3,854 - 4,442 - 177 - 216Current account deficit in % of GDP - 5.2% - 6.9% - 7.2% n/a n/a


F O R E I G N D I R E C T I N V E S T M E N T

Net and stock in LTL m 2003 20042 Q

20043 Q

20044 Q

20041 Q

20052 Q

2005

Foreign direct investment, net * 436 1,421 618 337 299 434 - 186Foreign direct investment stock 13,699 16,193 14,658 14,976 16,193 17,533 17,539

*) Foreign direct investments in Lithuania minus Lithuanian investments abroad.Source: Lithuania's central bank, Lietuvos Bankas.


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