VILNIUS - The Lithuanian government was all ears at last week's World Lithuanian Economic Forum 's but didn't like everything it heard.
At a roundtable discussion including Prime Minister Andrius Kubilius, a former U.S. Treasury official and various European market analysts, two methods to pull Lithuania out of the economic crisis were brought up 's devaluing the litas and creating a pan-Baltic development bank with Estonia and Latvia.
Economists around the world are debating the pros and cons of devaluing the litas and other Baltic currencies on the pages of newspapers, magazines, television shows and market reports, so naturally the controversial topic was brought up at the seminar of what choices Lithuania can make to get out of the crisis.
James Oates, a Central and Eastern European market expert and general director of Cicero Capital, said that until foreign investors feel the risk of devaluation has evaporated money from abroad will continue to remain scarce.
"Until people feel this risk is negligible, they won't invest," Oates said. "Either we have to convince people there isn't a large risk, or we have to go ahead with devaluation now."
Zilvinas Mecelis, an investment fund manager for London's GLG Partners, argued that devaluation is the only way to bring in a significant input of capital into Lithuania.
Mecelis noted that investment was not only needed for the general economy, but also to supplant Lithuania's primary source of electricity, the Ignalina Nuclear Power Station, set to go offline at the end of the year. Its proposed replacement will likely not be built until 2020.
"We already damaged our profile," Mecelis said of the Lithuanian government's handling of the Ignalina shutdown. "I think you need to do it fast, and the only people that can do it fast are three to four players."
Mecelis argued that lowering the value of the lita would give foreign investors more bang for their buck, creating a greater incentive to invest in Lithuania.
"What attracts investment is the price of assets," Mecelis said. "Right now, banks and all the commentators want to do it but the government doesn't want to do it because it is unpalatable. But the only capital coming in is very expensive. I think you should let the market decide and let the capital come in."
Kubilius and other government officials at the forum were cool to this proposal, though, unwavering in their approach toward devaluation since the crisis set in last year.
"Sixty to 70 percent of raw material is imported. Devaluation wouldn't help at all. Eighty-five percent of loans are denominated in euros 's this would harm the middle class very much," Economy Minister Dainius Kreivys told The Baltic Times.
Government officials expressed interest in Oates' call for the creation of a pan-Baltic development bank to stir up the stagnant flow of capital.
"We basically have a Swedish monoculture in banking," Oates said. "I think changing the banking development would benefit the economy here."
Kreivys said that this was a proposal the Council of Ministers had looked at before.
"They propose that we need to break the monopoly of Scandinavians and organize something that could bring capital in… We will consider this in our government. At the beginning of the year there were ideas about this."
REVERSE BRAIN DRAIN
The forum was organized by the Lithuanian government and the International Chamber of Commerce-Lithuania and held July 2-3 at the Reval Hotel in Vilnius. Its purpose was to bring brain drain emigrants and descendents of Lithuanians living abroad back to their homeland to network and brainstorm ways to overcome the crisis.
"This is a huge opportunity 's first for bringing knowledge back, second for investment," Kreivys said. "Lithuanians working for multinationals can promote Lithuania."
The forum was a mix of presentation, roundtable discussion and question and answer sessions and offered much more give and take than last money's World Forum on Direct Investment, also hosted in Vilnius.
