Lithuanian e-commerce still in its infancy

VILNIUS - Although Lithuanian President Valdas Adamkus underlined the importance of the information economy in his state of the nation report before the Lithuanian parliament earlier this year, e-commerce in Lithuania remains at a very primitive stage of development.

The reasons for this aren't hard to find. Out of every 100 Lithuanian residents, only four use the Internet, whereas Estonia can boast 27 regular Internet users per 100 residents. These figures illustrate the difference between the lowest monthly cost for unlimited dial-up Internet access via fixed analog lines - $8 in Estonia, compared to $24 in Lithuania.

In an open letter to the Lithuanian prime minister and transportation minister released on Aug. 25, Infobalt, an association of Lithuanian information technologies, telecommunications and office supply firms, in its criticism of the current state of affairs found fault with poor government handling of telecommunications issues rather than the legal monopoly enjoyed by telephone company Lietuvos Telekomas, also a member of Infobalt.

The statement pointed out that neighboring countries also have legal monopolies in charge of their telecom systems. Even so, Lietuvos Telekomas has been under heavy criticism for introducing so-called filters on analog lines, designed to inhibit high-speed transfer of digital data.

Moudrick Dadashov, president of Lithuanian IT company EUnet, told The Baltic Times that Lietuvos Telekomas is seeking to expand its monopoly sphere, and to drive independent Internet service providers out of the market. He said the company is trying to turn back the clock by putting a damper on all signals over 33 kilobytes per second over analog lines, demanding that IT companies lease higher-speed digital lines at unrealistic prices, thus making Internet inaccessible to consumers.

He added that Lietuvos Telekomas had hindered investment in his company from abroad. He said a plan with western European investors to lay fixed lines for higher-speed digital transmission was thwarted when Lietuvos Telekomas refused to service their network.

Dadashov said his company is fully capable of setting up e-commerce sites in Lithuania, and is currently working on a payment system for the users of the Web-site of the acclaimed Vilnius city guide, Vilnius in Your Pocket.

High Internet service prices, legal confusion and a general lack of value placed on the free flow of information has made e-commerce scarce in what could be a blossoming market.

"I'm counting on explosive growth in the market," commented Dadashov. "This country is three times the size of Estonia, and that means the market is potentially three times as large. The Internet is booming in Estonia right now. Maybe that's a consequence of close linguistic ties with Finland, the most connected country there is. I don't know, but I know it could happen here too."

The open letter sent by Infobalt, titled "On the lack of confidence in the Ministry of Transportation's Communications Department," claims that the Communications Department has demonstrated a conflict of interest in its mandate to balance the needs of Lithu-anian consumers, the government and private businesses.

The Communications Department approved of Lietuvos Telekomas's attempt to filter digital traffic and, according to the letter, claims the xDSL system, which allows sending up to 8 megabytes per second over copper lines, isn't necessary in Lithuania. Although there is no legal monopoly on the transfer of information in Lithuania, in fact Lithuanian enterprises aren't being allowed to use xDSL technology, the association said.

Infobalt also said the Communications Department is failing to present its draft legislation on the Internet for public inspection, as required by Lithuanian law. Infobalt points out the department doesn't even have its own Web-page.

However, even in this unfavourable environment for electronic commerce several initiatives are picking up.

Hansabank, the new player from Estonia in Lithu-ania's banking sector, has been offering global Internet banking services to Lithuanian clients for several months. Its current services include local payments, bank account operations reporting, currency conversion and financial advice. Egidijus Cepelis, head of Hansabank's IT division, said the bank is preparing a payment system for clients to stake e-commerce sites, slated for unveiling this October.

Lithuanian company Omnitel also offers something like e-commerce on its site www.muge.lt, although payment is not very simple. Shoppers can choose from a variety of products, including CDs, books and personal hygiene products, but payment is accepted only via Lietuvos Zemes Ukio Bankas with Maestro ATM card, or via mobile telephone credit held on one of Omnitel's customer plans. Omnitel's Webpage froze up in the process of investigation and wouldn't reveal more of its secrets.

The Vilnius book shop Penki Kontinentai (www.5ic.lt) claims to offer customers the possibility to open e-commerce sites in Lithuania, but unfortunately the site containing information for further inquiries wasn't working properly when The Baltic Times tried it.

Probably the most successful Internet sales operation in Lithuania currently is www.aukcionas.lt, similar to the classifieds section of a newspaper. People offer their goods with a contact telephone number, and the deal takes place off-line when both parties come to terms. It is widely used by Lithuanians seeking better deals on used computing equipment.

Another successful site is www.cv.lt, an online job market. A large number of jobs being offered demand applicants' reply by e-mail or via the Website, with no chance to meet potential employers face-to-face.

Vilniaus Bankas is said to be quite active in expanding its Internet services for clients, but the director of their IT department couldn't be reached for comment.