Lithuania scrapes bottom in FDI ranking

VILNIUS - The overall majority of Lithuanians agree on the need of foreign investment in the country; however, the experts maintain that, even though the public sentiment towards foreign investments is favorable, it is still hindered by different bureaucratic obstacles, reports news agency ELTA.

The economist Rimantas Rudzkis, chief analyst of DnB Nord, notes that Lithuanian investment indicators are rather weak. According to the figures of the World Economic Forum, last year Lithuania directed only 4.5 percent of its gross domestic product (GDP) to investment related to manufactured goods; in other words, to various technologies, machinery and manufacturing equipment. Lithuania ranks third from the bottom in the European Union (EU) according to these rates; in 2009, the country was at the bottom of the list.

Rudzkis also said that Lithuania is last in the EU according to the rates of cumulative foreign investment per capita. “The figures, in terms of macroeconomics, are rather poor, thus, we should not rejoice over the fact that we attract the flow of foreign investment that equals 1 percent of our domestic gross product. Back in 2003, Lithuania would attract around 4, 5 or 6 percent,” said the economist during the April 7 conference ‘Investment and Public Interest.’ The chief analyst said that investment in Lithuania is hindered due to the reasons that Lithuanian business is very slowly laying the foundations for the economy’s development in the future; there is no effective system of investment incentives, the tax system is far too complex, which impedes the accounting of small businesses. Also, a more active flow of investment is prevented by the inconsistency of economic policy, the position of local governments regarding the attraction of the investment, the shortage of a qualified labor force, heavy administrative burdens on businesses, cumbersome regulations, a high level of corruption, the lack of state institutions’ support to businesses, deeply rooted negative attitudes towards business, the lack of transparency in the judicial system and poorly developed air transportation.

The institution of public opinion and market research Vilmorus conducted a survey which revealed that the overall majority of Lithuanian respondents (78 percent) agree that Lithuania needs foreign investment; 13 percent of the respondents had a negative view of foreign investments. The reason for the favorable attitude towards foreign investors is the creation of new jobs. The negative view of foreign investments is explained by the fear that foreign companies would create intense competition for local companies.

“The sentiment is very positive and this should be used. The conditions for business should be altered, but we should also bear in mind that there might be some worrying aspects of foreign investment, too. We should take that into consideration, react to it and remember for the future,” the head of Vilmorus, the social scientist Vladas Gaidys, said summarizing the survey’s results.