Can Lithuania become a Baltic Tiger?

In the last decade, the economic success of the Republic of Ireland has been nothing short of miraculous.

Growth rates have been exceeding 7 percent every year for four years running, foreign investment has flooded in and the country has become a major exporter of pharmaceuticals and computer software. ƒmigrŽs have begun returning in massive numbers and even with their return, Ireland has become a net importer of labor as opposed to an exporter. In the construction industry alone, Ireland is forecasting a shortage of 23,000 workers in 2001. The international business media has run countless stories about the "Irish Miracle" or "The Celtic Tiger."

Lithuanians have watched the process with a mixture of fascination and envy. After all, the two countries share many common traits and politicians here have become fond of pointing to Ireland in order to bolster support for Lithuania's European Union membership or, simply, as a beacon of hope proving that a small country with few natural resources and two sea crossings away from the European mainland can be successful in international export markets and provide its citizens with a decent standard of living.

Identical cultural twins

"I've been hammering home the similarity between Lithuania and Ireland for years," said Algimantas Cekuolis, a popular political commentator and Vilnius University lecturer. "In my mind there are no two countries that are such identical twins."

Some of the similarities are obvious. Both are nearly identical in terms of geographic size as well as size of population and density. Both experienced waves of emigration to America over many decades. Both have histories involving a troublesome larger neighbor and both are predominantly Roman Catholic. Yet, some similarities go beyond facts and statistics.

"We are both countries that love music and song. Over the centuries we have also fostered revolution and resistance to interference by our neighbors. We are also big consumers of beer and strong drink," said Cekuolis. "Though Ireland is somewhat warmer as it is bathed by the Gulf Stream, the weather is generally overcast and rainy much like Lithuania," he said.

But the comparison is not quite perfect. "Lithuanians did manage to preserve their language unlike the Irish," Cekuolis said. But according to Robert Jennings, a professional economist who has been living in Lithuania for six years, this is changing.

"There is a strong feeling of regret in Ireland about the loss of the (Gaelic) language but there has recently been a movement to revive the language that is seeing growing success," he said.

Jennings also pointed out that Lithuanians make much of the fact that they were the last people of Europe to accept Christianity and thus there is a strong pagan substratum in the culture. "Even though Ireland was Christianized in the fifth century, the old gods still play a role in the attention that the Irish give to nature. This is very similar to Lithuania," he said.

The troublesome neighbor is also a shared experience. "Our historical experiences and the suffering that accompanied these has affected the outlook of both countries and there is an empathy there. I think we can understand one another very easily," said Jennings.

Putting it all in context

Despite the many cultural and historical similarities, does it follow that Lithuania can imitate Ireland's economic success?

British Ambassador to Lithuania, Christopher Robbins thinks it can. "Ireland was in 1970 a relatively poor, largely agrarian country at some distance from the industrial core of Europe. It had few natural resources. Thirty years later it has been transformed by EU membership. Financial support for farmers and business has stimulated the economy. Ireland is now wealthier per head than the United Kingdom, having created valuable high technology industries using a highly educated and young workforce. I know of no reason why Lithuania would not be able to do the same," he said. Ireland joined the European Community (now the European Union) in 1973.

But it is important to put this success in its proper context said Jennings. "It would be wrong to think that Ireland's success is owed mainly to the disbursement of structural funds from the EU," he said. It goes far deeper than mere investment. "Ireland made a conscious and far-sighted decision back in the 1960s to make education a national priority."

The country was well-positioned to face the challenges of an information society when it became a reality, he added.

"Also you have to keep in mind that some very tough and far-sighted political decisions were made," he said.

Jennings said that the "National Understanding" was a key factor in Ireland's economic rebirth. Politicians agreed to undertake an austere program of budget cuts in order to get the country out of it's debt quagmire and opposition leaders agreed not to use this as political capital. "It was austerity with a big A. Until then all taxation money generated went to pay only the interest on the debt. We were a profligate country. "

Consensus seems to have been one of the major ingredients. Government, business and labor would negotiate three-year agreements in the areas of wage growth, taxation and social expenditures so that the pie would be equitably divided.

"Lithuania is going to have to learn the same discipline. If the country can form a partnership among different groups at a national level, then there will be no obstacle to its success," he said. Days of work lost due to strikes used to number in the hundreds of thousands every year in Ireland in the 1970s. Today they are in the thousands. Striking, though, is not a luxury many Lithuanians can afford and are rare in the country.

Taxation policy has been another impetus for growth especially for attracting foreign investment. "Ireland has the lowest corporate tax rate in Europe but one of the highest personal tax rates. It is very difficult and tricky to get the mix right," said Jennings. Debates about investment similar to the ones in Lithuania were also part of the growing pains Ireland experienced. "People were initially highly suspicious about selling land to foreigners, especially agricultural land. This is the same situation in Lithuania today."

This attitude should change over time though. "Lithuanians have a fear that privatization of state property is like giving away strategic assets," said Kestutis Petrauskis, assistant editor at the Veidas news weekly. "But so many of our factories are worthless without investment and modernization and some people are having a tough time understanding this. After all, when an investor upgrades a plant or a property, the improvements stay in Lithuania. It's not like they can take them away with them. People in this country will begin to recognize this."

For Algimantas Cekuolis, EU and NATO membership are essential for ensuring Lithuania's future. "Lithuanians want to work and develop new skills. A Lithuanian can work like an ox. But we need the EU and NATO so that we have an umbrella over our heads in case of a thunderstorm from the East. Only then will we get more than a trickle of investment so that people will stop leaving," he said.

The diaspora

Ireland was a net exporter of people for two centuries. "People have begun to return massively," said Jennings. In 1998 there was net immigration of 22,800 people. "Our waves of emigration are typically accompanied by songs written about those who are leaving. But the songs of the last wave were more hopeful and there was a strong sense that these people would return," he said.

According to Petrauskis, Lithuania's Department of Statistics has been doing an abysmal job of keeping track of Lithuanians leaving the country. Officially, about 2,500 people have immigrated to the United States in the last decade and only 201 in 1999. One only needs to spend a few weeks in Lithuania speaking with locals to know that this is a huge underestimate. The U.S. Embassy in Warsaw issued 973 emigration visas to Lithuanians in 1999 alone. In the last twelve months, the U.S. issued over 10,000 tourist visas to Lithuanians. It is well-known that many stay well beyond their visa's expiry date and work illegally or marry U.S. citizens in order to stay on.

But whatever the numbers, Cekuolis is not phased. "I am not afraid of the high numbers of people leaving. A huge number will come back. I have seen how they live and adapting to a new culture and society is not as easy as it seems. It takes 25 years. Many will return," he said. Cekuolis thinks that Lithuania's ongoing modernization will also bring many immigrants home. "The best part for us is that these people will come back with new skills, new languages, a thorough understanding of market economics and capital. We only stand to win."