U.S.-Lithuanian investment accord set to go at last

  • 2001-10-25
  • Bryan Bradley
VILNIUS - Lithuanian Foreign Minister Antanas Valionis and U.S. Ambassador to Lithuania John Tefft met Oct. 23 for an exchange of documents after the two countries ratified a bilateral treaty on the encouragement and mutual protection of investment.

They said the 10-year treaty would take effect on Nov. 23 following a ratification process that lasted nearly four years.

"The treaty provides guarantees that will facilitate the investment process and open up new opportunities for investment in both countries," Valionis told journalists. Tefft agreed, saying the treaty would encourage Lithuania's economic development and strengthen its private sector.

The investment accord was signed in Washington in January 1998 and ratified by the Lithuanian Parliament and the U.S. Senate during 2000. It establishes that each country has most-favored-nation status in relation to each other's markets, stipulates that investors must receive fair and equitable treatment and provides for the application of international legal standards for expropriation and related compensation.

It also enables the free transfer of funds related to investments, and enshrines the investor's right to resolve disputes with the host government through international arbitration.

Lithuania has been eagerly awaiting a part of the new treaty that will make obtaining visas easier, as Lithuanians who do business in the United States currently often face hurdles getting such documents.

The accord also allows investors from either country to engage management personnel without regard to nationality.

"This is all quite positive as it means Lithuania is becoming more of a recognized partner in the international arena," said Rasa Bagdoniene, spokeswoman for Kraft Foods, one of the oldest and largest U.S. investors in Lithuania.

In recent years, the U.S.A. has lost its position as the leading source of foreign direct investment in Lithuania to Denmark and Sweden, though it remains a solid third.

As of mid-2001, 170 American companies had directly invested a total of $246 million in Lithuania since the restoration of independence, or 9.7 percent of all foreign direct investment, according to the Lithuanian Statistics Department.

But that is sharply down from the 28.5 percent share that the United States boasted at the start of 1997, a reflection of the way investors from elsewhere have followed the United States' early lead.

"I don't see any particular reasons why investment hasn't increased as rapidly in recent years, though obviously there have been some very big investments in Lithuania by U.S. firms," said Tefft.

Vytas Gruodis, director general of the Lithuanian Development Agency, said the treaty would help U.S. companies again play a more leading role in the Lithuanian economy. "It is a very positive development, even if it is not likely to be a decisive factor for potential investors," said Gruodis.

Both countries' officials see potential for significant new U.S. investments. The U.S. company Penninox has started work on a new stainless steel plant in Klaipeda. "If our $45 million project is successful, some other American companies will also consider expanding to Lithuania," Penninox Baltika marketing manager Romas Zvonkus told The Baltic Times.

He said there were hopes of establishing a U.S. industrial park, for which municipal authorities in Klaipeda had reserved four land lots adjacent to the future Penninox plant.

A long-awaited $300 million modernization project at Lithuania's Mazeikiu Nafta oil complex should also involve a good deal of American money and there are hopes that U.S. companies will take part in privatizing Lithuania's electricity utility next year.

So far the biggest U.S. investor in Lithuania is the Oklahoma-based energy group Williams. In late 1999, Williams International paid $75 million for a 33 percent controlling stake in Mazeikiu Nafta in what has continued to be a controversial privatization deal.

Since Philip Morris became one of the first foreign companies to enter Lithuania in 1993 it has invested $72.5 million in tobacco-processing facilities. Kraft Foods followed close behind, buying a Kaunas confectionery plant. Its investments to date total $31 million.

Coca-Cola has been in Lithuania since 1995, investing $31.5 million in a bottling plant, while the Masterfoods division of Mars, Inc. has put $27 million into a pet-food factory. Motorola, McDonald's and agribusiness giant Cargill have also all invested more than $10 million each.