Christmas moods hinder ratification

VILNIUS - Lithuanian and British businessmen will have to wait to benefit from the bilateral treaty on avoiding double taxation of income and capital gains for at least two more years, after Lithuanian lawmakers failed to ratify the document in 2001.

The treaty, signed in mid-2001, was endorsed by the British Parliament in December 2001.

According to parliamentary statute, ratification of a treaty should be supported by at least two-fifths of Lithuania's 141-member Parliament. The vote was originally planned for Dec. 21 but was cancelled after many parliamentarians failed to show up for the ballot.

The treaty stipulates it would step into force in Lithuania January 2003 after ratification in both parliaments, and April 2003, respectively, in the United Kingdom.

Representatives of the majority and the opposition made no secret of their vexation and confusion over the failure to ratify the agreement, which is seen as very important for Lithuanian businessmen.

"There was Christmas spirit, which could not be changed by a phone call or conversations with faction leaders," Parliamentary Vice Chairman Ceslovas Jursenas told BNS.

"There were many events and snow on that day, and we failed to gather for the meeting," said Social Democrat Gediminas Kirkilas, the head of the parliamentary foreign affairs committee.

The parliament received the final language of the treaty on the eve of the planned ratification on Dec. 21.

Roma Kaziliuniene, adviser to the finance minister, told BNS that the correction of translation mistakes was completed by the government at the end of November, adding that the Foreign Ministry was in charge of the corrections, which also had to be coordinated with representatives of the British government.

However, in Kaziliuniene's words, there is still hope that the document would be enforced next January despite the late ratification.

Finance Minister Dalia Grybauskaite has approached Britain's Finance Ministry with a request to start application of the document before it is ratified, said Kaziliuniene, adding that a similar procedure was used in the treaty with Germany.

She also stressed that the new Profit Tax Law enforced on Jan. 1 allowed foreign businessmen working in Lithuania to avoid double taxation.

Britain ranks 6th in terms of investments in Lithuania, with 667.8 million litas ($166.95 million) invested in Lithuania or about 6.6 percent of all direct foreign investment in the Baltic state.

Several companies want to quit bourse

By Kairi Kurm, TALLINN

Prompted by changes in their ownership structures the number of companies listed on the Tallinn Stock Exchange may decrease from the present 17 to 10.

"There are no certain leavers," said Veikko Maripuu, head analyst at the investment bank Suprema, "but there are some companies which have not fulfilled all the necessary terms of the exchange and want to leave."

This doesn't mean, however, the exchange is in danger of disappearing, he added. "The situation would be problematic if Hansapank and Eesti Telekom decided to leave, but in the present situation it would become stronger by getting rid of those companies which are trailing behind."

According to Maripuu trading in stocks looks set to increase as a result of cooperation between the Tallinn bourse and Finland's HEX stock exchange and in tandem with the development of the second pillar of Estonia's pension process, which obliges new employees to hold private pension plans.

He predicted that such state-owned companies as the Tallinn port Tallinna Sadam, Estonian power utility Eesti Energia and railway concern Eesti Raudtee would at least in part be listed on the exchange in future.

The companies preparing to quit the bourse at once are those with a big core of investors, where only a small number of shares - mostly with low liquidity - are traded.

The largest holders of shares in such companies as Sampo bank, meat packer Rakvere Lihakombinaat and cold store Tallinna Kulmhoone already have stakes of almost 95 percent.

Tallinna Kulmhoone wants to leave the exchange, but its majority owner Lithuanian Kauno Pienas Centras would have to increase its stake by another 0.7 percent to 95 percent before the exchange accepts the withdrawal, said Evald Karu, member of the board at Tallinna Kulmhoone.

"These few shares are hard to get," commented Karu. "Stock exchange rules to protect small shareholders are understandable to some extent. But since the stock is not changing hands, I can't see any reasons for staying at the exchange."

Olle Horm, chairman of Rakvere Lihakombinaat, said the company's majority owner, Finland's HK Ruaokatalo, wanted to leave the Tallinn Stock Exchange because the stock was not freely traded on the bourse. "Getting on the stock exchange was a good idea, but it hasn't given any additional value lately," he said.

Eva Palu, spokeswoman for the Tallinn Stock Exchange, said the idea that 95 percent of a company must be owned by a single entity before delisting was considered was not set in stone. Each case was decided by the listing committee separately, she said.

So far none of the companies in which one owner holds a stake of more than 95 percent has turned to the stock exchange for delisting, she said, adding that a couple of companies wished to leave the exchange a year ago but failed to meet all the necessary requirements.

Many of the companies Maripuu believes will delist are remaining tight-lipped about their plans.

But ownership changes at the clothing manufacturing company Baltika and the wood processor Viisnurk could logically result in their core investor Baltic Republic Fund holding onto the companies for a couple of years before reselling to a new strategic investor by 2003, he said.

Andrus Aljas, finance director at Viisnurk, downplayed such claims. "BRF, which controls almost 60 percent of Viisnurk, has been in the company for seven years now. If someone wished to buy BRF's stake an offer would also have to be made to other owners in order to protect the interests of the small shareholders. We, the management, do not want the company to be delisted. How else would a company outside the capital of Estonia be noticed if not through the exchange?"

Ulle Jarv, member of the board at Baltika said "We have no plans to leave the stock exchange, at least not in the near future."

Estonian seat belt manufacturer Norma is another potential stock exchange leaver, said Maripuu. "History shows that Norma's core investor Autoliv purchases companies in full after three years."

But Autoliv spokesman Mats Odman denied there was any plan to delist. "We're satisfied with the current situation. There are several examples where we have not bought out the whole company," he said.

Maripuu said that the confectionery Kalev, construction company Merko and Tallinn department store Tallinna Kaubamaja were attractive Estonian companies that would probably find a new foreign investor.

But Katrin Muhls, finance director at Tallinna Kaubamaja, also denied the company was about to delist.

Nonetheless, Maripuu believes consolidation is now the name of the game. "Tallinn pharmaceutical plant Tallinna Farmaatsiatehas and the Latvian pharmaceutical Grindex are tied to each other so densely that they should be listed under one name," said Maripuu.

The clothes manufacturer Klementi and the IT company XXL have also expressed desire to leave the exchange, said Maripuu.

Since 1999 nine companies have left the exchange, including EVEA Bank, insurance companies ASA Kindlustus and Leks Kindlustus, Estonian fair organizer Eesti Naitused, construction company EMV, Reval Hotel group, Uhispank, car dealer Fakto and the real estate developer Pro Kapital.