In Brief - 2002-12-19

  • 2002-12-19
Finnish enlargement fears

Finnish businessmen believe that enlargement of the European Union will mean a new distribution of labor in Europe and the transferring of headquarters of Finnish small-and medium-sized enterprises to Estonia, a country with aggressive tax laws.

Eero Lehti, chairman of the Finnish business association Yritys-Suomi, told the Kauppalehti business daily that companies would take advantage of the free movement of capital and that the change in that respect would be dramatic. "Three helicopters between Tallinn and Helsinki will probably not suffice if the suggested tax rise [in Finland] materializes," he said.

A proposal has been made in Finland to raise the corporate income tax to 44 percent, while in Estonia there is no taxation of reinvested profit. Finnish firms have transferred production to Estonia even now, but later it will be simpler to make decisions than at present, Lehti said. (Baltic News Service)

Competitiveness questioned

Despite strong enough positions that many Central and East European businesses - Latvian companies included - have in the global economy, they can be easily undermined by international competition, said a report by Deloitte & Touche auditors and consultants in their recent survey "Maintaining Competitive Ability."

One of the key conclusions by Deloitte & Touche was that results and productivity at Latvian companies were low as compared with Central Europe.

Deloitte & Touche Latvian branch head Janis Aboltins said that, on the one hand this meant that Latvian producers were not ready for accession to the European Union, but that on the other hand it implied the need for further efforts toward improving competitive ability upon joining the common market.

Although Latvian producers have been developing quite rapidly lately, they are still small and weak, and that further development required large investments and state support, which Aboltins describes as "a weak spot" at the moment.

The survey showed that production at regional companies fell 19 percent short of that in multinational corporations, personnel and organization management quality in regional companies was 17 percent lower and they also were 13 percent behind by readiness to globalization. (BNS)

Lithuanians in exclave

The Kaliningrad administration released data showing that Lithuania is the largest foreign investor in the Russian Baltic Sea exclave.

A total of 498 enterprises with Lithuanian capital participation operate in Kaliningrad, accounting for 27.4 percent of all joint ventures and foreign-owned companies operating in the region. Lithuanians have invested not only in the service and retail sector, which is characteristic of foreign investment in the region, but in the manufacturing sector as well, according to the report.

In the first 11 months of this year, Lithuania's total investments in the stock capital of companies operating in the region are valued at 5.7 million euros. This represents 13.7 percent of the total foreign equity investments in Kaliningrad, the largest share among foreign countries.

Poland and Germany lag behind Lithuania in terms of foreign investments in the Russian exclave, with Polish and German investments in the stock capital of Kaliningrad-based companies reaching 1.4 million euros and 4 million euros, respectively, over the 11 months of 2002. (BNS)

Budget cuts called for

The International Monetary Fund has recommended that Lithuania reduce the 2004 budget deficit, preserve the currency board arrangement, retain stable national currency and not to assume obligations resulting in higher budget expenditure.

Patricia Alonso-Gamo, head of the IMF mission which just completed its work in Vilnius, highlighted this in a meeting with Prime Minister Algirdas Brazauskas. Under the 2003 budget law, the budget deficit amounts to 1.13 billion litas (328 million euros) this year, and 1.31 billion litas in 2003, accounting for 2.4 percent of GDP.

Alonso-Gamo said Lithuania should decide how it wants to further cooperate with the IMF. The government had said that after the expiration of an economic policy memorandum with the IMF in March 2003, a new agreement is not likely to be signed. (BNS)

Snaige director steps down

Antanas Andrulionis has stepped down as managing director of Lithuania's Snaige, the leading refrigerator manufacturer in the Baltic countries.

Snaige's management board decided to dismiss Andrulionis, 61, from his job by mutual agreement, the company reported to the National Stock Exchange. Romualdas Raudonis, Snaige's production manager, took over as acting managing director Dec. 16 until a new chief executive is appointed.

"Health is the most important thing. I need three to four months to recover from my illness. I decided that heath was more important for me than my job," said Andrulionis, who had headed Snaige since 1982.

Snaige anticipates a pretax profit of 27 million litas (7.82 million euros) for 2002, with sales of approximately 250 million litas. (BNS)