Linas Jegelevicius, The Baltic Times

Plagued by some of the highest levels of emigration in the
European Union, plus reeling from Russian-imposed sanctions in a number of key
sectors, the pace of Lithuania’s economic growth roughly halved in 2015,
largely due to a downturn in the international environment.

However, Valdas Sutkus, the President of Lithuanian
Business Confederation, remains upbeat. “We did better last year than most EU
member states,” he told The Baltic Times. Sutkus then agreed to answer the
following questions.

Those in power in Lithuania have described emigration as
one of the most adverse factors facing Lithuanian business. Officials, however,
claim that emigration has slowed and emigres are returning to Lithuania. Does
your data show that?

The flow of people streams back and forth, but emigration
is not tapering off. In fact, it surged around 20 per cent last year,
year-on-year. A factor of higher pay in the West is still strong and the
economy will be shaped by migration trends in the future too.

Among those who did come back to Lithuania, I’d single out one particular
group: Lithuanians, who after successful careers abroad, return for the same or
higher management positions here.

Contrary to the claims that Lithuania supposedly cannot
offer many jobs to well-educated Western style professionals, I’d say there are
plenty of jobs of that kind, especially in Vilnius.

What especially characterises our labour market today is that Lithuania is
making a swift transition from a country of cheap labor to a country with a
skilled workforce. In terms of productivity, our labour productivity is
hovering at around 175 per cent and is nearing the EU statistical average.

It is a normal process, and a characteristic of an EU
country — Lithuania cannot be compared with Vietnam with its dominant cheap

Projecting ourselves as a country of cheap labour would be against our state’s
core interests and it also would go against our national identity.

What is so special about it?

Lithuanians are very hard-working by nature, but we are
also a very creative and intelligent nation. Regardless of what occupation and
job we have here, the majority of us want to move up the ladder.

Many of the people who left Lithuania in search of a better life tend to
achieve that.
I personally know some people who, for example, in the United Kingdom, started
as room cleaners and managed to climb to the top positions of management.

When people in Lithuania speak of cheap labor, they usually
have local sewing shops in mind. However, here they toil, as a rule, for
international clients and often well-known brands.

Speaking of the Baltic countries’ business identity,
Estonia has branded itself as an IT and Skype country, Latvia presents itself
as a nation of strong metallurgy. What is Lithuania’s business identity?

That’s a good question.
Frankly, I do not see us taking any particular direction with the economy.
 Unlike Latvia and Estonia, the territory of Lithuania is quite spread out
and, size-wise, is three times larger than Estonia, which in terms of the
economy is an important factor.
In Estonia, the whole business swirls around Tallinn and Tartu, meanwhile in
Latvia it is concentrated around the capital city, Riga. The ethnic make-up in
Latvia also is a factor in the economy.
From that standpoint, Lithuania has always been — even during the Soviet era —
a lot more economically diverse.

Unlike our neighbours, we have kept up large industrial
centres in Klaipeda, Siauliai, and Panevezys. The hot issue Lithuania faces is
this: what do we want to do with them? There’s no single answer to it. At least
I have not heard of one. Now much is left up to the municipalities themselves.
I am not sure that all of them have a clear vision for regional development.
Only Klaipeda — the seaport — is more definite with its development plans.

Are there any peculiarities about the Lithuanian workforce?

Well, I’d say this: most Lithuanians are unwilling to
relocate; that goes for jobs, too. In advanced Western societies, this is a
very understandable thing.

In Germany, for example, around 50 per cent of the
working-age population rent property in which to live.

In other words, people are not attached to one particular
place, which enables them to be flexible in the job market. You’d better not
ask a Lithuanian to relocate. Interestingly, roughly 90 per cent of Lithuanians
own an apartment or a house; an indication of very limited movability.

Another thing that I’d like to bring up is the great added
economic value of the direct mayoral elections that Lithuania had last spring.
As most of the mayors are real local leaders — some of them came from a business
background — the change in the mood and local business environment has been

As Lithuania heads for parliamentary elections, do you see
any relation between the economic activities and the make-up of the Lithuanian
parliament and government?

I think in Lithuania the two are unrelated. For many years
now, Lithuania has been known for its economic and political stability, which
each investor seeks.

I’d say thank God that we are not Venezuela with a radical,
unpredictable party in power.
Despite the ideological differences, which to me, frankly, are rather
indistinctive, all the traditional parties in Lithuania tend to be
centre-oriented on most economic issues.

Consistency and predictability are what business wants. The
Social Democratic-Centre Government has drawn much praise for providing that
for Lithuanian businesses. Just one example in that regard — alcohol excises.

We have sat down with the Cabinet members and struck an
accord that this tax will be raised gradually, over a period of three years.

Although some in business disagree with the decision to
hike the excise — generally speaking, not the increase but the attitude with
which the Government took into account the business’ request to proceed with
the matter consistently and matter-of-factly —  it was praised by the
market players.

Lithuania is discussing a new social model of work
relations, one similar to that employed by developed Western countries. Local
trade unions fear employees’ interests might be undermined at the end of the day.
Do you share these concerns?

You cannot expect trade unionists to be content with a
document of that kind. Our Confederation is fully supporting the draft and we
hope it will be passed in the Parliament’s spring session. In some key economic
parametres, like talent attraction, job maintenance costs, and so on, Lithuania
is among the countries in the first and second hundred places in the rankings,
which, for an EU country, is very low. Business in Lithuania is eagerly looking
forward to seeing the new Labour Code adopted.

It will give a whole lot more flexibility — not only to the
employers, but to all the employees, too. Foreign labour experts I speak to
cannot believe, for example, that the bulk of Lithuania’s labour contracts are
non-termed 40-hour-per-week labour agreements.

Labour contracts in the developed world are much more
varied and flexible.

Contrary to the widespread belief that the new labour
legislation is a step back, I see it as a big stride forward, taking into
account both sides’ interests and, importantly, providing workers more leverage
to get better working conditions according to the law. This is, for example,
through collective labour contracts and an enhanced role of negotiations.

Few doubt the necessity of the euro adoption in Lithuania,
but could I ask you to think of any negative effect of the new currency?

It depends what one considers a negative or positive side
of the adoption. First of all, there’s a tangible psychological affect from the
lower figures (Lithuanian currency litas was pegged with the Euro at the rate
3.4528 litas per 1 euro), which may have prompted some people into bigger

This is definitely a positive side of the adoption as it
fosters economic growth and consumption.
On the other hand, some entrepreneurs took advantage of the transition and
raised prices. They have increased in Lithuania over the last year, especially
in the service sector.

Was 20 per cent greater emigration last year partly a
result of more expensive living with the euro?

Before I answer the question, I will remind you that the
Lithuanian Prime Minister chalked higher emigration up to conscription that
also began in Lithuania in 2015.

If there were a relation between conscription and
emigration, Israel would be empty by now, but it’s not. The euro cannot be
blamed for higher emigration, either. I am convinced neither was a major factor
for the departure of people.

Did the Lithuanian dairy and haulage markets, which have
always been known for their strong presence in Russia, bounce back from the
shake-up following EU and US sanctions against Russia?

Indeed, these sectors have been hit hardest by the
retaliatory sanctions by Russia. Speaking generally, the segments are still in
transition and searching for new markets and opportunities. Some of the
companies did better in the endeavour; others were not so good at it. Some
smaller companies had to revamp their business activities in order to stay

 It was obviously quite a challenge to some, as the
amount of exports to Russia in some companies amounted to 30 per cent from
their total.

However, even with the numbers, the dependency on Russia
has not been anywhere near where it was 25 years ago, when Lithuania broke away
from the Soviet Union.

Russian sanctions have helped many Lithuanian dairy and
cargo haulage companies make some unique business discoveries, like those by
dairy producers in China.

Some of the new business meetings with the Chinese were
anecdotal. In one of the meetings in China that I was participating in, some
Chinese entrepreneurs started excusing themselves because they represented only
a small region. It turned out that the region had a population of nearly 50
million people.

I’d say size is not the most determining factor in business

Let’s imagine economic sanctions are lifted. Do you think
Lithuanian business will start casting glances towards the Russian market

A business’ memory is short-lived. It is about the nature
of business — explore, endeavour, and expand. So even businesses scorched by
Russia will seek to reap the fruits again that the vast Russian markets, albeit
often unpredictable, provide. The question, however, remains whether the
Russian authorities will want our return due to political reasons.