Gediminas Vagnorius, Prime Minister of Lithuania

Lithuania on the Threshold of the 21st Century

Gediminas Vagnorius is the Prime Minister of the Republic of Lithuania.

On March 11, 1990 when the members of Lithuania’s newly-elected parliament assembled to carry out their electoral mandate to restore the independence of Lithuania, we knew that our country faced the daunting task of catching up to the West. Ending Soviet rule would be less difficult than the effort the country faced in modernizing its economy and restoring normal societal relationships. Lithuania was going to have to leap the wide societal chasm that separated the democratic West and the communist East for 50 years.

During the last nine years, the people of Lithuania have worked hard to transform their economy from a command-style to a market economy hospitable to both native entrepreneurs and foreign investors. Our task has been both to disassemble the economic dinosaur left behind by Soviet planners and to prepare our citizens to successfully compete in a global economy. The country’s economic and legal reforms are acknowledged as among the most successful throughout Central Europe. We believe that last year’s economic indicators demonstrate that Lithuania is succeeding in making the transition.

There has been positive growth and expansion of the economy for the last four years, consistently reaching 4.5 to 5.0 percent each year. Nine years ago the private sector was nonexistent; it now generates 75 percent of Gross Domestic Product (GDP). Inflation has been tamed to 2.4 percent in 1998, as opposed to three digits seven years ago. The country’s currency, the Litas, has remained stable since it was anchored to the U.S. dollar in early 1994 and foreign currency reserves continue to grow and exceed Lithuania’s total foreign debt.

The banking crisis of late 1995, as painful as it was, served to reorganize the private banking sector on a sound footing. The legal system is rapidly developing to handle contract disputes and other business-related legal issues. Good infrastructure for transport exists both within the country in its modern highways and at the ice-free Baltic seaport at Klaipeda. The privatization of port facilities has led to a rapid modernization. In fact, the government’s aggressive privatization program of state industries throughout the country is nearing completion with only a small percentage of former state companies still available for purchase.

Foreign investors noting the improved business climate in Lithuania have tripled their investments in the country over the last two years. American companies account for 17 percent of all foreign direct investment in the country. Investors such as Coca-Cola, Philip Morris, and Motorola were among the first to invest in Lithuania. Their presence has served as a stabilizing factor during some of the most difficult months of transition. Last October, the U.S.-based company Williams International became a strategic investor in the Lithuanian economy, acquiring a 33 percent interest and management control of the reorganized oil complex of Lithuania, which includes a new port dedicated only to oil shipments, the Mažeikiai oil refinery, and a crude oil pipeline.

Lithuania’s formula for regaining its independence was peaceful protest and patience, coupled with international support. In our political fight to reestablish our democracy and statehood, we managed to remain on good terms with all our neighbors, including the successor state to the Soviet Union, the Russian Federation. There are no disputes between Russia and Lithuania concerning ethnic minorities, citizenship or border issues. We believe that Lithuania can serve a useful role as a bridge between Russia, and the European Union.

In an Agreement signed on July 29, 1991, the Russian Federation recognized Lithuania’s right to seek its own security arrangements. This was a very important moment in Lithuanian-Russian relations because it demonstrated that democratic Russia is not a captive of its soviet legacy, or imperial history, and can have normal relations with its neighbors. Lithuania was one of the first countries of Central and Eastern Europe to apply for NATO membership in January 1994. We congratulate our neighbors in Poland, Hungary and the Czech Republic for finally achieving NATO membership and hope to join them when NATO makes the decision for a next round of enlargement.

In Lithuania we understand that business needs a secure environment. Global marketplace competition creates many risks for investors already. To continue to attract foreign investment as well as keep working capital at home, it is essential that Lithuania, like the other states of Central Europe, guarantee an environment free of political and social instability as well as regional military threats. We take our responsibility to secure the lives and prosperity of our citizens very seriously and have devoted 1.5 percent of our GDP to building the nation’s defense capability. By the year 2001, as our economy strengthens, we hope to be spending 2 percent of the GDP and complete our goal of restructuring our defense forces to meet NATO standards of interoperability.

Lithuania’s greatest resource is its people. With their resolute will they took their country back from foreign control. With their creativity and industriousness they are building a better life for themselves and their children. They have demonstrated that they can be effective and reliable partners in business, as well as shouldering international security responsibilities. In Lithuania, we look to the 21st century with optimism and a commitment to build a more peaceful and prosperous world. When the people of the United States and other western democracies cross the threshold of the new millennium, we Lithuanians will also be ready to make our contribution.