LITHUANIA: INVESTMENT CLIMATE STATEMENT 2006

UNCLAS SECTION 01 OF 09 VILNIUS 000129 SIPDIS STATE FOR EUR/NB, EB/IFD/OIA, AND EB/CBA DEPT PASS TO USTR E.O. 12958: N/A TAGS: SUBJECT: LITHUANIA: INVESTMENT CLIMATE STATEMENT 2006 REF: 05 STATE 202943 ¶1. The following paragraphs represent a corrected version of our Investment Climate Statement for 2006. We have also submitted via e-mail (per reftel instructions) a copy of this report in MS Word format to DOS/EB/IFD/OIA (Hatcher) and DOS/EB/IFD/OIA (Brown). ¶2. Begin text of report: 2006 INVESTMENT CLIMATE STATEMENT -- LITHUANIA Lithuania boasts a rapidly expanding economy, educated workforce, a strong work ethic, good quality of life at relatively low cost, and the legal protections afforded by the rule of law. Detracting from an otherwise good investment climate are a shrinking labor force, prevalent petty corruption, an abundance of bureaucratic red tape, and the lack of a national strategy to attract new investment. The government affords foreign investors protection equal to that provided to domestic investors, and sets few limitations on their activities. Foreign investors have the right to repatriate or reinvest profits without restriction, and can bring disputes to the International Center for the Settlement of Investment Disputes. Lithuania automatically extended protections to European Community trademarks and designs when it acceded to the EU on May 1, 2004 and has stepped up seizures of pirated goods. It remains on the Special 301 Watch List, however, because piracy rates remain high. The government harmonized the national laws governing businesses with EU requirements, offers special incentives, such as tax concessions, to strategic investors, and has completed nearly all major privatizations. U.S. executives report burdensome procedures to obtain licenses and residence permits as well as corruption, particularly in the lower and middle ranks of government. Labor shortages, the result of increased emigration to the EU, affect several sectors. The United States is the seventh largest investor in Lithuania, with investments totaling USD nearly 314 million (4.8 percent of total FDI). Openness to Foreign Investment -------------- Lithuania has one of the fastest growing economies in Europe, with GDP growth of 9.7 percent in 2003, 7 percent in 2004, and 6.9 in the first three quarters of 2005. Among the attractions of Lithuania's investment climate are a diversified economy, investment laws that conform to EU standards, a low corporate profit tax, a well-educated workforce, the region's best-developed infrastructure, a stable democratic government and banking system, and membership in the European Union and proximity to Eastern European markets. Substantial inflows of capital from the EU (more than USD 12.4 billion over the next seven years) should provide a boost to the economy. Lithuania's income levels still lag behind the rest of the EU, with per capita GDP (at purchasing power parity) of nearly 48 percent of the EU average. This, combined with the gradual liberalization of the EU's labor market, is encouraging emigration of Lithuania's labor force abroad. Employers report labor shortages in several sectors, including construction, healthcare, and transportation. Large investments may face difficulty finding the necessary number of workers for production needs. Lithuania encourages foreign companies and investors to explore investment opportunities. The Lithuanian Development Agency (LDA) is the government's principal agency dedicated to attracting foreign investment. Lithuania's laws assure equal protection for both foreign and domestic investors. No special permit is required from Government authorities to invest foreign capital in Lithuania. Foreign investors have free access to all sectors of economy with some limited exceptions: -- The Law on Investment prohibits investment of foreign capital in sectors related to the security and defense of the State. -- The Law also requires government permission and licensing for commercial activities that may pose risks to human life, health, or the environment, including the manufacturing of, or trade in, weapons. -- Non-Lithuanians are generally not able to buy agricultural or forestry land. As part of its EU accession agreement, however, the Lithuanian government Lithuania must eliminate this restriction by 2011. The restriction does not apply to most non-Lithuanian individuals and organizations that have engaged in agriculture in Lithuania for at least three years. This restriction also does not apply to organizations that have established representative or branch offices in Lithuania. The Law on Investment specifically permits the following forms of investment in Lithuania: --Establishment of an enterprise or acquisition of a part or whole of the authorized capital of an operating enterprise registered in Lithuania; --Acquisition of securities of any type; --Creation, acquisition, and increase in the value of long- term assets; --Lending of funds or other assets to business entities in which the investor owns a stake, allowing control or considerable influence over the company; and --Performance of concession or leasing agreements. Foreign entities are allowed to establish branches or representative offices. There are no limits on foreign ownership or control. Foreign investors can contribute capital in the form of money, assets, or intellectual or industrial property. Lithuanian law protects foreign investments and investors' rights, and the judicial system is generally effective at upholding the enforcement of contracts. Foreign investors are free to enforce their rights by applying to the courts of Lithuania or directly to the International Center for Settlement of Investment Disputes under the Washington Convention of 1965. Foreign investors have the right to repatriate profits, income, or dividends, in cash or otherwise, or to reinvest the income without any limitation, after paying taxes. The law establishes no limits on foreign ownership or control. State institutions have no right to interfere with the legal possession of foreign investors' property. In the event of justified expropriation, investors are entitled to compensation equivalent to the market value of the property expropriated. The law obligates state institutions and officials to keep commercial secrets confidential and requires compensation for any loss or damage caused by illegal disclosure. Foreign investors are treated equitably in privatization programs. The government has privatized most state enterprises and property, and the State Property Fund is responsible for managing and privatizing state assets. Major assets still under government control include the Lithuanian electric power distribution company (Rytu Skirstomieji Tinklai) and the railway company (Lietuvos Gelezinkeliai). Foreign investors purchased the majority of state assets offered for privatization since 1990. These included companies in the banking, transportation, and energy sectors. Some foreign companies complained previously about lack of transparency or discrimination in certain privatization transactions. The State Property Fund screens the performance record and size of companies bidding on state or municipal property and has halted privatizations when it determined that the bidders were not suitable. Conversion and Transfer Policies -------------- The national currency is the litas. The Law on Foreign currency also allows individuals and organizations to use the euro for domestic cash and non-cash payments and settlements; it allows individuals and organizations to use other foreign currency for making non-cash payments and settlements when both parties in the transaction agree to do so. There are no restrictions on the transfer or conversion of the litas. Lithuania has maintained a currency board since 1994. On February 1, 2002, the government pegged the litas (LTL) to the euro (EUR) at the rate of LTL 3.4528 to EUR 1. Prior to that date, the peg was LTL 4 to 1 USD. The government backs the litas with gold and foreign currency reserves. Lithuania entered the EU's exchange rate mechanism (ERM II) in June 2004 and plans to adopt the euro in January 2007 if it meets the Maastricht criteria. Expropriation and Compensation Policies -------------- Lithuanian law permits expropriation on the basis of public need, but requires compensation at market value in convertible currency. The law requires payment of compensation within three months of the date of expropriation in the currency the foreign investor requests. (If the government determines compensation in litas, it uses the official exchange rate on the date of this determination.) The compensation must include interest (calculated on the basis of the LIBOR rate of the relevant currency) from the date of publication of the notice of expropriation until the payment of compensation. The recipient may transfer this compensation abroad without any restrictions. There have been no cases of expropriation of private property by the Government of Lithuania since 1990. Dispute Settlement -------------- The Lithuanian legal system stems from the legal traditions of continental Europe and is in accordance with the EU's acquis communautaire. New laws enter into force upon promulgation by the President (or in some cases the Chairman of the Parliament (Seimas)) and publication in the official gazette Valstybes Zinios (State News). General jurisdiction courts, dealing with civil and criminal matters, comprise the core of Lithuanian court system: the Supreme Court, the Court of Appeals, district courts, and local courts. In 1999, Lithuania established a system of administrative courts to adjudicate administrative cases, which generally involve disputes between government regulatory agencies and individuals or organizations. The administrative court system consists of the Highest Administrative Court and District Administrative Court. The Constitutional Court of Lithuania is a separate, independent judicial body that determines whether laws and legal acts adopted by the Seimas, President, and the Government conform to the Constitution. Lithuania's legal system provides several possibilities for commercial dispute resolution. Parties can settle disputes in local courts or in the independent (i.e., non- governmental) Commercial Court of Arbitration. Lithuania also recognizes arbitration by foreign courts. Courts generally operate independently of government influence. There have been no major disputes between foreign investors and the Government of Lithuania since independence in 1991. Lithuania passed the current Enterprise Bankruptcy Law in ¶2001. This law applies to all enterprises, public establishments, commercial banks, and other credit institutions registered in Lithuania. The law provides a mechanism to override the provisions of other laws regulating enterprise activities, assuring protection of creditors' rights, recovery of debts, and payment of taxes and other mandatory contributions to the State. This law establishes the following order of creditors' claims: claims by creditors that are secured by a mortgage/pledge of debtor; claims related to employment; tax, social insurance, and state medical insurance claims; claims arising from loans guaranteed or issued on behalf of the Republic of Lithuania or its Government; and other claims. Lithuania is a party to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (Washington Convention) and is a member of the International Center for the Settlement of Investment Disputes. It is also a signatory to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Performance Requirements and Incentives -------------- Lithuania provides special incentives to strategic investors. The criteria by which the national government or a municipality designates a strategic investor varies from project to project. In general, the national government requires that a strategic investor invest USD 50 million or more. Municipalities may tie the designation criteria, such as the number of jobs created and the environmental benefits that accrue. Strategic investors' rewards include special business conditions, such as favorable tax incentives for up to ten years. Significant tax incentives apply to foreign investments made before 1997. Municipalities may grant special incentives to induce investments in municipal infrastructure, manufacturing, and services. Government Resolution No. 918 of July 15, 2003 requires offset agreements as a condition for awarding contracts to procure military equipment valued at more than LTL 5 million (USD 1.9 million). Offsets are obligations the government imposes that require companies to provide services, create jobs, or purchase local goods as a condition for the contract's award. Bidders can negotiate the exact terms of the offset agreement with the government. Foreign investors have the same rights as local firms to participate in government-financed and -subsidized research and development (R&D) programs. There are no requirements for local content or purchasing from local sources as a condition for investment or public purchases. Municipalities may ask investors to develop roadways or other infrastructure adjoining their project, but such development is subject to negotiation. Lithuania's EU membership has given foreign firms the additional right to appeal adverse governmental rulings to the European Court of Justice. Lithuania's "Law on Public Procurement," which came into effect on March 1, 2003, is in accordance with the EU Acquis Communautaire. Some foreign investors, including U.S. citizens, report difficulties in obtaining and renewing residency permits. U.S. citizens can stay in Lithuania no more than 90 days without a visa (and no more than 180 days per calendar year). Those who stay longer face fines and deportation. The current residency permit process is not user-friendly. In principle, Lithuanian embassies abroad are able to initiate the residency permits process. In practice, U.S. citizens are only able to begin the residency permit process upon arrival in Lithuania. Decisions by the Migration Office regarding the issuance of residency permits may take up to six months. The Embassy has learned of instances where American Citizens have either been effectively trapped in Lithuania or asked to leave solely because their application for a residency permit was not processed in a timely manner. The Embassy has also received reports that the Migration Office imposes varying and sometimes capricious demands regarding the documentation required for a residency permit. Citizens of former Soviet republics may face even more restrictive requirements. Right to Private Ownership and Establishment -------------- Foreign and domestic private entities have the right to establish, acquire, and dispose of interests in business enterprises. The laws of the Republic of Lithuania protect rights and legal interests of both domestic and foreign investors. Lithuania has privatized most enterprises. Where state-owned companies and private companies compete, they do so on equal terms. The Law on Investments describes the basic principles defining the treatment of foreign investments in Lithuania. Foreign investors have the same rights and obligations relating to commercial activities as local investors. They have the right to transfer profit (income) owned as private property without any restrictions, after paying obligatory taxes. Generally, foreign investors have free access to all sectors of the economy. However, Lithuanian law prohibits investment of capital of foreign origin in sectors relating to security and defense of the State. Lithuania's government is considering a "competition law" that would regulate relations between large retailers and suppliers. If enacted, this law may increase the government's ability to intercede in retailers' negotiations with their suppliers. Lithuania introduced a law restricting monopolies in 1993. Protection of Property Rights/Dispute Settlement -------------- --- Lithuanian law protects foreign investments and the rights of investors in several ways. -- The Constitution and the Law on Foreign Capital Investment protect all forms of private property against nationalization or requisition. -- International agreements offer protections, such as the 1958 New York Convention on the recognition and enforcement of foreign arbitral awards. -- Bilateral agreements with the United States and other western countries on the mutual protection and encouragement of investments reinforce these protections. -- The law on capital investment in Lithuania and other acts regulate customs duties, taxes, and relationships with financial and inspection authorities. This law also establishes the procedures of dispute settlements. -- In the event of justified expropriation, applicable law entitles investors to compensation equivalent to the market value of the expropriated property. -- Foreign investors may defend their rights under the Washington Convention of 1965 by applying to either Lithuanian courts or directly to the International Center for the Settlement of Investment Disputes. To date, Lithuania has not been involved in any major investment disputes with American or other foreign investors. -- State institutions and officials are obligated to keep commercial secrets confidential and must pay compensation for any loss or damage caused by illegal disclosure. Lithuania legalized the possibility of hiring private bailiffs to enforce court judgments in 2003. Lithuania's commercial laws conform to EU requirements, and include the principles of the free establishment of companies, protection of shareholders' and creditors' rights, free access to information, and registration procedures. These laws include the following: the "Company Law" and "Law on Partnerships" (last modified January 1, 2004),the "Law on Personal Enterprises" (January 1, 2004), the "Law on Investments" (1999),the "Law On Bankruptcy of Enterprises," (2001) and the "Law on Restructuring of Enterprises" (2001). The Civil Code of 2000 governs commercial guarantees and security instruments. It provides for the following types of guarantee and security instruments to secure fulfillment of contractual obligations: forfeiture, surety, guarantee, earnest money, pledge, and mortgage. Lithuania joined the World Intellectual Property Organization (WIPO) in 2002 and the World Trade Organization (WTO) in 2001. It is also a signatory to the following IPR- related treaties and conventions: -- The Paris Convention for the Protection of Industrial Property in 1990 (effective May 22, 1994); -- The Berne Convention for the Protection of Literary and Artistic Works of 1886 (effective December 14, 1994); -- The Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations of 1961 (effective July 22, 1999); -- The Nice Agreement Concerning International Classification of Goods and Services of 1957 (effective February 22, 1997); -- The Madrid Protocol of 1989 (effective November 15, 1997); -- The Patent Cooperation Treaty of 1970 under the auspices of WIPO (effective July 5, 1994); -- The Conventions on the Grant of European Patents (December 1 2004); -- The WIPO Copyright Treaty of 1996 (effective March 6, 2002); -- The WIPO Performances and Phonograms Treaty of 1996 (effective May 20, 2002); and -- The Trademark Law Treaty of 1994 (effective April 27, 1998). Lithuania enacted regulations in 2002 to protect confidential test data that pharmaceutical firms submit for SIPDIS patent and trademark registration. Following EU accession, Lithuania extended protection to member states' trademarks, designs, and applications. Lithuania brought its national law protecting biological inventions into compliance with EU Directive 98/44 in June 2005. Lithuania remains on the Special 301 Watch List. The country remains a transshipment point for pirated optical media products from the East, particularly Russia, to Europe. Lithuania's parliament is in the process of amending the country's Copyright Law to bring it in line with the EU copyright directive. The rate of CD piracy in 2004, estimated at approximately 80 percent of all sales, was extremely high. The software piracy rate in 2004 (58 percent for business software and 85 percent for entertainment software) was also high. Transparency of the Regulatory System -------------- The World Bank's "Doing Business" survey, which evaluates according to 10 criteria the ease of doing business in 155 countries, gave generally high marks to Lithuania, ranking it 15th in 2005. Lithuania scored especially high in the categories of "registering property" (second) and "enforcing contracts" (seventh). It did less well in the categories of "hiring and firing" (93rd) and "protecting investors" (61st). Registering a company takes approximately 26 days and requires eight procedures. The legal system of the Republic of Lithuania recognizes generally accepted principles of the legal regulation of investments and subjects both Lithuanian and foreign investors to equal business conditions. Red tape remains a problem. The World Bank's 2005 survey of Lithuania's investment climate found that senior managers spend approximately 27 percent of their time dealing with regulations. Local business leaders also complain that bureaucratic procedures often are not user-friendly and that the interpretation of regulations is too often inconsistent and unclear. Businesses and private individuals complain frequently of corruption, particularly in the process of awarding government contracts and the granting of licenses and permits. Businesses also complain that they have little opportunity to influence new legislation and that new legislation sometimes appears with little advance notice. Modern technology, however, is changing this situation: the parliament's website contains all draft laws currently before it. Ministries also post many, but not all, draft laws under consideration. The tax code for businesses will change in 2006. The government raised, as of January 1, 2006, the tax on corporate profits from 15 to 19 percent and plans to lower this to 18 percent in 2007. It currently plans to return the tax on corporate profits to 15 percent in 2008. In July 2006, the government will decrease personal income tax from 33 to 27 percent. The rate will drop in January 2008 to 24 percent. The government also introduced in 2006 an annual tax of one percent of the market price on real estate owned by individuals that is used only for commercial purposes. Efficient Capital Markets and Portfolio Investment -------------- -------------- Government policies do not interfere with the free flow of financial resources or allocation of credit. In 1994, Lithuania accepted the requirements of Article VIII of the Articles of Agreement of the International Monetary Fund to liberalize all current payments and to establish non- discriminatory currency agreements. Lithuania ensures free movement of capital and does not plan to impose any restrictions. The government imposes no restrictions on credits related to commercial transactions or the provision of services, nor on financial loans and credits. There are no restrictions on non-residents opening accounts with commercial banks. The banking system is stable, well-regulated and conforms to EU standards. Dozens of banks operate in Lithuania: ten banks under license of the Bank of Lithuania, branches of two foreign banks, three foreign bank representative offices, 61 credit unions, and the Central Credit Union of Lithuania. Following the completion of the bank privatization process in 2002, the share of banking capital held by foreign investors increased to 87.5 per cent. Nearly all foreign banks are under German or Scandinavian control. In 2005, banks operating in Lithuania strengthened and increased their asset and loan portfolio, widened the range of e-banking services, extended payment card networks, and introduced new consumer products. The annual rate of growth of loans in the twelve-month period ending September 30, 2005, was 46.5 percent, year-on-year. There is no restriction on portfolio investment. The right of ownership to shares acquired through automatically matched trades is transferred on the third working day following the conclusion of the transaction. The Vilnius Stock Exchange is part of the OMX group of exchanges and offers access to 80 percent of all securities trading in the Nordic and Baltic marketplace. Three authorities supervise the financial market. The Bank of Lithuania supervises commercial banks and credit unions, the Securities Commission supervises the securities market, and the Insurance Supervisory Commission supervises insurance companies. The law requires these institutions to cooperate with appropriate EU authorities. Political Violence -------------- Lithuania has not witnessed any incidents involving politically-motivated damage to projects and/or installations. There are no nascent insurrections, belligerent neighbors, or other politically-motivated violence. Corruption -------------- There is a general perception that corruption is common. Local companies admit that they routinely pay bribes. Service providers -- customs brokers, for example -- often pay small bribes to officials and recoup the costs in fees they charge their clients. More than 50 governmental institutions regulate commerce in one way or another, creating plenty of opportunities for corrupt practices. Large foreign investors, however, report few problems with corruption. On the contrary, most large investors report that high-level officials are often very helpful in solving problems fairly. In general, foreign investors say that corruption is not a significant obstacle to doing business in Lithuania and describe most of the bureaucrats they deal with in Lithuania as reasonable and fair. Small and medium enterprises (SME) perceive themselves as more vulnerable to petty bureaucrats and commonly complain about extortion. SMEs often complain that excessive red tape virtually requires the payment of "grease money" to obtain permits promptly. Business owners maintain that some government officials, on the other hand, view SMEs as likely tax-cheats and smugglers, and treat the owners and managers accordingly. Paying or accepting a bribe is a criminal act. Lithuania established in 1997 the Special Investigation Service (Specialiuju Tyrimu Tarnyba) specifically to fight public sector corruption. The agency investigates approximately 100 cases of alleged corruption every year. Some business leaders and government officials report that establishing an institutional framework to fight corruption was high on the government's agenda when Lithuania was seeking membership in the EU and NATO, but they suggest that combating corruption is less of a priority now. Lithuania is a signatory of the UN Convention Against Corruption and the OECD Convention on Combating Bribery of Foreign Public Officials. Lithuania also hosts a representative office of Transparency International (TI). TI ranked Lithuania 44th in its 2005 Perceptions of Corruption Index with a score of 4.8. (TI considers countries with a score below 5.0 to have serious problems with corruption.) This score, up from 4.6 in 2004, reflected some improvement but no change in ranking. Bilateral Investment Agreements -------------- Lithuania joined the European Union on May 1, 2004. In doing so, it joined all EU trade agreements with third countries and international organizations. Lithuania also delegated its international trade policy function to the EU Council and the European Commission. As a consequence, Lithuania had to revoke all of its bilateral free trade agreements signed before its accession to the EU. The United States and Lithuania have signed and ratified the following agreements and treaties: -- A charter of partnership between the United States, Estonia, Latvia, Lithuania; -- A bilateral investment treaty that ensures reciprocal investment protection and encourages additional investment; -- Treaty on avoidance of double taxation; -- Treaty on legal assistance in criminal matters; -- Extradition treaty; -- Agreement on social security; and -- Agreement on cooperation in preventing proliferation of weapons of mass destruction and promotion of defense and military relations. OPIC and Other Investment Insurance Programs -------------- Coverage from the Overseas Private Investment Corporation (OPIC) is available for U.S. investments in Lithuania. Lithuania is a member of the Multilateral Investment Guarantee Agency (MIGA). Lithuania's fully convertible currency, the litas, is pegged to the euro and its exchange rate against the U.S. dollar fluctuates on a daily basis. On January 11, 2006, the exchange rate was USD 1 = LTL 2.85. Lithuania plans to adopt the EU's common currency (euro) on January 1, 2007. Labor -------------- Lithuanian labor is inexpensive compared with Western Europe, but a shrinking labor force has pushed the salaries up ten percent, annually, for two consecutive years, and employers complain about high personnel-related taxes. Employment regulations are often stricter than in other EU countries. By law, white-collar workers have a 40-hour workweek. Blue- collar workers have a 48-hour workweek with premium pay for overtime. There are minimum legal health and safety standards for the workplace. However, worker complaints indicate that employers do not always observe these standards. Lithuania is a member of International Labor Organization (ILO) and adheres to its conventions. The government adjusts the monthly minimum wage -- currently USD 192 and set to rise to USD 210 in mid-2006 -- regularly. The average monthly wage is the equivalent of approximately USD 475. Average salaries increased by nearly 10 percent in both 2004 and 2005. Membership in the EU, and the consequent ability of Lithuanians to work legally in the United Kingdom and Ireland, has generated a sizable outflow of labor. The national labor exchange reports a shortage of skilled construction workers, truck drivers, shop assistants, medical nurses, and medical specialists. Press reports and anecdotal information from business leaders suggest that some companies are facing serious problems finding enough skilled workers. Business leaders claim that government regulations make it difficult to hire foreigners, especially citizens of the former Soviet Union, to compensate for the lack of local labor. Lithuania's registered unemployment rate at the end of 2005 was 4.8 percent -- the lowest since the country's transition to a market economy. Lithuania's management-labor relations are good and labor unions are weak. There have been no major strikes or labor disruptions since the country's independence in 1991. Some business leaders claim that the 2002 Labor Law lacks flexibility and increases the cost of production by making it harder to hire and fire labor. This is a particular complaint of businesses that experience seasonal fluctuations in labor needs. Free Economic Zones -------------- Lithuania has two Free Economic Zones (FEZ): one in Klaipeda, the country's largest seaport, and one in Kaunas, an air, road, and rail hub. There are currently eight businesses either operating or about to start operation in the Klaipeda FEZ, with an estimated USD 410 million in total foreign investment. Established in 1996, the Kaunas FEZ announced its first investment in late 2005. Lithuania's EU accession agreement permits the indefinite operation of existing FEZs, but precludes the establishment of new ones. Foreign firms operating in the FEZs have the same opportunities and benefits as local companies. Companies operating within the zones enjoy: -- Six years' exemption from corporate income tax and 50 percent reduction during the following 10 years (if the company invests more than USD 1.2 million; -- Exemption from real estate tax; and -- A 50 percent discount on land leases. Foreign Direct Investment (FDI) Statistics -------------- The United States is the seventh largest investor in Lithuania. American investments (stock) totaled USD 261 million (2005, third quarter),accounting for approximately four percent of total FDI in Lithuania. There are 190 U.S. companies registered in Lithuania, and more than 590 U.S. companies have representatives in the country. Total accumulated FDI was USD 6.4 billion as of October 2005, representing approximately 30 percent of GDP. FDI flows into Lithuania decreased more than 28 percent during the first 10 months of 2005 to USD 447 million, or 2.1 percent of GDP. More than 74 percent of FDI stock in Lithuania comes from EU countries. FDI (stock) from EU countries increased by 5.7 percent and made up slightly more than LTL 13 billion (USD 4.8 billion). More than 33 percent of the FDI stock is invested in the manufacturing sector, 14.6 percent in financial intermediation, 14.5 percent in trade, and 12.9 percent in transport, storage and communication. The countries with the most foreign investment (stock) in Lithuania as of October 2005 are: -- Sweden: USD 903.2 million, 13.9 percent of FDI; -- Denmark: USD 893.6 million, 13.7 percent; -- Germany: USD 856.1 million, 13.2 percent; -- Russia: USD 834.6 million, 12.8 percent; -- Finland: USD 526.8 million, 8.1 percent; -- Estonia: USD 477.9 million, 7.3 percent; and -- United States: USD 260.7 million, 4 percent. Lithuanian businesses are expanding abroad, with investments totaling USD 955 million. Investments into traded goods make up 46.9 percent of Lithuanian investments abroad, followed by manufacturing (22.7 percent),financial intermediation (9.6 percent),and transport, storage, and communication enterprises (9.6 percent) of total Lithuania's FDI abroad. The top destinations for Lithuania's investments abroad are: -- Latvia: USD 238.6 million, 43.5 percent of FDI abroad; -- Russia: USD 78.3 million, 14.3 percent; (investment in Russia's Kaliningrad region accounts for USD 67.7 million, 12.4 percent); -- Ukraine: USD 67.7 million, 12.4 percent; -- Estonia: USD 34.6 million, 6.3 percent; and -- Bosnia and Herzegovina: USD 16.3 million, 3 percent. End text of report. Mull