Area: 65,200 sq km, slightly larger than W. Virginia
Population: 3,592,561 (July 2003 est.)
Annual Inflation: 0.8% (2002 est.)
Population Growth Rate: -0.23% (2003 est.)
Gross Domestic Product (GDP): $30.08 billion (purchasing power parity, 2002 est.)
Life Expectancy: male ? 63.78 years; female ? 75.7 years (2003 est.)
GDP Per Capita: $8,400 (purchasing power parity, 2002 est.)
Infant Mortality: 14.17 deaths/1,000 live births (2003 est.)
Real Annual GDP Growth: 6.7% (2002 est.)
U.S. STRATEGIC INTERESTS
Lithuania?s large, educated population and strategic location make it a potential force for economic growth and stability in the Baltic Sea region. Lithuania borders one current (Poland) and one future (Latvia) NATO ally, contributed troops to Operation Iraqi Freedom and Operation Enduring Freedom, and cooperates fully on international law enforcement matters. More than 800,000 U.S. residents consider themselves Lithuanian-Americans. It is in the U.S. interest to promote Lithuania?s economic and political prosperity by increasing commercial ties, academic and cultural exchanges, and security cooperation.
OVERVIEW OF U.S. GOVERNMENT ASSISTANCE
In FY 2003, the U.S. Government (USG) provided an estimated $14,158,000 in assistance to Lithuania:
- $1,120,000 in democratic reform programs (including Public Diplomacy exchange programs);
- $473,000 in economic and social sector reform programs;
- $12,412,000 in security, regional stability, and law enforcement programs;
- $30,000 in cross-sectoral programs; and
- U.S. Defense Department humanitarian assistance valued at $123,000.
In FY 2003, a total of 23 Lithuanians traveled to the U.S. on USG-funded exchange programs.
U.S. ASSISTANCE PRIORITIES
Democratic Reform Programs: In FY 2003, the main priorities of U.S. democratic reform assistance in Lithuania included development of a vibrant, sustainable non-governmental organization (NGO) sector, tolerance and inclusion of minority ethnic groups, and building governmental and civil society capacity to fight administrative corruption. USG-funded exchange programs targeted a range of issues on the bilateral agenda and included managing diversity, biotechnology, U.S.-European security, government accountability, and narcotics demand reduction.
Economic and Social Sector Reform Programs: In FY 2003, more than one-third of U.S. economic and social sector reform assistance went to economic and entrepreneurial training to build the skills necessary to manage a modern economy and develop small and medium enterprises (SMEs), and to create cross-border commercial opportunities within the region and with the U.S. Specific technical assistance targeted accounting standards, corporate governance, and money laundering to improve the business environment. The second third went to fighting trafficking in persons, including monitoring the situation, raising awareness, training law enforcement officials, and providing job-skills training for at-risk populations. Less than one third went to other priorities, including international research cooperation, science and technology partnership building, implementation of the Global Learning and Observations to Benefit the Environment (GLOBE) program, and developing practical energy management tools and planning concepts for local authorities and district heating suppliers.
Security, Regional Stability, and Law Enforcement Programs: In FY 2003, International Military Education and Training (IMET) funds for the Armed Forces targeted the continued professionalization of senior and mid-level leaders, logistics training, civil-military operations, and special operations to prepare Lithuania for its role as a full NATO member in 2004. The focus for the Foreign Military Financing (FMF) program continued to be the transformation of the military from a static territorial defense force to a deployable NATO-compatible military. The U.S. Nuclear Regulatory Commission continued its regular technical assistance at the Ignalina Nuclear Power Plant (INPP), providing a valuable second opinion on maintenance and closure issues as the INPP enters its final decade of operation. SEED Act funding administered by the Department of State, Bureau of International Narcotics and Law Enforcement Affairs (INL) allows the U.S. Secret Service to target the skills and equipment gap necessary to fight the counterfeiting of U.S. currency and documents.
SECTORAL ASSESSMENTS
Democratic Reform
In FY 2003, Lithuania remained on its steady course of democratic reform. The Criminal Code, Code on Execution of Penalties, and Criminal Procedure Code entered into force in May 2003. Amendments to the Code of Administrative Infringements provide for more rational penalties for administrative offences, as well as for postponing arrest and penalties. The new Civil Procedure Code, in effect since January 2003, should facilitate and speed up legal proceedings. Following the approval of its national anti-corruption program in January 2002, Lithuania created an inter-agency coordination commission to oversee its implementation, in February 2003. A special anti-corruption service accountable to the President and Parliament has been operating since May 2000. Lithuania ranked 41st, out of 102 countries, on the Transparency International Global Corruption Perception Index 2003. Lithuanian law enforcement officials have sought assistance and training from U.S. and European law enforcement agencies. Lithuania continued to hold free and fair elections. Municipal elections and the first round of the presidential elections took place on December 22, 2002, with the presidential runoff election following on January 5, 2003. The political parties continue to demonstrate growing levels of maturity.
On minority and ethnic issues, fairly little changed in FY 2003. About 6.3 percent of Lithuania?s citizens are of Russian ethnic origin -- they are fairly well integrated and face no official discrimination. In June 2000, the Government of Lithuania (GOL) adopted a national program for integrating the Roma minority, numbering some 3,000 people. However, the OSCE and others have noted that Lithuania could be doing more to address the social issues affecting Roma. Religious freedom continues to be respected. There is a well-established ombudsman system, which functions satisfactorily. The GOL continues to address historical justice issues (virtually all of Lithuania?s 200,000 Jews were killed in the Holocaust). An official Historical Commission, established in 1998 by Presidential Decree, examines the Nazi and Soviet occupations. The Commission remained active in research and public education in FY 2003, in part due to Democracy Commission grants from the Embassy. Following the 2002 cooperation agreement with the Ministry of Education and Science to implement a large-scale program of Holocaust education (including the prevention of crimes against humanity and tolerance development in the country?s schools), the Commission signed similar agreements with Yad Vashem, the New Jersey Commission on Holocaust Education, and other organizations. Several exchanges took place in FY 2003. The Commission also organized a number of local and international conferences and seminars to promote the development of a tolerant civil society. Throughout FY 2003, the GOL reiterated its plans to start restituting Jewish communal property and has successfully restituted many Jewish religious properties.
The NGO sector continues to develop, despite decreased international funding and the lack of a philanthropic community in Lithuania. Progress was particularly noticeable in NGO-GOL cooperation in areas such as trafficking in persons (TIP), conflict resolution, environmental planning, and small business development. While the legal tax status of NGOs represents a financial barrier for some organizations, the NGO community is actively working to reduce legal barriers and to promote NGO sustainability. NGO networking throughout the country has also increased.
In FY 2003, the Democracy Commission remained the Embassy?s front-line resource for building capacity in civil society to promote democratic and free market values and institutions. Grants focused on raising people?s awareness of Roma and other minority groups, promoting the health care system?s financial viability, building women?s leadership skills in rural areas, fighting corruption, and promoting transparency.
The Embassy-funded Governmental Ethics Training program is becoming a self-sustaining part of the GOL?s own ethics training for officials. In FY 2003, a new program focus was on government procurement, aiming to reduce malfeasance and increase private-sector knowledge of procurement strategies, to pressure the GOL to adopt fair practices. Thirty-six seminars are planned in five major cities for over 150 participants from the Parliament, including the members of Ethics and Procedure Commission; Parliament legal and procurement staff; members of national, regional, and local governments; media representatives; and NGO leaders. The training is intended to help deter corruption in the issuance of contracts and in other government expenditures.
In FY 2004 (with FY 2003 SEED Act funds), the Embassy plans to continue Democracy Commission programs and anti-corruption/ethics training. Other programs will bring Lithuanians to the U.S. to improve mutual understanding in critical areas, including public sector reform, intellectual property rights, and trafficking in persons.
Economic and Social Sector Reform
Lithuania had the fastest growing economy in Europe in 2003, winning it the sobriquet of the "Baltic tiger." Real GDP grew by 6.7 percent in 2002, and by 8.4 percent in the third quarter of 2003. Despite the overall slowdown in Europe, investments and exports continued to drive growth, while inflation has remained very low. The current account deficit was 5.3 percent of GDP in 2002, and 7.9 percent in the second quarter of 2003. The general government budget recorded a deficit of 1.2 percent in 2002. The projected budget deficit for 2004 is 2.95 percent. In July 2003, public debt accounted for 24.3 percent of projected GDP. The unemployment rate declined to a four-year low of 9.2 percent in October 2003. Employment in SMEs made up 53 percent of total employment. Average real wages were equal to 851.9 litas (?247) per month in the third quarter of 2003.
On July 1, 2003, overall FDI reached ?4.6 billion, with per capita FDI rising to ?1,177. The U.S. is in fifth place, with 8.5 percent of FDI. Most U.S. investments were in the food and beverage industries sector. Foreign investors consider Lithuania attractive on account of its infrastructure, close links to suppliers in the east, and inexpensive, educated labor force. Further, they view Lithuania?s upcoming membership in NATO and the EU as guaranteeing security.
In 2002 (latest statistics available), 48.4 percent of Lithuania?s exports went to EU countries and 19.2 percent to the CIS countries. Most imported goods came from EU countries. Trade with the U.S. accounted for 3.0 percent of exports and 3.2 percent of the imports. The main export goods include textile goods, refined oil products, and machinery, while the principal imports are raw materials, chemicals, and cars. The export share of GDP is 45 percent. In 2004, harmonization of the country's trade regime with that of the EU may result in an increase in some tariffs, including those applied to the goods traded with the U.S.
In the social sector, the rapid economic development of Vilnius and other major cities masks a stagnant economic situation in rural areas that have yet to experience many of the benefits of Western integration and FDI. A difficult climate (long, dark winters) and high unemployment in rural areas fosters social problems, including alcoholism, drug addiction, suicide, and crime. Although Lithuania has developed and begun to implement numerous strategies to reduce poverty, rural unemployment, and substance abuse, some contend that social services rarely reach groups at risk for these activities. With agriculture and rural reforms a significant aspect of EU accession, disparities in income between urban and rural areas may diminish in the coming years.
The GOL has been active in developing strategies and programs for poverty reduction, alcohol and tobacco control, national drug control and prevention, and crime deterrence. However, many of these programs have gaps, particularly in utilizing existing public health and social work resources to implement the plans regionally. Better countrywide access to social services might help keep families together and decrease the number of juvenile first-time offenders. Effective intervention against alcoholism and drug use might reduce the number of juvenile offenders progressing to violent crime. More importantly, economic development must be addressed to get at the root cause of these social problems. Although a small portion of the total population, unemployed working-age people not enrolled in school/university have committed two-thirds of the recorded crimes in the past few years.
Substantial USG assistance has been focused on initiatives to prevent trafficking in persons (TIP). Through USG support, Lithuanian NGOs continuously monitor the National Program for Control and Prevention of Trafficking in Human Beings and have made recommendations to fill in gaps and insufficiencies in preventive work. Other programs will address the effectiveness of TIP prevention by building collaboration among NGOs, the police, municipal authorities, and other local partners. To raise awareness, a separate information program has been conducted at 81 schools in 13 towns. This campaign alerted young people to the danger and insecurities in seeking illegal work abroad. Recently, NGOs engaged on anti-TIP issues have started cooperating and networking to exchange information systematically, extend support to victims, and coordinate their activities. Finally, the USG supported programs to help victims of trafficking by providing medical equipment and aid, as well as social support.
The Regional Economists Training for Lithuania, Belarus, and Kaliningrad program trained about 100 economists from state authorities, research institutes, and NGOs in free-market-based solutions to economic problems. It also established cross-border cooperation for work on joint economic projects, 10 of which were developed on various forms of cross-border economic cooperation and regional networking. In FY 2002, over 200 people were trained through USAID?s Regional Entrepreneurs Training Program for Belarus, Kaliningrad, and Lithuania program. All participants found the program extremely useful in terms of professional improvement, contributions to their work, and cross-border cooperation. Over 10 individual and joint ventures have been formed. The recently initiated FY 2003 entrepreneurs program will train additional Lithuanians.
Through the Municipal Energy Efficiency (MUNEE) program, over 30 Lithuanian municipalities have learned about integrated resource planning (IRP). Fifteen of them expect to use IRP in their development plans, as required under a new Heat law. The current stage of MUNEE assistance focuses on capacity building of municipalities to attract private capital and stimulate job growth in the energy efficiency field.
In FY 2004 (with FY 2003 SEED funds), the Embassy will work closely with the Ministry of Health and the NGO sector to implement the National HIV/AIDS Policy by assisting in the development of regional HIV/AIDS action plans. The Embassy also plans to increase U.S.-Lithuania cooperation in research and development. Other regional programs will target financial sector reforms, tuberculosis, and TIP.
Security, Regional Stability, and Law Enforcement
Lithuania was invited to join NATO in November 2002, and expects to join the alliance in spring 2004 (at about the same time as it will be entering the EU). Lithuania continues to contribute actively to alliance activities, such as peacekeeping and counter-terrorism missions. Lithuania will continue spending 2 percent of GDP on defense in 2004. Finally, Lithuania is an enthusiastic participant in the activities of the OSCE and numerous other international organizations.
Throughout FY 2003, Lithuania demonstrated its commitment to allocating resources for meeting NATO obligations. As of 2003, Lithuania had one battalion fully equipped, fully interoperable, and ready for deployment alongside NATO forces for any Article 5 operation outside Lithuanian territory. No later than 2006, Lithuania expects to complete preparation of one Reaction Brigade for the same type of operations. As much as 22 percent of the defense budget is devoted to procurement, including a contract signed with the U.S. for procurement of the JAVELIN anti-tank weapon system. Lithuania also demonstrated commitment to specializing and force restructuring. The Baltic States have already been specializing at the regional level, including BALTRON and BALTNET. BALTNET is already fully interoperable with NATO's air-surveillance system and could be connected to this system in a matter of hours. BALTRON will potentially become a part of the mine-countermeasure element of NATO?s naval force. There are a number of other areas where Lithuania could provide useful capabilities, including special forces, medical personnel, engineering, and logistics units.
The Foreign Military Financing (FMF) and International Military Education and Training (IMET) programs in FY 2003 continued to give the U.S. significant influence in the development of Lithuania?s armed forces. FY 2003 FMF and IMET programs were key elements in transforming Lithuania?s military to a U.S.-style expeditionary force that is deployable, sustainable, and fully capable of operating alongside U.S. and NATO forces. In addition, a large portion of the FMF and IMET programs initiated or extended with FY 2003 funds directly and indirectly supported the over 250 Lithuanian soldiers deployed in support of Operation Iraqi Freedom (OIF), Operation Enduring Freedom (OEF), and Balkan peace operations.
The FY 2003 IMET grant of $1.2 million funded the attendance of over 50 officers and NCOs at nearly 100 courses in the U.S. In addition, the U.S. conducted three separate IMET-funded Mobile Education Team (MET) courses in Lithuania. The focus of IMET is the continued professionalization of senior and mid-level leaders, logistics training, civil-military operations, and special operations. Five Lithuanian officers attended Senior Service and Command and Staff colleges in FY 2003. Lithuania continues to place graduates from these mid- and senior-level courses in key command and staff positions throughout the military, resulting in the introduction of U.S. doctrine, military philosophies, and ideals at the highest levels. Lithuanian attendance at logistics, special operations, and civil-military operations courses continues to develop a gifted cadre of young officers with a strong foundation in U.S. and NATO doctrine. This training is critical for the transformation of Lithuania?s military into an agile, deployable force that can support U.S. and NATO operations.
Lithuania obligated all $7 million of its FY 2003 FMF funds, as well as remaining previous-year funds. The focus of the FY 2003 FMF program continued to be the transformation of the military from a static territorial defense force to a deployable NATO-compatible military. The major FMF acquisition of over 60 military vehicles greatly increases the readiness of the military and its interoperability with NATO. These modern vehicles will enhance Lithuania?s ability to support its armed forces when deployed out of country. Funds were also obligated to an existing FMF case, which is providing valuable military advice, focused on the ongoing transformation of the military. This contractor support has been instrumental in helping Lithuania design a National Military Strategy and a road map for transformation and procurement through 2014. The five-person U.S. team, headed by a retired Marine Corps general, interacts daily with Ministry of Defense officials, providing significant U.S. influence on the transformation of the military. In addition, FY 2003 FMF money as well as $4 million in supplemental funds were used to support conventional and special operations forces deployed in support of OIF and OEF.
Regarding law enforcement, the U.S. and Lithuania cooperated in FY 2003 in numerous investigations, and several extraditions have been initiated under the new extradition treaty. Close cooperation also continues in narcotics and counterfeiting cases. The U.S. Secret Service has been allocated funding to provide training and equipment in counterfeiting that will prove vital for current and future investigations. The Lithuanian Special Investigations Service (STT) continued to ramp up its anti-corruption investigations, and the rewards of previous training and equipment are apparent. The STT?s progressive stance was aided by the watchdog role of Transparency International Lithuania, which also received Embassy funding to investigate corruption in Lithuania.
In FY 2004 (with FY 2003 SEED Act funds and renewed IMET/FMF funds), assistance will continue to help prepare Lithuania for NATO membership. Law enforcement cooperation will also be vital, and other regional programs will focus on narcotics control and prevention.
COUNTRY PERFORMANCE MEASURES
Economic Policy Reforms and Democratic Freedoms in Lithuania, 1991-2002
Ratings based on a 1 to 5 scale, with 5 representing the most advanced.
Sources: EBRD, Transition Report 2003 (November 2003); Freedom House, Freedom in the World 2003 (2003); and (various years)
Economic Structure and Human Development in Lithuania, 1991-2002
The Human Development Index (HDI) is based on three indicators: longevity, as measured by life expectancy; educational attainment, as measured by a combination of adult literacy and combined primary, secondary, and tertiary enrollment ratios; and standard of living, as measured by real per capita GDP ($PPP). The HDI ranges from 0 to 1, with higher values representing greater human development. UNDP, Human Development Report 2003 (July 2003), and previous editions; EBRD, Transition Report 2003 (November 2003), and previous editions.
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