U.S. STRATEGIC INTERESTS

Lithuania’s large and educated population and strategic location on the Baltic Sea make it a potential force for economic growth and stability in and beyond the Baltic Sea region. Lithuania borders two NATO allies, contributed troops to Operations Iraqi Freedom (OIF) and Enduring Freedom (OEF), and cooperates fully on international law enforcement matters. Nearly one million U.S. residents identify themselves as 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 2004, the U.S. Government (USG) provided an estimated $12.30 million in assistance to Lithuania:

• $1.28 million in democratic reform programs (including academic and professional exchanges); 
  
  
• $420,000 in economic reform programs; and 
  
  
• $10.60 million in security, regional stability, and law enforcement programs.

In FY 2004, a total of 220 Lithuanians traveled to the United States on USG-funded exchange programs, of whom 100 participated in the Open World Program, which was formerly under the Library of Congress and expanded in FY 2004 to include Lithuania. A total of 90 Lithuanian military personnel traveled to the United States on International Military Education and Training (IMET) or U.S. Defense Department Joint Contact programs, and another 30 Lithuanians participated in State Department exchange programs.

Although no new SEED funds were provided in FY 2004, implementers continued using SEED funding remaining from previous fiscal years, as described below.

U.S. ASSISTANCE PRIORITIES

Democratic Reform Programs

In FY 2004, the main priorities for U.S. democratic reform assistance in Lithuania included the development of a vibrant and sustainable non-governmental organization (NGO) sector through Democracy Commission small grants (a total of $250,000); development of strong a civil society, strengthening media ethical standards, encouraging election participation and campaign finance reform, supporting regional democratic systems, enhancing governmental and civil society capacity to fight administrative corruption, and promoting tolerance and inclusion of minority ethnic groups. USG-funded exchange programs targeted a range of issues on the bilateral agenda, including, biotechnology, managing diversity, U.S.-European security, government accountability, narcotics demand reduction, and environmental and media ethics issues.

Economic and Social Sector Reform Programs

In FY 2004, USG assistance programs in these areas focused on health and science projects. Almost half of this assistance went to combat the spread of HIV/AIDS at a local level, trauma responder training, encouraging innovation and university partnerships, and international research co-operation. In FY 2004, the Lithuanian economy continued to require assistance in certain areas, such as intellectual property rights (IPR), strengthening cross-border commercial ties within the region and with the United States, business support-system development, and promotion of Lithuania as a free-market, democratic model for transitional nations. Other USG assistance supported environmental programs, such as implementation of the Global Learning and Observations to Benefit the Environment (GLOBE) Program that links Lithuania to a network of U.S. and international schools in making scientific measurements. Implementation of the training program to develop HIV/AIDS control strategies at the municipal level and a project on developing practical energy management tools for local authorities will continue into FY 2005.

Security, Regional Stability, and Law Enforcement Programs

In FY 2004, IMET funds for the Lithuanian Armed Forces targeted the continued professionalization of senior and mid-level leaders, logistics training, civil-military operations, and special operations to help Lithuania play its new role as a full member of NATO. The transformation of the military from a static territorial defense force to a deployable NATO-compatible military continued to be the focus for Foreign Military Financing (FMF) provided to Lithuanian in FY 2004.

A SEED-funded program implemented by the U.S. Secret Service targeted the skills and provided the equipment necessary to fight the counterfeiting of U.S. currency and documents. A significant portion of SEED funds was directed to the issue of combating trafficking in persons (TIP) by raising the awareness of law enforcement officials and supporting preventive efforts at a local level. The USG. Provided $535,000 in Export Control and Related Border Security (EXBS) assistance to train Lithuanian Customs, Border Guards and other officials and to improve Lithuania’s abilities to interdict trafficking in weapons of mass destruction (WMD).

SECTORAL ASSESSMENTS

Democratic Reform

In FY 2004, Lithuania continued along its steady course of democratic reform. In the previous year, the Criminal Code, the Code on Execution of Penalties, the Criminal Procedure Code, and the new Civil Procedure Code entered into force. A special Anti-Corruption Service accountable to Parliament and the President has been operating since May 2000. In FY 2004, the Service investigated a number of corruption cases involving politicians and senior civil servants. Lithuania ranked forty-sixth on the 2004 Transparency International Global Corruption Perception Index, with no significant change from its 2003 ranking. Lithuanian law enforcement officials have sought assistance and training from U.S. and European law enforcement agencies. Lithuania continued to show that it has established a solid pattern of free and fair elections. Following the impeachment of President Rolandas Paksas in April 2004 for violating the Constitution and his oath of office, early presidential elections were held in June. Former President Valdas Adamkus was elected and took office in July. Also in June, Lithuania held its first elections to the European Parliament. In October, regular elections to the Parliament were held.

On minority and ethnic issues, the status quo was maintained in FY 2004. The roughly 6.3 percent of Lithuanian citizens who are of Russian ethnic origin are fairly well integrated and face no official discrimination. Lithuania continued its efforts to address the social troubles affecting Roma. Religious freedom continues to be respected in Lithuania. There is a well-established ombudsman system, which functions satisfactorily. The Government of Lithuania (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, is examining the Nazi and Soviet occupations. The Commission was quite active in research and public education in FY 2004, with help from the U.S. Embassy in the form of Democracy Commission grants. 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 Historical Commission signed similar agreements with Yad Vashem, the New Jersey Commission on Holocaust Education, and other organizations. Several exchanges took place in FY 2004. Two Lithuanian teachers traveled to the United States to participate in a program organized by the U.S. Holocaust Museum. The Commission also organized a number of local and international conferences and seminars to promote the development of a tolerant civil society. Throughout FY 2004, the GOL restated its plans to start restituting Jewish communal property and has successfully restituted many Jewish religious properties.

Lithuania’s NGO sector continues to develop, despite decreases in international funding and the lack of a philanthropic community and administrative capacities. Progress was particularly noticeable in NGO–GOL cooperation in areas such as combating TIP, conflict resolution, environmental planning, and small business development. A two-percent income tax facility, which came into effect in 2004, had a positive impact on NGO-sector financial sustainability. NGO networking throughout the country has also increased.

The Democracy Commission Small Grants Program, the Embassy’s front-line resource for building capacity in civil society and promoting democratic and free market values and institutions, reached its final stage in FY 2004. Grants focused on raising public awareness about disabled people; promoting pro bono legal aid; protection of human rights, building women’s leadership skills in rural areas; combating trafficking in persons; fighting corruption; and promoting transparency.

Although Lithuania has already instituted a fully functioning democratic society, some legacies from its past remain, most notably in the relatively underdeveloped state of civil society. The U.S. Embassy initiated an Ethics and Character Building Training Program for schools to raise the topic of ethics in the community and further to enhance the political/institutional culture in Lithuania. The main purpose of the project is the development of citizens of strong moral character, who are committed to integrity and civic engagement in a democratic society. Over a two-year period, teachers from two pilot schools in Panevezys will be trained to form a core group of trainers to train 150 teachers in those two schools and develop materials that integrate character education into the academic curriculum. The trained school staff will implement character education programs in the school community of about 2,000 students, with the aim of impacting their moral and civic development.

The SEED-funded Governmental Ethics Training program continued in 2004. This year a new focus of the program has been on government procurement, aiming to reduce instances of malfeasance in procurement divisions and increase private-sector knowledge of procurement strategies to pressure government to adopt fair practices. Thirty-six seminars were conducted 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 intended to help to deter instances of corruption in the issuance of contracts and other government expenditures. The program was a success and well timed to meet the domestic challenges stemming from a Presidential impeachment, scandals regarding the transparency of political party financing, and conflict-of-interest cases involving civil servants. Developing systems to promote ethics and control corruption became an important GOL priority in 2004.

In FY 2005, the U.S. Embassy plans to continue actively monitoring issued grants and to participate in project implementation. Several grants awarded in FY 2004 will support activities in FY 2005, including the monitoring of anti-corruption activities, media ethics, and campaign finance. Other programs will bring Lithuanians to the United States to improve mutual understanding in critical areas, including public sector reform, IPR and TIP.

Economic Reform

Lithuania had the fastest growing economy in Europe in 2004, earning it the nickname of the "Baltic tiger." Real GDP grew by 9.7 percent in 2003, and by 7.2 percent in the first half of 2004. Domestic demand, fueled by a credit boom, and exports, continued to drive growth, while inflation has remained very low. Lithuania joined the European Union’s (EU) Exchange Rate Mechanism (ERM II) in June 2004, and already meets the EU Stability Pact Criteria for the introduction of the Euro in 2007. Lithuania’s current account deficit was 9.8 percent in the second half of 2004. The projected budget deficit for 2004 is 2.95 percent. In July 2004, public debt accounted for 20.8 percent of projected annual GDP. The unemployment rate declined to 6.6 percent at the end of June 2004. Employment in small and medium-sized enterprises (SMEs) made up 53 percent of total employment. Average gross wages were equal to $453 per month in the second quarter of 2004.

On April 1, 2004, overall foreign direct investment (FDI) in Lithuania reached €5 billion. The U.S. is in fifth place, accounting for 8.6 percent of FDI in Lithuania. Most U.S. investments are in the food and beverage industry. Foreign investors consider Lithuania an attractive place on account of its infrastructure, close links to suppliers in the East, and an inexpensive, but educated labor force. Further, they view Lithuania’s membership in NATO and the EU as a security guarantee.

In 2004, 63 percent of Lithuania’s total exports went to EU countries and 15.9 percent to the Eurasian countries. Most of the imported goods (64 percent) came from EU countries. Trade with the United States accounted for 4.2 percent of exports and 1.6 percent of Lithuania’s total imports. The country’s main export goods include textiles, refined oil products, and machinery, and the principal import groups are raw materials, chemicals and cars. The export share of GDP is 45 percent.

Social-Sector Reform

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 integration with the West and foreign direct investment. A difficult climate (i.e., long, dark winters) and high unemployment in rural areas foster a range of 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 Lithuania’s social services rarely reach the groups at greatest risk. 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. Keeping social problems in check will allow Lithuania to remain an attractive market for foreign investment.

Throughout FY 2004, the GOL actively developed strategies and programs for poverty reduction, alcohol and tobacco control, national drug control and prevention, and crime prevention. However, many of these programs continued to have gaps, particularly in utilizing existing public health and social work resources to implement the plans regionally. Better access to social services throughout Lithuania might help to decrease the number of first-time juvenile offenders who continue to commit crimes, and help keep families together. Similarly, more effective intervention against alcoholism and drug use might reduce the number of juvenile offenders progressing to violent crime. Although a small portion of the total population, working-age unemployed people not enrolled in school/university have committed two-thirds of the recorded crimes in the past few years.

As Eastern Europe faces an increasing prevalence of HIV, Lithuania seeks to remain a leader of the region in HIV/AIDS prevention. Although the HIV/AIDS rates in Lithuania are fairly low, the situation in neighboring countries (e.g., in the neighboring Russian exclave of Kaliningrad) is worrisome. In FY 2004, the U.S. Embassy supported Lithuania’s commitment to build capacity to address the spread of HIV/AIDS, tuberculosis and emerging diseases. It funded a project which aims to implement the National HIV/AIDS Prevention Program at the municipal level. The GOL will receive technical assistance on model municipal action plans for HIV/AIDS prevention. As part of the project, local administrative, medical, and social personnel will receive appropriate training to address HIV/AIDS. The most problematic aspect of the AIDS issue in Lithuania is discrimination against those infected with HIV. The Embassy has responded to this problem by funding an NGO-implemented project for advocating the access of at-risk groups to medical, social, and education services.

The U.S. Embassy directed a portion of its assistance funds for innovation, an area crucial to Lithuania’s future and one that offers fertile ground for U.S.-Lithuanian commercial and research cooperation. The Embassy funded a visit, hosted by the U.S. National Academy of Sciences, of key Lithuanian knowledge economy decision-makers to meet high-ranking officials in the U.S. technology sector, which led to the holding of a major conference on the role of Lithuanian universities in innovation. The USG also encouraged U.S.-Lithuanian cooperation in research and development. The Regional Environmental Office at the U.S. Embassy in Copenhagen sponsored a science and technology review trip, the goal of which was to initiate further cooperation between U.S. scientific agencies and their counterparts in Lithuania by looking at the scientific capacities and priorities. SEED funds also supported a number of environmental projects, such as a regional Global Learning and Observations to Benefit the Environment (GLOBE) training.

In FY 2004, SEED assistance was also targeted at addressing the high rate of IPR violations and lack of knowledge about IPR in Lithuania, both at the general public and professional levels. The U.S. Embassy funded several IPR projects involving the participation of U.S. experts.

In FY 2005, the Embassy will continue to work closely with a number of grantees on the implementation and close-out of projects funded with SEED funds, especially those that require the participation of U.S. experts.

Security, Regional Stability, and Law Enforcement

Lithuania joined NATO in April 2004, just a month before entering the EU. It continues to contribute actively to alliance activities, such as peacekeeping and counter-terrorism missions. Lithuania maintained defense spending at two percent of GDP in 2004, and it is an enthusiastic participant in the activities of the Organization for Security and Cooperation in Europe (OSCE) and numerous other international organizations.

Throughout FY 2004, Lithuania demonstrated its commitment to allocating resources to meet its NATO obligations. As of 2003, Lithuania had one battalion fully equipped, fully interoperable, and ready to be deployed alongside NATO forces for an Article 5 operation outside its territory. No later than 2006, Lithuania expects to complete the preparation of one reaction brigade for the same types of operations. As much as 22 percent of the defense budget is devoted to procurement, including a contract signed with the U.S. for procuring 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 now 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 mine-countermeasure element of NATO’s naval force. There are a number of other areas where the Lithuanians could provide capabilities, including Special Forces, medical personnel, engineering, and logistic units.

In FY 2004, the FMF and IMET programs continued to provide significant U.S. influence in the development of Lithuania’s Armed Forces and to serve as an excellent vehicle for unfettered access to key decision-makers throughout the military leadership. These programs were key elements in the transformation of Lithuania’s military into a U.S.-style expeditionary force that is deployable, sustainable and fully capable of operating alongside U.S. and NATO coalition forces. A key asset of the IMET program is the continued U.S. influence it provides on the development of military leaders at all levels. In addition, a large portion of the FMF and IMET programs initiated or extended with FY 2004 funds directly and indirectly supported the over 250 Lithuanian soldiers deployed in support of OIF, OEF and Balkan peace operations.

The FY 2004 IMET grant of $1.3 million funded the attendance of over 50 officers and noncommissioned officers at nearly 100 courses in the United States. In addition, the U.S. conducted three separate IMET-funded Mobile Education Team (MET) courses in Lithuania. The focus of Lithuania’s ongoing IMET program is the continued professionalization of senior and mid-level leaders, logistics training, civil-military operations, and special operations. In FY 2004, one Lithuanian officer attended the Senior Service College, three officers attended Command and Staff colleges, and one senior sergeant attended the Sergeant Major Academy. Lithuania continues to place graduates from these mid-level 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 the Lithuanian military into an agile, deployable force that can help support U.S. and NATO operations.

Lithuania obligated, or has obligation documents pending U.S. approval for, all of the $6.4 million in FMF funds allocated for FY 2004. The focus for Lithuania’s FY 2004 FMF program continued to be the transformation of the military from a static, territorial defense force into a deployable NATO-compatible military. The major FMF cases implemented or requested for FY 2004 are for the acquisition of over 39 military vehicles and the establishment of a simulation center. Both cases contribute directly to greatly increasing military readiness and interoperability with NATO. 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. In addition, Lithuania requested the procurement of special operations radios with FY 2003 FMF supplemental funds to support special operations forces deployed with OEF.

To increase assistance to victims of trafficking in persons and prosecution of those who conduct this socially and physically damaging trade, substantial USG assistance has been focused on TIP prevention initiatives. Through USG support, Lithuanian NGOs continuously monitor the National Program for Control and Prevention of Trafficking in Human Beings and have generated recommendations to fill in the gaps and insufficiencies in preventive work. U.S.-funded TIP programs cover a wide range of activities, starting with awareness-raising campaigns for youth on the dangers in seeking illegal work abroad; those addressing human trafficking at a local level with law enforcement and NGO sector cooperation; and also capacity building and competence development for law enforcement officials and legal practitioners.

COUNTRY PERFORMANCE MEASURES

ECONOMIC & DEMOCRATIC REFORMS, 1991-2004

Data are drawn from EBRD, Transition Report (November 2004) & Freedom House, Nations in Transit 2004 & Freedom in the World 2004. Ratings are based on a 1 to 5 scale with 5 representing the most advanced. Latest year observation refers to 2004 economic reform data and 2003 democratic reform data; i.e., 2004 data for democratic reforms are not yet available.

ECONOMIC STRUCTURE AND HUMAN DEVELOPMENT, 1990-2004

World Bank, World Development Indicators 2004 (2004); UNICEF, Social Monitor 2004 (2004); EBRD, Transition Report (November 2004); and UNDP, Human Development Report (2004).

TOTAL USG FUNDS BUDGETED: (INCLUDING ACCOUNTS OTHER THAN SEED) $12.30 m

non-SEED Total:$12.30 m Dept. of Defense    International Counterproliferation Programs $1.05 Total DoD: $1.05 Dept. of Education    Fulbright-Hays Programs $0.04 Total DoEduc: $0.04 Dept. of Energy    Nonproliferation & International Security Programs $0.05    Nuclear Reactor Safety $0.93 Total DoEnergy: $0.98 Dept. of State    Export Control & Related Border Security Asst. (EXBS) $0.84    Foreign Military Financing (FMF) $6.39    International Information Programs (IIP) $0.02    International Military Educ. & Training (IMET) $1.34    Public Diplomacy Exchanges $0.91 Total State: $9.50 Open World Leadership Center    Open World Program $0.32 Total Open World Leadership Center: $0.32 Trade & Development Agency (USTDA)    Feasibility Studies / Trade Promotion $0.42 Total USTDA: $0.42