Destination Lithuania

Lithuania, one of the relatively peaceful countries in the EU, is looking at Indian investment in the country to start and increase in the coming years. Lithuanian Development Agency presents a snapshot of Lithuania

The Lithuanian pharma market, which is predominantly driven by imports, is relatively small and was valued at around $ 450 million in 2006. The market can be classified into prescription and OTC segments with the former accounting to around 70 percent of the market and OTC drugs representing the balance. Bulk of the imports comes from Germany and other European countries. Of the top five multinationals globally profiled by BMI, drugs produced by Pfizer, GlaxoSmithKline (GSK), Merck & Co, Novartis and Sanofi-Aventis are prominent in the Lithuanian market. In the fragmented OTC market, multinationals also dominate, with GSK, Pfizer and Novartis enjoying market share of around 5 percent each and Sanofi-Aventis a market share of around 4 percent.

While the country's drug manufacturing segment is relatively small, it manufactures and sells its products primarily to Russia and other CIS nations. However, between 2001 and 2002, the volume of production declined dramatically on back of GMP implementation and other regulatory changes introduced before EU accession in 2004.

On the domestic retail front, there were about 1,100 pharmacies operating in Lithuania at the end of 2004. The market is expected to approach saturation levels and to stop growing in absolute store numbers at just below 1300 pharmacies by 2009. Some of the major players in the industry are Eurofarmacijos Vaistines (having around 200 pharmacies in Lithuania as well as smaller chains in Latvia, Estonia and Slovakia under the Euroapteka brand), Camelia (the country's second largest chain, with approximately 130 stores) and Finland's Tamro, (part of the Phoenix Group, has around 85 stores under the Seimos Vaistines brand).

The big picture

Though the pharma industry is still in a nascent stage of development, Lithuania as an economy has been doing quite well for sometime. With a new World Trade Centre proposed to established in 2010 and with the World Bank ranking the economy as 16th easiest economy to do business with among the EU-10, there is lot going in for Lithuania.

Lithuania has four international airports, an ice-free seaport and a satellite-based telecommunications system. Its already extensive road network is being upgraded with the assistance of the EU, the EBRD and the European Investment Bank. The European Union has recognised Lithuania as the prime transport centre in the region linking the EU with the East. The EU's transportation commission designated two routes running through Lithuania, a North-South road and rail route connecting Scandinavia with Central Europe, and an East-West route linking the huge Eastern markets with the rest of Europe, as among the ten most important in Europe.

Exchange rates

Lithuania's currency is the Litas (LTL), equal to 100 Lithuanian cents. Under a Currency Board system, the Litas is presently pegged to the Euro at a rate of 3.4528:1.

In 1994 the Lithuanian Currency Board was established, under which the amount of Litas in circulation was pegged to the amount of gold and foreign currency reserves held by the Bank of Lithuania, and the official exchange rate of 4 Litas to 1 US Dollar was introduced within the context of a strict monetary regime. The Litas-USD exchange rate has remained stable since 1994, making it one of the most stable currencies of all the countries of Central and Eastern Europe. On February 2, 2002 Lithuania re-pegged the Litas to the Euro at the rate of 3.4528LTL/EUR, thus ending the Litas-USD peg, which lasted for almost 8 years.

Trade with Lithuania

Lithuania, since 31st of May 2001 is a member of World Trade Organisation. Before joining the EU, Lithuania pursued a liberal trade policy and had Free Trade Agreements with the EU, EFTA, CEE countries, Turkey and the Ukraine. From May 1, 2004, as an EU member, Lithuania enjoys preferences stipulated in the trade agreements between the EU and third countries.

Free Economic Zones (FEZs) : Lithuania's FEZs are located in economically important cities and provide extremely favourable conditions for developing business activities by offering a prepared industrial site with physical and/or legal infrastructure, support services, and tax incentives. Lithuania has two Free Economic Zones, one in Klaipeda and one in Kaunas. The tax incentives available in FEZs are as follows:

• Six years exemption from corporate income tax following the date of investment and 50% discount for the following 10 years- for companies that have invested more than EUR 1 million. Normally in Lithuania, there is a 15% corporate tax
• No real estate taxes, whereas normally in Lithuania, it is 1% from real estate value annually
• No taxes on dividends paid to foreign investors, whereas there is 15% tax on dividends (exemptions are available due to agreements on avoidance of double taxation)

Total amount of incentives received by a Company may not exceed 65% for small enterprises and 50% for medium and large enterprises of investment to the long term assets.

Education

Lithuania has the best-educated workforce in Central and Eastern Europe. According to the Lithuanian Department of Statistics, its proportion of graduates is the highest in CEE, with 4.3 university graduates per year per 1000 inhabitants. All five major cities in Lithuania now have their own universities.

Most educational institutions are run by the state though several private gymnasiums, lyceums and other educational institutions (including private business schools) have recently been established. At present there are 21 universities and 27 colleges with a total enrolment of 170,700 students.