APPROVED

APPROVED Official translation government of the republic of lithuania resolution no. 789 ON THE MEDIUM-TERM INDUSTRIAL DEVELOPMENT POLICY AND ITS IMPLEMENTATION STRATEGY 5 July 2000 Vilnius The Government of the Republic of Lithuania hereby r e s o l v e s:

1. To approve the Medium-term Industrial Development Policy and Its Implementation Strategy (appended).
2. To approve the Measures for Implementation of the Medium-term Industrial Development Policy and Strategy .(appended).
3. To instruct the Ministry of Economy to coordinate and monitor the implementation of the Policy and its Strategy Measures referred to in paragraph
4. Prime Minister Andrius Kubilius Minister of Economy Valentinas Milaknis ANNEX I APPROVED by Resolution No. 789 of 5 July 2000 of the Government of the Republic of Lithuania Medium-term industrIAL development policy and ITS IMPLEMENTATION strategy I. GENERAL PROVISIONS
5. The medium-term industrial development policy and its implementation strategy (hereinafter referred to as “Strategy”) have been developed on the basis of the Lithuanian Government Action Programme for 1999-2000 and the general principles of the EU industrial policy. The Strategy is the continuation of the policy formulated in the Programme for the Restructuring of Industry and Conversion of Large-scale Enterprises drawn up in
6. Since then the situation in domestic and international markets has changed considerably, entailing radical changes in the industrial development policy.
7. Even though the member states of the EU do not have a common position either on the aim or character of industrial policy, nor on the role of governments in it, however they all agree on the principal issue – the necessity to improve competitiveness; the government has the duty to improve business environment and establish priorities, in order to achieve sustainable development whereas activity policies should be set by enterprises themselves.
8. The strategic goal of the industrial policy is to create a solid foundation for the efficient market structures and to improve the areas where market is not efficient enough. The main activity principles are as follows: to provide support in those cases where enterprises need to be encouraged to undertake ventures where the initial threshold is too high for individual enterprises, to eliminate trade barriers, to reduce administrative regulation, to increase investment into R&D and human competence, to develop business services and infrastructure. This will create favourable conditions for competition, will enable economic entities to operate their businesses more efficiently and will encourage competitiveness. The objectives and goals of the medium-term industrial development programme and most of its implementation measures are in compliance with the measures applicable by the EU member states and with requirements set for the candidate countries.
9. The Strategy does not provide for a detailed description of the implementation of industrial policy. It only outlines the main principles and trends, ensuring long-term development of industry. The present legal act may serve as a basis on which sectorial industrial associations and enterprises may draw up effective policies of their respective industries (enterprises). II. STRATEGIC POSITIONS OF LITHUANIAN INDUSTRY Changes in the Lithuanian economy and industry
10. In the course of transformation to the free market, Lithuanian economy has experienced significant changes. Some of these changes had major impact on the development of industrial policy and strategy: the GDP share of services increased, while that of agriculture, construction and manufacturing fell; major changes occurred in the structure of mining and processing industries; industrial competitiveness increased, however this happened too slowly to ensure ongoing growth of the export. Factors impeding the development of Lithuanian industry
11. The following factors are most important in impeding the development of Lithuanian industry: 6.1 Inefficient industrial structure, decreased share of the knowledge-intensive production; 6.2 Low productivity in the majority of sectors; 6.3 High dependence of certain industries on unstable CIS (particularly, Russian) markets of raw materials; 6.4 Poor management experience, inadequate professional and managerial competence; 6.5 Low degree of co-operation between economic agents; 6.6 Insufficiently developed sector of financial services, high price of the borrowed capital; 6.7 Insufficiently developed infrastructure of business services, innovation and quality (metrology, conformity assessment, market surveillance). Future perspectives of traditional industrial sectors
12. According to the increase of the created added value, average annual employment and efficiency, the following industrial sectors have relative advantage and good perspectives: 7.1 manufacture chemicals and mineral products; 7.2 manufacture of textiles and wearing apparel; 7.3 manufacture of transport equipment, 7.4 manufacture of construction materials, 7.5 publishing, printing and copying, 7.6 manufacture of electric devices, 7.7 manufacture of metal products, 7.8 manufacture of radio, television and communications equipment, 7.9 manufacture of timber, wood articles and furniture. However, these sectors are not given a priority, although together with some other industries (pharmaceuticals, biotechnology, laser technology, precision instruments and electronics), they can play major role in the industrial development in the future. III. VISION OF THE LITHUANIAN INDUSTRY AND ITS POLICY AND STRATEGY GOALS Vision of the Lithuanian industry
13. Efforts should be made that in future: 8.1 Lithuania becomes attractive for internationally competitive firms, especially those which are knowledge-based and use high technologies, they set up their representations and branch offices; 8.2 Industry operates in an environment which supports innovation, skills, fair competition and cost effective, globally competitive infrastructure; 8.3 Industrial development be promoted by a pro-enterprise regulatory environment ensuring stability and reliability for investors; 8.4 Lithuanian industrial structure and company strategies respond adequately to the continuously changing global competitive forces. Goals of the Lithuanian industrial policy and strategy
14. The choice of the Lithuanian industrial development policy and strategy has been predetermined by: 9.1 decreasing share of industry in GDP; 9.2 slow growth of industry; 9.3 slow growth of industrial competitiveness and poor resistance to the impact of economic crises in other regions of the world; 9.4 great industrial development disparities between different regions; 9.5 decreasing possibilities of industry to reduce possible negative effects of social, environmental and other reforms; 9.6 incomplete restructuring of large enterprises;
15. The key goals of this strategy policy are: 10.1 To increase the role of internationally competitive Lithuanian clusters and networks of enterprises in the economy; to encourage new entries. 10.2 To reduce social, regional, environmental and other negative effects caused by implementation of the industrial competitiveness policy. IV. ENHANCING INTERNATIONAL COMPETITIVENESS OF INDUSTRY Creating preconditions for enhancing industrial competitiveness Combination of macro-stability and micro-mobility
16. In order to enhance macro stability and micro mobility it is necessary to: 11.1 Implement measures, approved by the proposal of preliminary working groups responsible for the drawing up of the strategic plan for the improvement of business environment, to support macroeconomic stability and promote private investment; 11.2 Restructure more rapidly inefficient economic sectors, primarily of energy; 11.3 Eliminate barriers impeding the restructuring of unprofitable but promising enterprises, simplifying bankruptcy procedures; 11.4 Promote local and international competition, creating macroeconomic and institutional environment encouraging export of higher value added products and services, as well as import of goods and services of lower value added. Creation of regulative and economic environment and organisational structures increasing Lithuania’s attractiveness to local and foreign investors
17. In order to attract foreign investment, it is being planned to: 12.1 Eliminate investment barriers; 12.2 Develop investor-friendly environment; 12.3 Identify and co-ordinate interests of Lithuanian and foreign investors;
18. Barrier elimination will be based on the recommendations of the World Bank FIAS (Foreign Investment Advisory Service) mission which has accomplished a study on the existing administrative investment barriers. The recommendations point out the necessity to urgently reduce business regulation, adopt the policy encouraging voluntary payment of taxes, solve the problem of land restitution and create conditions for investors to purchase land with no risk, simplify the procedures of issuing permits for construction, improve relations between Tax Office and tax-payers, create a single network of customs computers, reduce operating expenses of businesses, etc. Ensuring structural changes in industry and its infrastructure
19. With increasing globalisation, emergence of information society and intensifying international competition, changes of the industrial structure turn into one of the key goals of the industrial development ensuring competitiveness and sustainability. These changes can be turned into desired direction only by the following measures: 14.1 to create favourable conditions for the development and adoption of technologies and innovations, and for integration of science and industry; 14.2 to provide possibilities for local firms to join large international enterprises and their clusters, which would secure markets for Lithuanian products; 14.3 to create favourable conditions for researchers working with high technologies to introduce them in industry through establishment of science and technology parks, private research and manufacturing firms, and research institutes; 14.4 to eliminate barriers to restructuring of insolvent but viable enterprises.; 14.5 to promote the improvement of managers’ skills; 14.6 to provide conditions for making better use of local resources; 14.7 to create legal framework and economic conditions promoting fair competition. Creating favourable business environment and promoting fair competition
20. Business-friendly environment and fair competition shall be promoted by: 15.1 improving legal acts regulating industrial and business enterprises aimed at liberalising business and creating conditions for fair competition through harmonisation of Lithuanian legislation with the EU acquis; 15.2 orienting legal and institutional framework towards the enterprises which export sophisticated, high value added products and services; 15.3 improving operation of transit and customs and of border crossing procedures, liberalisation of the activities of customs terminals; 15.4 radically simplifying bankruptcy, restructuring, start-up and liquidation procedures; 15.5 improving industry and economy administration by giving up functions where state actions are not needed or interfere with company business; developing state’s partnership with private sector. Expanding possibilities for enterprises to make use of investment sources
21. The following measures of the development of financial sector will have major impact on industry: 16.1 privatisation of the remaining state-owned banks; 16.2 improvement of terms and conditions for foreign banks intending to establish their branches in Lithuania; 16.3 promoting start-ups of investment enterprises and their growth; 16.4 providing regulatory and economic conditions for operation of pension funds; 16.5 further developing the insurance system, especially that of business insurance; improving efficiency of the Lithuanian Export and Import Insurance company 16.6 expanding enterprises’ possibilities to make use of non-traditional for Lithuania sources of investment and foreign foundations. Increasing company awareness
22. Being well informed about the markets, competitors, new products, technologies, and development trends becomes one of the key preconditions of competitiveness. The primary task of the government is to develop an efficient information system incorporating ministries, Lithuanian embassies, foreign trade missions, professional and other associations; to promote and to support establishment of industrial and cross-industrial analytical groups and preparation of reports on technological changes and trends in the international competition. Making use of such information is the matter of enterprises and it depends on their managerial and professional skills and interests. Such institutions as Lithuanian Economic Development Agency or Lithuanian Innovation Centre should turn into the main centres of information, therefore their functions should be changed. . It is being planned to create favourable conditions for information business to make it one of the most profitable businesses in a few years. Key trends for enhancing industrial competitiveness
23. International competitiveness of the Lithuanian industry shall be enhanced by promoting: 18.1 rapid development of high value added (primarily high-tech) industries; 18.2 development and adoption of new technologies and innovations; 18.3 strengthening of current and developing of new factors of competitive advantage; 18.4 international and local co-operation and clusterisation; 18.5 restructuring of enterprises; 18.6 development of business services sector; 18.7 improvement of quality management. Development of high value added industries
24. The structure of the Lithuanian industry fails to ensure stable growth. It is dominated by low value added industries. This is especially obvious when looking at the situation from the perspective of OECD classification. National Innovation System should become a methodological and practical instrument for developing higher value added and knowledge –intensive industries. Manufacturing of high-tech products shall be assigned to national priorities and shall be encouraged by all means. An important practical step in this direction could be the White Paper on Science and Technology, outlining the strategic principles for creation of the innovation-friendly environment and of the system of key measures and actions targeted at the promotion of technological progress in Lithuania.
25. The development of this sector shall be promoted through: 20.1 training and educating highly qualified specialists of all levels, developing high scientific potential; 20.2 encouraging investment (public and private) into modern technologies and knowledge-intensive activities (primarily joining international clusters) in sectors such as electronics, IT, manufacturing of precision instruments and pharmaceuticals; 20.3 formulating, in the near future, the policy of technological research and of evaluation of research support results targeted at supporting research aimed at solving development problems, particularly in high-tech areas; 20.4 concentration of efforts onto secondary market of innovations, making better use of the potential created elsewhere, improvement of transferred technologies and products adapting them to the specific conditions; 20.5 further promotion of traditional industries paying major attention to those parts of the value chain which create higher value added. Development and transfer of technologies, introduction of innovations
26. The current system of science, education and research does not create preconditions for accelerating the technological progress of firms, although all major structural elements of the innovation system do exist. They should be integrated into the national innovation system, efficiently functioning in the situation of the limited financial resources, as this is important because innovativeness of the country will be determined not by efficient operation of individual enterprises, research institutes or universities, but by the way they will interact with each other as the elements of the system creating knowledge and using it for commercial purposes.
27. The key instruments for implementation of technology and innovation policy: 22.1 policy on science and technology development supporting the overall industrial competitiveness policies and the attainment of an efficient and productive industrial structure; 22.2 authorised public institution responsible for co-ordination of partial financing of research targeted at technological development, technology transfer and control; 22.3 increasing contribution of technological research institutes to industrial competitiveness; 22.4 research and technology development in enterprises, carried out with no outside support or by science institutions; creating economic and organisational mechanisms to support such research; 22.5 the system of introduction and support of scientific and technological research in industrial enterprises; 22.6 close ties between universities, research centres and enterprises; 22.7 support to industry in creating the institutional system of professional training and skills development; incentives to enterprises to invest into their staff competence development; making good use of the experience of foreign institutions and skilled specialists in the system of professional training; 22.8 research which can be rapidly commercialised and used by the industrial enterprises for increasing their competitiveness; fundamental research should be supported only in those areas where Lithuanian science has strong positions internationally and where possibilities exist to create a commercial product; 22.9 good organisation of research; Efforts will be made to improve research management in line with requirements of the market economy; 22.10 favourable conditions for the EU support (PHARE funds) for research. Strengthening current and developing new factors of competitive advantage
28. At present most of the enterprises rely on the strategy of low prices which is feasible due to the relatively cheap and qualified labour force. Under conditions of globalisation and liberalisation, the strategy of industrial competitiveness should be based on the development of distinctive competencies and factors and capability of firms to acquire the specific abilities and qualities ensuring competitiveness and to efficiently use them.
29. The following measures will have major impact on the development of competitive advantage: 24.1 restructuring of the Lithuanian scientific and research institutions enabling them to facilitate enterprises in introducing innovations; 24.2 development of professional competence in the area of management, IT, business administration and strategy, change management, etc.; 24.3 improvement of the local demand structure through public procurement of goods or services and through setting standards for products and manufacturing processes; 24.4 more rapid introduction of international standards for products and implementation of good production practice; 24.5 the influence of the government of the Republic of Lithuania on the strategies of industrial enterprises which should be constructive, in line with their interests, and should not distort competition; 24.6 creation of economic and institutional conditions for the promotion of know-how through effective national innovations system; 24.7 development of traditional ties and communication with neighbouring countries aimed at making better use of know-how; Promotion of the international and local co-operation and clusterisation
30. Promotion of co-operation will be based on the approach that it is better for the enterprises to join large international clusters rather than create local ones. This would enable to more rapidly integrate into international markets; high standards would encourage the enterprises to develop more rapidly and to remain competitive for the longer period. Certainly, this is not the alternative to local clusters, especially to those which would efficiently use local resources and consist of small, interrelated enterprises.
31. The key trends for promoting co-operation and clusterisation: 26.1 developing the system for collecting and processing information about the possibilities of local and international co-operation and providing it to industrial enterprises and businesses; 26.2 improved operation of specialised institutions providing information to enterprises about the possibilities of participation in the international projects financed from PHARE or other funds and helping them to make practical use of these possibilities; 26.3 more rapid development of business services (intermediaries in clusterisation) clusterisation. Development of business services sector
32. The infrastructure as such rarely becomes a source of competitive advantage, however its absence or poor level can turn into the key obstacle of competitiveness. This especially applies to transport, logistics and telecommunications. The following sectors of business services have the greatest strategic importance for industrial competitiveness: 27.1 management consulting; 27.2 information technologies and communications; 27.3 technical services; 27.4 marketing and advertising; 27.5 legal services and auditing.
33. Strategic trends for developing business services sector: 28.1 public investment into training of professionals, able to provide new specialised technical and business services; 28.2 technical and organisational support to the newly established firms of specialised business services; 28.3 support to the development of managerial competence of executives; 28.4 promotion of co-operation between the industrial enterprises and the entities in the surrounding business environment; 28.5 increasing enterprises’ awareness of the demand for business services, the possibilities of meeting this demand and the benefits of using these services. Improvement of quality management
34. In order to enhance industrial competitiveness, it is necessary to: 29.1 improve legal acts, regulating product safety and harmlessness and the system of domestic market surveillance; 29.2 enhance and improve the training of quality specialists; 29.3 establish certified testing laboratories and certification institutions as well as other conformity assessment institutions. It is intended to continue providing financial support to legal persons establishing testing laboratories and/or certification institutions; 29.4 promote and accelerate adoption of harmonised standards and calibration of measuring instruments used in the certified testing laboratories; 29.5 improve market surveillance system which should guarantee consumer protection and equal competitive conditions for producers and service providers. Efforts will be made to increase the number of enterprises with certified quality systems, as well as the number of products to be certified in Lithuania. This requires ensuring operation of certification laboratories in Lithuania and validity of their findings all over Europe. It is important that a Lithuanian institution is entitled to issue ISO 9000 and ISO 14000 certificates. Restructuring of enterprises
35. The State has primarily to create favourable conditions for entering the market (particularly, by starting up new enterprises) and leaving it (bankruptcy or liquidation), as well as for restructuring the loss-making enterprises or those experiencing temporary difficulties.
36. The enterprise restructuring policy covers both profitable and loss-making enterprises with special focus on the latter. It will be implemented by: 32.1 promoting the restructuring of part of the loss-making enterprises, which will result in the greater number of enterprises being restructured that might develop into profit-making ones; 32.2 accelerating bankruptcy proceedings of insolvent enterprises and bankruptcy procedures which should result in enlivening of the market of resources, particularly of property, used by newly established, profitable and loss-making firms; 32.3 creating conditions for profitable and loss-making enterprises to restructure their debts, thus providing them with better business opportunities.
37. It is intended to create such conditions that only viable enterprises which operate at a loss only temporarily, are restructured, and that restructuring should not distort fair competition and should not put them in a better position than successfully operating enterprises competing against them.
38. An important role in implementation of this policy will be assigned to the government of the Republic of Lithuania as one of the major creditors. The creditors will be able to postpone the terms for meeting credit liabilities, to reduce claims and to renounce them, and to replace monetary liabilities with other liabilities (e.g., repayment by assets, shares or other securities).
39. One of the major tasks of the Government is optimisation of bankruptcy procedure to make it shorter and more efficient. This problem will be solved by a new Law on Enterprise Bankruptcy which is to come into force as of 1 October,
40. V. SUSTAINABLE INDUSTRIAL DEVELOPMENT
41. Radical structural changes of Lithuanian industry and national economy, disappearance of a considerable number of enterprises and even of some industries, qualitative changes in the firms not only open up new development possibilities, but also cause a number of social and environmental problems. They should be attempted to solve by sustainable development of industry. Sustainable industrial development shall be implemented through regional development and efficient use of its potential, SME development and promotion of environment-friendly production. Using regional potential for industrial development
42. All Lithuanian regions have their peculiarities and certain specialisation. This is a big advantage because it makes possible the establishment of regional company networks or even mini clusters in this way further increasing the specialised potential, and through that – the competitive advantage of the specific regional industry. An important step in creating preconditions for emergence and growth of the knowledge-based industries is the foundation of universities in Klaipėda and Šiauliai as well as intention to establish such regional university in Panevėžys. Together with industrial enterprises of these cities, they should create the promising growth centres making full use of the local resources.
43. Regional industrial development is based on the medium-term priorities set forth in the Accession Partnership as well as on the principles outlined in Government Resolution No. 902 of 21 July, 1998 ‘On the Outline of the Lithuanian Regional Policy’ (Official Gazette 1998, No.66-1922), the Special Pre-accession programme, Seimas Resolution No. VIII - 1035 of 14 January, 1999 ‘On the Report of the Seimas Committee for European Affairs on the EU Regional Policy and Lithuania's Readiness for its Implementation’ (Official Gazette, 1999, No. 11-251), Government Resolution No. 538 of 6 May, 1999 ‘On Measures for the Implementation of Lithuania’s Regional Policy Outline’ (Official Gazette, 1999, No.41-1290) and other regulations.
44. In order to make better use of regional capacities in the industrial and sustainable regional development, the following principles shall be observed: 39.
45. A region will be developed successfully when it will host industries and businesses best reflecting its peculiarities, the existing potential and the actual possibilities to use it. Regional industry and business will be encouraged to extensively integrate into other regions inside Lithuania and abroad. 39.2 The essential improvement of the situation in regions is impossible without effective partnerships between local government, industry, business and social interest groups. 39.3 It is important to develop an efficient mechanism of financing regional development. 39.4 When preparing regional plans for industrial and business development, it is important to take into account the fact the overall goal is international and not local competitiveness of economic entities. SME development
46. Promotion of establishment of new enterprises and creation of new jobs would be the most effective way of solving social problems and enhancing competitiveness. The key measure is development of small and medium-sized enterprises. Industrial development measures, outlined in the present Strategy, are also completely applicable for SMEs. On the other hand, some SME development measures could effectively contribute to the solution of social problems and enhancement of industrial competitiveness. These measures include: 40.1 improvement of entrepreneurs’ awareness about the new business opportunities in domestic and international markets; 40.2 simplification of the start-up, liquidation and accounting procedures, elimination of bureaucratic barriers; 40.3 promotion of research and introduction of new technologies; 40.4 organising training for entrepreneurs, especially of the newcomers, in financial management, IT, new forms and methods of activity, introduction of know –how; 40.5 assistance to those willing to join international projects and other initiatives, sectorial and regional clusters; 40.6 creation of the system of cheap and qualified business consulting and training services; 40.7 creation of institutional business infrastructure, first of all - business incubators, business centres, etc. Promotion of environment –friendly production
47. Even tough in transition to the market economy production volume decreased more than twice, environment protection remains an important problem. Until now, the means of clean production in industry are introduced through the projects mainly financed by Western partners and institutions. 42.Many of the Lithuanian enterprises have good possibilities for enhancing the efficiency of environmental protection in terms of both management and modernisation and optimisation of equipment and processes. However, these possibilities are not fully assessed and exploited, so instead of cost-effective means of clean production enterprises often invest considerable amounts into cleaning technologies.
48. Nature protection problems will be dealt with by economic and legal measures targeted at ensuring safe handling of chemical substances and preparations, their safe and sustainable use, utilisation of harmful materials, and recycling of waste and secondary raw materials, at implementing energy conservation measures, promotion of reduction of water use and water and air pollution, and at supporting development of environment-friendly and sustainable industry.
49. Extensive implementation of clean production in the Lithuanian enterprises depends not only on the environmental protection policy, but also on the way these goals are treated in interrelated areas, such as education, science, information, etc.
50. The following key trends for the implementation of environment-friendly production policy may be distinguished in terms of enhancing competitiveness: 45.1 legitimisation of the concept and principles of clean production as the highest priority in all production activities including them into the national environment protection policy, regulations, regional and sectorial development programmes; 45.2 propagation of the principles of clean production in the private sector; 45.3 consumer education and their involvement into propagation of clean production; 45.4 participation in the international projects concerning clean production; 45.5 development of legal framework and economic conditions favouring the development of clean production; 45.6 promotion of foreign investment in clean industrial technology; 45.7 involvement of all interested parties (trade unions, NGOs, engineering associations, consumer organisations, Pollution Prevention Centre and universities) into environmental management in enterprises; 45.8 urgent training of clean production experts and managers; 45.9 dissemination of international experience and information on the strategies of clean production through international organisations and forums; 45.10 developing the system of collecting, analysing and disseminating information on clean production technologies, processes, products, etc. 45.11 support to NGOs, actively contributing to introduction of clean production and environmental management systems; 45.12 establishment of institutions assisting enterprises in implementation of EMAS and ISO 14000; 45.13 integration of clean production and environmental management systems, which is the only means of ensuring that environmental management contributes to the ongoing improvement of quality of environmental protection; 45.14 development, improvement and systematising of legal acts. V. MANAGEMENT OF THE IMPLEMENTATION OF INDUSTRIAL POLICY Co-operation between policy implementation entities
51. The government of the Republic of Lithuania is not able to implement the objectives of this strategy without the assistance of all entities involved. In order for the strategy of industrial development to become a reality and to contribute to the economic development and business growth, the efforts of all interested and necessary parties is crucial. Various institutions should be established and strengthened, and the competence of public servants improved by developing the skills required for strategy implementation and for flexibly responding to the needs of businesses. Business community should also become involved in the process of institution building, so that in this way it could facilitate its own activities and adjustment to the changes in the country and in the world. The government should maintain dialogue with industry and business structures. This can be done through special institutions. One of them could be Industrial Competition Council consisting of public officials, entitled to make strategic decisions, and leading business professionals as well as specialists from other areas. The other, less formal, body could be a regular round table of ministry officials and representatives of large-scale, medium and small businesses, for discussing specific problems, for example, of a particular sector. Banks and other financial institutions will be encouraged to be more responsive to the needs of industry by expanding the range of possible loans and improving the conditions of financing. The State will retain its key function - ensuring macroeconomic stability and competitive interest rates. Principles of the provision of state and EU support
52. The intervention of the State in enterprise activities must be limited. Efforts should be made to create preconditions for smooth growth of economy through enhancement of industrial competitiveness and through co-ordination and integration of the key economic, social and environmental actions.
53. To ensure efficient use of public funds, subsidies could be allocated based on the following principles: 48.
54. subsidies should induce changes in enterprises which would otherwise be impossible; 48.
55. all enterprises should be treated equally and subsidies should not have a negative impact on competition; 48.3 Subsidies from the state budget of the Republic of Lithuania should be reduced.
56. When providing state support to industry, the following important principles shall be observed: 49.1 the EU regulations do not exclude provision of state support, especially to the regions lagging behind the EU average in terms of employment and GDP, however, they clearly limit the type and extent of subsidies that may be provided; 49.2 direct subsidies to export shall be avoided, i.e. subsidies which help enterprises of one Member State unfairly take market share from unsubsidised enterprises in another; also subsidies to support day to day operations shall be prohibited; 49.3 the EU prohibition to provide state support to certain economic sectors shall be observed.
57. The state should support primarily those measures which are directly targeted at encouraging intangible investment and which will have a wide range of impact, i.e. the spill-over effect within the entire industry or its specific sectors. Especially important are subsidies to management training and applied research.
58. Support shall be provided following the principle that the State should interfere only when private sector is unwilling or unable to resolve certain market problems. However, even where market failures are clearly manifested, it will be avoided to create a culture of dependency when firms continually seek subsidies and even build them into their financial plans as a matter of course. In respect to financing, the state and business or, e.g. the financial sector and the state will share the risk when providing support to industry. Institutional instruments for the implementation of industrial policy
59. The implementation of this Strategy to high extent depends on the ability of various public institutions responsible for policy implementation, monitoring and evaluation to perform these functions. This ability will be enhanced through special training programmes for employees of these institutions. Co-operation between ministries and other public authorities, responsible for the development and implementation of the industrial policy, will be encouraged. It is being planned to appoint a public official responsible for this area at each ministry. The function of such official would be the implementation of strategic measures by co-ordinating the actions of the particular ministry with the general plan of strategic measures Independent experts will also play increasingly important role in monitoring and evaluation of the process since their participation adds objectivity and transparency.
60. The responsibility for the implementation of the Strategy will be vested in the Ministry of Economy. The Government will establish the Industrial Competitiveness Council under the Ministry of Economy for solution of interdepartmental issues related to the industrial competitiveness. The Council will be headed by the Minister of Economy. The Council could include ministers or vice-ministers of the ministries concerned and representatives of the Confederation of Industrialists, the Chamber of Commerce, Industry and Crafts, scientific and other institutions. Functions of the Council would include development of the overall industrial competitiveness policy and co-ordination of actions of certain ministries and institutions during the implementation of measures for enhancing competitiveness and deciding on the issues of their financing. In addition, as in many other countries, the Council would estimate the factors of competitiveness of the industrial and business enterprises and would initiate the measures for strengthening these factors and solving strategic problems. ANNEX II APPROVED by Resolution No. 789 of 5 July 2000 of the Government of the Republic of Lithuania Measures for the Implementation of the Medium-term Industrial Development Policy and Strategy Measures Timing of measures Executors Notes I. THE STRATEGY OF HARMONISATION OF MACRO-STABILITY AND MICRO-MOBILITY; DEVELOPMENT OF BUSINESS-FRIENDLY ENVIRONMENT* 2 3 4
61. Settle taxation and incentive systems and ensure their stability; create favourable conditions for stable, innovative and profitable corporate activities. Prepare draft laws amending the Laws on Taxes on Profits of Legal Persons, Value Added Tax, Tax Administration, Excise Tax, Provisional Law on Income Tax of Natural Persons, Law on Immovable Property and other laws. The Government will set deadlines for implementation of the proposals submitted by the provisional working groups. Ministries and other public institutions which following the proposals of the Strategic Planning Committee will be authorised by the Government to implement the proposals submitted by the provisional working groups drafting strategic plan for the improvement of business environment provisional working group concerning taxation
62. Create favourable conditions to activate capital market. Prepare draft amendments and supplements to the laws and other regulations targeted at attracting new investment by means of the capital market, by modifying privatisation terms and procedures and the operation terms in the stock exchange, by reducing the number of the state-controlled entities, by promoting establishment of investment companies and investment activities, by enhancing activities of insurance companies, etc. provisional working group for activating capital market
63. Further liberalise foreign investment market, make conditions more attractive for foreign investors, especially those investing into modern high-tech manufacturing companies to be built in the country, and create possibilities for joining international clusters.
64. Reduce regulation of business and bureaucracy by amending the Law on Public Administration, Administrative Code, etc. provisional working group dealing with reduction of regulation and bureaucracy .
65. Improve export conditions, make regulation of foreign trade more efficient by creating more favourable export and re-export conditions, improve financial settlements for the exported products, improve operation of customs offices, strengthen protection of local manufacturers from import of goods detrimental to them, improve solution of tariff problems, enhance research of foreign markets. provisional working group dealing with export and foreign trade regulation
66. Create conditions for the development of electronic commerce in Lithuania: 6.
67. create legal framework for this kind of business by developing the laws on electronic signature and electronic commerce, and other regulations; 6.
68. Create the relevant infrastructure for the on-line trade; 6.3 reimburse part of expenses incurred by enterprises for training of marketing specialists to work in the Internet. Year 2001 - 2003 Ministry of Public Administration Reforms and Local Authorities, Ministry for Finance, Bank of Lithuania, Ministry of Economy, SE Infostruktūra Proposals are developed based on the EU principles for the Development of Information Society
69. Create an efficient system for enhancing enterprise awareness by connecting ministries, Lithuanian Embassies and foreign trade missions abroad, industrial associations and companies via the Internet. In the associations of the large-scale industries, establish the Association Information Centres, reimburse part of expenses incurred for developing web sites of enterprises on the Internet. 4th quarter of
70. Ministry of Economy, Ministry of Foreign Affairs, SE Infostruktūra II. ENHANCING COMPETITIVE ADVANTAGE FACTORS OF INDUSTRY
71. Create efficient public procurement control system, which would ensure the transparency of public tenders as well as fair competition. 3rd quarter of
72. Ministry of Economy, Ministry of Finance
73. Improve and support corporate governance training system, propagate the advantages of introducing information technologies in enterprises, corporate cooperation and joining international clusters. Continuously Ministry of Economy, Ministry of Education and Science, Ministry of Social Security and Labour
74. Give priority to production based on high technologies. Develop selection criteria and create the system stimulating the introduction of high technologies. 1st quarter of 2001 Ministry of Economy, Ministry of Finance, Ministry of Education and Science 11.Develop proposals concerning the management of the implementation of the Strategy and the creation of economic and institutional preconditions for acceleration of the scientific and technological progress. 11.
75. Explore the possibilities for establishing the Committee of Science and Technology under the Government or under the Ministry of Economy for coordinating research, technological development, innovation, its partial financing, monitoring and technology transfer. 11.2 Prepare a draft Government resolution concerning the establishment of the Industrial Competitiveness Council, the Council regulations and other necessary documents. 2nd quarter of 2001 Ministry of Economy, Ministry of Education and Science, Ministry of Public Administration Reforms and Local Authorities
76. Encourage and support research and development of competitive products by joining efforts, resources of enterprises, scientific institutions and research institutes, establish the procedure for supporting the projects. Continuously, 2nd quarter of 2001 Ministry of Economy, Ministry of Education and Science.
77. Develop proposals concerning the restructuring of state research institutes and promotion of their applied research in line with the needs of local economy. 4th quarter of 2001 Ministry of Economy, Ministry of Education and Science.
78. Prepare the programme for the development of research laboratories and training centres at the Universities and colleges, especially in the field of mechanical engineering, electronics and other applied sciences, intended for the laboratories and centres with a potential to develop and introduce high technologies into production. The procedure of its financing with public and corporate funds should be also established. 2nd quarter of 2001 Ministry of Education and Science, Ministry of Economy.
79. Develop a network of the state-supported certification bodies and testing laboratories. Prepare a three-year programme to support its development. 3rd quarter of 2000 Ministry of Economy with the funds allocated for the implementation of the National Quality Programme III. RESTRUCTURING OF ENTERPRISES
80. Draft a law on the Bankruptcy of Enterprises and on the restructuring of enterprises and the subordinate legislation, providing for the elimination of barriers impeding the renewal of the operation of enterprises and simplifying and accelerating bankruptcy procedures. 3rd quarter of 2000 Ministry of Economy, Ministry of Finance
81. Involve SE State Property Fund and Property Bank in the process of enterprise restructuring and activity renewal. 2000 – 2001 Ministry of Economy, Ministry of Finance IV.DEVELOPEMNT OF BUSINESS SERVICES SECTOR AS AN IMPORTANT FACTOR OF THE ENHANCEMENT OF INDUSTRIAL COMPETITIVENESS
82. Prepare the strategy of the development of business services sector intended to: 18.
83. encourage investment in training of specialists with technical and business service skills; 18.
84. provide technical and organisational assistance to the newly established specialised business services companies; 18.
85. provide support for organising the development of managerial competence of top executives; 18.
86. Encourage cooperation between industry and the related business environment; 18.
87. improve enterprises’ awareness about the needs for business services and on the possibilities of meeting these needs. 3rd quarter of 2001 Ministry of Economy, Ministry of Agriculture, Ministry of Environment V. ENSURING SUSTAINABLE DEVELOPMENT OF INDUSTRY
88. Develop and implement the programme of sustainable industry development, providing for: 19.
89. softening of social consequences of industrial restructuring: 19.1.
90. improve investment conditions in rural regions and especially in regions with high unemployment rate by encouraging the establishment of industrial parks, by providing tax incentives, etc.; 19.1.
91. ensure the sustainable development of the regions and effective utilisation of their potential; 19.
92. introduction of clean production and other environment-friendly measures: 19.2.
93. develop capacities for meeting the standards of safe handling of chemicals and preparations, for analysing the reports of enterprises (containing necessary data) on new chemical substances, and for evaluation of their potential risks to health and environment; 19.2.
94. create the system of education and development of competence of management and staff in the area of ecology and environmental management in industry; 19.2.
95. develop the certification system for corporate environmental management (according to ISO 14000); 19.2.
96. provide support to enterprises introducing environment management systems (EMS) in industrial enterprises. 2000 – 2003 Ministry of Economy, Ministry of Agriculture, Ministry of Environment, Ministry of Finance, Ministry of Public Administration Reforms and Local Authorities, Ministry of Social Security and Labour, Ministry of Education and Science The Programme is to be developed in 2000 based on the Baltic-21 Programme for industrial sector. To be implemented in 2001-
97. The measures outlined in the Programme will also create favourable conditions for the implementation of this Strategy. * The measures were developed on the basis of proposals received from the provisional working groups which have been working on the strategic plan for the improvement of business environment. Note. Implementation of strategic measures shall be financed from different sources outlined in the NPAA implementation measures, approved in the (Decision of the Government of the Republic of Lithuania of 24 May, 2000, minutes No. 26). According to the Programme, 125 million Litas will be allocated for the implementation of industrial policy in 2001-
98. In addition, part of the funds intended for the implementation of the Innovation Programme and the National Quality Programme will be also allocated for the implementation of the Strategy.