Private Enterprise

In September the Economic Ministry completed a programme on small and medium-size enterprise development.

In the process of the development of the programme and upon its presentation, LFMI submitted to the Economic Ministry comments and proposals for its revision.

Elena Leontjeva, President, testified on the programme before the September 10 Economic Ministry sitting and held a series of discussions and meetings to advocate the conversion of fragmentary and arbitrary tax and regulatory breaks to general tax cuts and regulatory relief.

Leontjeva participated as a discussant in a September 30 conference, held in the parliament to introduce the programme. Her comments and statements, which were featured on The Lithuanian Television and in the October 2 Kauno diena, made a profound impact on the opinions articulated at the conference.

Consistent with the proposals from LFMI, a fundamental shift was made in the approach to SME development. Aid programmes as well as regulatory relief for selected businesses were considerably curtailed, and efforts focused on providing equal and favourable conditions for all businesses by identifying and removing the root causes of business problems.

Pursuant to its objectives on improving the business environment, LFMI submitted to the prime minister and Econimoc Ministry a proposal for the revision of regulations of business activity conducted by governmental agencies for the purpose of eliminating barriers to market entry and operational business constraints.

In her comments for the August 4 Lietuvos rytas, Lithuania's largest daily, Elena Leontjeva advocated the removal of barriers to market entry and operational business constraints as well as the simplification of the tax code as the only effective measures in improving the business climate in Lithuania.

As a result, the government instructed relevant institutions to draw a description of their functions and propose ways to simplify regulatory procedures.

The government proposed a bill on disqualification of enterprise managers. LFMI embarked on an extensive policy advocacy and dissemination campaign to highlight the inadequacy of the bill.

LFMI submitted to the prime minister and other cabinet members a policy paper outlining compelling arguments against the bill.

Elena Leontjeva testified on the issue before the October 18 cabinet meeting.

LFMI's criticism was featured in Lietuvos rytas, and a renowned business paper, Verslo žinios, October 10.

The text of LFMI's evaluation of the draft legislation was published in a financial newspaper, Litas, October 14, and an accounting journal, Apskaita ir kontrolė, October 15.

Rūta Vainienė, Senior Policy Analyst, commented on the weaknesses of the bill in the October 9 and 30 Lietuvos rytas and in the Veidas magazine, October 18.

Elena Leontjeva gave an interview for Vilnius Television, October 9, and was cited in the October 9 Kauno diena.

LFMI's campaign provoked intense public debates and a barrage of criticism from the business community and media. Consequently, the government returned, on its own initiative, the bill from parliament for further revision, confining its application to state-run enterprises.

Ugnius Trumpa, Vice President, spoke about government interference in private business affairs at a conference sponsored by the Šiauliai Business Consulting Centre, October 17.

Fiscal Policy

The Law on Inheritance and Gift Taxes, which was adopted two years ago, is scheduled to come into effect in January 1998. LFMI launched an active media campaign to voice opposition to the bill.

Rūta Vainienė was featured in Lietuvos rytas, September 8, and was cited in the second-largest daily Respublika, September 18.

She also appeared on a live programme of Radiocentras, September 12.

Elena Leontjeva's comments on inheritance and gift taxes were published in the September 13 Veidas and the September 23 Respublika.

Elena Leontjeva was interviewed for a discussion show of The Lithuanian Radio and The Lithuanian Television, October 8.

In response to public concern, the government submitted to the Seimas a draft of amendments, exempting from taxation inheritance and gifts received by close relatives and lowering the rate of gift tax. The Seimas revised the legislation, adopting the proposed amendments.

The Finance Ministry launched work on the revision of income tax on business activity of natural persons.

Rūta Vainienė testified on the issue before an interdepartmental council, October 20, and was invited to participate in a ministerial policy-drafting group.

Rūta Vainienė and Elena Leontjeva testified on the application of income tax on business activity before the Finance Ministry, October 23 and 28.

LFMI launched a policy advocacy campaign against the government's plans to introduce real estate tax for natural persons. In a policy paper delivered to the cabinet, LFMI expanded on the destructiveness of said tax and its application.

Consistent with the recommendations from LFMI, the government halted policy deliberations and suspended the bill.

Elena Leontjeva read a paper at a Finance Ministry and IMF conference, "Economic Analysis and Fiscal Policy in Transition Economy," September 29. She appeared on The Lithuanian Radio to discuss taxation and the economic reform process, September 26.

The LFMI's evaluation of the 1998 state budget was featured in the October 16 Lietuvos rytas.

Capital Market

Drawing on its long record of research and policy advocacy, LFMI continued work on the legal framework for privatisation. Several parliamentary committees approached LFMI with a request to evaluate and submit comments and recommendations for a revised privatisation bill.

LFMI's policy analysts developed a package of comprehensive legislative proposals.

Remigijus Šimašius, Legal Expert, testified on the bill before the parliamentary Budget and Finance Committee, September 22.

Elena Leontjeva and Remigijus Šimašius delivered papers to a Friedrich Naumann Foundation and Lithuanian Liberal Union conference, "Privatisation in Lithuania: Lessons and Opportunities," September 19.

Remigijus Šimašius authored an article "Privatisation will Liberate Human Initiative," in the Lietuvos aidas daily, September 19, and highlighted the LFMI's position on privatisation in the October 2 Lietuvos rytas.

Elena Leontjeva was cited in Kauno diena, October 2, and Lietuvos rytas, October 9.

She was a guest speaker on The Lithuanian Radio, September 19, and Znad Wilii radio, September 23.

Remigijus Šimašius spoke on the privatisation of strategic enterprises at the Layers Club of the Commercial Law Centre, September 12.

The revision of the bill resulted in considerable improvement of the provisions on the forms of privatisation. Yet, the legislation continues to demand attention and revision. LFMI will keep pressing for increased procedural transparency and automatic realease of property for privatisation by establishing clear-cut criteria and terms of privatisation.

LFMI continued its involvement in the policy-drafting process on pension fund legislation, reliance on sound principles and market forces, extensive investment in wide-ranging financial instruments and internal risk control mechanisms as the cornerstones of a viable operation of private pension funds.

Audronė Morkūnienė, Social Policy Analyst, participated in a series of meetings of a ministerial policy-drafting group working on the bill.

She testified on pension fund issues before the Tripartite Committee, September 16, and before the Securities Commission, October 17.

Elena Leontjeva and Audronė Morkūnienė held a meeting on the pension fund bill with officials from the Securities Commission and the Board for Insurance Affairs, October 27.

Audronė Morkūnienė was interviewed about the pension fund legislation on The Lithuanian Radio, October 2, and commented for the October 8 Verslo žinios.

She contributed an article "The Pension Fund Bill is About Ready but Imperfect," to the October 28 Litas.

LFMI provided demonstrative input to the policy deliberations on the legal status and operational principles of pension funds, the pension insurance model, the form of ownership, and supervisory mechanisms. LFMI initiated a series of debates with capital market and insurance experts, a prospect likely to lead to the refinement of the bill on pension funds.

Elena Leontjeva commented on the Health Care Ministry's proposals to issue licences for health insurance in Lietuvos rytas, September 11. The LFMI's position was also highlighted in the September 15 Lietuvos rytas.

LFMI was invited to participate in a project designed to evaluate the PHARE support to Lithuania's banking sector. Elena Leontjeva attended a Netherlands Economic Institute workshop in Amsterdam, October 20-22.

Audronė Morkūnienė was cited on investment funds in Respublika, October 13.

Rūta Vainienė commented on enterprise debt capitalisation in the October 16 Lietuvos rytas.

Monetary Policy

The Bank of Lithuania presented a new Monetary Policy Programme, outlining monetary policy objectives and development stages.

Elena Leontjeva and Rūta Vainienė spoke on monetary policy issues before the Council of the Light Industry Association, October 2. The association voiced support for the current monetary arrangement.

An interview with Elena Leontjeva on the abolition of the currency board and the Bank of Lithuania's programme was broadcast on LNK television from a Bank of Lithuania conference on the changing role of central banks in Europe, October 3.

She gave an interview for Vilnius Television about The Economist's speculations about the currency situation in the Baltics, October 9.

The LFMI's president was cited in Kauno diena, October 4, Verslo žinios, October 6, an accounting journal, Apskaita ir kontrolė, October 10, and the only English-language weekly in the Baltics, The Baltic Times, October 9-15.

The article "An Epitaph to the Currency Board," by Elena Leontjeva, which is published in this issue of the newsletter, was reproduced in Respublika, October 13, and Kauno diena.

LFMI's efforts helped to enhance people's understanding of the programme and the implications of its objectives. The media exposures received much response from influential political circles, the business community, and the general public. It confirmed that the current monetary arrangement based on strict, rule-bound policy protected from political pressure had gained widespread support.

Given the recent policy actions aimed at the restoration of central bank functions, LFMI has launched a monitoring programme on central bank interventions.

Other Economic Policy Issues

Elena Leontjeva attended the Second Annual Symposium of the Economic Freedom of the World Network, organised by Liberales Institute of the Friedrich Naumann Stiftung in Berlin, October 12-14.

Leontjeva's comments and proposals provided impetus for the revision of the freedom index methodology and LFMI was invited to become a freedom index network member. Presently LFMI is actively involved in the improvement of the methodology.

Rūta Vainienė contributed opinion columns to Veidas on foreign trade deficit, September 9, and on government borrowing, September 27.

Audronė Morkūnienė published widely on socials security.

She authored articles "The State Budget Will Patch Up Sodra's Cavity," Lietuvos aidas, September 19, and "Barring Day-Labourers," Respublika, October 28.

She wrote an opinion column on the problems confronting social security for the September issue of the Esu journal. Her comments appeared in the September 10 Lietuvos rytas.

She attended an EURACS conference on pension reform in Bratislava, October 29-30.

Guoda Steponavičienė, Policy Analyst, wrote an article "Lithuanian Statistics: Erring and Misleading," for the September 4 Lietuvos rytas. She commented on public transport issues in Lietuvos rytas, October 16 and 20.

Elena Leontjeva participated in the October 30th meeting of the Board of the Lithuanian Agency for Economic Development. The LFMI's president is member of the Board.

Rūta Vainienė commented on product certification in the October 9 Lietuvos rytas.