A booming economy – with some legislative updates hampering the smooth sailing of corporate operations – and frictions with China and Belarus are the key updates for Lithuania, according to Glimstedt Partner Andrius Ivanauskas.
“There are two major topics that dominate the political discourse in Lithuania right now,” begins Ivanauskas. “The first one is the strained trade relation status with China.” Recently, Ivanauskas reports, Taiwan opened a representative office in Lithuania, irking the People’s Republic of China. “The representative office uses the word ‘Taiwan’ in its official name, which incurred China’s anger and led to some friction for Lithuanian companies that do business with the Asian giant,” he reports. “I expect that some of the trade relation hurdles might even end up being solved with the help of the European Union.”
Furthermore, Ivanauskas points to the current status of Belarus. “With the sanctions firmly in place, Belarus apparently organized swaths of migrants flowing over into Lithuania, Latvia, and Poland – a lot of them from Iraq,” he says. “With Lithuania being a close neighbor, and the sanctions being a political constant, there has been blowback in terms of doing business as well.” Ivanauskas points to a recent example where the CEO of Lithuanian Railways had to step down due to having continued transportation of Belaruskali production. “The CEO was most efficient in his work, alas the political ramifications would have been too big and he had to be relieved.”
Following these political implications, there are two areas of consequence when it comes to legislation. “Firstly, speaking of the sanctions – it is difficult for the Lithuanian government to implement international sanctions in a way that the international partners to most of our businesses are happy and not suffering much.” He believes that the Lithuanian parliament will, in the end, introduce sanctions into the broader legal framework, but that it might lead to some blowback, business-wise.
“Secondly, there is the matter of the EU-wide push for introducing legislative mechanisms towards scrutinizing FDI more,” Ivanauskas reports. “Lithuania has passed a law to this end some while back, but the implementation has ushered in some difficulties.” He provides the example of a Spanish railway construction company: “The company in question was denied their investment because some of their ultimate owners were a Chinese company. You can offer, from this example, that businesses might face problems while operating freely due to this law being implemented.”
However, despite such obstacles, the Lithuanian economy is booming. “Our GDP numbers were great, even with the pandemic,” Ivanauskas says. “Our pre-pandemic momentum was that of such growth that COVID-19 only made a small dent – but we kept right on going.” And, building on a 2021 that saw “a record number of M&A transactions,” Ivanauskas highlights which sectors are booming.
“Obviously, healthcare is quite active,” he says. “Closing is expected to occur soon on the merger of two of the largest private healthcare clinics in the country.” In addition, he mentions that the IT sector has been a star performer, with “many startups getting their Series A and Series B – to the tune of millions of dollars.”
Finally and somewhat surprisingly, Ivanauskas reports that the entertainment sector was in the top three most active ones. “Despite the pandemic, there has been a lot of activity in this area, most notably with the attempted merger of some of the largest cinema chains in the Baltics,” which was blocked in Lithuania on competition grounds. Overall, Ivanauskas describes a vibrant economy, with active business sectors poised on an upwards trajectory.