- Observatory: EMCC
- Published on: 02 March 2008
Disclaimer: This information is made available as a service to the public but has not been edited or approved by the European Foundation for the Improvement of Living and Working Conditions. The content is the responsibility of the authors.
We can say that the impact of the globalisation aspects at issue – the relocation of production abroad, the acquisition of domestic companies by foreign-owned ones and the establishment of new plants by foreign-owned companies in the country – on the Lithuanian economy was not very strong. There is no special legislation in Lithuania related to the mentioned globalisation aspects; social partners look quite “calmly” at the inevitability of globalisation processes.
1. Institutional responses to globalisation
1.1. Government action to prevent or reduce the extent of off shoring/relocation
Are there any recent examples in your country (i.e. over the past 3-4 years) of the government intervening to prevent particular activities from being relocated abroad or to reduce the scale of this?
If so, please give summary details and indicate the activities concerned
Though over the latter several years, there have been few press releases on the intentions (or even threats) of national producers to relocate production to former countries of the Soviet block (Russia, the Ukraine) or East Asia (China), actually such relocation did not take place (or at least was not recorded). Therefore there are no examples of the government intervening to prevent particular activities from being relocated abroad or to reduce the scale of this.
On the other hand, we can say that economic, financial and social policies adhered to by the State are aimed at improving business and work conditions in Lithuania (for example, reduction of income tax for individuals, liberalised regulation of labour relations, etc.) and (though indirectly) at prevention or reduction of the extent of off-shoring/relocation.
1.2. Social partner attitudes towards off-shoring/relocation
Have there been cases over the past 3-4 years where the possibility – or threat – of relocation of production has featured as a factor in collective bargaining?
If so, please indicate the cases concerned, how the possibility has been used and whether its use has become a more frequent occurrence.
Several trade unions, particularly – Lithuanian Trade Union of Manufacturing Workers (Lietuvos lengvosios pramonės profesinė sąjunga, LLPPS) and Lithuanian Trade Union of Food Producers (Lietuvos maistininkų profesinė sąjunga, LMPS) mentioned cases where the possibility (or threat) of relocation of production has featured as a factor in collective bargaining. According to representatives of trade unions, such cases were recorded in enterprises operating in manufacture of food products, beverages and tobacco products as well as manufacture of textiles sectors. According to trade unions, in some enterprises threats of production relocation to other countries (Russia, Belarus, the Ukraine, China), whether jokingly or seriously, have been heard for several years each time when negotiating.
Are there any cases over the past 3-4 years where trade unions have successfully resisted plans to relocate production abroad or have managed to reduce the extent of this?
If so, please indicate the cases concerned and outline their main features Are there any cases where trade unions have accepted the need for the relocation of production – or part of it – abroad as a means of maintaining or improving the viability of companies and so of preserving some jobs and even ultimately expanding them?
If so, please briefly describe the cases concerned
Though we failed to find out any particular instances, basing on the interviews with trade union representatives we can say that the trade unions allowed somewhat more concessions than they would have allowed in the absence of the above-mentioned intentions/threats. However, according to the trade unions, it is very difficult (if possible at all) to measure the exact number of concessions made by the trade unions in negotiations in a result of the threats to relocate production and, even more so, to measure the impact on the plans to relocate production abroad.
1.3. Government policy on foreign-owned firms controlling significant sections of the economy
Does the Government in your country have an explicit policy on restricting the acquisition of domestic companies in certain sectors by foreign-owned firms?
If so, please give summary details and indicate which sectors this applies to as well as whether any distinction is made between companies according to their nationality (e.g. whether non-European companies are treated differently from European ones)
The Lithuanian Law on the Basics of National Security stipulates that “A single investor shall be prohibited from dominating in one or several economic sectors of strategic importance to national security”
According to the mentioned Law, the sectors of the Lithuanian economy which are of strategic importance to national security shall be:
- information technologies and telecommunications, other high technologies;
- finance and credit.
The Law stipulates:
Seeking to ensure the protection of interests of national security, the Government shall, in compliance with the requirements set by European Union law, submit to the Seimas for approval by a law the objects of strategic importance to national security which must belong to the State by the right of ownership and the objects in which, and the conditions under which, a proportion of the capital may be held by a private national and foreign capital meeting the criteria of European and trans-Atlantic integration provided the power of decision is retained by the State, and shall submit for approval other objects of importance to ensuring national security
In the framework of implementation of this law, the Law on Enterprises and Facilities of Strategic Importance to National Security and Other Enterprises of Importance to Safeguarding the National Security of Lithuania has been drafted. This Law lists the state-owned enterprises of strategic importance to national security in which a proportion of the capital may be held by a private national and foreign capital meeting the criteria of European and trans-Atlantic integration provided the power of decision is retained by the State.
Are there any restrictions on foreign-owned companies setting up branches or subsidiaries in your country either generally or in specific sectors?
Please indicate the sectors concerned and the stated reasons for the restrictions. Please also indicate whether the restriction apply to companies from other parts of the EU as well as from outside
Are there any sectors of the economy in which the acquisition of a domestic company has not been allowed over the past 3-4 years?
If so, please indicate the sectors concerned and the nationality of the foreign companies involved as well as the reasons given for the decision
The Lithuanian Law on Investments stipulates that in the Republic of Lithuania “foreign investment shall be prohibited in the activities guaranteeing state security and defence (except for investment by the foreign entities meeting the criteria of European and trans-Atlantic integration which Lithuania has opted for, provided this is approved by the State Defence Council)“.
1.4. Social partner responses to the take-over of domestic firms by foreign-owned ones
Have there been any recent cases (i.e. over the past 3-4 years) where trade unions have resisted foreign acquisition of domestic companies explicitly because of the nationality of the company concerned?
If so, please give summary details, indicating whether there is any evidence of different attitudes being shown towards European firms as opposed to companies from outside Europe
We can say that major processes of foreign acquisition of domestic companies took place in Lithuania earlier than 3-4 years ago – main former domestic sectors of the economy were acquired by foreign companies in the 90s. At that period of time, foreign acquisition of domestic companies was positively approached by the employees (as well as by trade unions) of these companies, because for “wild” work conditions in Lithuania this often meant coming of western traditions, culture of labour relations, respect and attention towards employees, higher wages compared to those in national companies.
Rare protests/discontents of trade unions with acquisition of domestic companies by foreign ones had more to do with allegedly worse work conditions of employees than with the nationality of the company concerned.
Have there been any recent cases (i.e. over the past 3-4 years) where domestic companies have resisted acquisition by a foreign-owned firm on the grounds of its nationality?
If so, please give summary details, indicating the nationality of the company concerned and whether there is any evidence of European and non-European companies being regarded differently in this regard.
As it was mentioned before, in this instance we can also say that sporadic cases were more related to some poorer social-economic conditions rather than to the nationality of the company concerned. For example, to this effect we can mention recently somewhat noted case when both local communities and some businessmen resisted establishment of pig-breeding farms by Danish businessmen in Lithuania. Though Lithuanians resisting this initiative give many arguments relating to the impact on environment and people living nearby, the main business argument lies in that the pig-breeding farms may ruin the rural tourism sector which is given important weight in Lithuania. There are some concerns, too, that neighbourhood of rural homesteads with pig-breeding farms will repel rural tourists.
2. Attitudes to globalisation
Have employers’ associations in your country adopted a stated position as regards the main aspects of globalisation – i.e. outsourcing or the relocation of production abroad and the acquisition of domestic companies by foreign-owned ones?
If so, please give summary details, indicating whether or not the position varies across sectors of the economy
According to the Vice President of the Lithuanian Confederation of Industrialists (Lietuvos pramonininkų konfederacija, LPK), Lithuanian employers understand inevitability of globalisation processes very well and are of the opinion that Lithuania must use its advantage as that of a small and flexible country to a maximum extent in order to adapt to the changing business conditions as easier and better as possible.
According to the representative of the LPK, production will be relocated, if it is more beneficial for Lithuanian enterprises to develop certain activities in foreign countries (due to cheaper production resources, new markets or lighter environmental restrictions).
The LPK finds it quite natural that foreign capital comes to Lithuania. According to the representative of the LPK, it is not the processes of acquisition of domestic companies by foreign-owned ones what are currently characteristic in Lithuania, but coming of foreign capital to Lithuanian enterprises and eventually resulting in joint work of Lithuanian and foreign partners.
On the other hand, we can say that there are some cases in Lithuania when interests of domestic and foreign capital (or to be more exact, small and large capital) do collide. In this respect we can mention recent debates regarding the establishment of a 'ceiling' for social insurance contributions (LT0612029I). The Investors’ Forum (Investuotojų forumas, IF) – ‘an association of the largest and most active investors in the Lithuanian economy’ – initiated a discussion on setting up a ‘ceiling’ for social insurance contributions in Lithuania. According to the IF, high taxation of labour force is one of the preconditions restricting direct foreign investment in the country. This initiative was opposed by small and medium business in Lithuania as well as all peak trade union confederations.
Have trade unions in your country adopted a stated position as regards the main aspects of globalisation – i.e. outsourcing or the relocation of production abroad and the acquisition of domestic companies by foreign-owned ones?
If so, please give summary details, indicating whether or not the position varies across sectors of the economy
Understanding inevitability of globalisation processes, trade unions, contrary to employers, look very antagonistically to outsourcing or the relocation of production abroad. It was as early as in 2005 when getting ready for likely production relocation processes trade unions, particularly the Confederation of Trade Unions (Lietuvos profesinių sąjungų konfederacija, LPSK), initiated amendments to the Labour Code of the Republic of Lithuania (LT0508101S), wherewith higher than usual severance pays was set forth in cases of dissolution of a company (except for its bankruptcy). Insertion of this amendment increased guarantees of individuals exposed to release from work in case of liquidation of the employer.
Like in previous instances, the attitude of trade unions towards a particular employer depends not on his nationality, but on the work conditions he creates for his employees. Accordingly, we can say that trade unions find it natural that foreign capital comes to Lithuania unless this makes the economic and social situation of the employed worse.
*A Eurobarometer survey on globalisation was carried out in 2003 in the EU-15 Member States. This might serve as a useful point of reference for the countries concerned, to see, for example, whether or not national attitudes expressed in the survey are in line with similar surveys which have been conducted nationally. The survey findings are available at:
Have there been any surveys of public opinion in your country over the past 3-4 years on attitudes towards globalisation or on the various dimensions of this (as listed above)?
If so, please summarise the main findings of these. Please give a breakdown, where possible, in terms of the characteristics of respondents (e.g. by sex, age, socio-economic group, education level, occupation, sector of employment or region).
Over the past 3-4 years there were no surveys of public opinion in Lithuania on attitudes towards particular dimensions of globalisation (i.e. outsourcing or the relocation of production abroad and the acquisition of domestic companies by foreign-owned ones), however the Eurobarometer 66 carried out in autumn 2006 showed that Lithuanians much more often than other EU citizens were of the opinion that globalisation had a positive impact on employment in the country. According to the Eurobarometer, this opinion was shared by 52% of Lithuanians in autumn 2006, while the average in the EU-25 amounted to 27%.
Have these surveys made a distinction between the different dimensions of globalisation (as listed above) or have separate surveys been carried out on these dimensions?
Have these surveys made an explicit distinction between globalisation and the process of European integration, by, for example, distinguishing between relocation of production to other EU Member States and relocation to countries outside the EU or between the take-over of domestic companies by EU-owned firms and take-over by a non-EU companies?
Inga Blaziene, Instiute of Labour and Social Research