Vilnius Municipal Government
Vilnius is the centre of Lithuania's political, business and cultural life. The
capital is known as a rapidly developing city of modern technologies and highly
qualified specialists. Most of major international companies, ranging from
manufacturing, telecommunications, insurance, banking businesses to highly
qualified IT, finance and accounting consultants have their subsidiaries or
offices here. Our city favourably compares to the neighbouring countries for
its relatively low real estate prices and reasonable rates of housing and
office lease, which also adds to its attractiveness as a place for doing
business. Geographically, one can hardly find a more attractive location for
doing business on the eastern Baltic Sea coast. Vilnius is within easy reach
from Riga, Tallinn, Minsk or Warsaw as well as other European countries. No
wonder that foreign companies choose Vilnius as a primary place for their
investments in Lithuania.
Vilnius Municipality strongly believes that cooperation between private sector
and public authorities will lead to success and will create stable and business
friendly environment. Vilnius has a great potential and a good opportunity to
become an important business and tourism centre in the Baltics. Therefore, the
City of Vilnius seeks to ensure a balanced long-term development of the city,
developing clear and simple investment procedures, encouraging economically
useful initiatives and implementing other related policies that would increase
its attractiveness for foreign investment.
Vilnius Municipality is pleased to present this section of the guide, which
shortly introduces to you business and social environment of our city. We
believe that your choice to invest in Vilnius will surpass your business
expectations.
Artūras Zuokas
Mayor of Vilnius
Municipal Government
Vilnius Municipality is one of 60 municipalities that constitute the level of
local self-government based on administrative and territorial division of
Lithuania. The municipal government is responsible for administration of local
issues, but it is not empowered to raise taxes, which increases its dependence
upon the central government. The decentralisation within this area is one of
the tasks for the Lithuanian Government.
The supreme governing body of the Municipality is the Municipal Council elected
by the local population for a period of three years on the basis of universal,
equal and direct suffrage. In addition to the Municipal Council, the local
self-government of Vilnius comprises the following institutions: executive
institutions (the Mayor, two vice-mayors and the Municipal Board) and a
controlling institution (the Municipal Controller). Various special issues are
attributed to seven departments within Vilnius Municipality: the department of
economy; energy and city economy department; the department of culture and
education; urban development department; the department of personnel; health
and social care department; and the department of law.
City Background
Vilnius is the largest city and the capital of Lithuania, the biggest country
in the Baltics. The city is located next to the geographical centre of
continental Europe in the south-eastern part of the country, over 300
kilometres from the Baltic Sea in the west and 35 kilometres from the Republic
of Belarus in the east. Vilnius is not only the largest city in terms of
population (589 thousand) and the area that it takes (401.3 km²), but is also a
political, business, social and cultural centre of the country. The population
of Vilnius is constantly increasing, although it has been affected by negative
birth rate and negative migration net. According to the forecast, in 2015 the
number of inhabitants is likely to reach 675-695 thousand. 20.2% of the
country's labour force is located in Vilnius and its unemployment rate is the
lowest in Lithuania - 6.4%.
Vilnius - the capital of Lithuania, the most modern city of Central and Eastern
Europe, the international centre of business, science and culture.
The modernity of Vilnius manifests itself in the new economy developed by the
modern society which lives in a distinctive environment.
New Economy
Vilnius is the gate of the world to Lithuania. The capital is attractive to both
domestic and international business. Modern communication system (the airport,
road and railway, public transport) ensures fast and convenient connection of
the city with the region and with the entire world. Vilnius is the centre of
advanced technologies and of the knowledge economy stimulating innovations both
in the country and in the entire region. The development of the modern economy
is closely related to high potential of science and education. Vilnius is a
famous centre of tourism, conferences, exhibitions, and entertainment.
Progressive Society
Vilnius is the centre of information society. This is a dynamic place of
creative work favoured by young people and ensuring resources of skilled
specialists. Vilnius is also a city with a high living standard. An advanced
social system ensures social justice and security for all inhabitant groups.
The capital of Lithuania is situated at the confluence of the Western and the
Eastern cultures, thus encouraging international cultural co-operation.
Distinctive Environment
Vilnius is a cosy and distinctive city. New urban development is carried out in
harmony with the abundant cultural and natural heritage. Vilnius is an
ecological city taking care of the unique natural environment, which is adapted
for the recreation of city inhabitants and guests.
Conditions of Success
The city boasts efficient administration. Vilnius inhabitants actively make
important contributions to the city development, which is aimed at ensuring
welfare of the people. Both Lithuanian and foreign partners are invited to
implement ambitious city development plans. Investments into business and
infrastructure in Vilnius are rapidly growing. The development of the capital
follows the principal of sustainability, in co-operation with the county and
other Lithuanian and foreign cities. The geographical location of the capital
and its political tolerance are the most important preconditions for the city
to function as a "bridge" between the West and the East.
Vilnius is a very quickly developing, youthful and dynamic city. The growth is
not spontaneous but carefully planned and organised, as it is perceived, the
city is unique by its beauty and historical background. In the strategic plan
of Vilnius Municipality for 2002-2004 long-run city priorities are set as
follows: Increase in international competitiveness of Vilnius, Development of
the new economy, Creation of a progressive society, Development of the
communication infrastructure.
Vilnius is surrounded by 40 lakes, numerous national and regional parks, nature
preservations, therefore one will be impressed by the surroundings not less
that by the city itself. The Old Town of Vilnius is among the most extensive in
Europe, occupying in total 359 hectares. Nearly 40% of buildings located in the
Old Town are of highest architectural and historical value. UNESCO included
Vilnius Old Town in the World Culture Heritage List, because of its unique
mixture of different architectural styles represented. In 2003, International
Conference on Eastern and Middle Europe World Culture Heritage will be held in
Vilnius.
Many cultural, economic and political events take place every year in Vilnius.
The cultural events include Vilnius Festival, National Song Festival, Vilnius
Days, Vilnius Jazz Festival. Vilnius is a place of wide variety of museums and
exhibitions. Vilnius Exhibition Centre LITEXPO annually hosts a number of
various commercial exhibitions and trade fairs, among others on advertising,
books, textiles and clothing, building renovation, tourism, cosmetics and
perfumery, automobiles, car accessories, transport services and logistics,
footwear, agriculture, shop, hotel and restaurant requisites, medical equipment
and pharmacy, computers and telecommunications, furniture. Total exhibition
area amounts to 31,100 m².
At present, Lithuania is still only discovering its potential in the tourism
industry. Although since 1990 the industry has seen significant growth, there
is a long way to go, particularly in terms of marketing of the country and its
capital worldwide. As approximately 50 countries (including many European
countries, UK, USA and the Nordic countries) have visa-free travel with
Lithuania, getting into country is a relatively transparent and simple process.
According to the Lithuanian Tourist Board, Vilnius firmly remains the most
popular destination for tourists visiting Lithuania. Nearly 80% of all tourists
choose Vilnius as their destination when visiting the country. The increasing
interest of tourists is fostered by rapidly improving tourism services as well
as a variety of cultural events, restaurants and nightclubs.
City's Fiscal Balance
The main sources of municipal revenues are taxes, non-tax revenues and
subsidies.
Source: Vilnius municipality
As one can see from the graph, municipal revenues decreased slightly in 2001,
but the Municipality planned an increase in its revenues in 2002. Due to
structural changes in income tax distribution, since 2002 a major part of
income tax revenues comes as subsidy.
Taxes and Subsidies from the State budget are the largest income sources of
Vilnius Municipality revenues since 2002.
The Municipality planned to receive more than EUR 68.841 million of revenues
from various taxes in 2002. Income tax and real estate taxes are the main
sources of the tax revenue.
Source: Vilnius municipality
Subsidies from the State budget amounted to EUR 72.181 million in the budget of
2002. Subsidies are used for:
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financing primary and secondary education (55.41% of Subsidies);
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financing state delegated functions (39.69% of Subsidies);
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financing projects of State investment programme (4.53% of Subsidies);
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financing other programmes (0.37% of Subsidies).
Non-tax revenue amounted to EUR 11.904 million in the Municipality's budget in
2002. Non-tax revenues include:
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revenues from property;
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levies and payments;
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revenues from premises rent;
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revenues from provided services;
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revenues from fines and confiscations;
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revenues from capital.
In 2002, the largest portion of the Municipality's income was sliced to fund
the city's social activities, which included primary and secondary education,
social care and other social programmes. That year, almost EUR 100 million was
budgeted for these activities. The Municipality planned to spend almost EUR 29
million for the maintenance of public transport and public utilities in 2002.
The remainder of the budget (EUR 25 million) is allotted to the Municipality's
activities and other programmes.
Foreign Investments
The country's government and local authorities are strongly committed to
promote foreign investments in Vilnius. The city attracts more than a half of
all foreign direct investment coming to Lithuania (62.1% of foreign direct
investment came to the capital, other two major parts of foreign capital were
directed to the port Klaipeda - 9.2% and second biggest city Kaunas - 10.8%).
It is recognised that foreign investment plays an important role in the
modernisation and growth of the country's economy.
The municipality maintains a number of units dealing with local and foreign
investments. In addition, Vilnius Old Town Renewal Agency was established
according to Vilnius Old Town Revitalisation Strategy. The Agency develops and
implements the Old Town conservation and revitalisation programmes, provides
consultations, co-operates with international organisations, etc.
Foreign companies coming to Lithuania choose Vilnius as a primary place for
their investments. Total foreign direct investment in Vilnius increased by some
16.2% in 2000, if compared to 1999, and amounted to EUR 1.68 billion or EUR
2.851 per resident.
Source: Lithuanian Department of Statistics
In 2000 the largest share of foreign investment has been directed to transport,
storage and communication; financial intermediation; and wholesale and retail
trade.
Source: Lithuanian Department of Statistics
A number of multinational companies have made significant investments in
Lithuania and particularly in Vilnius. The major investors include Philip
Morris, Shell, McDonald's, Coca Cola, PepsiCo, Siemens, ABB, IBM, DHL,
Olivetti, Minolta, Skandinasvska Enskilda Banken, Motorola, Norddeutsche
Landesbank Girozentrale, Hansabank Group.
Investment Projects
Over the last ten years, the Lithuanian Government, Vilnius Municipality and
international partners have focused on and provided funds and technical
assistance for the renewal of Vilnius Old Town.
Implementation of the Old Town renewal programmes from the State funds has
created an attractive image of the city to private investments and economic
development in the historical centre. Prestige of the Old Town as a residential
area has significantly increased.
In Vilnius Municipality, the Urban Development Department is the centre that
prepares documents for publicly organized auctions for which State-owned land
plots are put up. By the end of 2001, there were 37 land plots ready for sale
in Vilnius. Their total value exceeded EUR 4 million.
In 2001, the negotiated procedure to construct a new building of Vilnius
Municipality at Ukmerges St. took place. The winner Skanska statyba will
complete the construction of the 20-floor-building by the end of 2003 with the
total value of the project amounting EUR 25 million. Skanska statyba will
cooperate with Hanner for New City Centre project implementation. A part from a
new building of Vilnius Municipality, the New City Centre will include the
retail complex for 50 stores, coming in the end of 2003 and two multi-storey
building for offices with the high-capacity underground garage to be finished
in 2005-2006.
The improvement of the transportation system and modernization of the
transportation infrastructure has been declared as one of the priorities for
the city growth and is now considered as a key factor to secure the successful
development of the urban economy. In 2001, The Council of Vilnius Municipality
confirmed the list of priority objects of Vilnius Municipality transport
infrastructure development programme for 2002-2005, comprising Vilnius western
and southern by-passes, two-level interchange at the conjunction of T. Narbuto
St. and Laisvės ave. and the extension of T. Narbuto St. up to Pilaitės St.,
two level intersection at Geležinio Vilko St. and Ukmergės St., southern
by-pass of the Old town from P. Višinskio St. up to Aušros Vartų St. and
reconstruction of Ukmergės St. intersections between Kalvarijų St. and
Geležinio Vilko St. The estimated value of the programme is EUR 130.8 million.
The implementation of these projects will not only improve the transportation
conditions in the city of Vilnius, but will also stimulate the investment into
the remote districts of the city by making them involved in the investment
possibilities plan.
Driven by public initiative and a strong high technology sector in Vilnius, an
idea emerged to establish and develop knowledge economy clusters in the city.
In spring 2002 five projects related to the development of knowledge economy
were under implementation or were being developed:
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Material Science and Measurement Clusters (Physics);
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Šiaurės Miestelis Technology Park (IT);
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Biotechnology Science Park (Biotechnology);
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Sunrise Valley (IT, Laser technology, Semiconductor optical technology,
Nanotechnology, Environmental technology);
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Visoriai Valley (IT, Biotechnology).
Credit Rating
Standard & Poor's assigned its triple-'B'-minus long-term local and foreign
currency issuer credit ratings to the City of Vilnius (local currency
BBB+/Stable/A-2; foreign currency BBB-/Stable/A-3) on 17 April 2002.
The ratings reflect:
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Vilnius' service-driven economy and its position as Lithuania's engine for
growth;
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The stabilization of the Lithuanian intergovernmental system; and
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The city's stable financial performance, and its low debt.
Despite the transitional nature of the Lithuanian economy, Vilnius' operating
performance has been relatively stable, and budgeting has been cautious. The
five-year operating balance of operating revenues has averaged a moderate 8%
between 1997 and 2001. Vilnius has a direct debt of 18% of operating revenues,
which is low both by international standards and compared with Central and
Eastern European (CEE) peers. As the central government limits municipal
borrowing, the city is dependent on capital grants from the central government
to address its major infrastructure projects, which mainly relate to roads and
transportation.
In the context of the limited financial flexibility of Lithuanian municipalities
under the current system, Vilnius is expected to maintain an adequate financial
balance and a low debt burden over the next few years. This is due to the
positive impact of the gradual strengthening of the Lithuanian economy on tax
revenues and the significant participation of the state in the financing of the
city's capital investment needs.
Services and Trade
In the last decade, the service sector (wholesale and retail trade,
transportation, communications, education, health care, social work, public
administration, business and personal services, financial, insurance and real
estate) has been the most rapidly developing sector of Vilnius economy.
Currently, the service sector employs more than 72% of all people employed in
Vilnius.
The service sector has demonstrated a significant growth in the last few years
and new kinds of services have been introduced. The sector encompasses a
comprehensive range of services, including financial services,
telecommunications, tourism and hotels, advertising industry.
The number of restaurants, cafes and pubs is also continuously increasing. At
the end of 2000 there were 5,142 such companies in Lithuania. 23% of them (or
1,196 restaurants and other public catering companies) were located in Vilnius.
The number of shops and modern supermarkets has also gone up and the majority
of them now match Western European standards. During the period from spring
2001 to spring 2002 three huge supermarkets, one raw material store and one
trade and entertainment centre were opened in Vilnius. As a result of their
establishment more than 2,500 jobs were created and the total shopping floor
space increased by 19% as compared to the shopping floor space in Vilnius in
2000.
Service companies involved in business services, health and social care and real
estate activities generate the highest revenues. In 2000, the strongest growth
was achieved in the rent of machinery and equipment without an operator and
that of personal and household goods reaching 35% and computer related
activities accounting for 14%. The most significant decline was noted in two
areas, i.e. in organisation of recreational, cultural and sporting activities
(decline by 17%) and sewage and refuse disposal, sanitation and similar
activities (by 10%).
Industry and Production
Vilnius attracts foreign investment for a number of reasons, not only for its
relatively low operating costs as utilities, rent, building, overhead, but also
service costs, which are among the lowest ones in Central and Eastern Europe.
In Vilnius there are no problems associated with the availability of
comparatively cheap but highly qualified labour force. The city also benefits
from the well-developed transport and warehousing infrastructure, which allows
easy transportation of raw materials from other markets.
Inflation in Lithuania was 2.0% in 2000. The real interest rate on loans is
favourable for long-term investment given that the rate of return on new
capital is higher than in advanced economies. The Lithuanian banks are
expanding the range of their products and increasing the average length of
loans.
Today, Vilnius industry produces 15.1% of the country's manufacturing output.
20% out of 332,400 Vilnius labour force are employed by Vilnius industrial
companies.
Manufacture of wearing apparel, dressing and dyeing of fur, manufacture of food
products and beverages, printing and publishing are the main industries in
Vilnius. The remaining 52.4% of the industrial production sold are produced by
other industries. 50.6% (or EUR 410 million) of production by Vilnius
manufacturing companies are sold on the local market and 49.4% (or EUR 400
million) are exported. Five out of twenty one major Vilnius industries export
more than 70% of their own production. These include textiles, manufacture of
wearing apparel, dressing and dyeing of fur, leather articles, medical,
precision and optical instruments and recycling of metal waste and scrap.
Manufacture of food and beverages, printing and publishing, manufacture of basic
metals, manufacture of fabricated metal products, except machinery and
equipment, and manufacture of other transport equipment have a very strong
focus on the local market, selling there over 80% of their production. The
analysis of the structure of exported production by industries shows that the
biggest sole exporter among Vilnius industries is manufacture of wearing
apparel, dressing and dyeing of fur, which amounts to 41% of total exports.
Privatisation
Real Estate and Privatisation division of Economic department and, in certain
cases, the state enterprise State Property Fund are charged with privatisation
of municipal assets, including share blocks in private and public companies.
The list of municipal objects put for privatisation is continuously
supplemented with new, and often very attractive, offers.
In 2001 municipal assets for over EUR 3.4 million were privatised. In the first
quarter of 2002 the value of privatisation in Vilnius reached EUR 3.9 million.
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