Lithuania
An attractive investment destination with serious issues with its neighbors, organized crime, and cyberthreats.
As attractive investment destination, Lithuania has high potential for development. However, the region also presents several risks that will prove challenging to organizations wishing to invest there. Two notable sources of instability include organized crime and regional instability involving Russia and Ukraine.
Lithuania’s robust domestic demand, high-quality infrastructure and tax exemptions to foreign companies certainly has its appeal. However, businesses are increasingly affected by organized crime looking to move their own products in addition to regional conflicts as an eastern EU border. Its proximity and its dependency on Russia create an environment that is vulnerable to geopolitical insecurity. Organized crime, as a source of instability, inhibits business growth by creating an atmosphere of insecurity and skepticism among potential investors.
Issues that have arisen between the EU and Russia and organized crime since the end of the Cold War have largely been centered around several elements of globalization: the movement of people and capital, environmental resources, human rights, and liberal institutions.
While Vilnius is budding in finance and the IT sector, former industrial giants in the West and Central regions are suffering. Despite positive economic outlooks, only a minority of the population is reaping the benefits. As a result, Lithuania is facing mass emigration and a widened gap of income inequality.
Organized crime undoubtedly contributes to Lithuania’s large underground economy (26% of its GDP), but leads to a host of other interconnected issues. It’s an obstacle that can inhibit business growth due to bribery, cybercrime, and exploiting impoverished regions of the country through human trafficking. To combat this business risk, implementation of UN and EU recommendations on tackling organized crime would be imperative.
In terms of regional instability involving Russia and Ukraine, organizations and institutions involved in international peacebuilding should assist in decreasing Lithuanian dependence on Russia for exports and the importing natural gas for energy. The role of businesses and the private sector could use this as an opportunity to manage global stability by investing in renewable energy and interweaving projects with its IT sector to ensure businesses are protected from interference by organized crime and related attempts at Russian cyber-attacks.
The EU’s Cyber Rapid Response Force has its headquarters in Lithuania and serves as a prime area of interest for NATO strategy. Independent groups are also emerging to combat Russian cyberwarfare interference. Investment in counter-cyberwarfare units could also prove beneficial for tech firms and improve regional stability.
In terms of trade, the EU remains Lithuania’s primary trading partner (58% of exports in 2018), followed by Russia (14% of exports). The main origins of Lithuania’s imports in 2018 were the EU (68.2%) and Russia (14.2%). Ongoing geopolitical tensions between the EU and Russia have left Baltic countries like Lithuania vulnerable.
To manage this regional conflict, there needs to be a multilateral approach. The role of business and the private sector in managing global instability could be first identified through its main investors: Sweden, the Netherlands, Estonia, Cyprus, and Germany. Understanding threats of a Russian military invasion, possible NATO dissolution, and uncertainty pertaining to Lithuanian national security appear to be vital in maintaining positive business investment projections.
Lithuania’s government should implement a stronger industrial investment strategy to reduce socioeconomic disparities in poorer regions. Additionally, institutional infrastructure and policy could benefit with the help of regional state actors and institutions to enforce policy and rule of law.
Stakeholders ranging from local communities to MNCs, non-state actors, and governmental institutions could help shape policy recommendations to address regional-specific issues to bolster security in the region – primarily as it relates to Russia - and counteract its active organized crime sector.
Lithuania’s government should implement a stronger industrial investment strategy to reduce socioeconomic disparities in poorer regions. Additionally, institutional infrastructure and policy could benefit with the help of regional state actors and institutions to enforce policy and rule of law.
Stakeholders ranging from local communities to MNCs, non-state actors, and governmental institutions could help shape policy recommendations to address regional-specific issues to bolster security in the region – primarily as it relates to Russia - and counteract its active organized crime sector. However, as we see the world recover from COVID-19 in the coming years, Lithuania’s prospects still depend upon its ability to manage internal and external vulnerabilities.
