Finance

Lithuania is a transit country. This is determined by a favourable geographical position and Lithuania’s effort to rapidly develop its road infrastructure, to modernise Klaipėda Seaport, and airports in Vilnius, Kaunas and Palanga. Tremendous work is being carried out on Lithuanian railways.

The Minister of Transport and Communications of the Republic of Lithuania, Eligijus Masiulis, answers the questions put to him by the Made in Lithuania about the prospects of Lithuania as a transit country.

– How does Lithuania manage to develop important transport corridors crossing the country and assure cargo transit between the East and the West?

– Transport networks are arteries of the European single market, the moving force of competitiveness of the markets. Two international transport corridors and their branches cross the territory of Lithuania: IXB and IXD branches of Transport Corridor IX cross the country in the east-west direction and Transport Corridor I and its branch IA extends in the north-south direction. This creates the possibility for Lithuania to become an important link in the global transport logistics chain when servicing east-west and north-south trade flows making maximum use of the advantages of different kinds of transport and their effective interaction.

The largest part of investment is allocated annually to modernisation of infrastructure of international transport corridors – LTL 665,8 million was spent in 2009; this year we plan to spend more than LTL 1 billion. The most significant projects being implemented making use of these funds are as follows: reconstruction of the road sections of Via Baltica, Vilnius–Kaunas–Klaipėda, Vilnius–Panevėžys–Šiauliai–Palanga, Kaunas–Zarasai–Daugpilis; modernisation of Vilnius, Kaunas and Palanga international airports; modernisation of railway signalling and electric power supply systems; renewal of railways lines; building of bypasses; and modernisation of Klaipėda State Seaport.

It is very important for Lithuania not only to develop transport corridors that extend east-west but also those which run north-south. Last year the Republic of Lithuania approved the Plan for Urgent Actions, which are necessary to carry out in implementing the Rail Baltica project. In implementing this plan construction works of the project have already been begun; after they have been completed, Lithuanian railways will be connected with the European railway systems, the quality of cargo and passenger services will improve.

– What are Lithuania’s possibilities to take over the cargo flow of Asia going to Europe?

– Lithuania is a member of the European Union, it is situated between three big markets: the Baltic Sea Region (110 million consumers); Western Europe (340 million consumers); and the Commonwealth of Independent States (CIS) (250 million consumers). A developed competitive logistics hub in the Baltic Sea Region is a direct implication of this convenient geographical position and together with well-developed Lithuanian transport infrastructure provides good connections with the European, CIS and Asian markets.

It is natural that effective transport and logistics serve as the basis for a competitive economy. Within this context, the transport sector is one of the most rapidly developing economic sectors in our country and provides a wide range of opportunities, such as:
• high quality logistics services and international intermodal solutions;
• convenient geographical location between big markets (Western Europe, Scandinavia, CIS);
• transport hub linking Western and the Eastern Europe;
• crossroads of international transport corridors;
• competitive transport and logistics costs;
• attractive tax environment.

Lithuania has a well-developed transport system. Klaipėda Seaport is connected with the main ports in Europe and other continents by a dense network of feeder and transcontinental shipping lines. Moreover, the port is effectively linked by well-developed rail and road hinterland connections, mainly within Pan-European transport corridors. These corridors provide further connection with the Eastern neighbours of the EU - Belarus, Ukraine and Russia – and can be extended as far as China. The port has well-developed intermodal transport capacities, including maritime and land transport infrastructure. This forms a strong basis for facilitation of transport and logistic services between Europe and Asia.

– What ambitions does Klaipėda Seaport have to become a cargo distribution leader in the Baltic Region?

– Klaipėda Seaport is not only ambitious but is also already one of the leading ports in the Baltic countries. In 2008 a total of 30 million tons of freight were handled in Klaipėda Seaport. During January – May of this year as much as 15.8 per cent more cargoes were loaded in Klaipėda Seaport than during the corresponding period in 2009, and the Seaport is catching up with the volumes recorded in 2008. I am sure this is not a limit – Klaipėda Seaport aims at strengthening its positions as a container distribution centre in the Baltic Sea.

Investments of large companies into the port’s development reflect long-term planning perspectives. Stevedoring company Klaipėdos Smeltė whose controlling block of shares was bought by the port terminal operator Terminal Investment Limited closely related to Mediterranean Shipping Company (MSC), plans to establish a container distribution centre for the Baltic Sea Region in Klaipėda Seaport. Areas of the container terminal grounds are rapidly being expanded and the water area is being deepened (up to 13,5 metres) at Klaipėdos Smeltė. Next year it is planned to broaden the ship turning basin located next to the Company. After reconstruction works at the terminal have been completed, the Company’s capacities will amount to 700,000 TEU. The Company will engage in distribution of containers brought by ocean container ships in the Baltic Sea Region. Other Companies are also rapidly increasing their cargo handling capacities; the Administration of the Port also is making large investments into both modernisation of infrastructure and deepening of the Port.

– What most successful examples of recent transit through Klaipėda Seaport would you cite?

– Transit cargoes account for 40 per cent of total cargo handling at Klaipėda State Seaport. Since the Lithuanian market is relatively small, the Port is intensively looking for the ways and possibilities to increase flows of transit cargoes and we can give several successful examples.

In March 2010, after the Amendment to the Rules of Application of Levies of Klaipėda State Seaport came into effect, two new ro-ro cargo lines were opened at the Port. In the first quarter of this year, as compared with the corresponding period in 2009, the increase in ro-ro cargoes by weight amounted to 37.2 per cent. This shows an increase in the flow of transit cargoes.

Cargo handling of loose Belarusian fertilisers is on the increase. Until 2008 loose fertilisers were carried from Belarus through the port of Ventspils. However, in 2008, the terminals of Klaipėda Port signed three-year agreements on carrying Belarusian fertilisers through Klaipėda Port the annual amounts of which totalled as much as 4 million tons. During five months of this year 1,76 million tons of loose Belarusian fertilisers were reloaded in Klaipėda Port, which is 2.3 times as much as during the corresponding period last year.

Also, since 2008 the Company Klaipėdos konteinerių terminalas has started carrying Belarusian tractors to Venezuela through Klaipėda Port. This company has carried five shipments containing 500 tractors each since the beginning of the contract.

– During the first quarter of this year the amount of cargoes by railway increased by as much as 20 per cent. How do you plan to maintain this level of growth?

– An increase in the flow of cargoes has been obvious this year. According to the preliminary data, in January-May as much as 19.1 per cent more cargoes was carried by railways than during the corresponding period last year.

Transit cargoes are mainly carried by railways in the direction of Kaliningrad Region and Klaipėda Seaport. This year the flow of cargoes in the direction of Kaliningrad Region is increasing due to intensive work that Lietuvos geležinkeliai AB carries out with cargo dispatchers, forwarding agents and colleagues from railways of other countries.

Another main direction in carrying transit cargoes of Lietuvos geležinkeliai AB – through Klaipėda Seaport – has preserved the former cargo flows, and in 2010 they are on the increase. The flexible tariffs policy being pursued and concessions applied exert the greatest influence on the cargoes being carried in this direction.

– What cargo carrying tariff policy does Lithuania pursue?

– Our principle is efficiency of activities, so we apply a flexible tariff policy at the state institutions of all spheres by promptly reacting to the changes taking place and correcting the applied cargo carrying tariffs – thus creating the most favourable conditions for carrying cargoes through the territory of Lithuania.

Lietuvos geležinkeliai AB, taking into consideration the continuing economic crisis and seeking to remain competitive in cargo carrying markets, in 2009 and 2010 did not increase prices of cargoes being carried and in 2010 left the tariffs that were valid in 2008.

Seeking to maintain existing cargo flows and to attract new ones Lietuvos geležinkeliai AB proposes that its clients should conclude long-term agreements according to which the tariffs applied depend on the amount of cargoes being carried.

– What are the development prospects for the Viking inter-national container train connecting the East and the West?

– The Viking combined transport train is a joint project of Lithuanian, Belarusian and Ukrainian railways and Klaipėda, Iljiceska and Odessa Ports linking the Baltic and Black Seas by railways. This project operated successfully even in the crisis year of 2009; as compared with the year 2008, the cargo flow increased by as much as 16 per cent. This year, stable results have also been achieved. Many problems, which arose during the first years of the train’s running, have been solved. For example, today it takes as little as 30 minutes to cross the border of the European Union; the simplified customs transit procedure is applied to the cargoes being carried by this train.

In 2008, Ministers of Transport of Lithuania, Belarus and Ukraine signed a tripartite agreement on the development of cargoes being carried along the Baltic Sea – Black Sea route. This year the same countries established a tripartite co-ordination council, which will address specific issues: it will co-ordinate the activity of carrying cargoes at the international level, take care of improving cargo carrying conditions and extend the geography.

The geographical development of the Viking project is one of the most significant factors seeking to attract as many cargoes as possible. Sweden and Finland in the northern part of the route and Turkey, Bulgaria and other states of the Black Sea Region in the southern part, as well as other interested states, are invited to join the project as major co-operating countries.

Another possibility is participation in the East West Transport Corridor Project (EWTC2) aimed at developing this transport corridor as a part of the northern transport axis, an element of the TEN-T transport network. Partners from Sweden, Denmark, Germany, Belarus and Lithuania are taking part in the implementation of the project.

The Viking project is constantly presented and advertised at international events – transport and logistics exhibitions, conferences and meetings.

Due to its universality carrying cargoes in containers is becoming the main trend in the development of cargo carrying services, therefore we think that the project Viking has favourable development prospects.

– What priorities are guiding the development of the civil aviation sector? Lithuania has attracted a company offering cheap flights, so what is going to be done to make Lithuania easily accessible from any European state?

– In 2009, the main task in developing air transport was to extend geography of regular flights. The system of taxes and levies of international airports was reviewed, marketing and incentive measures applied. Airline companies launched flights along the new routes, new airline companies came to the market, for example, Brussels Airlines, Skyways, Star1 Airlines, and the existing ones increased frequency of flights.
Seeking to encourage introduction of new direct flight routes and to increase their frequency, the Route Development Programme is successfully being implemented in Lithuania. It is based on the financial contribution of the state, local authorities and the private sector making use of the incentive measures and applying them individually to each route. This incentive system is in line with the EU competitive law, does not raise any problems of illegal state assistance or market distortion, and is not too risky. This is the most optimal strategic solution to develop the network of direct flight routes in the liberalised market where many airline companies operate.

In May this year, the company Ryanair, which offers cheap flights, established its base in the international airport of Kaunas, its first base in Eastern Europe. It operates regular flights in 16 directions. We would also encourage other air carriers of the European Community to establish their bases in Lithuania.

– What are Lithuania’s prospects in assuring smooth cargo logistics between Asia and Europe?

– The formation of intermodal transport and logistics chains would significantly contribute to the existing Euro-Asian transport and logistics system. Such measures would promote intermodal transport and enable different transport modes to be used more efficiently.

Transcontinental inland transport connections between Europe and Asia create opportunities for the Baltic Sea Region to become the gateway for increasing flows of trade from the Far East, namely China. The essential precondition for the Baltic Sea Region to become a successful gateway in transcontinental transport links is fruitful cooperation with Russia. Increasing demands for international trade from the regions of Central Asia, the Caspian and Black Seas should be considered as an opportunity for the Baltic Sea Region.

Lithuania is ready to become an active player in this process. We are successfully developing the deepwater Klaipėda Seaport, also ensuring interoperability between the Russian and European railway gauge systems. The Lithuanian transport network provides good opportunities for connecting the Far Eastern, Central Asian and Russian markets with Western Europe.

– In Lithuania work has started on the European track linking Kaunas, Poland and the entire Western Europe. What are the cargo carrying prospects along this track?

– The Rail Baltica project is an important international project giving us the opportunity to strengthen Lithuania’s position as a transit state, which will help us integrate into the transport structure of the European Union, to improve the quality of transport services of the country, and to strengthen international competitiveness. The first construction works have been started this year – reconstruction of the parallel track in the railway section Šeštokai–Mockava is being carried out.

Having built the European standard railway (the track width is 1435 mm) along the existing railway (the track width is 1520 mm) or having built the parallel road (1435/1520 mm) as far as Kaunas, the possibility will be raised to develop logistics throughout the entire section from state borders of Poland and Lithuania to Kaunas. It is worth mentioning that Lietuvos geležinkeliai AB has equipped a cargo terminal in Ðeðtokai railway station whose capacities total about 2 million tons per year, an intermodal terminal is being designed in Mockava, Marijampolė region’s authorities are developing an industrial park in the village of Baraginė, and a public logistics centre is planned for Kaunas.

At the present time infrastructure is not developed in the direction of Poland and conditions on the railways mean that all carrying cargo is carried by road transport. New infrastructure will raise the possibility for competitive cargo transportation by railways.

Building of a railway is a long-term investment. Maintenance of the railway costs less than that of a highway. Having made competitive conditions equal for motor transport and railway carriers, a part of cargoes could be directed from highways to railways thus avoiding a great number of heavy-weight vehicles on the roads, traffic jams, danger to traffic safety, ever-increasing air pollution and modernisation of infrastructure that is worth billions of investments.

– What are you doing to strengthen the image of Lithuania as a convenient transit country? How will the country’s economy benefit from it?

– Lithuania’s ambitious objective is to integrate into transport and logistics chains of Asia and Europe and to become an effective gateway of logistic in these regions.

Seeking to create an attractive transport and logistics system we are going to form a network of strong logistics centres and intermodal terminals, improve the quality of logistics processes and employee training, implement intelligent transport systems solutions, expand capabilities of Klaipėda State Seaport and its interaction with road and railway infrastructure, and facilitate the crossing of the state borders.

 
On 19-20 October 2009, on the initiative of Lithuania and China, the first Asia and Europe Transport Ministers Meeting (ASEM) was held in Vilnius. The Asia-Europe Transport Development Forum approved the Vilnius Declaration thereby agreeing to create a strategic action plan for connecting European and Asian transport networks. Lithuanian business had the opportunity to directly communicate with the largest companies of China, and to look for partners in Europe and Asia.

In 2010, Lithuania will seek to build on the business possibilities created by these events. We shall discuss specific forms of cooperation with the largest transport and logistics companies of China.

The benefits that the transport sector brings to Lithuania’s economy are best reflected by balance of transport services. This is one of the most significant economic indicators of the activity of transport.

Despite hard times, the balance of Lithuania’s transport services remained positive and totalled more than LTL 2,5 billion in 2009. Simply speaking, this means that last year foreigners paid LTL 2,5 billion more to Lithuanian carrier companies than the Lithuanians did to foreign carriers. This indicator outdid the 2008 results when export of transport services exceeded LTL 1,9 billion. Furthermore, in 2009, the contribution of transport and warehousing activities into the general value added (GVA) increased from 9.6 per cent in 2008 to 11 per cent in 2009. This shows that the transport activity is beginning to ease the downturn in the country’s economy.

– Thank you for your talk.

Facts about Lithuania’s transport sector

• Every year Lithuania’s transport sector creates on average 10 per cent of the country’s general value added (GVA) though as little as 5 per cent of all the employed population works in this sector.
• Exceptional labour productivity is achieved in the transport sector: almost twice the value added is created per working hour than the general economic average of the country.
• Transport services account for about 60 per cent of the country’s export of services.
• Every Litas invested into transport infrastructure of the country guarantees a double return in five years.