President Algirdas Brazauskas argues that his country has learnt from past mistakes

What are your priorities in the next twelve months?

Twelve months is a rather short period of time and it is hardly possible to accomplish anything on a large scale. The priority which holds our main attention is economic and social stability, establishment of democratic principles and good relations with foreign countries.

Our longer-term priorities are set by circumstances. One of the key priorities that will require our constant attention is problems that have accumulated in the energy sector, which determines the functioning of the entire economy. These problems are: how to use energy resources in a more rational way, improve the payment system between energy consumers and suppliers and review energy tariffs. Energy issues are especially urgent because our country has to import almost all energy resources: oil, natural gas, coal and nuclear fuel. About one-fifth of the electricity produced in our country is exported. Another group of problems or, in other words, another priority that will also require a lot of time and financial resources, is defusing the banking crisis. In this regard, we are implementing, together with international financial organisations, a plan of bank restructuring, following which commercial banks will be accorded more freedom for manoeuvre so that they can solve the accumulated problems by themselves. The first steps show that we have chosen the right direction.

Lithuania has been less successful in attracting foreign investment than Latvia and Estonia. Why?

It is difficult to evaluate the level of foreign investment in the Baltic states. Each state applies different evaluation methods and the presented data do not always reflect the real situation. The situation in Estonia, which maintains broad economic co-operation with Finland, is, perhaps, better than in the other two republics. And, in general, if we lag behind, it is because of the shortcomings of the privatisation process and the mistakes made in creating a favourable economic climate for joint and foreign capital ventures. During the first stage of privatisation, Lithuania applied a system of investment vouchers and privileges to the employees of enterprises and not to foreign investors. As a result, privatisation was rather fast, albeit with only modest foreign participation. Meanwhile, Estonia and Latvia aimed at selling their enterprises for a real price and did not forget foreigners' interests. As a result, they succeeded in attracting investment. It is also obvious today that we should make more effort to inform foreign entrepreneurs about the existing opportunities for investing funds into Lithuania's economy on mutually beneficial terms. We are therefore trying to provide more information to our potential foreign partners.

What are the government's plans to boost levels of foreign investment?

We understand only too well that without foreign capital, new technology and foreign intellectual assistance, we shall not be able to restructure our economy and integrate successfully into the European Union. We are carrying out a broad range of projects in this area. First, we are trying to introduce fundamental changes in the economic environment to make it more attractive for foreign investors. Much effort is being put into the preparation of legislation to conform with EU requirements. The activity of the Lithuanian Investment Agency is gaining speed. Its main tasks are to expand relations between Lithuanian and foreign entrepreneurs and to mediate in preparing economic agreements. We devote more attention to publishing material to acquaint foreign business people with the business environment in Lithuania. While creating an open market economy, our main task is to restructure, without delay, our production capacity to ensure the competitiveness of our products and services, lift living standards and ensure the protection of human rights.

Lithuania, along with the other Baltic states, is looking to increase trade links with the EU. How successful have these moves been? What does Lithuania have to offer EU countries as a trading partner?

Before the restoration of independence in the Baltic states in 1991, all three of them were integrated into the Soviet Union; there was practically no foreign trade to speak of. A marked contraction and even collapse of the traditional eastern markets forced the Baltic states, including Lithuania, to take resolute steps and redirect their trade towards the West, adopt Western know-how and create products that could be sold in the West. Therefore, although Russia is still Lithuania's biggest trade partner, its share in Lithuania's foreign trade decreases from year to year.

Due to constant efforts in redirecting its foreign trade from eastern to western markets, Lithuania exported more to the west than to the east (53.3 and 46.7 per cent respectively) for the first time in 1994. The EU countries are, of course, our biggest trade partners in the West. Trade with the EU countries has almost doubled since 1993, largely as a result of the free trade agreement between Lithuania and the EU which came into force on 1 January 1995.

Relations with Russia are a key foreign policy issue. To what extent does the issue of the Kaliningrad enclave hamper the development of better relations?

Relations with Russia are one of the priorities of our foreign policy. Integration into the West should be accompanied by good relations with our neighbours. Lithuania seeks to maintain friendly relations with all its neighbours, and it is especially important to us that Lithuania and Russia succeed in sorting out a number of difficult issues. Relations between our two states are business-like and constructive. Despite tragic historical events, there are no clearly expressed anti-Russian tendencies in our society.

The Kaliningrad region has played an especially significant role in Russian/Lithuanian relations. This region - our immediate neighbour - is an important economic and trade partner. New forms of co-operation have evolved in the spheres of culture, science and education. Direct relations between people, cultural and arts figures and entrepreneurs have always been and should remain a sound foundation for relations between Lithuania and the Kaliningrad region.

We could prepare and implement a number of joint projects in different spheres: transport, tourism, communications or environmental protection. Mutual confidence and interest as well as goodwill are the essential prerequisites.

Under the Treaty On the Basis For Relations Between States, Lithuania and Russia have recognised each other's territorial integrity. Lithuania does not raise the question of the independence of the Kaliningrad region. The ideas harboured by individual Lithuanian politicians concerning the revision of the status of the Kaliningrad region are personal opinions and have nothing to do with Lithuania's official position. I believe that all people are interested in rapid social and economic development of the region, its openness to new ideas and initiatives and co-operation among neighbours. The active participation of the region in economic co-operation, favourable conditions for investment and business activity, modern communications and political stability fully correspond with Lithuania's interests. We all wish Kaliningrad to became a zone of active international entrepreneurship. We hold regular meetings with the authorities of the Kaliningrad region at which we try to find solutions to emerging problems and to increase mutual confidence. We would like to see the Kaliningrad region become an integrating force in the Baltic Sea region, and not a centre of tension. I believe that this is exactly what is meant by those who speak about the necessity to ensure demilitarisation and confidence-building measures.

Are you concerned that the outcome of Russian presidential elections could see a serious deterioration in relations with Russia?

Lithuania supports democratic reform in Russia. However, the elections should not affect the interstate relations which I can describe as stable and good. During the last five years, Russia has learnt lessons of democracy which have resulted in irreversible changes. This gives hope with regard to its further foreign policy direction.

It is understandable that the presidential elections are a very important geopolitical factor and stir up great interest in Lithuania. Lithuania will always respect the choice of the Russian people and preserve good relations with this country based on mutual benefit. Lithuania, like the Western states, does not want to isolate Russia. We strive for co-operation and try to forge our relations with Russia by including it in all European processes. This is how we visualise the future of our relations against the backdrop of building a stable, secure and prosperous Europe.

Where do you see Lithuania at the turn of the century?

Lithuania's independence on March 11 1991 returned the country to the world community of democratic states. It became a member of the UN and accepted, by a unanimous vote, into the Council of Europe. In their efforts to create the institutions of a free and democratic state, our people and all political parties and movements seek to transform the formerly centralised economy into a free and modern market economy.

We believe that at the turn of the century all the principles of a democratic state will be firmly established, with a reviving industry and agriculture and a developing economy. All this will facilitate integration into the political and economic life of Europe. We hope that, during the last four years of this century, GDP will grow by at least 17 per cent, and the private sector will grow to 70 per cent of the total economy.

We are convinced that during the last years of this century we shall make considerable progress towards harmonising Lithuania's legislation with that of the EU and, having exploited the opportunities of the six-year transition period, we shall be ready to join the Union.

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