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East & Central Europe: Country Overviews
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The flag of LithuaniaLithuania

Capital City: Vilnius
Population (Millions): 3

ECONOMIC OVERVIEW

GDP Per Capita: US$ 15,500
GDP per Sector:
Agriculture - 4.2%
Industry - 21%
Services - 76%
Currency: Lithuanian litas (LT
Ex.Rates: litai (LTL) per US dollar - 2.5337
Big Cities (>100,000): Vilnius, Kaunas, Klaipėda, Siauliai, Panevezys
Urban Population: 0.67
Languages: Lithuanian (official) 82%, Russian 8%, Polish 5.6%, other and unspecified 4.4%

Background:

Lithuania is situated in the North East of Europe on the Eastern coast of the Baltic sea and is the geographical centre of Europe. Lithuania borders with four neighbouring countries:

  • Latvia
  • Belarus
  • Poland
  • Russia

Lithuania is a value-added generating transit country and logistics centre between the Baltic Sea region, Europe and Asia. This affords the country a distinct advantage of a link between the Western, Eastern and Northern Europe.

The Lithuanian population is multi-lingual high qualified labour; workplace costs are relatively low, business infrastructure is well-developed and inexpensive, telecommunications infrastructure is excellent. Lithuania is characterised by stable political situation. From the restoration of Independence until the global economic crisis the country’s economy displayed steady growth and was oriented to both the Western and the Eastern markets.

Although in the recent years Lithuania’s economic downturn has been particularly abrupt and deep, Lithuania managed to cope with the challenges of the downturn more effectively than some of the fellow EU member states and signs of economic recovery have been noted in 2010.

Lithuania has moderately warm climate of middle latitudes going from oceanic to continental. Summer period: June to August, winter: December to February. Average annual temperature in Lithuania is approx. +7° C; average temperature is approx. +18° C in summer and -4.9° C. in winter. The country is situated in excess precipitation zone.

ECONOMIC BACKGROUND

This is an open economy with a small domestic market; the World Bank has placed it in the “above average” group in terms of the level of income. In terms of the nominal GDP Lithuania held 79th position among 181 countries in the 2009 International Monetary Fund country ranking.

Since the start of the global economic crisis the Gross Domestic Product of Lithuania in 2009 declined by 15 % decline but thanks to the country’s resilient financial system Lithuania was not compelled to assume the financial assistance measures provided by the international institutions. The assessment of the situation at the end of 2010 shows that the economy of Lithuania begins displaying first signs of recovery, export being the main driving power of the improvement.

During the crisis period unemployment rate in Lithuania increased to 13.7 %.

A major part of the total value added is contributed by services sector (~76 % in 2009), strong manufacturing industry (~21 % of GDP), well-developed agricultural sector (~3 % of GDP).

Rapidly developing sectors of the services segment include information and communication technologies, real estate and tourism.

The dominant sectors of the manufacturing industry include chemicals, chemical products, furniture, food and textile; high and medium technology sectors having the highest development potential include lasers, biotechnology and manufacturing of plastic products.

Sectors of the Lithuanian economy which account for the greatest amount of Foreign Direct Investment include manufacturing industry (manufacture of refined oil products and chemical products, food products, beverages and tobacco manufacturing), activities associated with real estate, financial intermediation sector as well as wholesale and retail trade.

LEGAL OVERVIEW

Legal regulation of franchising relations

Starting from 2001 the main piece of national legislation directly regulating legal relations of franchising in Lithuania is the Civil Code of the Republic of Lithuania (hereinafter – CC LR). Franchise-related provisions can also be found in legislative acts on competition, intellectual property and taxation.

Lithuanian legislation does not provide a definition of franchise therefore understanding of the concept is based on international practice of good will which defines it as a specific contractual license under which one individual (franchisor) grants another individual (franchisee) a right to use, on a temporary basis, a package of industrial and intellectual property rights belonging to him. According to CC LR under a contract of franchise one party (franchisor) shall take an obligation to grant to the other party (franchisee) for remuneration for a certain period or without specifying the period the right to use in the business activity of the franchisee a complex of exclusive rights which belong to the franchisor (right to the firm name, right to the trade or service mark, right to protected commercial (industrial) information, etc.), while the other party shall be obliged to pay for that the remuneration determined in the contract. A contract of franchise shall provide for the use of a complex of exclusive rights, business reputation and commercial experience of the franchisor to a determined extent (by establishing the minimum and maximum amount of use or any other form). A contract of franchise may also determine the territory of use applicable to such exclusive rights, business reputation or commercial experience, or the commercial activity within which it will be used (sale of goods, rendering of services, etc.).

Effective national legislation also provides for a possibility of sub-franchising. National legislation covers only individual aspects of the content of franchise contracts; it leaves a great deal of freedom for parties to determine their contractual liabilities. Te main requirements which apply to such contracts: written form, remuneration basis and compulsory registration in a specific national register (or registers).

General income tax of 15 % applies to franchise revenue.

Legal Aspects of Franchising prepared by International Law Firm VARUL

For a much more in-depth view of franchising in Lithuania and Latvia, please download the following PDFs:

1. "Buying a Franchise - Highway to Business Success" - PDF (4.9Mb)
2. "Study Report On Franchising Attractiveness Of Lithuanian And Latvian Border Regions" - PDF (2.8Mb)
Published By: Lithuanian Franchise Centre

 

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