2017 SBA Fact Sheet Lithuania

Transcription

1 2017 SBA Fact Sheet Lithuania Key points Past & future SME performance 1 : Between 2012 and 2016, SMEs experienced strong growth in Lithuania. Value added increased by 28.1 % and employment grew by 14.4 %. SMEs value added exceeded its pre-crisis 2008 level by 24.5 %, but employment remained 2.6 % below the 2008 level. This slower employment growth can be explained also by a 2.5 % drop in the labour force between 2008 and 2016 due to a combination of ageing and emigration. The outlook for SMEs in Lithuania is reasonably favourable. SMEs value added is predicted to rise by 11.6 % between 2016 and 2018, while SME employment is forecast to increase by 1.4 %. As a result, approximately new jobs are likely to be created by SMEs over this period. Implementing the Small Business Act for Europe (SBA): Lithuania performs above the EU average in most SBA areas. The country performs in line with the EU average on skills & innovation, single market and access to finance, but it lags behind the EU average in second chance. Since 2008, Lithuania has made substantial progress in implementing the SBA. It has improved its performance in a number of SBA areas, most notably in responsive administration, single market and access to finance. SME policy priorities: The insolvency framework needs to be strengthened, including by helping distressed businesses avoid bankruptcy and encouraging honest entrepreneurs to re-start. On access to finance, there is still significant room for improvement, especially on access to bank loans. Venture capital financing needs to be increased, and SME financing sources diversified and expanded, such as through microcredits. Better investments in human capital are needed, in particular in terms of ICT skills. Number of persons employed in SMEs (Index: 2008=100, estimates as from 2015 onwards) Value added of SMEs (Index: 2008=100, estimates as from 2015 onwards) SMEs in Lithuania SMEs in the European Union SMEs in Lithuania SMEs in the European Union About the SBA fact sheets The Small Business Act for Europe (SBA) is the EU s flagship policy initiative to support small and medium-sized enterprises (SMEs). It comprises a set of policy measures organised around 10 principles ranging from entrepreneurship and responsive administration to internationalisation. To improve the governance of the SBA, the 2011 review of it called for better monitoring. The SBA fact sheets, published annually, aim to improve the understanding of recent trends and national policies affecting SMEs. Since 2011, each EU Member State has appointed a high-ranking government official as its national SME envoy. SME envoys spearhead the implementation of the SBA agenda in their countries. Internal market, industry, entrepreneurship and SMEs

2 Table of contents Key points SMEs basic figures SBA profile SBA principles Think Small First Entrepreneurship Second chance Responsive administration State aid & public procurement Access to finance Single market Skills & innovation Environment Internationalisation Interesting initiative SMEs basic figures Class size Number of enterprises Number of persons employed Value added Lithuania EU-28 Lithuania EU-28 Lithuania EU-28 Number Share Share Number Share Share Billion Share Share Micro % 93.0 % % 29.8 % % 20.9 % Small % 5.8 % % 20.0 % % 17.8 % Mediumsized % 0.9 % % 16.7 % % 18.2 % SMEs % 99.8 % % 66.6 % % 56.8 % Large % 0.2 % % 33.4 % % 43.2 % Total % % % % % % These are estimates for 2016 produced by DIW Econ, based on figures from the Structural Business Statistics Database (Eurostat). The data cover the non-financial business economy, which includes industry, construction, trade, and services (NACE Rev. 2 sections B to J, L, M and N), but not enterprises in agriculture, forestry and fisheries and the largely non-market service sectors such as education and health. The following size-class definitions are applied: micro firms (0-9 persons employed), small firms (10-49 persons employed), medium-sized firms ( persons employed), and large firms (250+ persons employed). The advantage of using Eurostat data is that the statistics are harmonised and comparable across countries. The disadvantage is that for some countries the data may be different from those published by national authorities. SMEs play an even larger role in the non-financial business economy in Lithuania than is the case on average in the rest of the EU. The share of SME value added is 69.9 %, compared to the EU average of 56.8 %. SMEs account for three quarters of employment in Lithuania, whereas the EU average is two thirds. Micro firms are responsible for almost one third of employment, which is similar to the EU as a whole. Medium-sized firms contribute 27.7 % of value added this is a high figure and substantially more than the EU average of 18.2 %. The average number of people employed at SMEs is 4, which is on a par with the EU average. In , SMEs experienced strong growth. Value added increased by 28.1 % and employment grew by 14.4 %. Large firms generated similarly strong employment growth, but a more moderate rise in value added of 17.6 %. In , SMEs continued to grow strongly, with value added and employment rising by 3.7 % and 3.3 % respectively. SME value added exceeded its pre-crisis 2008 level by 24.5 %, but employment remained 2.6 % below the 2008 level. This slower growth in employment can be explained also by a 2.5 % drop in the labour force in due to a combination of population ageing and emigration SBA Fact Sheet Lithuania 2

3 The overall strong SME growth was partly driven by the professional activities sector. SME employment in this sector rose by 31.9 % in , while SME value added increased by 43 %. This growth is mainly driven by outsourcing activities of international firms which have set up shared service centres in Lithuania. In June 2015, approximately people were employed in Lithuanian shared service centres. The key reasons given for choosing Lithuania for foreign direct investment were the relatively low operating costs, and the high level of education and language skills of the workforce 3. SME value added in the accommodation and food services sector grew strongly by 34 % in , while SME employment increased by 16.3 %, slightly more than the average increase in overall SME employment. The rise in value added was driven by the restaurants and grocers subsector, in which value added increased by 46.5 %. Although the increase in value added in accommodation was weaker by comparison, at 14.5 %, the increase in employment was strong, at 21.3 %. The growth of the entire sector is likely to have been driven by an increase in tourism in the Baltic countries as a whole, with Lithuania ranking first in terms of overnight stays 4, which increased by 21.3 % in However, the rise of non-professional accommodation providers through online booking platforms such as Airbnb has increased competition in this sector and is the likely explanation for lower growth in value added than in employment 6. Furthermore, hourly labour costs for this sector increased substantially, by 15.7 % in alone, 7 because of several increases in the minimum wage over the past few years 8. In 2016, SMEs in the manufacturing sector provided about one fifth of total SME jobs. This sector has not yet fully recovered from the crisis, with employment remaining 4.8 % below its 2008 level. In , SME employment grew by 13.5 %, while value added increased by 26.3 %. It is notable that almost all of the growth in value added took place in the years prior to 2014, after which growth levelled off, slipping to just 0.2 % in As in most other sectors, growth in value added was hampered by increases in labour costs per hour worked, and was limited to 11.4 % in In 2016, there were a total of business registrations 10, 22.3 % less than in These were mainly the result of continuing EU trade sanctions against Russia, which reduced the volume of trade in Namely, as from 2015, setting up new business enterprises, especially in the trade and transport sectors, has slowed due to the imposition of reciprocal sanctions between the EU and Russia, which influenced the deceleration of the volume of international trade. Companies operating in the construction sector faced difficulties mostly driven by insufficient demand for their work in the domestic market. However, compared to 2015, the trend in new registrations is upward, with an increase of 3.3 %. In 2016, 11.2 % of all employment in Lithuania was self-employment 12, which is lower than the EU average of 14 %. However, this share has been rising consistently in Lithuania from its level of 9.1 % in In terms of de-registrations, there was a rise of 498 % in to a total of , resulting in a net loss of businesses. Nonetheless, these high numbers do not reflect a deterioration in the business economy, as removals from the register include firms whose liquidation started before 2004, In addition, there was a 4.9 % rise in the number of active businesses between 1 January 2016 and 1 January In 2014, firms 11 % of all firms with at least 10 employees in the business economy were high-growth firms 14. This is slightly more than the EU average of 9.2 %. The outlook for SMEs in Lithuania is reasonably favourable. SME value added is predicted to rise by 11.6 % in , while the forecast for SME employment is an increase of 1.4 %. As a result, approximately new jobs are likely to be created by SMEs in this period. In contrast, job losses of about are expected in large firms in the non-financial business economy SBA Fact Sheet Lithuania 3

4 2. SBA profile 15 distributed as low-interest loans and loans with favourable terms to SMEs and start-ups in Lithuania. On skills & innovation, the increasing lack of qualified applicants to fill open positions is the main concern across all industries. A broad range of measures has therefore been introduced to tackle this issue since Implemented measures mostly focus on support to R&D and innovation activities in SMEs, the gaining of qualifications through training and work placements, and access to external expertise. Lithuania performs above the EU average in most SBA areas, while the country performs in line with the EU average on skills & innovation, single market and access to finance. By contrast, Lithuania s weakest performance continues to be in second chance, which has seen no improvement since last year s SBA fact sheet. Overall, Lithuania has made substantial progress since 2008 in implementing the SBA. The country continues to implement a broad range of measures to stimulate the business environment. Two areas stand out in particular in terms of the number of measures implemented and the progress made: these are access to finance and skills & innovation. However, despite the progress made on access to finance, one of the biggest issues faced by SMEs is the high rejection rate of loan applications, combined with unacceptable loan conditions offered by banks. In response to this problem, many new financing instruments have been created since Access to finance was also improved for traditional SMEs thanks to the growing recognition of microfinance as a cost-effective tool for both social inclusion and regional economic growth. In addition, in 2010, the Lithuanian Government used part of its European Social Fund (ESF) allocation to promote entrepreneurship in the country through a financial instrument called the Entrepreneurship Promotion Fund. More than EUR 14 million in ESF funds were The Think Small First principle has also seen a number of measures implemented. Systematic efforts to reduce the administrative burden have also been made in the area of responsive administration. However, there is still plenty of room for improvement in these two areas. By contrast, only moderate progress was made on state aid & public procurement. Although Lithuania has addressed many of the issues for this SBA area, there is still a need for further improvement. The key challenge is to encourage SMEs to compete for public contracts. In 2016 and the first quarter of 2017, which is the reference period for policy measures in this year s SBA fact sheet, Lithuania adopted or implemented a substantial number of policy measures (24) addressing 9 out of the SBA s 10 policy areas, with 9 measures addressing more than one single SBA area. Overall, stakeholders acknowledge that the progress made in implementing the SBA was substantial during the reference period. In terms of SBA impact, there is a consensus that progress in 2016 was most significant for skills & innovation (eight measures) and access to finance (three measures). Access to finance is also the secondary target of four of the measures aimed at skills & innovation, two measures aimed at environment and one measure aimed at the responsive administration policy area. Additionally, four other SBA areas entrepreneurship, responsive administration, access to finance and environment are each the target of three measures. The most significant single measure adopted in 2016 was the amendment to the Law on Small and Medium-sized Business Development, which falls under Think Small First. This amendment provides a new definition of SMEs, describes the forms of state support to SMEs and sets out the status and functions of the Small and Medium-sized Business Council SBA Fact Sheet Lithuania 4

5 Progress over time (Compound annual growth rate ) SBA performance of Lithuania: state of play and development from 2008 to Low Performance, Progress High Performance, Progress 12% 8% Legend: % Low Performance, High Performance, Deterioration Deterioration -12% Performance Variation from the EU average (in standard deviations; EU average=0) Note: The scores presented in the chart above are not fully comparable to those displayed in previous versions of the fact sheet. This is due to a review of the framework of indicators used to assess performance across the SBA principles. Only the aspects with sufficient background data are presented. The value for progress over time was set to 0% in case of insufficient data and marked in the above chart by a diamond shape. For more details, please consult the methodological note on the webpage of the SME Performance Review: 4% 0% -4% 1. Entrepreneurship 2. 'Second chance' 3. 'Responsive administration' 4. State aid & public procurement 5. Access to finance 6. Single market 7. Skills & innovation 8. Environment 9. Internationalisation 2017 SBA Fact Sheet Lithuania 5

6 3. SBA principles Think Small First The Think Small First principle is meant to be a guiding principle for all policy- and law-making activities. It requires policymakers to take SME interests into account at the early stages of the policy-making process. The principle also calls for newly designed legislation, administrative rules and procedures to be made simple and easy to apply. Since 2008, some key mechanisms for the Think Small First principle have been implemented, including common commencement dates for new laws, the regulatory impact assessment and consultations with key SME stakeholders: The regulatory impact assessment is largely in place. A number of laws and resolutions have laid down the requirements for better regulation. The administrative burden is measured and monitored. The Commission for the Supervision of Better Regulation Action produces plans for reducing administrative burdens and monitors their implementation. A programme for screening all licences and permits has led to hundreds of licences being reviewed. It is estimated that the administrative burden for business was reduced by EUR 2.23 million in 2015 alone. Public consultations with SME stakeholders occur regularly in the legislative process (in primary and secondary legislation) and there is an opportunity to influence the proposals. The Small and Medium-sized Business Council, which represents the business community, convenes regularly to discuss and communicate its opinions on matters important to SMEs. Common commencement dates are in place and complied with. A Commission proposal permitting Member States to increase the threshold for VAT registration to EUR has been adopted. Better regulation reforms have introduced requirements for impact assessment, stakeholder engagement and administrative burden reduction at municipal level. In addition, the reform of inspections has introduced some innovations, including the requirement for the inspection of institutions that provide methodological assistance to economic entities. However, there is still room for improvement on how Think Small First mechanisms operate. The SME test (used to assess the impact of regulation on SMEs) is not regularly used. The regulatory impact assessment is not consistently used and quality control could be improved. There is no clear guidance on the laws and regulations that should undergo a more in-depth regulatory impact assessment. All ministries are required not to increase the overall administrative burden, but this principle needs to be better implemented and enforced. SMEs sometimes feel that they are not sufficiently consulted or that their comments are not taken on board. SMEs feel that expensive regulations are still imposed on them and that compliance costs are too high. Even though key Think Small First principles were already adopted in previous years, some progress was made in 2016 and the first quarter of A single but significant measure was implemented that may affect many SMEs: this is the amendment to the Law on Small and Medium-sized Business Development (amendment No XII-192 adopted on 12 January 2017). The amendment provides a new definition of micro, small and medium-sized enterprises, describes the forms of state support available to SMEs and sets out the status and functions of the Small and Medium-sized Business Council. The amendment creates preconditions for small and medium-sized business development and the promotion of entrepreneurship SBA Fact Sheet Lithuania 6

7 3.1 Entrepreneurship Variation from the EU average (measured in standard deviations, EU average=0) Early stage entrepreneurial activity (%); 2014; Lithuania: 11.32; EU avg: 7.8 Early stage entrepreneurial activity for female population (%); 2014; Lithuania: 6.78; EU avg: 5.45 Established business ownership rate (%); 2014; Lithuania: 7.84; EU avg: 6.7 Opportunity-driven entrepreneurial activity (%); 2014; Lithuania: 43.78; EU avg: 47.9 Entrepreneurial intentions (percentage of adults who intend to start a business within 3 years); 2014; Lithuania: 19.65; EU avg: 12.1 Entrepreneurship as a desirable career choice (%); 2014; Lithuania: 68.81; EU avg: 56.9 High status given to successful entrepreneurship (%); 2014; Lithuania: 58.33; EU avg: 66.6 Media attention given to entrepreneurship (%); 2014; Lithuania: 55.14; EU avg: 53.3 Entrepreneurship education at basic school (1-5) ; 2014; Lithuania: 2.37; EU avg: 2.02 Entrepreneurship education at post-secondary levels (1-5); 2014; Lithuania: 3.07; EU avg: 2.79 Share of high growth enterprises (%); 2014; Lithuania: 11.04; EU avg: Note: Data bars pointing right show better performance than the EU average and data bars pointing left show weaker performance. Lithuania performs above the EU average in this SBA policy area. All but one of the indicators remained unchanged from the last year s SBA fact sheet, with the exception of the newly added indicator assessing the share of high-growth enterprises in Lithuania. The country scores above the EU average in this category, demonstrating the government s continued efforts on the scale-up of businesses. Since 2008, a range of measures have been implemented to help entrepreneurs and start-ups grow. Altogether, the measures have contributed to significantly improved conditions for entrepreneurship. Entrepreneurship education has been introduced in secondary and tertiary education. Students now have the opportunity to develop a positive attitude towards entrepreneurship and can gain practical skills through experience. Business support programmes, tools and services have been introduced to support would-be or young entrepreneurs. One such programme is the First year of business service basket, which provides a package of business consulting and training services for start-ups. There is a range of schemes providing financial support to entrepreneurs. The Entrepreneurship Promotion Fund is an example of a key finance-related measure. It helps SMEs to take advantage of low-interest loans and free training to set up businesses. Early-stage, innovative and highpotential companies have access to seed and venture funding. The start-up ecosystem in Lithuania is relatively young and dynamic. Several major infrastructure projects have been implemented in recent years, also providing co-working space for start-ups. On the investment side, there are six local venture capital funds, four of which were established under the European JEREMIE initiative. Six more are to be set up by The largest microcredit programme for entrepreneurs is the Entrepreneurship Promotion Fund run by Investment and Business Guarantees Ltd (INVEGA). The strength of its approach lies in combining individual entrepreneurship training and microcredit financing. Start-ups can get advice and consultancy support from Enterprise Lithuania, a national agency for promoting entrepreneurship. Most of the key SBA principles in this area have been implemented. The one issue yet to be addressed is support for business transfers. Three measures were implemented in 2016 and the first quarter of 2017: 2017 SBA Fact Sheet Lithuania 7

8 - Legislative amendments to ease the process of acquiring residency rights for citizens of non-eu/eea countries who wish to establish innovative businesses in Lithuania (a Start-up Visa ): the new legislation will remove much of the bureaucratic burden that start-up founders and skilled employees face when relocating to Lithuania. New immigration rules will fast-track the permanent residency process for high-tech, early-stage start-ups that have a scalable and innovative product or business model. - The Social Business Guide was published. The guide defines the concept of a social business, relates it to other economic entities and provides practical information for those interested in starting a social business. - The Business Consultant Network was launched. This brings expert knowledge together in one place to provide qualified and personalised services to entrepreneurs implementing their business ideas during the first year of activity and in later business development. Consultancy services are provided in the areas of business planning, strategy, taxation, legal issues, finance, technology and management. The services are provided in the form of a consultancy cheque. 3.2 Second chance Variation from the EU average (measured in standard deviations, EU average=0) Strength of insolvency framework index (0-16); 2017; Lithuania: 8; EU avg: Time to resolve insolvency (in years); 2017; Lithuania: 2.3; EU avg: 1.97 Cost of resolving insolvency (cost of recovering debt as percentage of the debtor's estate); 2017; Lithuania: 10; EU avg: Fear of failure rate (%); 2014; Lithuania: 44.77; EU avg: Note: Data bars pointing right show better performance than the EU average and data bars pointing left show weaker performance. Second chance refers to ensuring that honest entrepreneurs who have gone bankrupt get a second chance quickly. Lithuania performs below the EU average on second chance, with the fifth lowest score in the EU. The country s performance remained unchanged in comparison to last year s SBA fact sheet. Overall, a moderate number of measures have been introduced in this SBA area since 2008, with insolvency always having been Lithuania s focus under this principle. Between 2013 and 2015, amendments to corporate and personal bankruptcy legislation were enacted to optimise insolvency procedures. Steps were taken to prevent fraud, to make procedures more transparent and faster, and to strengthen companies ability to reorganise. Efforts have been made to reduce the stigma of failure, including national information campaigns. In 2016 and the first quarter of 2017, a single significant measure was implemented: this was the amendment of the law to optimise insolvency procedures. The government approved a resolution setting the recommended cost rates for bankruptcy administration and the administrator s remuneration guidelines. The resolution follows and complements the 2015 amendments to the Bankruptcy Law. The new rules clarify how bankruptcy expenses are calculated and should thus reduce disputes over bankruptcy administration costs. There is still room for improvement under this SBA principle, in particular for the support service to help distressed businesses avoid bankruptcy, and on the treatment of re-starters to make sure that they are on an equal footing with new start-ups SBA Fact Sheet Lithuania 8

9 3.3 Responsive administration Time to start a business (in calendar days); 2016; Lithuania: 4; EU avg: 3.3 Variation from the EU average (measured in standard deviations, EU average=0) Cost of starting a business (in euros); 2016; Lithuania: 135; EU avg: 360 Start-up procedures (number); 2017; Lithuania: 4; EU avg: 5.25 Paid-in minimum capital (percentage of income per capita); 2017; Lithuania: 20.3; EU avg: Time required to transfer property (in calendar days); 2017; Lithuania: 3.5; EU avg: Cost required to transfer property (percentage of property value); 2017; Lithuania: 0.8; EU avg: 4.79 Number of tax payments per year; 2017; Lithuania: 11; EU avg: Time it takes to pay taxes (hours per year); 2017; Lithuania: 171; EU avg: Cost of enforcing contracts (percentage of claim); 2017; Lithuania: 23.6; EU avg: Fast-changing legislation and policies are a problem for doing business (percentage of respondents who agree); 2015; Lithuania: 36; EU avg: 64 The complexity of administrative procedures is a problem for doing business (percentage of respondents who agree); 2015; Lithuania: 34; EU avg: 62 Burden of government regulations (1=burdensome, 7=not burdensome); 2016; Lithuania: 3.18; EU avg: 3.3 Competency and effectiveness of government staff in supporting new and growing firms (1-5); 2014; Lithuania: 2.68; EU avg: Note: Data bars pointing right show better performance than the EU average and data bars pointing left show weaker performance. Responsive administration refers to public administration being responsive to the needs of SMEs. Lithuania scores above the EU average on responsive administration. The country has made significant progress in this area since Lithuania s performance remained largely unchanged compared to last year s SBA fact sheet. Over the past years, Lithuania has put significant effort into the area of responsive administration, particularly through the adoption of a Law on Administrative Burden Reduction. This law created a new monitoring body (the Better Regulation Supervisory Commission) and introduced two-year administrative burden reduction plans. The plans include concrete measures such as simplifying the licencing regime in a specific area and simplifying procedures. New electronic services in areas such as taxes, social insurance and legal-entity registration are being actively developed. There is a central government portal, the E-Government Gateway, which serves as a single point of access to all public and administrative services 18. All key components of this SBA principle have been implemented. Two key measures were introduced in 2016 and the first quarter of 2017: - An amendment to the Law on Companies, establishing the right for private limited companies to offer bonds publicly (except convertible bonds). The amendment determines the conditions for the use of this right. Previously the bonds could only be issued by public limited companies (usually larger companies). This amendment provides an alternative source of funding (besides bank loans) for private limited liability companies. - The administrative burden reduction plan for provides 60 measures aiming to reduce the administrative burden for business entities and natural persons. The plan was developed in cooperation with government institutions and businesses. Some 28 measures were already implemented by 2016, such as simplified requirements for outdoor advertising, registration of veterinary pharmaceuticals, transportation of passengers by taxis and licencing of road-transport activities SBA Fact Sheet Lithuania 9

10 3.4 State aid & public procurement Percentage of businesses participating in public tenders (%); 2015; Lithuania: 42; EU avg: 37 Percentage of businesses submitting proposals in a public electronic tender system (e-procurement) (%); 2013; Lithuania: 29.69; EU avg: Percentage SMEs account for in the total value of public contracts awarded (%); 2013; Lithuania: 30; EU avg: 29 Average delay in payments from public authorities (in days); 2016; Lithuania: 1; EU avg: Variation from the EU average (measured in standard deviations, EU average=0) Note: Data bars pointing right show better performance than the EU average and data bars pointing left show weaker performance. Lithuania scores among the top three EU Member States in this SBA policy area. It scores particularly highly for the percentage of businesses submitting proposals via e-procurement, recording the second best score in the EU. Public authorities remain very reactive, with an average delay in their payments of 1 day (this refers to the delay before payments are made, in addition to the days stipulated in the contract). Various measures have been introduced in this SBA area since Lithuania has addressed most of the issues under this SBA area. Measures to encourage SME participation in public procurement were put in place in 2010, when the Public Procurement Office published recommendations for contracting authorities. The recommendations advise contracting authorities to simplify procurement rules, introduce flexibility to the process, and reduce the time and cost of the administration involved in competing for a public-sector contract. Other suggestions include: (i) breaking large contracts into smaller lots; (ii) ensuring access to information and quality of information; and (iii) setting minimum criteria for qualifications. The key challenge is to find a way to turn the provisions into common practice. The Lithuanian e-procurement portal was launched in It covers all the awarding phases of the public procurement process: e-notification, e-access, e-submission and e-awarding. Provisions for green and innovative procurement are also in place, but these need to be strengthened. One area which still needs closer attention is late payment of suppliers. No major new measures were implemented in 2016 and the first quarter of 2017, but the law transposing new public procurement directives is due to enter into force from mid SBA Fact Sheet Lithuania 10

11 3.5 Access to finance Variation from the EU average (measured in standard deviations, EU average=0) Strength of legal rights index (0-12); 2017; Lithuania: 6; EU avg: 5.75 Total amount of time it takes to get paid (days); 2016; Lithuania: 23.67; EU avg: Bad debt loss (percentage of total turnover); 2016; Lithuania: 2.2; EU avg: 2.32 Cost of borrowing for small loans relative to large loans (%); 2016; Lithuania: 18.82; EU avg: Willingness of banks to provide a loan (percentage of respondents that indicated a deterioration); 2016; Lithuania: 7.63; EU avg: Rejected loan applications and unacceptable loan offers (percentage of loan applications by SMEs); 2016; Lithuania: 22.77; EU avg: 8.57 Access to public financial support including guarantees (percentage of respondents that indicated a deterioration); 2016; Lithuania: 8.69; EU avg: Equity funding for new and growing firms (1-5); 2014; Lithuania: 2.5; EU avg: 2.77 Business angels funding for new and growing firms (1-5); 2014; Lithuania: 3.13; EU avg: Note: Data bars pointing right show better performance than the EU average and data bars pointing left show weaker performance. Lithuania continues to score broadly in line with the EU average on access to finance. Since 2008, the country has been continuously improving its performance in this SBA policy area. The cost of borrowing for small loans relative to large loans dropped from 21.2 % in 2015 to 18.8 % in However, the percentage of rejected loan applications and unacceptable loans offers increased slightly from % to %. From a policy perspective, access to finance has been the government s focus area for SBA implementation. There is a wide range of financial instruments available to SMEs in Lithuania, including bank loans and guarantee schemes. Many of these instruments have been introduced over the past few years. UAB Investicijų ir verslo garantijos (Investment and Business Guarantees, INVEGA), introduced several risk capital instruments to support young start-ups at different stages of their development. Access to finance has also improved for traditional SMEs, but there is still a lot of room for improvement, especially regarding the conditions of bank loans. Financial sources for SMEs such as venture capital need to further develop and diversify. In addition, microcredits for the start-up micro companies programme are gaining recognition as a costeffective tool for both social inclusion and regional economic growth. Given the popularity of these measures, they should be expanded and further developed. Under access to finance, three new measures were taken in 2016 and early 2017: - The Law on Crowdfunding, which removes legal barriers to establishing and running crowdfunding platforms. It facilitates alternative financing and alternative investment opportunities in Lithuania. - The Co-Investment Fund addresses a significant obstacle in Lithuania s business finance markets, namely insufficient funding for taking technology and business ideas from research institutions and transforming them into viable businesses. This fund will invest, together with private investors, in young SMEs. Part of the funds will be given to companies starting new businesses in the areas covered by the Lithuanian smart specialisation strategy. Over EUR 24 million of extra funding will be available to SMEs. - The Introduction of High-Impact Technologies in Industry+ measure provides for subsidies for the introduction of high-impact technologies (micro- and nano-electronics, advanced materials, biotechnology, photonics and advanced manufacturing systems) in the traditional sectors of Lithuanian industry. This will build the foundations for innovative product development on a larger scale. SMEs are eligible to apply SBA Fact Sheet Lithuania 11

12 3.6 Single market Variation from the EU average (measured in standard deviations, EU average=0) Number of single market directives not yet transposed; 2016; Lithuania: 13; EU avg: 15.5 Average transposition delay for overdue directives (in months); 2016; Lithuania: 7.7; EU avg: 7.1 Number of pending infringement proceedings; 2016; Lithuania: 13; EU avg: 24 Public contracts secured abroad by SMEs (percentage of total value of public contracts); 2013; Lithuania: 2.2; EU avg: 2.6 SMEs with intra-eu exports of goods (percentage of SMEs in industry); 2014; Lithuania: 14.15; EU avg: SMEs with intra-eu imports of goods (percentage of SMEs in industry); 2014; Lithuania: 17.23; EU avg: Intra-EU online exporters (% of SMEs); 2015; Lithuania: 9.71; EU avg: 7.52 Easy market access for new and growing firms (1-5); 2014; Lithuania: 2.49; EU avg: 2.77 Market access for new and growing firms without being unfairly blocked by established firms (1-5); 2014; Lithuania: 2.78; EU avg: Note: Data bars pointing right show better performance than the EU average and data bars pointing left show weaker performance. Lithuania continues to perform in line with the EU average in this SBA policy area. Since 2008, the country has improved its performance on this SBA principle. Changes since last year s SBA fact sheet can mainly be observed in the implementation of single market legislation. The number of outstanding single market directives increased from 3 in 2015 to 13 in , and the average transposition delay for overdue directives grew from 5.3 months to 7.7 months. During the same period, the number of pending infringement proceedings fell from 15 to 13. Since 2008, relatively few major measures have been implemented under this SBA area, partly also because Lithuania already has some important corresponding measures in place. The point of single contact, provides support to SMEs concerning the single market. The national contact point of the Enterprise Europe Network supplies information on business opportunities and applicable rules in other Member States. The Lithuanian SOLVIT centre (SOLVIT LT) and an internal market information system (IMI) are also in place and their use and efficiency are increasing. Lithuanian authorities received 257 requests through the IMI system in 2016, which is 39 requests more than in Some 93 % of incoming requests were accepted within 1 week and 89 % of requests were answered by the date agreed in IMI. Some 10 new authorities and 27 new users were registered in Lithuania s IMI system during 2016 and the first quarter of In 2016, SOLVIT LT dealt with 34 cases, which is 17 % more than in All the cases were assembled within the onemonth deadline. SOLVIT LT solved 83 % of these cases (compared with 80 % in 2015). Continuous promotional efforts contributed to ever increasing number of cases being handled by SOLVIT LT. Companies including SMEs are regularly involved in developing the standards of the Lithuanian Standards Board for Standardisation. They may search and browse standards relevant to their industry at no cost. No significant measures under this SBA principle were adopted in 2016 and the first quarter of SBA Fact Sheet Lithuania 12

13 3.7 Skills & innovation Variation from the EU average (measured in standard deviations, EU average=0) Percentage of SMEs introducing product or process innovations; 2014; Lithuania: 33.69; EU avg: 30.9 Percentage of SMEs introducing marketing or organisational innovations ; 2014; Lithuania: 24; EU avg: Percentage of SMEs innovating in-house; 2014; Lithuania: 30.38; EU avg: Percentage of innovative SMEs collaborating with others; 2014; Lithuania: 15.19; EU avg: Sales of new-to-market and new-to-firm innovations (percentage of turnover); 2014; Lithuania: 8.57; EU avg: Percentage of SMEs selling online; 2016; Lithuania: 18.42; EU avg: Percentage of SMEs purchasing online; 2016; Lithuania: 23.52; EU avg: Turnover from e-commerce; 2016; Lithuania: 12.16; EU avg: 9.37 Percentage of persons employed that have ICT specialist skills; 2016; Lithuania: 13.93; EU avg: Percentage of enterprises providing ICT skills training to their employees; 2016; Lithuania: 8.68; EU avg: Percentage of all enterprises that train their employees; 2010; Lithuania: 52; EU avg: 66 National R&D available to SMEs (1-5); 2014; Lithuania: 2.61; EU avg: Note: Data bars pointing right show better performance than the EU average and data bars pointing left show weaker performance. Lithuania s performance on skills & innovation is on a par with the EU average. Lithuania has improved its overall performance since last year s SBA fact sheet. This progress is visible in SMEs IT capacities, with the share of SMEs selling online up from 17.6 % in 2015 to 18.4 % in 2016, and in turnover from e-commerce, which increased in the same period from 11 % to 12.2 %. However, the share of SMEs making online purchases fell slightly, from 24.8 % in 2015 to 23.5 % in On a similar downward trend, the percentage of enterprises providing ICT skills training to their employees dropped from 9.8 % in 2015 to 8.7 % in 2016, which further widened the gap to the EU average. In recent years, the government has made efforts to improve the situation in the area of skills and innovation. The measures implemented support SMEs R&D and innovation activities. Measures include subsidies for protecting intellectual property (2009) and innovation vouchers to stimulate cooperation between SMEs and public research organisations (2010). On skills, SME policy also focused on qualification development through training and work placements and access to external expertise. In this regard, the government recently recognised professional experience as an alternative to higher education qualifications for attracting skilled foreign workers. Most of the SBA skills & innovation requirements are in place in Lithuania. However, one area given less attention was support to innovative high-growth companies. Overall, eight measures were implemented on skills and innovation in 2016 and the first quarter of The two key measures introduced in the reference period were: - The Competence LT (Kompetecija LT) programme to help SMEs acquire specialist sectoral skills and qualifications. Under this measure, a subsidy is paid to cover part of the training costs incurred by employees of the companies operating in a single sector. - The Apprenticeship (Pameistrystė) programme, which supports investments in apprenticeship activities by companies, with priority given to SMEs. Under the programme, SMEs can cover part of their employees training costs. However, the beneficiary must ensure that the skills acquired by the employees are approved as a professional qualification (or part of it) by a licensed institution. Potential partners include licensed vocational training providers SBA Fact Sheet Lithuania 13

14 3.8 Environment Lithuania performs above the EU average in this SBA policy area. While significant improvements are necessary on the percentage of SMEs that take resource-efficiency measures, 2015 saw a significant increase in public support for these measures compared to Moreover, the country continued to perform far above the EU average for the percentage of SMEs with more than 50 % of turnover generated by green products or services. Since 2008, some measures dedicated specifically to SMEs have been implemented in this area. The first national green procurement action plan ( ) encouraged public authorities to plan and implement green public procurement, and provided industry with incentives to invest in green products and services. The Green Industry Innovation Programme encouraged SMEs to develop or improve environmental technologies and green products. The Audit in Industry programme (2015) was designed to encourage SMEs to perform energy audits and implement energy-saving measures. Three new measures were adopted during the reference period of 2016 and the first quarter of 2017: - The Eko-inovacijos (Eco-innovation) programme was launched to help SMEs implement internationally recognised environmental-management systems and carry out production technology and/or environmental audits. The measure also supports eco-design projects (i.e. projects that aim to improve a product s environmental performance over its life cycle through design). - The Eko-inovacijos+ (Eco-innovation+) programme was launched to encourage SMEs to invest in eco-efficient production technology. It aims to reduce the negative impact that businesses can have on the environment (i.e. cleaner production technologies that employ advanced pollution-prevention methods, and/or ensuring that resources are used rationally). - The Atsinaujinantys energijos šaltiniai pramonėje+ (Renewable Energy Sources in Industry+) programme was launched to encourage SMEs to invest in renewable-energy production equipment. It also supports industrial SMEs as they develop new effective energy-generation technologies for their own use, and for supplying surplus energy to other companies and to the grid. Nearly all of the SBA s environment-related recommendations in this area are in place. The only issue that has not been addressed is the recommendation to have in place an organisation specifically responsible for providing strategic support to ensure compliance with environmental and energy regulations SBA Fact Sheet Lithuania 14

15 3.9 Internationalisation Lithuania performs above the EU average in this SBA policy area, and achieved the best score in the EU in this year s SBA fact sheet. As most of the indicators under this SBA principle have been replaced, overall performance in this area cannot be compared to that of last year, 20 with the exception of extra-eu imports and exports of goods by SMEs, which went down slightly. In this year s SBA fact sheet, Lithuania scores especially highly for the streamlining of border-control procedures and the availability of trade information, suggesting a strong government commitment to facilitating administrative procedures related to internationalisation. The country s strong performance on border agency cooperation further reflects the government s desire to increase cross-border cooperation and make it easier for national SMEs to access the international market. Lithuania put internationalisation support at the centre of its economic and SME policy-making in 2009, when the government approved its national export development strategy for The strategy made provisions for key support measures, including: (i) support for participation in international fairs, exhibitions and missions; (ii) market research; training and consulting; and (iii) export-credit guarantees. In 2014, the country s export national development guidelines further outlined the priority markets and sectors, and the range of activities to deliver this vision. In response to faltering exports arising from the imposition of reciprocal trade sanctions between the EU and Russia, the government decided to launch some new internationalisation measures earlier, increase budgets and extend the duration of existing measures. All but one of the measures recommended in the SBA under this principle are in place. The one issue that has not yet been addressed is the recommendation to have an umbrella organisation providing all internationalisation support. However, activities are well coordinated between several organisations. One key measure was implemented during the reference period. This was the Business Cluster (Verslo klasteris) programme, launched in This measure provides financial support to clusters or SME groups (business associations, chambers of commerce, industry and crafts) engaging in internationalisation activities. Support can be used to cover part of the participation fees in international networks (platforms), travel costs, acquiring research and the analytical work necessary for implementing projects, marketing expenses, etc SBA Fact Sheet Lithuania 15

16 4. Interesting initiative Below is an example of an initiative from Lithuania to show what governments can do to support SMEs: Wings young export leaders programme The Wings programme aims at providing prospective graduates from Lithuanian and foreign higher education institutions with knowledge and experience in business. Sixteen young export leaders were selected by professionals to be included in the programme. Export leaders worked across 44 Lithuanian SMEs over 2 years, becoming acquainted with business best practices, business promotion, export development management, marketing, etc. They also received support from professional mentors. The programme ranked best among export initiatives in the developed countries category at the Excellence in Export Initiatives Awards at the 10th annual Trade Promotion Organisation World Conference in Dubai in November Wings introduced Lithuanian products to 47 foreign markets, and 23 initiatives were launched during the programme, generating a value of EUR References: SBA Fact Sheet Lithuania 16

17 Important remarks The European Commission Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs (DG GROW) produces the SBA fact sheets as part of the SME Performance Review (SPR), its main vehicle for economic analysis of SME issues. They combine the latest available statistical and policy information. Produced annually, they help to organise the available information to facilitate SME policy assessments and monitor SBA implementation. They take stock and record progress. They are not an assessment of Member State policies. Rather, they should be regarded as an additional source of information to improve evidence-based policy-making. For example, they cite only policy measures national SME policy experts consider relevant. They do not and cannot reflect all measures the government has taken over the reference period. There is more policy information on a database accessible from the SPR website. SME Performance Review: grow-spr@ec.europa.eu Small Business Act: European Small Business Portal: Endnotes 1 The two graphs below present the trend over time for the variables. They consist of index values for the years since 2008, with the base year 2008 set at a value of 100. From 2015, the graphs show estimates of the development over time, produced by DIW Econ on the basis of figures from Eurostat s Structural Business Statistics Database. The data cover the nonfinancial business economy, which includes industry, construction, trade and services (NACE Rev. 2 sections B to J, L, M and N). They do not cover enterprises in agriculture, forestry and fisheries or largely non-market service sectors such as education and health. A detailed methodology can be consulted at: 2 Official Statistics Portal Database of Indicators. last accessed Paslaugų centrai Lietuvoje Apžvalga. last accessed State Department of Tourism: Lithuania ranks first among the Baltic States in terms of the number of tourist overnight stays, last accessed Excluding rural tourism; see State Department of Tourism: Accommodation statistics, updated , last accessed The Lithuania Tribune: Lithuanian hotels push for regulation of Airbnb-type accommodation, last accessed last accessed Viktorija Chockevičiūtė: Atskleidė, kur labiausiai didėjo atlyginimai, last accessed Official Statistics Portal: Labour cost index, last accessed SBA Fact Sheet Lithuania 17