Geert Bekaert and Campbell R. Harvey's


Chronology of Economic, Political and Financial Events in Emerging Markets




Major Political and Economic Events


Banking crises (1995-1996): Central Bank suspended of countries largest private bank and one mid-size private bank; these actions followed interventions in two smaller banks earlier in the year.a2


The introduction of the Insider Trading Laws.a4


ADR effective date. (Company=VILNIAUC BANKAS AB)a11


(Provisions specific to commercial banks and other credit institutions) The BOL introduced reserve requirements for nonresidents' deposits. a3(first entry)


(Provisions specific to commercial banks and other credit institutions) The reserve requirement was extended to cover commercial banks' borrowing from foreign financial institutions. a3


The country's foreign debt rose from $1.157 billion in 1996 to $1.402 billion in 1997. Trade deficit rose by 46%.


GDP expanded from 1996 growth of 4.7% to 5.7% in 1997.


The merger of Vilniaus Bank and Hermis Bank was called off. The government predicted it would balance its budget deficit by the year 2000. The central bank said that the litas would be pegged to a basket of European currencies and the U.S. dollar by the middle of 1999.


The government continued privatizing state-held companies, boosting foreign currency reserves, and repurchasing T-bills.


A 15% capital gain tax on individual investors took effect.


Vilniaus Bankas withdraw its hostile bid for Hermis Bankas. The unemployment rate hit record high.


Prime Minister Gediminas Vagorius resigned after numerous requests from President Valdas Adamkus.


Popular Vilnius Mayor Rolandas Paksas was nominated as the prime minister.


Vilniaus Bankas and Hermis Bankas announced their intent to merge.


The government approved 450 million litas in 1999 budget cut, less than the initially proposed one billion litas reduction.


The IMF praised the performance of Lithuania's banking system and government supervision during and after the Russian financial crisis, but expressed concerns over the country's high budget deficit.


The prime minister and two key ministers resigned over a controversial sale of oil refinery Mazeikiu nafta.


Parliament approved 2000 budget in line with IMF recommendations, promised to deliver low-cost World Bank structural adjustment loans. But GDP contracted 5% in the third quarter.


The three Baltic exchanges set up a Baltic blue-chip list to encourage foreign investors. Lithuania planned to increase its defense spending in preparation to join NATO. It also agreed to reduce its budget deficit to 2.8% of GDP.


Unemployment hit 11.4%. The sharp correction of the NASDAQ forced many companies to cancel or scale back plans to sell shares.


S&P affirmed the credit rating for Lithuania.


The three Baltic exchanges signed a letter of intent to join the Norex Alliance. A European Commission report showed that among the 10 East European countries negotiating to join the EU, Lithuania recorded the biggest prior-year GDP decline of more than 4%.


Member nations at an international conference pledged over 200 million euro to decommission the Ignalina nuclear power plant, which produced 89% of Lithuania's electricity. Net FDI dropped by 50% compared with the prior year.


In the third quarter, the IPO of a 25% stake in Lithuania Telecom, the country's largest IPO to date, failed. The sale of a 33% stake in the Mazeikiu oil refinery (MN) to a U.S. firm in 1999 was questioned. IMF pressure forced disclosure about loans and special benefits.


Lithuania completed negotiations for formally joining the World Trade Organization. The centrist coalition won general elections. Rolandas Paksas became the prime minister. Parliament approved a proposed 2001 budget with a planned deficit 13% larger than that of 2000, and scrapped a 15% capital gain tax to push the country's ailing financial markets. Lithuania launched the first Baltic currency Eurobond through a US$25 million five-year bond issue. The government reduced personal taxes from 33% to 23%.


Shares of Ekranas were admitted to the official trading list of the exchange.


In the second quarter, The Lithuanian stock exchange abandoned a prior agreement with Norex, the equity bourse alliance between the Stockholm, Copenhagen, Reykjavik, and Oslo stock exchanges.


S&P reaffirmed the investment grade foreign currency sovereign credit ratings for Lithuania. Lithuania also signed a memorandum of cooperation with the Warsaw Stock Exchange.


During the fourth quarter, Lithuania closed the transport and financial control chapters of its EU negotiations. The country's state-controlled energy company was restructured into five entities and the government announced plans to privatize the two power distribution networks in 2002.


Lithuania swaps the dollar peg for the euro peg.


Under EU pressure, Lithuania formally agrees to close Soviet-era Ignalina nuclear power station, which is of the same design as Chernobyl. One reactor is to close by 2005 and the other by 2009. The plant provides over 70% of the country's electricity.


Lithuania and Iceland signed an agreement aimed at protecting and encouraging investment and boosting bilateral economic ties.


Legislation passed by parliament yesterday will allow payments to be made in foreign currency within Lithuania.


NATO summit in Prague includes Lithuania on list of countries formally invited to join the alliance.


EU summit in Copenhagen formally invites Lithuania to join in 2004.


Rolandas Paksas elected president.


The Lithuanian parliament has agreed to approve a bill regulating the implementation of the constitutional amendment granting foreigners the right to purchase agricultural land. The legislation will permit legal and physical entities from EU and NATO countries to acquire land, inland water bodies and forestry in Lithuania after a seven-year transition period. Companies which have been operating in Lithuania within the agriculture sector for the past three years will be exempt from the law.


Lithuanian referendum results in vote in favor of joining EU.


Lithuania has decided to cancel 12 free-trade agreements as it gears up for membership of the European Union (EU).


Demonstrators take to streets to demand resignation of President Paksas following allegations of links between his office and Russian organized crime.


Impeachment proceedings begin against President Paksas after parliamentary inquiry concludes that alleged links between his office and Russian organized crime constitute threat to national security.


Court rules that President Paksas violated constitution by awarding citizenship to controversial Russian businessman.


Lithuania has announced plans for the launch of a 600m euro (US$764.70m) Eurobond launch over the coming year, as part of a LTL4.8bn (US$1.77bn) program of domestic and foreign issues.


Regulations changing VAT rates for certain services have been approved by the Lithuanian parliament. Plans to make the VAT rules compliant with European Union.


Parliament voted to start impeachment proceedings against Lithuanian President Rolandas Paksas.


Lithuania admitted to NATO.


Parliament impeaches and dismisses Rolandas Paksas.


Lithuania is one of 10 new states to join the EU.


Valdas Adamkus re-elected president.


former President Rolandas Paksas will this week face prosecutors charged with leaking state secrets.


Regulations on Foreign Investors


Restrictions: If a foreign investor acquires a controlling interest in a firm, then a firm must be registered as a joint venture in accord with the Foreign Investment Law.

Taxation: None.a6


Restrictions: Under the 7 June 1999 Investment Law, foreigner investment is permitted in all spheres of economic and commercial activity except security and defense, manufacture or sale of narcotic substances, and other medical , poisonous substances, growing, processing and sale of cultures that contain narcotic and poisonous substances, and organizing lotteries.

Taxation: Under amendments to the taxation law effective from Jan. 1, 1999, there is a 29% dividend tax except for double taxation agreements. Own capital investments can be subtracted from taxable income, and up to five-year loss carryforward is allowed. Interest payable to foreign companies is taxed at 15%. A 10% withholding tax is imposed on payments by Lithuanian companies to non-resident company in respect of the use of trademarks, licenses and business names (royalties), unless a double taxation agreement specifies a lower rate. A 24% withholding tax is imposed on interest and royalties paid by Lithuanian companies to offshore companies registered in tax haven zones or countries.a7


Restrictions: Mass media enterprises were made open to foreign investments.


Taxation: Corporate tax rate is reduced from 24% to 15% on January 1st.


Taxation: VAT tax rate ranges from 5-18%. b1