Geert Bekaert and Campbell R. Harvey's

Chronology of Economic, Political and Financial Events in Emerging Markets

Lithuania

Date

Major Political and Economic Events

9512

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

9600

The introduction of the Insider Trading Laws.^a4

960701

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

980113

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

980131

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

9802

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

9803

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

9805

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.

9809

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

990101

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

9903

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

990430

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

9905

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

9907

Vilniaus Bankas and Hermis Bankas announced their intent to merge.

9908

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

9909

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.

9910

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

9912

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.

200001

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.

200003

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

200004

S&P affirmed the credit rating for Lithuania.

200005

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%.

200006

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.

200000

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.

200010

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%.

200103

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

200100

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.

200107

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.

200100

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.

20020201

Lithuania swaps the dollar peg for the euro peg.

20020600

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.

20020820

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

20021022

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

20021100

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

20021200

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

20030100

Rolandas Paksas elected president.

20030300

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.

20030500

Lithuanian referendum results in vote in favor of joining EU.

20030900

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

20031100

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

20031200

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.

20031200

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

20040100

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.

20040100

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

20040220

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

20040300

Lithuania admitted to NATO.

20040400

Parliament impeaches and dismisses Rolandas Paksas.

20040500

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

20040600

Valdas Adamkus re-elected president.

20040700

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

Year

Regulations on Foreign Investors

1998

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

1999

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

2000

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

2002

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

2004

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