Nations in Transit - Lithuania (2005)

Capital: Vilnius
Population: 3,400,000
Status: Free
PPP: $3,670
Private Sector as % of GNI: na
Life Expectancy: 72
Religious Groups: Roman Catholic, Lutheran, Russian Orthodox, other
Ethnic Groups: Lithuanian (81 percent), Russian (9 percent), Polish (7 percent), Byelorussian (2 percent), other (2 percent)

Executive Summary

Lithuania continues to build on the political and economic accomplishments achieved since the restoration of independence in 1990 and to strengthen the democratic system and rule of law. With political rights and civil liberties well established and protected, the country has achieved a remarkable political stability. Transfers of power have been smooth, and viable political parties function at all levels of governance. Major political forces have forged a high degree of unity on the need to build ties with Western democracies. Despite 12 administrations since 1990, this unity has largely allowed the country to consistently pursue and, in 2004, achieve accession to NATO and the European Union (EU). Public support for these integration processes has been strong.

The country owes much of its post-Communist success to a vibrant civil sector, which has been spurred by significant improvements in the legal and regulatory framework in recent years. Lithuania's judicial framework has been overhauled, but corruption remains a serious challenge. Since 1990, Lithuania has established a functioning market economy thanks to large-scale privatization, business deregulation, and liberalization of foreign trade. The country has achieved strong macro positions and remains the fastest-growing economy in the region, with fairly low debt and inflation levels, a sound currency, and low interest rates. Admittedly, many of the reforms have been driven by the aspirations to integrate into the Western community and the obligations such integration carries, thus raising questions in the minds of both Lithuanians and outside observers on what the future holds now that the country has joined both the EU and NATO.

The year 2004 brought a series of significant developments in the country's political life. In April 2004, Lithuania joined NATO, and on May 1,2004, the country became a member of the EU. In April 2004, the Parliament removed President Rolandas Paksas from office on charges of violating the Constitution and his presidential oath. The presidential scandal confirmed concerns about rampant political corruption. It also alerted the public and media and contributed to increased transparency of the political process. Former president Valdas Adamkus was reelected to replace Paksas. The newly founded populist Labor Party won the most votes in the October 2004 parliamentary elections, beating the ruling Lithuanian Social Democratic Party (LSDP) and other established parties. No party secured a majority, and following long negotiations, a coalition government was formed with the LSDP, the Labor Party, the Social Liberals, and the Union of Peasants and New Democracy Party (UPNDP) as members. Lithuania's 13 seats in the European Parliament were shared among five major political parties in elections held in June 2004.

In 2004, the Constitutional Court delivered several pivotal rulings on the presidential impeachment crisis and the duties of elected politicians. Also in 2004, legislation on nongovernmental organizations (NGOs) was overhauled, eliminating a number of restrictions that formerly had a chilling effect on the growth of civil society.

National Democratic Governance. In 2004, national governance issues revolved around the presidential impeachment and the rulings of the Constitutional Court regarding the status and duties of members of Parliament (MPs). Public confidence in democratic processes had been on the rise in recent years, but the presidential scandal shook public and political opinion on the functioning of the Lithuanian system of governance. In July 2004, the Constitutional Court ruled that parliamentary mandates were incompatible with stock holding, business ownership, or paid teaching activities, widely practiced by MPs. The State Control Office made numerous reports of routine misuse of funds and recently concluded that almost a third of audited state institutions lacked administrative capacities and that the internal auditing system was flawed. In the military sphere, full accession to NATO in April 2004 improved the administration and transparency of the armed forces, which are fully under civilian authority. However, oversight of the main security services was affected by the political battles in 2004. A special parliamentary commission concluded that parliamentary control over security was improper and that the conduct of intelligence activities was not effective. Lithuania's stable democratic system, characterized by well-established political rights and an unfettered legislature but a lack of transparency in the executive branch, merits a rating of 2.50 as the benchmark for the new national democratic governance rating.

Electoral Process. In April 2004, President Rolandas Paksas was impeached and removed from office on charges of giving favors in return for campaign funding, divulging state secrets, and unduly influencing the privatization process. In June, former president Valdas Adamkus was reelected to replace Paksas, defeating Kazimiera Prunskiene, Lithuania's first postindependence prime minister, in the second round of voting. The election had little effect on government personnel. Adamkus reappointed Algirdas Brazauskas, the leader of the ruling LSDP and former president, as prime minister, and the cabinet was unchanged. No party won a majority in the October 2004 national elections. The newly founded populist Labor Party came in first, while the coalition of the ruling LSDP and the Social Liberals, which had enjoyed a parliamentary majority since 2001, ranked second. In mid-December, a new coalition government of the LSDP, the Social Liberals, the Labor Party, and the UPNDP took office. Five major political parties secured seats in the European Parliament in the elections held in June 2004. Lithuania's rating for electoral process remains 1.75 owing to a smooth democratic resolution of the political crisis of 2004.

Civil Society. New legislation on associations and charitable funds that came into force in early 2004 simplified the earlier artificial regulatory segmentation of the nonprofit sector. It will apply to some 10,000 to 11,000 NGOs. The new legislation further improved managerial and operational conditions for civil society groups. Associations are allowed to earn profit from commercial activities, and management requirements have been simplified. Charitable and sponsorship funds no longer must employ paid administrators, but the use of property and funds is subject to more rigid regulation. The reformed legislation helped create fairer, simpler, and more transparent legal conditions for civil society organizations. However, certain excessive constraints and bureaucracy remain, and experts insist that a single law on nonprofit organizations is the best solution. In 2004, Lithuanian taxpayers used a new provision allowing them to allocate up to 2 percent of their income tax to public and private nonprofit entities. Opinion polls show that more than half of Lithuanians are unaware of this option and that the society is largely skeptical of its effectiveness. Experts worry that the 2 percent option leaves room for abuse and threatens to discourage voluntary giving, as philanthropy may come to be associated with compulsory tax collection. Lithuania's rating for civil society remains 1.50.

Independent Media. The intensely competitive private media sector includes a diverse range of print and electronic outlets at both national and local levels. The government-owned and -funded Lithuanian Radio and Television (LRT) is increasingly criticized by private operators, who say it interferes with free competition by accepting commercial advertising. The state-owned minority share in the Lithuanian news agency ELTA has been slated for privatization. Private media outlets continue to be held by numerous domestic and foreign interests, although the year saw some consolidation of media ownership among influential local business groups as they took over control of several leading media outlets from foreign owners. Two national television stations with a third of the audience, three major radio groups reaching an overwhelming majority of listeners, and four of five national dailies belong to domestic owners. Observers note that the ongoing penetration of local industrial capital into the media market and the trend to concentration may explain falling public confidence in the media. The rating for independent media remains at 1.75.

Local Democratic Governance. In February 2004, a Constitutional Court decision prohibited members of elected municipal councils from holding executive positions in municipally owned entities. This means that in some municipalities, up to a third of council members have to be replaced. In addition, recent legislative changes prohibited MPs from parallel work in local governments and separated the representative and executive powers of municipal authorities. Mayors remain the heads of municipal councils, but their executive functions have been delegated to the municipal council and administration. These changes accommodate a proper separation of powers and allow for better representation by elected bodies. Direct elections of mayors supported by all sides of the political spectrum became the main local governance issue during the 2004 legislative election campaign. The new rating for local democratic governance is set at 2.50 given that the substantial decentralization of power remains impaired by ambiguities in the division of competence between central and local authorities and by insufficient financial independence.

Judicial Framework and Independence. Several groundbreaking decisions put the Constitutional Court at the center of attention in 2004. In addition to several rulings on the constitutionality of presidential decrees, the court outlawed reelection of impeached officials and stipulated that parliamentary mandates are incompatible with other professional commitments or business ownership and that municipal council mandates are incompatible with executive positions in municipally owned entities. Accession to the EU in May 2004 was a major turning point for the Lithuanian legal system and the judiciary. Lack of expertise and technical barriers will likely raise difficulties for the courts in applying complex EU law, while at the same time the judiciary continues to face challenges as it tries to come to grips with a set of new legal codes enforced from 2003. Lithuania's judicial framework and independence rating remains 1.75.

Corruption. In 2004, Lithuania was shaken by grave political corruption scandals involving the president and other influential politicians. President Paksas was impeached and removed from office on charges relating to electoral campaign financing and undue interference with privatization. The presidential scandal brought out evidence of entrenched corruption at the highest levels of governance and highlighted the need for better exposure. Three MPs representing major political parties resigned following corruption charges brought by the Special Investigation Bureau (SIB). However, the investigation was closed for lack of evidence, and the SIB chief finally resigned after facing accusations that the investigation was politically motivated. Recent corruption scandals prompted discussion on expanding the application of lobbying legislation to explicitly embrace all actions aimed at exerting influence on legislators. The level of corruption has decreased in recent years and exposure has improved, but the society continues to consider corruption an effective tool in its dealings with public authorities. In 2004, Lithuania scored 4.6 in Transparency International's Corruption Perceptions Index, a slight improvement from 4.7 in 2003. Lithuania remained below the threshold designating countries with low levels of corruption. Lithuania's rating for corruption drops from 3.50 to 3.75 owing to the number and gravity of political scandals and negligible progress in rooting out corruption.

Outlook for 2005. Public and political attention in 2005 will focus on the functioning of the coalition government and the new Parliament. Some observers anticipate serious splits among the coalition partners, particularly between the LSDP and the Labor Party, given signs of dissension from the very beginning of the partnership. The key issues on the 2004 political agenda include a likely renationalization of the Mazeikiai oil refinery, gas and energy price regulation, the utilization of EU funds, and tax reform. The government will also face challenges in adapting to EU membership as it formulates and articulates national interests at the community level.

National Governance (Score: 2.50)

Lithuania has a democratic system of government. Elections are conducted in a free and fair manner in accordance with the Constitution. Changes in government are regular and smooth, aided by a well-functioning system of checks and balances. Lithuania is a parliamentary republic with certain features of presidential governance due to the role the popularly elected president plays in forming the government. According to the Constitution, the president nominates and on the Parliament's approval appoints the prime minister, charges the prime minister to form a government, and approves its composition. Pursuant to public information laws, state and municipal institutions are obligated to make official documents public, and the laws entrench a citizen's right to receive all personal information from state and municipal authorities.

In 2004, the Parliament impeached President Rolandas Paksas and removed him from office after the Constitutional Court found grave violations of the Constitution by the president. The stability of the existing system of governance was not affected, but public and political opinion on the functioning of the system of governance was shaken. The impeachment provoked discussions about the model of governance and separation of powers in Lithuania, but after the presidential and parliamentary elections, these discussions subsided. Since the Paksas scandal, the institution of the presidency has been rehabilitated and public confidence generally restored, although the public seems to be more attentive to the way the presidency functions.

The Parliament operates in an open manner. All bills are posted on the Internet from introduction through adoption. Legislative and executive processes are also becoming more open. Despite this, draft legislation is not always readily available to the public. Executive authorities often propose bills or adopt new regulations without prior notice or public scrutiny, although they are required by law to announce policy proposals on the Internet. One reason for this is a quick and prolific legislature and frequent amendments to adopted laws. During the legislative year from September 2003 until September 2004, for example, the Parliament enacted 692 laws and legislative amendments. The legislature does not have a legislative plan to guide its work and depends upon the government's program, which it approves together with the cabinet. In practice, most bills, especially systemic and regulatory documents whose drafting requires administrative capacities, originate in the government.

The executive branch operates with a particular lack of transparency. The government often provides only limited public access to information on regulatory proposals, arguing that the position of the government is not finalized in the drafting process. Cabinet sessions take place behind closed doors, and since July 2002 the government has ceased the once regular public release of draft decrees and other documents.

The Parliament is regularly troubled by absenteeism, which not only contributes to voter discontent, but also raises doubts about the legitimacy of adopted laws. This is more of a symbolic problem than a statutory one. Members of Parliament (MPs) often fail to pay proper attention to debated issues and so deepen public mistrust of the legislature. Several attempts have been made to require a quorum rather than a simple majority for the enactment of laws, and in July 2004 the Constitutional Court ruled that attendance of parliamentary sittings was a primary obligation of legislators and that sanctions up to impeachment might be imposed for noncompliance. The court also ruled that parliamentary mandates are incompatible with stock holding, business ownership, and paid teaching activities. At the time, some 20 MPs were teaching at Lithuanian universities.

The State Control Office audits the administration of funds from the state budget. The office has improved its performance and now reports regularly on misuse of funds. It concluded recently that almost a third of audited state institutions lacked administrative capacities and found flaws in the internal auditing process. The State Control Office conducts audits on a regular basis; its findings are public and well accepted by audited institutions. A new parliamentary audit committee was set up after the 2004 elections. The committee was charged with examining state audit reports and legislative proposals on financial matters and with overseeing state control and privatization and public procurement agencies.

The military and its functions are entirely under civilian control. The run-up and accession to NATO improved the administration and transparency of the military. However, the conduct and oversight of the main security services were affected by the political battles in 2004. The State Security Department was the main supplier of the information that led to the impeachment of President Paksas and did not evade criticism from political opponents. A special parliamentary commission concluded that the conduct of the agency in charge of investigating corruption, the Special Investigation Bureau (SIB), was politicized because the SIB inadmissibly aired corruption accusations to politicians in the process of the Paksas investigation. A commission report stated that parliamentary control over security agencies and their conduct of intelligence activities was ineffective and that improper intelligence activities had been undertaken.

The civil service comprises four categories: career civil servants, political appointees, heads of institutions, and acting or temporary civil servants. Ongoing reforms of the public service system notwithstanding, civil servants are criticized for lacking competence. The professional skills and managerial abilities of local officials vary significantly. Civil servants are frequently inclined toward excessive interventionism and are affected by political connections and cronyism. This, coupled with slow reforms and entrenched bureaucracy and corruption, contributes to the high degree of public mistrust of government.

A code of conduct for civil servants, adopted in August 2003, establishes the principles of state service, responsibility for ethics violations, and a legal mechanism for punishment of unethical behavior. Yet critics charge that the code is too vague and abstract and the enforcement mechanism is inadequate.

Electoral Process (Score: 1.75)

Lithuania underwent several political tests in 2004. The head of state was removed from office, the political system was shaken by corruption scandals, and three elections took place: presidential, national legislative, and European Parliament.

The presidential scandal began in late 2003, when allegations emerged that tied President Paksas and his top aides to a controversial Russian-born businessman, Yuri Borisov the biggest contributor to Paksas's presidential campaign and to Russia's foreign intelligence service. A special parliamentary commission concluded that Paksas had violated the Constitution and presidential oath on six counts. Paksas dismissed the numerous calls to resign from political leaders and civic groups and blamed the scandal on political opponents. The situation soon grew into open confrontation between Paksas and the Parliament and government, and Paksas loyalists became involved in legal disputes over the president's actions. Several presidential advisers were later successfully sued for political slander; Borisov was found guilty of threatening behavior toward the president.

With the support of 86 MPs, the legislature initiated impeachment proceedings against Paksas on charges of divulging state secrets, illegally influencing privatization, and threatening national security. Paksas's position grew still worse when the Constitutional Court ruled on December 30,2003, that he had violated the Constitution and presidential oath by granting Borisov Lithuanian citizenship in return for substantial financial and other support; by leaking classified information about the intelligence investigation on Borisov; and by exerting undue influence on stakeholders in a private company connected to him.

In April 2004, the Parliament voted to impeach Paksas on all three counts by a narrow margin (respectively, 86,86, and 89 votes; 85 votes were required) and removed him from office. The entire scandal and impeachment process reflected a deep political confrontation, as shown by the widening gap between the president and the country's political leadership and the defiance that major political forces displayed toward the president. But this also determined that the exposure of the facts of corruption led to an effective outcome. While during the scandal both foreign and domestic observers saw it as tarnishing Lithuania's image in the international arena, the democratic resolution of the political crisis was hailed as a victory of democracy and proof of functioning democratic governance.

In May 2004, the Parliament, with votes from both the ruling majority and the opposition, passed legislative amendments to prohibit an impeached president or MP from running for office for five years. The Constitutional Court, asked to assess the constitutionality of this restriction, ruled that an impeached person "may not evade the constitutional liability either by new elections, or referendum, or in any other way" and may never be reelected.

Snap presidential elections were held on June 13,2004, along with elections to the European Parliament. Five candidates competed in the first round: ex-president Valdas Adamkus, defeated by Paksas in the second round of the 2002 presidential elections, who was supported by the Liberal and Centre Union (LCU); Lithuania's chief European Union (EU) membership negotiator, Petras Austrevicius, supported by the Homeland Union (Conservatives) and the Labor Party; social security and labor minister Vilija Blinkeviciute, nominated by the Social Liberals; Ceslovas Jursenas, nominated by the Lithuanian Social Democratic Party (LSDP); and Lithuania's first prime minister and leader of the Union of Peasants and New Democracy Parties (UPNDP), Kazimiera Prunskiene. Adamkus and Prunskiene were the top vote winners in the first round and faced each other in the second round on June 27, when Adamkus was elected with 51.9 percent of the vote to Prunskiene's 46.7 percent on a turnout of 52.5 percent. Given the contrasting moods and rhetoric around the two candidates, the result was hailed by local and foreign observers as proof of Lithuania's Western orientation. Algirdas Brazauskas, leader of the ruling LSDP and former president, was reappointed prime minister and retained his cabinet. The LSDP and the Social Liberals had formed a ruling coalition and parliamentary majority since June 2001, becoming the longest lived of the 12 administrations since 1990.

Viable political parties, including members of the opposition, function at all levels of government. In 2004, there were 37 registered political parties. The established, so-called traditional parties represent a range of competing ideologies, but they are largely unanimous on most issues regarding the country's democratization process, market reforms, and generally supported membership of NATO and the EU. In 2004, the main political debates and splits revolved around such issues as privatization of energy suppliers; regulation of gas and electricity prices (especially following the privatization of an electricity distribution network); possible renationalization of the Mazeikiai oil refinery after the troubles of its major stakeholder, the Russian-based Yukos; the future of the Ignalina nuclear power plant, Lithuania's biggest energy producer; and tax reform. The LSDP, a highly experienced and disciplined political force, is the foundation of the left-wing bloc. The Social Liberals, led by parliamentary speaker Arturas Paulauskas, are generally regarded as lacking a clear ideological identity and being dominated by their senior coalition partner. The LCU and the formerly ruling Conservatives remained influential opposition forces. Unlike the traditional parties, most of the smaller and less influential parties lack clear ideologies or platforms.

After the presidential scandal in early 2004, the political elite began to escalate a division between the established parties and newly founded "populist" Lithuanian Liberal Democratic Party (LLDP), led by ex-president Paksas, and the fledgling Labor Party, led by the country's wealthiest lawmaker, Viktor Uspaskich. The populist parties, rallying around their strong leaders, frequently made promises during election campaigns about a variety of issues that their opponents charged they could not possibly fulfill. But the established parties did much the same thing, leading to a bidding war that appears to have undercut the authority of both kinds of parties. The key difference between the two groups was that the established parties sought to function within the existing constitutional framework, while the LLDP and the Labor Party wanted to make fundamental changes in the country's basic law.

In 2004, the traditional parties, both right and left, sought to mobilize and consolidate their voters. The second-largest right-wing party, the Lithuanian Political Prisoners and Exile Union, merged with the Conservatives, while the Social Liberals signed a coalition agreement with their partner in the ruling coalition, the LSDP. Uspaskich's Labor Party topped opinion polls during 2004, although most of its members remained relatively unknown to the public. Observers attributed the party's popularity to its charismatic leader, popular promises, and people's routine disappointment with traditional and ruling forces. Uspaskich managed to attract publicly known figures to join the Labor Party as candidates for the parliamentary elections.

The Parliament passed critical amendments to election and campaign laws during the months leading up to the 2004 parliamentary elections. Most notably, in May 2004 lawmakers reintroduced a second round in single-mandate constituencies, restoring the system that had been revoked just before the 2000 parliamentary elections. Lithuania uses a mixed electoral system in which half of the Parliament is chosen through multimandate proportional balloting and half in single-mandate constituencies. Observers claimed this was aimed at adversely affecting the chances of the poll-leading Labor Party.

Yet Labor went on to gain the most votes in the national legislative elections held on October 10,2004, winning 35 seats in the 141-seat Parliament. The LSDP Social Liberal coalition ranked second with 31 seats; the Conservatives secured 25; the LCU won 19; and the UPNDP garnered 9. Paksas's new LLDP won 11 seats but was excluded from any coalition negotiations. Even so, Paksas was reelected as party chairman in December 2004.

After long negotiations with both left-of-center and opposition parties, the LSDP and the Social Liberals formed a ruling majority government in coalition with the Labor Party and the UPNDP. The Labor Party was invited to join the administration despite the antipathy of most political leaders toward both the party and Uspaskich, its leader. This arrangement allowed the LSDP to retain their influence in government. Parliamentary Speaker Arturas Paulauskas and Prime Minister Algirdas Brazauskas retained their positions. Viktor Uspaskich was appointed economy minister. Negotiations over the division of posts in the cabinet among the coalition leaders focused on four key ministries administering the bulk of EU funds: transport, environment, finance, and economy.

In the country's first ever European Parliament election in June, five parties divided Lithuania's 13 seats in the EU legislature: Labor (5 seats); the LSDP, the Conservatives, and the LCU (2 seats each); and the UPNDP (1 seat). Voter turnout was 46 percent. Such a relatively high turnout in comparison with other EU member states was probably due to the concurrent presidential elections, which traditionally attract more public attention.

In addition to the revised voting system, the Parliament made several other amendments to laws governing elections and political campaigns. In August 2004, the cap on political donations from a single private individual was lowered to LTL 37,500 (US$13,000). The Parliament also allocated US$1.7 million of state campaign funds to parliamentary parties. The parties said this was sufficient to take them through the 2004 legislative elections. At the same time, lawmakers put significant new restrictions on political advertising: outdoor advertising was prohibited except on small, inconspicuous municipally owned posts, and television advertising, typically the biggest drain on party budgets, was limited. The changes were meant to increase the transparency of political campaign financing by reducing demands for private funds and curbing the influence that campaign contributors might exert. The law requires that candidates make public all donations and media and other advertising contracts and that political advertising is clearly indicated as such. The Parliament also imposed new legal restrictions on the operation of political parties in 2004, voting to raise the membership requirement to qualify as a political party from 400 to 1,000 people. This means that political parties with fewer than 1,000 members will have no right to participate in elections. In spite of arguments from one side that the restriction was a step backward in terms of democratic freedoms, and from the other that it will discourage "frivolous" parties from splitting up the vote, the issue failed to trigger any strong political or public reaction.

Public engagement in political life remains passive, as reflected by low party membership and voter turnouts. About 2 percent of Lithuania's 3.5 million citizens belong to political parties, a reflection of the reluctance of many people living in post-Soviet countries to identify with any party. Voter turnout has been fairly steady, around 50 percent, with higher turnout for presidential elections. (Elections are considered valid if voter turnout is no less than 40 percent.) Ethnic and other minority groups participate freely in the political process. Public confidence in political parties and state institutions remains low, and according to opinion surveys, the Parliament and political parties remain the most unpopular public institutions.

Civil Society (Score: 1.50)

The nongovernmental organization (NGO) sector has developed steadily over the past decade, and observers note that NGOs have lately shown a more proactive stance on issues of public concern. In recent years, Lithuanian NGOs have significantly enhanced their organizational and managerial capacity, especially in the areas of administration and constituency building. Civil society groups more commonly have permanent staffs and recruit volunteers and are increasingly using local media and fund-raising events to establish contacts with their local constituencies. There are still weaknesses such as inadequate public relations skills and the absence of properly functioning boards of directors. Likewise, advocacy remains an abstract concept for many groups at both national and local levels.

The Constitution guarantees the right to freely form societies and associations, and the rights of the independent civil society sector are well established and protected. There are no serious obstacles to registering NGOs. They may raise funds both domestically and overseas, but most groups lack permanent sources of income and sufficient fund-raising capabilities. NGOs also may bid for government contracts, but this practice remains rather uncommon owing to a complex administrative process. Since 2002, NGOs have been exempt from profit tax.

In early 2004, the legislation on nonprofits was overhauled. The previous distinction between "associations" and "societal organizations" was dropped, thus simplifying the regulatory segmentation of civil society groups. The change, which affected 10,000 to 11,000 of Lithuania's 15,000 nonprofits, helped establish equal legal conditions and a simpler and clearer regulatory environment for NGOs. In addition, new legislation on charitable and sponsorship funds that regulates donations to nonprofits took effect in January 2004. Following several significant simplifications of grant-giving procedures adopted in recent years, the new laws further eased managerial and operational conditions for NGOs. The biggest improvements are that nonprofit associations are now allowed to generate profit and that management requirements have been eased significantly. Charitable and sponsorship funds no longer have to hire paid administrators, but the use of their property and funds is now regulated more strictly. Many experts continue to insist that a single law on civil society groups would be the ideal solution.

Most NGOs are registered in the largest cities, but regional groups constitute the bulk of functioning organizations. Sports and cultural groups dominate. Most foundations are devoted to youth or cultural activities. Women's organizations are numerous. According to the Women's Information Center, there are about 100 women's organizations, of which 56 are established in the five largest cities. Ethnic groups are quite active in the country's civic and cultural life. There are no prominent extremist groups active in Lithuania today. Most of the charitable activities of religious communities include care for the elderly, orphans, and disabled.

Public awareness about civil society groups remains rather low, although attitudes to private giving are favorable. According to a survey commissioned in May 2003 by the Open Society Fund Lithuania, 80 percent of the population would contribute to charities or other philanthropic causes if they could afford it, but more than half could not name a single donor organization. As much as 72 percent of the population, 88 percent of businesspeople, and 93 percent of NGO staff mistrust the way donations are allocated and think that donations are frequently misused or targeted improperly. Excessive bureaucracy and paperwork, a lack of community and philanthropic traditions, the ambiguous position of the state, and inadequate economic conditions are seen as the main obstacles to philanthropic activity, according to the survey.

Volunteerism is becoming more widespread, although it remains a rare form of NGO support, mainly because Lithuania lacks a strong tradition of independently donating one's time to a cause. Indeed, regulations even discouraged the practice until recently, as volunteers could be treated as illegal employees. Regulations were eased in 2001 and 2002 but still place excessive bureaucratic constraints on some areas of volunteer work.

Private giving benefits from income tax deductions. Starting in 2003, Lithuanian taxpayers may also allocate up to 2 percent of their income tax to private or public nonprofit entities. The "2 percent option" caused some controversy. It has helped reduce budget redistribution and allowed taxpayers to support civic initiatives of their own choice. Yet some worry that voluntary giving may be discouraged if philanthropy comes to be associated with compulsory tax collection. Also, there is room for narrow individual and group interests to abuse the provision by establishing fictitious organizations to absorb the funds. This in turn may prompt tighter regulation of the nonprofit sector.

Opinion polls reveal that people are skeptical of the 2 percent option and think it reflects the government's inability to solve social problems. More than half were unaware of the tax option, and only 15 percent of taxpayers planned to use it to support nonprofits, reported the market research firm RAIT. Companies can donate up to 40 percent of their annual taxable profits to NGOs.

Citizens are free to form and join trade unions. Although unions claim a relatively small share of the workforce, about 15 percent, they are quite strong and influential. Together with employers and the government, unions make recommendations on national labor policy. Trade unions exercise broad powers. By law, unions sign collective agreements with employers on behalf of all employees, and the 2003 labor code requires all employers to comply. Trade unions have a right to seek and obtain all sorts of information from businesses. Members of a union's elected governing body may not be dismissed or penalized by their employers without the union's approval. The Lithuanian Confederation of Trade Unions, the Lithuanian Labor Federation, and the Employees Union are coalitions of labor groups. The largest trade unions are in construction, the food and chemical industries, and the energy sector.

Interest groups, public policy groups, and other nonprofits may take part in the political process through policy advocacy, advising, and lobbying. Civil society groups are increasingly engaged in public hearings and joint task forces on pending policies and legislation. Business associations and trade unions are the most active and influential players. However, government cooperation and consultation with NGOs are not yet fully established. The media are receptive to independent public policy groups as reliable sources of information, but media coverage of other civil society organizations is not wide.

Official lobbying activity, legalized in 2000, is relatively rare. In 2004, there were only seven registered lobbyists. Observers note that this may be related to extensive informal representation of interest groups and to legislative corruption. In current law, the concept of lobbying is applied quite broadly and embraces any paid or unpaid actions of individuals or legal entities that are aimed at influencing legislative processes. Thus, lobbying regulations can be applied to any publicly aired opinions on legislation or policy research. Since Lithuanian law does not regulate policy advocacy per se, the boundaries between paid lobbying and advocacy are quite vague, so the law's broad interpretation of lobbying threatens to discredit and disrupt independent public policy groups that actively express their opinions. In 2004, proposals were made to expand the application of lobbying legislation to explicitly embrace all actions designed to exert influence on the legislature. These proposals are under consideration.

The education system in Lithuania is free of political control or influence. In 2004,2 percent of all educational establishments were private, up from 1.4 percent in 1999, owing mainly to a decrease in the number of public schools. From 1999 to 2004, the number of private secondary schools (19) remained stable, while the number of non-university establishments of higher education decreased. Six out of the country's 21 universities were private in 2004.

Independent Media (Score: 1.75)

Press freedom is well established and protected in Lithuania. Freedom House's annual Survey of Press Freedom has rated Lithuania "Free" since 1994. Most media outlets are privately owned, with the exception of the state-owned Lithuanian Radio and Television (LRT) and a state-owned minority share in the Lithuanian news agency ELTA, which is already scheduled for privatization. The intensely competitive private media sector includes a diverse range of print and electronic outlets at both national and local levels. In recent years, the media have consistently topped opinion polls, reflecting the degree of public confidence in various institutions. Lately, however, public trust in the media has diminished dramatically. Some observers link this to increased penetration of industrial capital into the media market and a trend to increased consolidation in the market, although there is no obvious evidence yet as to the effects of these processes on media coverage, quality, or independence. Reduced public trust in the media has also been attributed to the clearly partial attitudes of major national media outlets during the 2003-2004 presidential scandal.

Recent acquisitions of leading media outlets by large domestic companies have heightened consolidation of media ownership among a few influential business groups. In late 2003, a Lithuanian concern, MG Baltic, which also holds a majority share in ELTA, bought one of the leading television channels, LNK, from the Swedish Bonnier group. Achema Group is another Lithuanian business giant that is actively penetrating the Lithuanian media market. In 2004, Achema, which owns the national daily Lietuvos Zinios, popular radio stations RC2 and Radiocentras, and two publishing houses, acquired the fourth-largest national commercial television station, Baltijos TV, from the Dutch-based Polaris Finance and the Polish Polsat. MG Baltic and Achema are each planning to participate in the final privatization of ELTA, which the Parliament authorized in March 2004. In January 2004, a group active in the energy sector, Rubikon, bought a second regional television channel. These acquisitions have minimized foreign ownership in the Lithuanian television market. So far, given Lithuania's small market, the radio and the press have been dominated by small local shareholders, but they too are increasingly attracting large industrial and other capital. Lithuania has no sector-specific regulation of media ownership concentration. Applicable competition law sets a general limit of 40 percent of market share.

The media are editorially independent and free of government interference. There are five national daily newspapers: Lietuvos Rytas, Kauno Diena, Respublika, Vakaro Zinios, and Lietuvos Zinios. The most popular are Lietuvos Rytas (with a reported circulation of 55,000), Vakaro Zinios (65,000), and Respublika (30,000). Lietuvos Rytas and Respublika, each of which owns significant interests in the print media market, are the most prominent players and are old rivals, including in their political viewpoints. The newspaper distribution system is almost entirely privately owned, except for the Lithuanian Post, the national postal service, which holds a negligible share of the market.

The television market comprises 4 nationwide and 27 regional operators. The only public service television, Lithuanian Television (LTV), broadcasts two national programs, LTV1 and LTV2. (LRT stands jointly for the Lithuanian Radio and Television, whereas LTV is an acronym just for the state-owned TV channel Lithuanian Television.) The leading national broadcasters are TV3, owned by the Scandinavian Modern Times media group, and LNK, capturing about 27 percent of viewers each, according to September 2004 data. LTV (13 percent) and Baltijos (7 percent) follow. Regional stations emerged as private initiatives supported with public funding in 1994. There are 55 cable television operators and 4 wireless multichannel, multipoint distribution system (MMDS) operators. Cable television systems are different from MMDS operators; the latter comprise national and regional channels, while "cable television" refers to a different mode of transmission.

Of the 47 radio stations in Lithuania, 10 commercial stations and 1 public broadcaster (with 2 stations, LR1 and LR2) operate nationwide. The state-run Lithuanian Radio enjoys the largest audience, with about a 24 percent share in spring 2004. Other popular radio stations are Radiocentras, M-1, Russkoje Radio Baltija, and Pukas, each with about 10 percent of the listening time. The largest commercial radio stations are owned by four major groups, of which three belong to local owners and reach the vast majority of listeners.

The media market is subject to self-regulation based on a system of multiple regulators prescribed by law. The Commission on the Ethics of Journalists and Publishers, the Office of the Inspector of Journalists' Ethics, and the Radio and Television Commission function as independent supervisory bodies. Attempts to establish a media ombudsman's office failed a few years ago. The Radio and Television Commission, an independent body accountable to the Parliament, regulates and supervises the activities of commercial radio and television broadcasters and participates in forming national broadcast media policy. It consists of 12 members, 1 designated by the president, 3 by the Parliament, and the rest by civic organizations. The commission is financed by a percentage of broadcasters' advertising proceeds in order to secure independence from government and political groups. The government exerts some pressure on the national broadcaster, LRT, through budgetary controls. And politicians occasionally criticize public television's political commentary. Some lawmakers have suggested increasing the number of LRT council members appointed by civic organizations to prevent the influence of "political conjuncture" on the national broadcaster, according to the Baltic News Service. Private television operators increasingly complain that LRT, with 75 percent of its budget provided by the state, is allowed to sell advertising. This is seen as a violation of free competition. In December 2004, the Parliament postponed until 2006 the introduction of a subscription fee for LRT. Intended to help reduce state support for the national broadcaster, this unpopular decision has been postponed every year since 2000.

Journalists and media outlets are free to form their own professional associations, among which the Journalists Union is the most prominent. Most influential media representatives act in accordance with the ethics code for journalists and publishers.

According to the Lithuanian criminal code, libel or the dissemination in print of false information defaming a person can result in a fine, two years in prison, or two years of penitentiary labor, which is not as rigid as prison. However, in recent years few journalists have been convicted of such crimes. Publications can be closed and journalists penalized only by court order.

The public enjoys unhindered Internet access, and it is growing rapidly. In 2004, about 15 percent of Lithuanian households were connected to the Internet, up from 2 percent at the end of 2000. In summer 2004,28 percent of the population used the Internet, up from 23 percent a year before, reported market research company TNS Gallup. The Internet is being used more often in political and cultural debates. Some of the most popular information portals are www.google.lt, www.delfi.lt (targeting the Baltic states), www.one.lt, www.lrytas.lt (the Web site of Lietuvos Rytas), and www.takas.lt (Lithuanian Telecom). According to 2003 legal regulations, the electronic dissemination of information is subject to self-regulating mechanisms derived from other Lithuanian regulations, such as those that apply to the press, radio, and television. In November 2004, lawmakers postponed a proposal to write specific statutory regulation for online media. The proposed regulations were criticized for placing disproportionate responsibility on Internet service providers concerning the content of Web sites. The proposal was also criticized for setting double legal standards, discriminating against online media, and curbing free media and freedom of expression.

Local Governance (Score: 2.50)

Substantial power is situated at subnational levels of government. Lithuania has one level of local government, which encompasses 60 municipalities led by elected councils and 10 regional administrations governed by central appointees. The responsibilities of local government include municipal development, primary and secondary education, primary health care, environmental protection, social assistance, and public utilities. In certain areas, such as land planning, health care, and education, both central and local authorities are involved. Ambiguities in the division of power have impeded decentralization, the distribution of fiscal allocations for municipalities, and transparent and accountable governance on the municipal level. Proposals to abolish regional administrations were aired by political parties during the October 2004 parliamentary elections. However, regional governors remain influential political officials, and a political decision on the removal of the regional tier of governance is unlikely.

A new model of local government was introduced through 2003 amendments to the Law on Local Government, adopted to comply with a 2002 Constitutional Court ruling that MPs could hold only one post and could not serve concurrently on municipal councils, nor could mayors serve simultaneously as heads of municipal executive authorities and lead elected municipal councils. MPs were thus banned from parallel work in local governments, and representative and executive powers of municipal authorities were separated. Mayors remain the heads of municipal councils, but their executive duties have been delegated to the municipal council and administration, led by a director who is appointed by the municipal council at the suggestion of the mayor. The director of administration is now responsible, among other things, for administering municipal funds and implementing decisions of the municipal council. The press labeled the new model a "municipal revolution."

In June 2004, lawmakers reduced the shock by amending the law to allow those MPs who lost their seats in the October 2004 legislative elections to retain their municipal mandates. The parliamentary legal department heavily criticized these amendments as violating the principle of mandate continuity, but the new provisions went basically unnoticed by the public. The shock had already come to many municipal officeholders, however, when in February 2004 the Constitutional Court ruled that municipal council mandates were incompatible with executive posts in municipally owned entities, such as schools, hospitals, or businesses. This means that in some municipalities as many as a third of the council members have to be replaced without waiting for another election.

Municipal councils are elected in general elections. Candidates can run for local council seats through party lists only. The tenure of municipal councils has changed several times and is now four years. Mayors are elected by municipal councils. Direct election of mayors was a topical issue during the recent legislative election campaign. This idea is supported on all sides of the political spectrum, and the Parliament is likely to approve it. Municipal elections are universal and free and are conducted in accordance with established democratic rules. The current municipal councils were elected in December 2002, when 22 parties shared 1,560 council seats. Among the major parties, the ruling LSDP won 332 seats; the opposition Conservatives, 193; the UPNDP, 190; the Liberal Union, 160; and the Center Union 156 seats. (The Liberal Union and the Center Union were two different parties before the municipal elections, but later they merged into the LCU). Exploiting the often criticized party list election system, a popular practice among election candidates, especially prominent party leaders, is to occupy top positions on the municipal election lists but to reject municipal mandates after the elections in favor of parliamentary seats or posts in the government. Observers note that this disappoints and misleads the voters.

The operation of municipal councils and municipal administrations lacks transparency. Legal acts enacted by municipal councils are not available on the Internet; in practice, decisions are not communicated to the public until their enactment. Polling data cited by the Lithuanian branch of Transparency International suggest that municipal officials dealing with routine applications are the recipients of the largest bribes from businesspeople. Since the general public has difficulty deciphering the division of competences between national and local governments, voters are more demanding with respect to the ethics of national officials.

Municipal governments generally lack funds to meet their expenditure obligations, owing mainly to mismanagement and to their expanding sphere of authority. The bulk of municipal revenues comes from the central government. Changes are negotiated between municipalities and the central government and approved by the Parliament. In 2004, central budget subsidies accounted for 58 percent of municipal revenues; 32 percent was generated from personal income tax; and the rest came from local charges and dues. Given that revenue volumes differ markedly across municipalities, they are equalized according to the projected expenditure needs of specific municipalities.

Judicial Framework and Independence (Score: 1.75)

Accession to the EU in May 2004 was a major turning point for the Lithuanian legal system and judiciary. The judiciary is likely to face difficulties in implementing EU law, however, even though EU law is binding upon member states in the areas of exclusive competence of the communities. Lithuanian judges are generally reluctant to apply international legal instruments in their decisions; moreover, the system of EU law is rather complex and requires thorough knowledge of the concepts and of specific legal acts. Furthermore, not all legal acts and decisions of the European Court of Justice are accessible in Lithuanian.

Fundamental political, civil, and human rights are enshrined in the Constitution. Freedom of expression, religious freedom, freedom of association, the right to a fair trial, and the right to own property and businesses are guaranteed and well established in national legislation and Lithuania's international obligations. Accession to the European Convention for the Protection of Human Rights and Fundamental Freedoms has provided an extra tier for Lithuanian nationals to appeal cases of human rights violations. Equality before the law is generally well respected. According to an opinion poll released by the UN Development Program in December 2004, Lithuanians felt that the human rights situation had improved over the past three years. Respondents felt that religious freedom, the rights of ethnic minorities, and freedom of expression were given the highest level of protection, while socioeconomic rights were most vulnerable.

The concept of a right to privacy, which was not very widely known by the general public until recently, received extraordinary public attention in 2004 as recordings of tapped telephone conversations played major roles in the presidential scandal and the corruption scandals involving MPs. The recordings were classified information for the use of pretrial investigations but were leaked to the media. Some politicians and civil society organizations raised concerns about violations of privacy by law enforcement. However, law enforcement agencies and the society at large tend to treat such measures as acceptable when applied to influential businesspeople and politicians. Civic organizations are participating in the drafting of new legislation on intelligence activities. The process began in 2004 and will have significant implications for citizens' rights.

In 2004, the Constitutional Court continued to serve as a powerful, independent, and reliable guardian of the country's basic law and the rights it guarantees. In 2004, the court was confronted with a number of high-profile cases and made critical decisions on the constitutionality of presidential decrees, a ban on reelection of impeached officials, the incompatibility of parliamentary mandates with other professional activities, and the incompatibility of municipal council seats with executive functions in municipally owned entities. The Parliament evidently tried to transfer controversial political decisions to the Constitutional Court by framing those questions within constitutional disputes.

The process of reforming the country's legislative and judicial framework is now essentially complete. A new civil code in line with EU law and international legal acts came into effect in 2001. A code on civil procedure took effect in 2003 and significantly eased civil legal proceedings. A penal code came into effect in May 2003, along with a penal procedure code and the penalty execution code approved in 2000. The 2003 penal code, which replaced the old Soviet penal code, divided unlawful activity into crimes and criminal offenses and prohibited the imposition of prison sentences for the latter. These provisions are designed to prevent unjustified imprisonment and to increase the penalties for repeat offenders. Notably, criminal penalties in Lithuania have been among the strictest and the number of prisoners per capita among the highest in Europe. The 2003 penal procedure code is tailored to speed up law enforcement procedures, investigations, and trials. Judges are now more involved in the pretrial stage of investigation. The 2003 penalty execution code removed some excessive restrictions on the rights and liberties of convicts and improved the mechanism for filing and investigating their complaints.

There are no research data on the impact of these reforms, and the results will take some time to become apparent given the complexity and scope of the changes. However, experts and the judiciary alike complain that the new codes contain serious flaws that are already impeding their proper implementation. Reportedly, redefined crimes and changes in applicable penalties are causing the most difficulty. In particular, the delegation of pretrial investigation to police forces has brought confusion and uncertainty because many police officers, especially interrogators, lack adequate legal qualifications for performing this function. A total of 55 percent of interrogators had no legal education, the Kauno Diena newspaper reported in 2003.

The president nominates, and the Parliament approves, the chair and judges of the Supreme Court and the court of appeals. In the case of the Supreme Court, however, its chairman, rather than the Court Council, recommends appointments and dismissals of judges and department chairs. The Court Council makes such recommendations for judges and chairs of other courts. Critics charge that this increases Supreme Court judges' dependence on the chair. The Supreme Court reviews judgments and orders of the courts of general jurisdiction.

The president appoints district court judges and, upon approval of the Parliament, the prosecutor-general. Court chairs, court department chairs, and deputy court chairs are appointed for one term. The number of terms is not limited. Circuit court judges are first appointed for five years and then until 65 years of age. The first term is considered to be too lengthy by some analysts, who argue that judges may feel forced to accommodate the interests of both the government and the judiciary.

Most judges appear to rule fairly and impartially, but public mistrust of judges is high. Courts continue to appear at the bottom of the popularity list in public opinion polls. Lower-tier courts are trusted the least, national daily Kauno Diena reported. Corruption, protracted trials, and disrespect of the court toward trial participants are the main factors that undermine public confidence. Politicians and the media also distrust the judicial branch. As a result, judges work in a hostile atmosphere. Yet appeal statistics show that a very small percentage of verdicts is appealed.

The government has no formal control over court decisions. However, a lack of funding stimulated the national court administration to ask the Parliament on several occasions in 2004 to provide the means necessary for proper functioning. In the lowest tier, where most cases are tried, three judges now share one assistant, which is obviously insufficient for effective adjudication. Lower-level courts are reportedly suffering loss of staff owing to the high workload, heavy responsibility, and relatively low pay. Judges, especially court chairs, also perform administrative functions, which not only impairs judges' work capacities, but also raises doubts about transparency in assigning cases and the independence of judges.

Criminal investigations and trials are frequently protracted, and court hearings are lengthy. However, tighter control of court proceedings has helped to markedly reduce the number of overlong cases in the past few years. The presumption of innocence and the right to a fair and public hearing are guaranteed by law and normally secured in practice. But defendants' right to a fair trial is often undermined by poor legal representation. As the Law Institute, a governmental research group, reports, 94 percent of cases are represented by poorly paid and poorly motivated public attorneys. The 2003 penal procedure code is expected to finally bridge these gaps. Concerns linger over detention without trial and arbitrary arrests. The Human Rights Monitoring Institute reports that the main problems are with illegally prolonged temporary detention, failure to bring persons promptly before the court, and inadequate lockup conditions for police detainees.

Corruption (Score: 3.75)

Corruption remains a systemic problem in Lithuania, present in all layers of state governance and public administration. Most of the problem areas are associated with loopholes that grant excessive authority to public officials and create conditions ripe for the abuse of official power. A chain of scandals that broke in 2003 and continued through 2004 led analysts to reiterate concerns over recurrent corruption and to question the government's ability to fight it.

In 2004, Lithuania was shaken by grave political corruption scandals involving top officials and politicians. The scandal that resulted in the ouster of President Paksas was primarily about corruption. All three counts against Paksas involved connections between the president (and his top aides) and business interests. The presidential scandal confirmed concerns about entrenched political corruption and highlighted the need for better exposure and oversight of the political process.

Another scandal surfaced later in 2004 as three MPs representing established political parties were accused of taking bribes to ensure passage of amendments to energy legislation in favor of one influential business group. The authorities seized documents from the headquarters of the implicated parties on the eve of presidential and European Parliament elections. Politicians and opinion leaders severely criticized what they called the politicized timing of the raids. The accused lawmakers stepped down voluntarily to allow the investigation to continue, but it was later terminated for lack of evidence. This case received huge media coverage and provoked discussion not so much about legislative corruption, but about the involvement of law enforcement in political battles. The head of the anticorruption bureau, the SIB, was accused of acting in a politically motivated and partial manner and resigned from office in response to severe criticism from President Adamkus.

The SIB, an independent institution established in 1997, is in charge of official anticorruption activities. Lithuania has a comprehensive legislative and institutional framework for combating corruption, including a 2002 National Anticorruption Program, tailored to streamline interagency structures and reduce bureaucracy as key mechanisms in fighting administrative corruption. The program also seeks to make public officials personally responsible for inadequate regulations or administrative decisions. The state institutions tasked with overseeing the program have been blamed for lackluster implementation and for paying it at best nominal attention, and the SIB has been criticized for occupying itself with petty investigations and avoiding high-level corruption cases.

Executive and legislative bodies operate under audit and investigation rules. There are strict limitations on the participation of government officials and civil servants in economic life. They may not sit on enterprise boards, represent enterprises, or make contracts with related entities. Civil servants may not represent any interests related to their former place of employment for one year after entering state service. The law prohibits conflicts of interest and requires financial disclosure by politicians, heads of businesses, and their spouses. Elected politicians and political civil service appointees must make annual declarations of their income and property, but such declarations are often a sheer formality. Government authorities are obligated by law to publicize vacancies and call for contracts in the official gazette. However, these requirements have been systematically circumvented by various means.

The crime of accepting or demanding a bribe is punishable by denying offenders the right to hold certain professional positions and by imprisonment for three to eight years. Punishments for the abuse of official power include fines, denial of the right to hold certain positions, and imprisonment for four to six years. In July 2003, the law was amended to allow the dismissal of state servants for the abuse of official power and violations of ethics, punishable by a three-year prohibition from state service.

All persons reporting cases of corruption receive general legal protections. Allegations of corruption and violations of ethical norms are given extensive coverage in the media. The media played no small role in heating the atmosphere during the numerous political corruption scandals in 2004.

Public perception of corruption is high in Lithuania. Most Lithuanians censure those who profit from graft at the same time that they tolerate corruption. Half of the society thinks that Lithuania is a corrupt state, but only a sixth would report corruption to the authorities, according to polling data cited by the Delfi.lt portal. According to a survey released by Transparency International's Lithuanian branch in November 2004, the scope of corruption has shrunk in recent years, but bribes are still seen as effective tools by most Lithuanians. Transparency International's 2004 Corruption Perceptions Index shows Lithuania in much the same position as in 2003. Transparency International continues to rank Lithuania among the countries with serious corruption problems.

Corruption and bribery are entrenched in many areas. The traffic police, health care institutions, and institutions of higher education are the most vulnerable areas, according to a public opinion poll released by Transparency International and the SIB in June 2004. The results show that in the preceding year, half of all contacts with the traffic police involved bribes, almost a third of the population gave unofficial payments to doctors, and nearly every third student made unofficial payments to schools or teachers. Transparency International's Global Corruption Barometer 2004, a survey of the general public released in December 2004, reports that Lithuanians consider customs, political parties, the Parliament, and the courts to be the four most corrupt institutions.

Corruption also continues to plague land restitution and relocation procedures and public procurement. Misuse of information, favoritism, and concealment of conflicts of interest are the most frequent procedural and ethical violations seen in restitution of private property. New legislation on public procurement adopted in May 2003 made officials responsible not only for procedural infringements, but also for violations of equality, nondiscrimination, transparency, and efficiency, principles enshrined in law for the first time. Public purchase announcements must now be published on the Internet. The law thus increased procedural transparency, but officials retain discretionary powers in applying public procurement criteria and assessing bids.

Corruption is pervasive within Lithuania's extensive regulatory system. The state intervenes into the economy mainly by this avenue, such as by regulating energy prices, prescribing a mandatory minimum wage, setting quality standards, requiring numerous permits and inspections, and other regulatory steps. Many feel this amounts to excessive regulation. Direct participation of the state in the economy has been minimized through large-scale privatization, including infrastructure privatization. In 2004, privatization of the alcohol manufacturing industry was completed, and the transportation and energy sectors are also being released from state ownership.

Recent corruption scandals have prompted discussion about lobbying. The national Lobbyist Association and the Supreme Commission on Official Ethics have proposed expanding the application of lobbying legislation to explicitly embrace all actions designed to exert influence on the legislature, but the proposed definition of lobbying lacks cohesion. The amendments would also impose heavy registration, reporting, and disclosure requirements on civil organizations and business associations.

In 2004, Lithuania scored 4.6 in Transparency International's Corruption Perceptions Index, a slight improvement from 4.7 in 2003. Lithuania remained below the threshold designating countries with low levels of corruption. Although Lithuania has created a comprehensive legislative and institutional framework for fighting corruption and the level of corruption has dropped recently in the view of the public, domestic authorities and international organizations alike continue to recognize corruption as one of the country's biggest concerns. Recent scandals have raised public awareness of the problem and emphasized the need for better exposure.

Author

Aneta Piasecka is a senior policy analyst and Giedrius Kadziauskas is a policy analyst at the Lithuanian Free Market Institute, a nonprofit think tank based in Vilnius.