Ranked 20th in the 2016 World Bank’s Ease of Doing Business Index, Lithuania has outstripped its closest neighbours Latvia and Poland. Yet, possibilities of forging ahead as one of the most business-friendly economies are not fully exhausted.
Indeed, Lithuania has high ratings for starting a business, registering property and enforcing contracts, but red tape and a heavy administrative burden related to getting construction permits and electricity connection kept the country back from better positions. “Entrepreneurs face state control and bureaucracy at almost every stage of construction. This is not only costly but also ineffective with respect to the actual construction process,“ LFMI’s policy analyst Julia Simionenko-Kovacs says.
However, the situation is about to change as Lithuanian Free Market Institute (LFMI) has recently gained passage for a package of free enterprise policy reforms for reducing bureaucracy and removing barriers to getting electricity and construction permits that would lift the country up among the world’s top economies.
Over the past year LFMI accomplished a comprehensive research and policy advocacy program that helped to build the case and support for needed legislative and regulatory changes. Following the release of LFMI’s research report on risk assessment and management deficiencies in construction and intensive talks with policy makers and other stakeholders, earlier this year the Lithuanian Parliament adopted a new construction legislation which incorporated five key proposals from LFMI for simplifying the procedures for getting construction permits. As a result, two excessive procedures were removed and so the number of days required for getting a construction license was cut by 33.5 days, from 103 to 69 days. These changes are expected to lift Lithuania’s construction permit ranking from the 18th to at least 7th position and the country’s overall position from the 20th to 17th place.
Likewise, LFMI produced a detailed set of proposals for accelerating electricity connection and paired it with an extensive advocacy campaign that secured the elimination of one excessive procedure stipulated in the electricity legislation. This has reduced the number of days for getting electricity connection from 95 to 75, and Lithuania is to see its ranking in the electricity connection category move up from the 54th to 23rd position and the country’s overall ranking, from the 20th to 16th place.
Taken together, these improvements in the electricity and construction indicators should lift Lithuania from the 20th to 15th place in the overall standing. According to project leader Julia Simionenko-Kovacs, this huge step in fighting overregulation and excessive administrative burdens and costs would not only raise Lithuania’s global ranking. More importantly, shorter time limits would also increase the country’s investment attractiveness, facilitate business development planning and make public institutions more efficient.
The Lithuanian Free Market Institute is also working to achieve the unification of the tax base for social security contributions and a reduction in the total tax rate that measures the amount of taxes and mandatory contributions payable by businesses.