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Manufacturing Industry Trends in Lithuania

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Author(s): Rimantas Rudzkis | Natalja Titova

Journal: Engineering Economics
ISSN 1392-2785

Volume: 5;
Start page: 86;
Date: 2006;
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Keywords: manufacturing industry | Baltic States | high and medium-high technologies | foreign direct investment | competitiveness.

ABSTRACT
The article is aimed at highlighting developmenttrends of the manufacturing industry in Lithuania andassessing its prospects. In recent years, this industry hasbeen the driving force of the Lithuanian economic development.Not only does it generate the highest GDP sharebut has a significant direct impact on agriculture, transportand construction industries and dominates Lithuanianexports. Manufacturing industry plays a key role inLithuania’s efforts to cover the economic gap between thecountry and the developed states as soon as possible.Experience of a number of other countries has shown thatfast economic growth in the long term usually relies onthe development of manufacturing industry, especiallywhen a country lacks abundant natural resources.However, Lithuania is strengthening its formal and actualintegration into a rather uniform EU economic spacewhere an opposite trend of the reduction in manufacturingweigh is gaining momentum. The paper will try to answerthe question why Lithuania is probably the only EU memberstate where the manufacturing industry's share in theGDP has not declined and even went up significantly inrecent years. Experts believe that the industrial developmentin Lithuania has reached its breaking point. The periodwhen low production costs gave companies a competitiveadvantage and contacts with foreign partners were keysuccess factors is drawing to a close. Further industrialgrowth will rely on improved labour productivity, i.e. productionmodernization, generation of higher value addedand use of innovations. However, the main obstacles areshortage of highly skilled labour force, low foreign directinvestment flows, lack of close ties between business andresearch communities and a rather poor situation of R&Din the country. The paper analyses whether the expectationsthat the industrial structure will shift towards thedevelopment of high and medium-high technologiesbranches have a strong basis. Experts believe that thestrengthening competitive pressure from Asian companieswill force Lithuanian exporters to focus on penetrating theCIS region. The possibility to bridge the EU and CIS countriesis a strong, albeit highly overlooked, trump card ofthe Lithuanian economy in the competitive battle.The article concludes with the overview of the existingsituation in and outlook for major sectors of themanufacturing industry.
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