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LITHUANIAN CONSTRUCTION SECTOR ANALYSIS

INTRODUCTION

The subject of this paper is the Lithuanian construction sector. The concepts of both narrow and broadconstruction sectors will be used in the paper. The narrow construction sector includes all activitiesclassified as F under NACE Rev. 2. A detailed list of activities and the classification methodology aregiven in Annex 1. The broad definition covers the entire narrow construction sector and real estateactivities, architectural and engineering activities and related technical consultancy, as well as certainmanufacturing sectors related to the construction sector (see Annex 1).

The beginning of the paper provides a brief introduction of the Lithuanian construction sector, thenumber of companies operating in it, the overall production, and value added. The second part brieflydiscusses the country’s macroeconomic environment (GDP, inflation, unemployment, demographicsituation, fiscal policy, entrepreneurship, finance opportunities). The third part focuses more on themain economic aspects of the construction sector. It deals with labour productivity, total turnover,construction costs, number of people employed, business confidence, access to finance in theconstruction sector, housing. The fourth part analyses sales in the domestic market, exports ofconstruction products and services. The fifth part analyses foreign trade in regulated constructionproducts. How many regulated construction products are imported by Lithuania, how many areexported? What is the proportion of products originating from Lithuania? Which product groups andspecific products are most often imported and exported and who are the most important tradingpartners? The sixth part focuses on the main obstacles to the development of the construction sectorin Lithuania, discusses such issues as collapse of companies, delays in payments, lack of skills. Theseventh part deals with innovations in the construction sector. In part eight ‘National and regional policyand regulatory framework’ examines national strategies, programmes, development plans, and keyregulatory legislation. The ninth part discusses the current state and country’s readiness to achieve theobjectives of the national strategy ‘Construction 2020’, and discusses five aspects: investmentconditions and volumes, skills, resource efficiency/sustainable construction, single market, andinternational competitiveness. The tenth part presents the sector’s perspectives. At the end of the paperthere is a summary and conclusions.

The paper mainly uses data provided by the Statistical Office of the European Communities (Eurostat)and the Lithuanian Department of Statistics, as well as data provided by the Bank of Lithuania, theEuropean Central Bank and AMECO (the macro-economic database of the European Commission). Ituses the economic forecasts and insights provided by the Bank of Lithuania, analyses reviews andreports of the European Commission, the European Central Bank, the World Bank, and the annualreports of the Global Entrepreneurship Development Institute, the World Economic Forum, theOrganisation for Economic Co-operation and Development (OECD). It examines the legislation,strategies and programmes of the Republic of Lithuania, reports of the European Investment Bank(EIB), the Lithuanian Labour Exchange.


I. KEY INDICATORS OF THE CONSTRUCTION SECTOR

According to the broad definition, the number of companies operating in the Lithuanian constructionsector (see Annex 1) in 2016 was 51,412 (see Fig. 1). 57% were construction companies according tothe narrow definition, 25% were real estate companies, 9% manufacturing, 9% architectural andengineering companies. The total number of companies has increased by 11% since 2008 (and doubledsince 2010, when it was at its lowest (24,518) due to the crisis). Over the eight years, the biggest jumpwas in the number of architectural and engineering companies (55%); the number of companies in theconstruction sector increased by 31% according to the narrow definition, while the number of realestate companies decreased by 22%.

Fig. 1. Number of companies operating in the Lithuanian construction sector, 2008–2016

Overall production in 2017 increased by 9.6%, with the highest growth seen in civil engineeringproduction (16.3%); construction of buildings increased by 4.7% (see Fig. 2). However, compared to2008, overall production is still down by 32.5%, construction of buildings by 37.1%, civil engineeringby 25.3%.

Fig. 2. Lithuanian construction sector production index, 2008–2017 (2015=100)

In 2016, the total value added in the construction sector was EUR 2.5 billion (see Fig. 3) according tothe broad definition, with the largest share coming from the construction sector (50.2% or EUR 1.3billion) according to the narrow definition. In the second place were real estate activities (28.3% orEUR 710 million), manufacturing made up 15.2% (EUR 380 million), architectural and engineeringactivities—6.4% (EUR 160 million).

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Fig. 3. Value added in the Lithuanian construction sector, 2016

II. LITHUANIAN MACROECONOMIC INDICATORS

In 2017, Lithuania’s real GDP reached EUR 32.3 billion per year, which was an increase of 3.9%compared to 2016. After a severe recession in 2009 (-14.8%), Lithuania’s GDP recovered fairly quicklyand from 2010 onwards, increases by 3.3% per year on average.

In recent years, inflation has fluctuated strongly in Lithuania (see Fig. 4). The highest level was reachedin 2008 (11.1%); deflation was recorded in Lithuania in 2015 (-0.7%), while in 2017 inflation jumpedto 3.7%. Based on the forecast by the Bank of Lithuania of June 20181, inflation will bet 2.7% in 2018and 2.2% in 2019.

Fig. 4. Annual inflation in Lithuania, 2000–2017 (%)

Based on data by Eurostat, the average unemployment rate in 2017 in Lithuania was 7.3%, which wasslightly below the EU average (7.6%). The unemployment rate in Lithuania is still higher than in 2008(5.8%), but has sharply decreased in comparison with the highest unemployment rate of 17.8% in2010. Youth (up to 25 YO) unemployment rate in 2017 in Lithuania was 13.5%; this indicator is alsolower than in the EU (16.8%).

In 2017, Lithuanian population amounted to 2.8 million (see Table 1), but the projections indicate a3.5% decrease by 2020, 15.4% decrease by 2030, 31.3% by 2050, with the population eventually

1 Bank of Lithuania. Lithuania’s economic development and outlook. 25 June 2018https://www.lb.lt/lt/leidiniai/makroekonomines-prognozes-2018-m-birzelis

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barely reaching 2 million (if other conditions remain constant). In addition to the deterioratingdemographic situation, net migration has also been negative for the last ten years, with about 30,000people on average leaving the country annually.

Table 1. Lithuanian population projection until 2050

Population Change (%)2017 2,849,715 -2020 2,749,762 -3.5%2030 2,410,874 -15.4%2050 1,957,377 -31.3%

In 2017, 65.9% of the Lithuanian population were between the ages of 15 and 64, while 19.3% wereolder than 65 years (see Fig. 5). It is expected that the working age population will decrease from65.9% to 54.9% by 2050, while the population aged over 65 will increase to 28.5% by 2050.

Fig. 5. Lithuanian population by age group, 2017

Fiscal policy. The fiscal policy implemented by Lithuania meets the requirements for EU countries. In2017, for the second year in a row, the general government has reached its budget surplus. The ratioof the general government surplus to GDP was 0.5%; in the EU Member States the indicator averaged-1.0%. The government deficit has decreased since 2009, when it was (-9.1%). Government debt in2017 accounted for 39.7%. This indicator is well above the 2008 level of 14.6%, but is one of thelowest in the EU. In 2017, the ratio of government expenditure to GDP was 33.3%2. Reforms in thepension system have improved the long-term fiscal sustainability of Lithuania, but risks remain due tothe uncertainty associated with pension adequacy.3

Entrepreneurship. In the Doing Business index published in 2018, Lithuania ranks 27th out of 190countries4. The average time taken to register a company is 5.5 days, requiring 4 procedures, less thanthe average of OECD5 high-income economies (8.5 days and 4.9 procedures)6. In addition, the averagestart-up costs are 0.6% of income per capita, compared to 3.1% of OECD high-growth economies.

2 Based on the data from the Lithuanian Department of Statistics.3 European Commission, Country Report: Lithuania 2018 // https://ec.europa.eu/info/sites/info/files/2018-european-semester-country-report-lithuania-en.pdf4 World Bank Group, Doing Business 2018, Ease of Doing Business in Lithuania //http://www.doingbusiness.org/~/media/WBG/DoingBusiness/Documents/Annual-Reports/English/DB2018-Full-Report.pdf5 OECD—Organisation for Economic Co-operation and Development6 World Bank Group, Doing Business 2018, Starting a Business in Lithuania //http://www.doingbusiness.org/data/exploreeconomies/lithuania/#starting-a-business

15%

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iki 15 metų tarp 15 ir 64 metų vyresni nei 65 metai


However, the minimum capital is 19.3% of income per capita, compared to 8.7% of OECD high-growtheconomies.

According to the Global Entrepreneurship and Development Index, published in 2018, Lithuania ranks29th among 137 countries worldwide 7 . Lithuania has strong aspects of human capital,internationalisation, product innovation; the country’s position is weakened by risk taking andcompetitiveness.

According to the 2017 SBA Fact Sheet & Scoreboard8, Lithuania is above the EU average in manyrespects. The country is in line with the EU average for skills and innovation, the single market andaccess to finance. The weakness remains unchanged since last year, i.e. ‘second chance’9.

In addition, the Lithuanian government has used part of the European Social Fund’s package forpromoting entrepreneurship by introducing a financial instrument, i.e. the Entrepreneurship PromotionFund (EPF). According to the data of 2015, EUR 14.5 million of EPF funds were allocated to small andmedium-sized enterprises (SMEs) and start-ups in Lithuania through low-interest loans. SMEs were alsooffered free training and consultancy on how to strengthen their business skills10.

Access to finance. According to the Global Competitiveness Report 2017–2018, issued by the WorldEconomic Forum, Lithuania ranks 41st out of 137 countries11. In terms of financial market development,however, Lithuania is ranked 59th: 52th in terms of ease of access to loans, and 62th in terms of venturecapital availability. Lithuania ranks better in terms of affordability of financial services (36 th place) andavailability of financial services (38th place). Areas for improvement are: financing through local equitymarket (81st place), soundness of banks (72th place). Unlike most Member States, bank financing forcompanies in Lithuania is less important, as companies rely mostly on their own funds.

In addition, according to SAFE 201712, Lithuania (together with Spain) grants the most small loans,while according to the number of rejected applications, Lithuania ranks fourth (11%). In fact, accessto finance for start-ups and SMEs reveals potential investment barriers, while high financial costs canprevent receiving a loan13.

III. I. KEY ECONOMIC INDICATORS OF THE CONSTRUCTION SECTOR

In 2015, the labour productivity of real estate activities14 (EUR 26,300) was 2 times higher than that ofarchitectural and engineering activities (EUR 12,300), which had the lowest productivity, and narrowconstruction activities (EUR 12,800) (see Fig. 6). In the second place in terms of productivity aremanufacturing activities (EUR 1,900). In the 2008–2015 period, labour productivity declined in both theconstruction and the architecture and engineering sub-sectors. The biggest decline was seen inarchitectural and engineering activities (-17.5%) and in the narrow construction sub-sector (-3.8%).

7 Global Entrepreneurship and Development Institute, Country report, Lithuania //http://thegedi.org/countries/lithuania8 European Commission, 2017 SBA Fact Sheet Lithuania // https://ec.europa.eu/docsroom/documents/294899 ‘Second chance’ means ensuring that honest businessmen who have experienced bankruptcy can quickly geta second chance.10 European Commission, Lithuania: New trends in business finance //https://blogs.ec.europa.eu/promotingenterprise/lithuania-new-trends-in-business-finance/11 The Global Competitiveness Report 2017-2018 // https://www.weforum.org/reports/the-global-competitiveness-report-2017-201812 European Commission, Survey on the access to finance of enterprises (SAFE), Analytical Report 2017//https://ec.europa.eu/docsroom/documents/2664113 European Commission, Country Report: Lithuania 2016 // https://ec.europa.eu/info/publications/2016-european-semester-country-report-lithuania_en14 Eurostat data. Gross value added per employee.


Labour productivity in real estate and engineering activities sub-sector, by contrast, grew by 80.0%over the same period; meanwhile in manufacturing the growth was 20.0%.

In 2016, total turnover in the broad construction sector amounted to EUR 7.4 billion. The constructionsector was hit heavily by the economic crisis, which resulted in a decrease in turnover from EUR 9.1billion in 2008 to EUR 4.6 billion in 2010 (-49.2%). Since then, the turnover has been increasing until2015, although it has not reached the pre-crisis level. In 2016, total turnover decreased by 6.3%compared to 2015.

In 2016, the turnover of the narrow construction sector accounted for 58.4% of the total turnover, withthe real estate activities coming in the second place; similar turnover was achieved in the manufacturingsub-sector, while the smallest share of turnover (5.4% or EUR 406 million) was achieved byarchitectural and engineering activities. The gross operating surplus in the broad construction sector in2015 amounted to EUR 1.2 billion and exceeded the 2008 gross operating surplus by 2%.

Fig. 6. Labour productivity in the Lithuanian construction sector, 2008–2015

Construction costs have steadily increased since 2010 (see Fig. 7). The total turnover decreased, thegross operating surplus increased, construction costs also increased steadily, and therefore the grossoperating rate15 increased from 12.3% in 2008 to 14.6% in 2015.

Fig. 7. Lithuanian construction cost index, 2008–2017 (2015=100)

15 The gross operating rate is a profitability indicator, calculated as the ratio of gross operating surplus andturnover.

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In 2016, the number of people employed in the broad construction sector amounted to 167,079,representing 12.3% of all employees. The majority of construction workers (61.6%) worked in thenarrow construction sub-sector, 15.6% worked in manufacturing, 14.7% in real estate activities and8.1% carried out architectural and engineering activities (see Fig. 8).

Fig. 8. The share of people employed in the construction sector by sub-sector, 2016

However, during 2008–2016, the total number of people employed in the broad construction sector fellby 23%. The drop was driven by a decline in employment in all sub-sectors due to the economic crisis.In fact, the number of people employed fell most during 2008–2010 (-40.1%); employment thencontinued to grow up until 2015. In 2016, there is a slight dip (-1.5%).

In 2016, 18,300 employees in the narrow construction sector were self-employed, accounting for 11.8%of the self-employed workforce. The number of self-employed people in the narrow construction sectorhas been declining since 2008, when it was 22,200 self-employed people and accounted for 15.2% ofthe self-employed workforce.

Business confidence. Due to the crisis, all confidence indicators 16 , in particular the constructionconfidence indicator, have diminished significantly. Between 2007 and 2009, consumer confidencedropped from 4.4 to -49.1, industry confidence dropped from 5.9 to -33.6, while construction confidence

16 Confidence indicators reflect the general attitude and expectations of a particular sector; each confidenceindicator is calculated as a simple arithmetic mean of answers to specific questions.

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dropped from 5.7 to -81.4. As of 2010, all confidence indicators have begun to rise. Consumerconfidence from increased from -32.4 in 2010 to -10.1 in 2017. Industry confidence indicator recoveredslightly faster, from -13,1 in 2010 to -2.8 in 2017. Construction confidence indicator also rose confidentlyand reached -23,1 in 2017. Unfortunately, construction confidence indicator remains strongly negative,reflecting the perception of risk in the sector and indicating that investors are cautious about long-termcommitments.

Access to finance in the construction sector. Since 2011, the value of loans granted to the construction sectorhas fallen by 57%. In 2011, loans granted in the construction sector amounted to EUR 1 billion, in 2017 they wereEUR 431 million17. In 2017, loans granted to manufacturing, trade, transport, construction and real estatecompanies accounted for three quarters of all bank loans issued to non-financial companies. The value of loansgranted in the construction sector has fallen the most among non-financial companies, while manufacturingcompanies (-13%) are in the second place. The gross value of loans issued to non-financial companies has risenby 6% since 2011.

The highest level of bad loans is recorded in the accommodation, catering and construction sectors and in realestate activities. On the other hand, the level of non-performing loans in these activities, in particular real estateactivities, has been the fastest to decline in recent years, so if the current trends remain unchanged, banks willlikely tend to lend more. In 2016, loan portfolios of real estate and construction companies increased most18.

Housing. The number of households in Lithuania in 2017 amounted to 1.35 million. This number is almostunchanged from 2008, even though the population has decreased by 11% over the same period, from 3.2 millionin 2008 to 2.8 million in 2017. 67% of all households were in cities. The median equivalised net income19 increasedby 43% between 2008 and 2016 from EUR 4,902 to EUR 7,033.

Due to the crisis, investment and housing prices have fallen sharply, as the housing price index fell by 35.1%between 2008 and 2010 (see Fig. 9). Growth since 2010 has continued to this day, as the index is up by 36.3%from its lowest point in 2010, but has not yet reached the pre-crisis level of 2008. The total value of loans grantedfor purchasing housing increased rapidly from less than EUR 1 billion in 2004 to EUR 6 billion in 2008. Since theearly 2009, the total value of loans granted for housing has fallen slightly, but the growth that started in 2013continues to this day. In 2017, the total value of loans granted for housing exceeds the pre-crisis level and is atEUR 7.3 billion20.

Fig. 9. Housing price index in Lithuania, 2008–2017 (2015=100)

17 Bank of Lithuania // https://www.lb.lt/lt/paskolos-ne-finansu-bendrovems-pagal-ekonomines-veiklos-rusis18 Bank of Lithuania, Financial Stability Review 2017 // https://www.lb.lt/en/fss-financial-stability-review19 The median equivalised net, or disposable income, is the median of total income of all households, after taxand other deductions, that is available for spending or saving, divided by the number of household membersconverted into equivalised adults; household members are equalised or made equivalent by weighting eachaccording to their age, using the so-called modified OECD equivalence scale.20 Bank of Lithuania (Data of 2018-04) // http://www.lb.lt/lt/paskolos-gyventojams

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Due to the economic crisis, the number of building permits issued in 2009, compared to 2008, decreasedby 52.6%21. The downward trend continued until 2012, when the number of building permits issuedduring the year started to grow again and in 2016 and 2017 already exceeded the level of 2008. In2017, the number of residential building permits decreased by 8% compared to 2016, while the numberof non-residential building permits granted during the same period increased by 9%22. In 2017, thenumber of new completed residential buildings (6,420) decreased by 9% compared to the number of2016 (7,051), but in comparison with the pre-2008 figure (4,027), it exceeded it 59%.

Since 2008, interest rates on loans granted for purchasing housing in Lithuania have been constantlydecreasing. In 2017, the interest rates on loans (over 5 years) for housing were 1.6%, down from 5.7%in 2008 (see Fig. 10)23.

Fig. 10. Interest rates on loans (over 5 years) for housing (%) in Lithuania, 2008–201724

The size of the rental market in Lithuania is relatively small, as only 10.6% of households in the countryare tenants25. However, citizens with lower income are more likely to rent (18.1%) than citizens withhigher income. Furthermore, the availability of social housing is limited. The overcrowding rate26 inLithuania has dropped significantly during the last decade, from 53.5% in 2006 to 23.7% in 2016, yetis still well above the EU average (16.6%).

Infrastructure. In the Global Competitiveness Report 2017–201827, Lithuania ranked 47th in the fieldof general infrastructure development. It performed especially well in terms of the quality of railwayinfrastructure (27th), as well as the quality of overall infrastructure (29th), with the most room forimprovement seen in the quality of air transport infrastructure (68th place).

IV. SALES OF PRODUCTS AND SERVICES IN THE CONSTRUCTION SECTOR

Domestic sales

21 Based on Eurostat data.22 Based on the data from the Lithuanian Department of Statistics.23 Based on the data of the European Central Bank //http://sdw.ecb.europa.eu/quickview.do?SERIES_KEY=124.MIR.M.LT.B.A22.J.R.A.2250.EUR.O24 European Central Bank // http://sdw.ecb.europa.eu/browse.do?node=bbn575725 The State of Housing in the EU 2017/ http://www.housingeurope.eu/resource-1000/the-state-of-housing-in-the-eu-201726 The overcrowding rate describes how many people live in overcrowded dwellings based on the number ofrooms per household, the size of the household and the age and marital status of its members.27 The Global Competitiveness Report 2017-2018 // https://www.weforum.org/reports/the-global-competitiveness-report-2017-2018

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Top five most sold construction products28 in Lithuania accounted for 44.6% of domestic sales ofconstruction products29 in 2016 (see Table 1). Since 2008, only one of the top five positions hasremained the same (prefabricated structural components for building or civil engineering (236112)),but the share of the most sold products in the construction product sales market remained unchanged.

Lithuania’s domestic sales structure differs from the EU average, with only two product groups falling into top fiveproducts with the most domestic sales in both markets. In the EU, only one position has changed since 2008(Windows, French windows and their frames (162311)), while the first position has remained unchanged.

Table 1. Top 5 construction products with the most domestic sales in Lithuania and EU,2016

Lithuania EU-28

Product Value,EUR m

Share in domesticsales of

constructionproducts (%)

Product

1 Fibreboards (162112) 88.1 11.4% Other structures(251123)

2 Prefabricated buildings of metal(251110) 78.9 10.2% Doors, windows, etc.

(251210)

3 Prefabricated structural components forbuilding or civil engineering (236112) 68.6 8.9% Ready-mixed concrete

(236310)

4 Medium-density fibreboards (MDF)(162115) 58.0 7.5% Prefabricated buildings

of metal (251110)

5 Ready-mixed concrete (236310) 50.8 6.6%Windows, Frenchwindows and theirframes (162311)

Exports of construction products and services

Top five most exported construction products in Lithuania accounted for 60.5% of the all constructionproduct exports in 2016 (see Table 2). This share, like the entire top five, has remained the same since2008, with only the order of the rankings changing.

The export structure of construction products in Lithuania differs from that of the EU, with only oneproduct group falling into top five most exported products in both markets. The EU top five has alsoremained stable since 2008, with only one position changing (prefabricated buildings of metal(251110)).

Table 2. Top 5 most exported construction products in Lithuania and EU, 2016

Lithuania EU-28

Product Value,EUR m

Share in exports ofconstructionproducts (%)

Product

1 Prefabricated wooden buildings (162320) 145.4 16.6% Ceramic tiles and flags(233110)

2 Assembled parquet panels (162210) 138.9 15.8% Other structures(251123)

28 Based on the EU product list PRODCOM29 Domestic Salest = Value of Productst + Import Valuet - Export Valuet


3 Other structures and parts of structures(251123) 84.0 9.6%

Medium-densityfibreboards (MDF)(162115)

4 Pallets, box pallets and other load boardsof wood (162411) 81.8 9.3% Marble, travertine, etc.

(237011)

5 Windows, French windows and theirframes (162311) 80.8 9.2% Prefabricated buildings

of metal (251110)

In 2017, Lithuania exported construction services for EUR 290 million, which was 22% more than in2016 (EUR 238 million) and 4.5 times more than in 2010 (EUR 64.3 million). In 2017, EUR 63 millionworth of construction services were imported in Lithuania, same as in 2016, but twice as much as in2015 (EUR 28.3 million) and almost three times more than in 2010 (EUR 22.5 million). In 2017, foreigntrade surplus in construction services amounted to EUR 227 million.

Almost 30% of all construction services are exported to Sweden, 23% to Norway, while the othercountries account for less than 10% of all construction service exports. Exports of services in 2017grew to all countries, except Estonia and Belarus. In total, in 2017, Lithuania exported constructionservices to 14 countries (including Belarus, the United Kingdom, Italy and Spain in addition to those inFig. 11).

Fig. 11. Construction service exports by country, 2017

In 2017, construction services were imported by Lithuania from 8 countries. Almost half of theconstruction service imports in 2017 were accounted for by Germany, 35% by Latvia, 4% by Polandand Norway each.

V. LITHUANIAN FOREIGN TRADE IN REGULATED CONSTRUCTION PRODUCTS

In this section, the 6-digit classification of the Combined Nomenclature is used for the analysis ofLithuanian foreign trade in construction products. Construction products were selected on the basis of

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the list of regulated construction products in Lithuania30 (a detailed list of products used in the analysis(over 130 categories of products) is given in Annex 2). Based on this list, the following 12 productgroups have been identified:

1. Aggregates2. Concretes and mortars3. Thermal insulation materials and products4. Concrete, reinforced concrete and natural stone products5. Windows, doors and other partitions6. Glass and products7. Roof coverings and products8. Wall, ceiling and floor coverings9. Paints, varnishes, grouts, primers and coatings10. Heating, plumbing and ventilation installations11. Reinforcing steel, inserts and components12. Metal bearing structures and their components

In 2017, regulated construction products imported to Lithuania accounted for EUR 794 million, whileexported products accounted for EUR 1 billion. Foreign trade surplus of regulated construction productsamounted to EUR 230 million.

In 2017, 16% more regulated construction products were imported to Lithuania than in 2016, whileexports were 15% higher than in 2016. The import of regulated construction products has grown byan average of 8% annually over the last five years, while exports have grown by 9% annually (see Fig.12).

Fig. 12. Foreign trade in regulated construction products in Lithuania, 2012–2017, EUR m

In 2017, 70% (EUR 712 million) of the total export flow of regulated construction products consistedof products of Lithuanian origin and 30% (EUR 312 million) of re-exports. Over the past five years, thisratio has fluctuated slightly, but the share of regulated construction products of Lithuanian origin intotal exports has remained over 60%, with the peak in 2016 (72%). In 2017, compared to 2016,exports of regulated construction products of Lithuanian origin increased by 12% and re-exports by23% (see Fig. 13).

30 Order of the Minister of Environment of the Republic of Lithuania ‘On the Approval of the List of RegulatedConstruction Products’, 27 June 2018, No. D1-601 // https://www.e-tar.lt/portal/lt/legalAct/276ca3607a9f11e8ae2bfd1913d66d57

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Fig. 13. Exports of regulated construction products by export type, 2012–2017, EUR m

In 2017, about 30% of all regulated construction product imports consisted of metal bearing structuresand their components, of which almost EUR 230 million were imported to Lithuania (see Fig. 14). Afifth of the imports (almost EUR 150 million) were made up by paints, varnishes, grouts, primers andcoatings. The following three product groups were almost equally distributed: heating, plumbing,ventilation installations (15%), windows, doors, partitions (12%), reinforcing steel, inserts andcomponents (10%). These five product groups together accounted for 85% (EUR 674 million) of allimports of regulated construction products.

Fig. 14. Regulated construction product imports by product group, 2017

Out of all regulated construction products, the highest share of imports in 2017 was accounted for byiron or steel structures and their components (730890) and articles made of iron or steel (732690), asthese accounted for 9% and 8% of the total imports of regulated construction products, respectively.(Fig. 15 shows shortened product names; the detailed names can be found in Annex 2 according to thecode provided in brackets). Other product categories accounted for a significantly smaller share (3–4%

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Stiklas ir gaminiai

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Betonai ir skiediniai

Termoizoliacinės medžiagos ir gaminiai

Užpildai

Sienų, lubų ir grindų dangos

Betoniniai, gelžbetoniniai ir natūralaus akmens…

Armatūrinis plienas, įdėtinės detalės ir elementai

Langai, durys ir kitos atitvaros

Šildymo, vandentiekio ir vėdinimo įrenginiai

Dažai, lakai, glaistai, gruntai ir dangos

Metalinės laikančios konstrukcijos ir jų elementai


each). The top five products together account for almost 30% of all regulated construction productimports.

Fig. 15. Top 5 most imported regulated construction products, 2017.

In 2017, the main country of origin of regulated construction products imported into Lithuania wasPoland. 22% of all regulated construction products imported to Lithuania were from Poland (EUR 177million), with Germany being second (15%, EUR 120 million), and Latvia being third (8% or EUR 62million). Figure 16 shows top ten countries of origin of imported regulated construction products, whichtogether accounted for almost 80% of all regulated construction product imports. The top ten containsonly 2 non-EU countries, namely China and Belarus, which together accounted for 9% of all regulatedconstruction product imports.

Fig. 16. Regulated construction product imports by country, 2017

In 2017, 29% of all regulated construction product exports consisted of metal structures and theircomponents, of which Lithuania exported almost EUR 300 million (see Fig. 17). A quarter of all exports(EUR 245 million) were accounted for by windows, doors, partitions. Almost equally distributed werewall, ceiling and floor coverings and reinforcing steel, inserts and components, which accounted for

3%

4%

4%

8%

9%

0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%

Aliuminio konstrukcijos ir jų dalys (761090)

Jungiamosios detalės iš plastikų (391740)

Dažai ir lakai (320890)

Dirbiniai iš geležies arba iš plieno (732690)

Geležies arba plieno konstrukcijos ir jų dalys(730890)

3%

3%

4%

5%

6%

6%

7%

8%

15%

22%

0% 5% 10% 15% 20% 25%

Čekija

Ispanija

Kinija

Baltarusija

Estija

Italija

Švedija

Latvija

Vokietija

Lenkija


14% and 13% of all regulated construction product exports, respectively. 7% were made up by exportsof heating and ventilation installations. These five product groups together accounted for almost 90%(EUR 887 million) of all exports of regulated construction products.

The top two most exported regulated construction products are also the most exported regulatedconstruction products of Lithuanian origin; three quarters of these construction products are ofLithuanian origin (see Fig. 18). The largest share (over 90%) of exported wall, ceiling and floorcoverings, as well as thermal insulation materials and products are of Lithuanian origin.

Fig. 17. Total regulated construction product exports by product group, 2017

Fig. 18. Regulated construction product export flows by product groups, 2017

0.0%

0.0%

0.0%

0.1%

0.3%

0.3%

0.6%

0.7%

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1.4%

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2.9%

0% 5% 10% 15% 20% 25% 30% 35%

Stogo dangos ir gaminiai

Stiklas ir gaminiai

Betonai ir skiediniai

Užpildai

Betoniniai, gelžbetoniniai ir natūralaus akmens…

Termoizoliacinės medžiagos ir gaminiai

Dažai, lakai, glaistai, gruntai ir dangos

Šildymo, vandentiekio ir vėdinimo įrenginiai

Armatūrinis plienas, įdėtinės detalės ir elementai

Sienų, lubų ir grindų dangos

Langai, durys ir kitos atitvaros

Metalinės laikančios konstrukcijos ir jų elementai


Out of all regulated construction products, the largest share of exports in 2017 was accounted for byiron or steel structures and their components (730890), which made up 19% of the total exports ofregulated construction products, 23% of exports of regulated construction products of Lithuanian origin,and 10% of re-exports of regulated construction products. The top five most exported regulatedconstruction products, presented in Figure 19, represent 54% of all regulated construction productexports. Top five regulated construction products of Lithuanian origin, presented in Figure 20, togetheraccount for 66% of all regulated construction products of Lithuanian origin. Figure 21 presents the topfive most re-exported regulated construction products in Lithuania in 2017. The top five of the most re-exported regulated construction products coincides with the most imported regulated constructionproducts.

Fig. 19. Top 5 most exported regulated construction products, 2017

Fig. 20. Top 5 most exported regulated construction products of Lithuanian origin, 2017

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%100%

Stogo dangos ir gaminiaiStiklas ir gaminiai

Betonai ir skiediniaiUžpildai

Dažai, lakai, glaistai, gruntai ir dangosBetoniniai, gelžbetoniniai ir natūralaus akmens…

Šildymo, vandentiekio ir vėdinimo įrenginiaiTermoizoliacinės medžiagos ir gaminiai

Armatūrinis plienas, įdėtinės detalės ir elementaiSienų, lubų ir grindų dangos

Langai, durys ir kitos atitvarosMetalinės laikančios konstrukcijos ir jų elementai

Lietuviškos kilmės eksportas Reeksportas

4%

6%

12%

14%

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Mediniai langai, langai-durys ir jų rėmai (441810)


Daugiasluoksniai grindų skydai iš medienos(441875)



Fig. 21. Top 5 most re-exported construction products, 2017

In 2017, most of the regulated construction products were exported to Russia, 15% (EUR 152 million)of all regulated construction product exports, but 90% of this flow consists of re-exported products.Norway (14%) was in second, Sweden (10%) in third. Figure 22 shows top ten countries of origin ofexported regulated construction products, which together accounted for almost 80% of all regulatedconstruction product exports. This top ten contains 3 non-EU countries, namely Russia, Norway andChina.

Fig. 22. Total regulated construction product exports by country, 2017

5%

7%

12%

19%

23%

0% 5% 10% 15% 20% 25%

Durys, langai, rėmai, slenksčiai iš aliuminio(761010)

Mediniai langai, langai-durys ir jų rėmai (441810)


Daugiasluoksniai grindų skydai iš medienos(441875)


4%

6%

9%

10%

10%

0% 2% 4% 6% 8% 10% 12%

Jungiamosios detalės iš plastikų (391740)

Dažai ir lakai (320890)





Fig. 23. Exports of regulated construction products of Lithuanian origin by country, 2017

Norway and Sweden are the main destinations for regulated construction products of Lithuanian origin.They account for 18% and 14% of exports of regulated construction products of Lithuanian origin,respectively (see Fig. 23). 97% of all exports of regulated construction products to Sweden and 88%to Norway are of products of Lithuanian origin. More than 90% of exports of regulated constructionproducts to Denmark, Finland, Germany and China are of products of Lithuanian origin.

The main re-export market for regulated construction products is Russia, accounting for 44% of totalre-exports (EUR 137 million). The top ten countries in terms of re-export of regulated constructionproducts include six non-EU countries: Russia, Belarus, Norway, Kazakhstan, Uzbekistan, Ukraine (seeFig. 24).

Fig. 24. Regulated construction product re-export by country, 2017

3%

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5%

6%

7%

8%

10%

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15%

0% 2% 4% 6% 8% 10% 12% 14% 16%

Kinija

Lenkija

Suomija

Danija

Jungtinė Karalystė

Latvija

Vokietija

Švedija

Norvegija

Rusija

2%

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Rusija

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Kinija

Latvija

Suomija

Danija


Vokietija

Švedija

Norvegija


VI. MAIN OBSTACLES IN THE CONSTRUCTION SECTOR

In 2015, 8,648 company births were seen in the narrow construction sector, which was 10.2% lessthan in 2014 (9,634), but 3.6 times more than in 2009 (2,410). In 2015, 789 company deaths wereseen, with the largest number of company deaths seen in 2008 (10,790). During 2009–2014, onaverage, about 5,000 company deaths in the narrow construction sector were recorded annually.

In the real estate sub-sector in 2015, 2,616 company births were registered, 17.5% more than in 2014and as many as 2.4 times more than in 2009, but still less than in 2008 (4,606). In 2015, 391 companydeaths were registered in the real estate subsector, which was the smallest number of company deathsin this subsector since 2007; the largest number of company deaths was recorded in 2008 (9,566).During 2009–2014, on average, 1,300 company deaths were recorded in this subsector annually.

In 2015, 649 company births were registered in the architectural and engineering sub-sector, whichwas 44,1% less than in 2014, but twice more than in 2008. In 2015, 466 company deaths were recordedin this subsector, with about 400 company deaths recorded annually.

Given these facts, the development of the construction sector in Lithuania in recent years can beconsidered sustainable, as this sector generated 6.1% of all of value added in 2016, which was only1.0% more than the EU average (5.1%), when in 2008 this indicator was at 9.9% and was 3.6% abovethe EU average (6.3%).

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Ukraina

Uzbekistanas


Estija

Lenkija

Kazachstanas

Norvegija

Baltarusija

Latvija

Rusija


Trade credit

According to SAFE 2017 study31, only 19% of Lithuanian companies consider trade credit as a relevantsource of finance. In the EU, 33% of respondents think that trade credit is relevant for their business.Over the last 6 months prior to the survey, 15% of all respondents in Lithuania used this source offinance, in the EU the number was 19%.

Late payments

Late payments have a significant impact on Lithuanian companies. According to the 2018 EuropeanPayment Report32, 35% of Lithuanian businesses have reported loss of revenue due to late payments;on the EU level, this figure is 18%. Lithuanian companies have lost an average of 1.42% of annualincome over the past twelve months due to late payments by customers. This indicator is better thanthe average for European companies (1.7%).

Late payments also have a significant impact on the development of Lithuanian companies. 33% ofLithuanian companies indicate that late payments hinder the development of the company (16% on aEuropean scale).

The average payment terms depend on the type of business transactions. In Lithuania, in business-to-consumer transactions, the average payment term is about 20 days, while in business-to-businesstransactions this term is 27 days; in the public sector it is 28 days.

Time and cost of obtaining building permits and licenses

According to the Doing Business 2018 report by the World Bank, Lithuania ranks 12 th (among 190countries) in terms of dealing with building permits. The number of procedures for obtaining a buildingpermit is 13 (see Table 3) and is very similar to the OECD average (12.5)33. On average, it takes 75days to build a warehouse in Lithuania, which is significantly faster than in the OECD countries (onaverage 154.6 days). In addition, most of these procedures are free in Lithuania, so the cost of obtainingbuilding permits is five times lower than the OECD average (0.3% of the warehouse value comparedto 1.6%).

Table 3. Time and cost of building permit procedures in Lithuania

Procedures Time (indays) Price

Registering ownership of a land plot 0.5 EUR 3Topographic survey of a land plot 21 EUR 175Special architectural requirements for construction operations 21 freeWater supply and sewage network design requirements 14 freeApproval of design documentation and obtaining a building permit 14 EUR 72Approval of the water supply and sewage network design and the signing of thecontract

7 EUR 348

Documents for inspection and testing of water supply and sewage networks ofengineering networks

5 free

Connection to water supply and sewage networks 5 freeRecruitment of a private cadastral firm and cadastral measurements of thestructure

5 EUR 579

Application for a construction completion certificate 0.5 free

31 European Commission, Survey on the access to finance of enterprises (SAFE), Analytical Report 2017 //https://ec.europa.eu/docsroom/documents/2664132 European Payment Report, 2018 // https://www.intrum.com/press/publications/european-payment-report/33 World Bank Group, Doing Business 2018, Dealing with Construction Permits //http://www.doingbusiness.org/data/exploreeconomies/lithuania/#dealing-with-construction-permits


Final inspection 1 freeObtaining a construction completion certification 14 freeRegistration in the Land and Real Estate Register 1 EUR 749

Bureaucracy and corruption

Business representatives believe that the scale of corruption in Lithuania is decreasing. In the EU SingleMarket Scoreboard 201734, 21% of Lithuanian business respondents indicated that corruption hadhampered the development of business in the country (compared to 28% in 2015; on the EU level, thisfigure was 37% in 2017), while 26% said they did not win a tender due to corruption (compared with39% in 2015; on the EU level, this figure was 31% in 2017). However, 70% said that bribes and tiesare often the easiest way to get certain public services in our country35. 40% of respondents said thatcorruption is widespread among officers issuing building permits. Small and medium businesses havein particular reported the need to make facilitation payments in order to obtain permits on time 36.

Ineffective state bureaucracy is mentioned as the second biggest hindrance to business in Lithuania37.Companies also complain that the interpretation of regulations is unclear, application is inconsistent,new legislation is implemented without sufficient information, without proper public consultation, thereis a lack of legal certainty regarding the quality and complexity of laws. Lithuanian politicians often getcaught up in corruption scandals.

Shortage of skills

In 2017, the number of job vacancies in the narrow construction subsector increased by 80% to 1,893,which was still lower than in 2008 (2,059), but was 6.7 times higher than in 2009 (283). The oppositeis observed in the real estate subsector, where in 2017, the number of job vacancies decreased by 48%to 68 jobs and is higher than in 2008 (54).

In 2017, the participation of adults in education and training38 in the narrow construction subsectoramounted to 5.9%, slightly more than in 2015 (5.6%), but 22% less than in 2009 (7.6%).

Among the professions with the most demand in Lithuania were construction engineers, builders,painters, carpenters and joiners, unskilled construction workers39. This shortage of workers relates, inparticular, to the emigration of skilled workers to countries with higher pay and better workingconditions. The shortage of construction and other skilled workers is the result of a small number ofyoung people choosing vocational education training (VET).

In addition to commonly demanded construction workers, it is likely that the construction sector willneed 35,000 to 40,000 employees trained in the energy performance of buildings. There are no officialfigures on the number of staff trained so far, but according to a survey of construction companies,

34 European Commission. EU Single Market Scoreboard //http://ec.europa.eu/internal_market/scoreboard/performance_by_member_state/lithuania/index_en.htm35 European Commission. Flash Eurobarometer 457: Businesses’ attitudes towards corruption in the EU //https://data.europa.eu/euodp/data/dataset/S2177_457_ENG36 Business Anti-Corruption Portal. Lithuania Corruption Report // https://www.business-anti-corruption.com/country-profiles/lithuania/37 The Global Competitiveness Report 2017-2018 // https://www.weforum.org/reports/the-global-competitiveness-report-2017-201838 Eurostat data. Level of participation in education and training (last 4 weeks, age 16–64). The indicator includesparticipation in both formal and informal education and is a measure of lifelong learning.39 Lithuanian Labour Exchange // http://www.ldb.lt/Informacija/DarboRinka/Puslapiai/paklausios_profesijos.aspx(data of 09/04/2018)


about 40% of employees have received training on energy performance of buildings, and 30% onrenewable energy40.

40 European Commission, Intelligent Energy Europe //https://ec.europa.eu/energy/intelligent/projects/en/projects/build-skills-lt


Waste management

In 2014, 647,663 tons of construction and demolition waste were generated in Lithuania, which was15% more than in 2012 (564,841 tons), and 92% more than in 2010 (388,150), resulting from theintensification of construction in the country during this period.

Waste management, including construction and demolition waste, is governed by the Law on WasteManagement41, which establishes general requirements for waste prevention, accounting, collection,storage, transportation, utilisation and disposal. The Law on Pollution Tax42 defines the rules for theapplication of the pollution tax in order to promote pollution reduction and the implementation of wastemanagement.

The Government has approved the National Waste Management Plan for 2014–2020 in order to reducethe impact of waste pollution, ensure a waste management system and establish waste managementobjectives. The waste management system should address issues of the population, ensure the qualityof the environment, comply with the market economy standards; meanwhile, the share of recycledwaste in 2020 should be at least 50%.

VII. INNOVATION IN THE CONSTRUCTION SECTOR

According EU Innovation Scoreboard 201743, Lithuania is ranked among average innovators, while theoverall productivity of innovation and research and innovation is below the EU average. Lithuania is16th among 28 European Union countries. The growth of Lithuanian innovation activity in 2016,compared to 2010, was the fastest and was 21%. The Lithuanian innovation system is consideredrelatively strong in such innovation areas as environment, human resources, and business–sciencecollaboration, while in the areas of sales impact, attractive research and intellectual property theinnovation system is relatively weak.

Business enterprise research and development (R&D) expenditure in the construction sector has shownfluctuations over the last year (see Fig. 25). In 2009, R&D expenditure in the narrow constructionsubsector dropped by 98.9% from EUR 2.6 million down to EUR 0.029 million in 2009, then in 2010recovered strongly and reached EUR 1.4 million; during 2011–2013, decline in R&D expenditure wasobserved and then again strong recovery in 2014. In 2015, R&D expenditure in the narrow constructionsubsector amounted to EUR 0.76 million. In 2015, R&D expenditure in real estate activities amountedto EUR 0.057 million and the peak was in 2013, when it amounted to EUR 2.29 million44.

41 Law on Waste Management of the Republic of Lithuania. The Gazette, 08/07/1998, No. 61-1726 //https://www.e-tar.lt/portal/lt/legalAct/TAR.8D38517814F1/cThueyllRO42 Law on Pollution Tax of the Republic of Lithuania. The Gazette, 28/05/1999, No. 47-1469 // https://www.e-tar.lt/portal/lt/legalAct/TAR.FFF9AE9162EE/tvLgZlioOt43 European Commission. European Innovation Scoreboard 2017 //https://ec.europa.eu/docsroom/documents/2482944 Eurostat data. Data for R&D expenditure in real estate activities is only available for 2010, 2012–2015.


Fig. 25. Business enterprise research and development expenditure in the constructionsector in Lithuania (2008–2015, EUR m)

Total R&D personnel (full-time equivalent45) in the construction subsector fluctuated, as did R&Dexpenditure. In 2008, the narrow construction subsector employed 45 R&D employees, in 2015—66,while the largest number of R&D personnel was in 2014 (130). In 2015, real estate companies employed8 R&D employees, while the highest number was employed in 2014 (10).

According to the 2017 EU Industrial R&D Investment Scoreboard46, no Lithuanian construction companywas among the top 1000 EU companies in terms of R&D spending.

The Government of Lithuania is developing state programs and strategies for promoting innovation invarious national economic sectors: renewable resources, energy waste management, construction andenvironmentally-friendly transport. One of the main initiatives is the Lithuanian Innovation DevelopmentProgram 2014–2020, which aims to promote Lithuania’s competitiveness by creating an effectiveinnovation system across all sectors47. In addition, the Smart Specialisation Strategy was launched in201548. The strategy seeks to increase investment in research in order to develop competencies inbusiness potential, strengthen scientific, technological development and innovation, and promotecooperation between public and private actors. One of the main priority areas for R&D is the‘Technology for the Development and Use of Smart Low-Energy Buildings—Digital Construction’, whichhas an approved action plan for 2015–2020. The action plan describes in detail the steps taken todevelop and implement digital construction technologies, building information models, new products,processes and methods in the construction market. Smart specialisation priorities were created by agroup of independent experts, set up by the Lithuanian Research and Higher Education Monitoring andAnalysis Centre (MOSTA)49. Monitoring is carried out by developing action plans that determine thebasis and objectives of each priority. The second monitoring report on the implementation of MOSTAsmart specialisation indicates that the investments into R&D50 infrastructure planned by the Ministry ofEducation and Science for 2014–202051 fail to allocate any finance to the ‘Digital Construction’ priority.

45 A full-time equivalent is obtained by converting the number of part-time research employees to the numberof full-time research employees.46 European Commission. The 2017 EU Industrial R&D Investment Scoreboard. R&D ranking of EU top 1000companies // http://iri.jrc.ec.europa.eu/scoreboard17.html47 Lithuanian Innovation Development Program 2014–2020. The Gazette, 30/12/2013, No. 140-7110 //https://www.e-tar.lt/portal/lt/legalAct/ab492740723811e3b29084acd991add848 http://sumani2020.lt/49 http://mosta.lt/50 Research and experimental (socio-cultural) development and innovation51 Ministry of Education and Science of the Republic of Lithuania

0

0,5

1

1,5

2

2,5

3

2008 2009 2010 2011 2012 2013 2014 2015

Statyba Nekilnojamojo turto veikla


According to the amount of finance of the EU research and innovation programme Horizon 2020, theleast amount of funds is allocated to the digital construction priority (EUR 66,600, 0.22% of the funds).

The construction sector has been actively involved in the digitisation of the industry. In 2014, the LithuanianConstruction Association, together with 12 other associations, established a public institution ‘Skaitmeninė Statyba’(Digital Construction) for the coordination of the Lithuanian digitisation process. The institution seeks to standardisebuilding information modelling (hereinafter referred to as BIM52), create, implement and develop a nationalconstruction classification. The institution represents Lithuania in the Nordic country section of the international‘buidingSMART’ alliance.

VIII. NATIONAL AND REGIONAL POLICY AND REGULATORY FRAMEWORK

Policy schemes

The Ministry of Environment of the Republic of Lithuania is responsible for construction and housing issues. TheLithuanian Housing Strategy defining the housing policy was recognised in 2017 as a document that was not legallyvalid and was not actually implemented, or more precisely was not funded. The goals and objectives of the HousingStrategy are implemented through programmes that receive budget funding, for example, the Programme for theRenovation (Modernisation) of Multi-Apartment Houses, an action plan for the development of the social housingfund, etc. Nevertheless, the strategic goals set by the Housing Strategy remain relevant; therefore, it was decidedto transfer them to the Master Plan for the Territory of the Republic of Lithuania. This is because it is directlyrelated to sustainable development, addressing available/affordable, comfortable housing issues andexpanding the range of housing products. The concept for a new plan is currently underway53.

The Ministry of Social Security and Labour approved the Action Plan for the Development of MunicipalSocial Housing Fund for 2015–2020, based on the funds of the European Regional Development Fund(ERDF54), intended to meet the growing demand for affordable housing. In particular, the action planfinances such projects as the construction of new social housing buildings, the reconstruction ormaintenance of existing buildings (living quarters, dormitories, nursing homes, shelters, etc.) and theconversion of non-residential buildings into social housing. In addition, the plan aims to promote energyefficiency by encouraging households to buy social housing with a minimum energy grade of C. Finally,the action plan aims to create 1,150 new social housing units and increase their availability to eligiblehouseholds. The overall budget for the implementation of the plan amounts to EUR 58.7 million, EUR49.9 million of which are from the ERDF and EUR 8.8 million—from municipal budgets55.

In order to support low and middle income families in obtaining affordable housing, the Governmenthas approved the Law On State Support to Acquire or Rent Housing, which provides that householdsentitled to receive social housing or to rent housing under market conditions shall be entitled to acompensation for some of the rent or lease payments. In addition, the state shall support selectedbeneficiaries (i.e., people under 35 years of age, families with three or more children, people withdisabilities, etc.) by covering up to 20% of the mortgage loan56.

Finally, in November 2015, the Ministry of Environment approved the Guidelines of developingLithuanian construction sector 2015–2020. This document defines the strategic objectives of the sector

52 BIM (Building Information Modelling) is a process that continues throughout the life cycle of a structure. BIMincludes design, construction, operation and management, upgrading and eventually demolition of the structure.In order to reduce the environmental impact of a structure, it is very important to take into account all aspects ofenergy consumption.53 https://lrv.lt/lt/naujienos/pradedamas-rengti-lietuvos-respublikos-teritorijos-bendrasis-planas54 ERDF— European Regional Development Fund55 Action Plan for the Development of Municipal Social Housing Fund for 2015–2020 // https://www.e-tar.lt/portal/lt/legalAct/5f9f8880df3c11e48b678a6bad30f55f/SdAoDCmKea56 Law On State Support to Acquire or Rent Housing of the Republic of Lithuania // https://www.e-tar.lt/portal/lt/legalAct/e944ee00600111e4bad5c03f56793630/mYcwnjxkkS


up to 2020, as well as the objectives to be achieved in order to address the challenges associated withqualifications, energy and environmental requirements, market access, application of informationtechnology and implementation areas. The strategic objectives of the guidelines include improving thesustainability of buildings; more efficient use of resources for the production, transport and use ofconstruction products; promotion of sustainable cities and infrastructure and promotion of highlyqualified training and continuous professional development57.

Construction regulation

The Law on Construction of the Republic of Lithuania58 is the main legal act governing constructionoperations in Lithuania. It sets out all the essential requirements for construction, reconstruction andrepair operations within the country. It includes detailed procedures for research, design, construction,reconstruction, repair, operation, use and demolition works, as well as the relations between partiesinvolved in construction activities. It also includes minimum energy performance requirements forbuildings.

In addition, the construction process is also governed by various construction technical regulations,such as the classification of structures (STR 1.01.03:2017), structure design, expert examination ofdesign documentation (STR 1.04.04:2017), supervision of construction works (STR 1.06.01:2016 ),accident at a construction works (STR 1.03.01:2016), completion of construction (STR 1.05.01:2017),etc.59

Article 42 of the Law on Construction of the Republic of Lithuania stipulates that designers of constructionoperations and construction contractors must have compulsory insurance against civil liability. For designers, thiscompulsory insurance covers damage caused to third parties due to inadequate design, and for constructioncontractors—the losses incurred due to inadequate construction operations for third parties. The amended versionof the law also extends this obligation to the technical supervision of construction operations. In this respect, theprinciples of regulation and the main provisions are set out in the documents on the rules of compulsory civilliability insurance of the contractor, the rules of compulsory civil liability of the construction contractor, and therules of compulsory civil liability insurance of the technical supervision administrator, which must be taken intoaccount when entering into contracts for compulsory civil liability insurance.

Insurance may also be voluntary, including civil liability insurance and contractor’s all risk insurance, which coversdamage caused during construction.

The principles of liability in the construction sector are defined by the Civil Code, which stipulates that liability mayarise from non-compliance with an obligation stipulated in a law or a contract (for example, failing to complete aconstruction works within the time period specified in the contract or according to the specifications laid downtherein), prohibited actions or negligence. In such cases, the contractor may need to remedy defects orcompensate the customer for expenses. In the case of structural defects, the liability shall last 10 years, and inthe case of deliberately concealed defects—20 years.

57 Order on the Approval of the Guidelines of developing Lithuanian construction sector 2015–2020 //https://www.e-tar.lt/portal/lt/legalAct/4a443e3087a811e5b7eba10a9b5a9c5f58 Law on Construction of the Republic of Lithuania. The Gazette, 10/04/1996, No. 32-788 // https://www.e-tar.lt/portal/lt/legalAct/TAR.F31E79DEC55D/YvnvhJQEpn59 A collection of applicable technical construction regulations only (29/05/2018) //http://www.am.lt/VI/index.php#a/16982


IX. CURRENT STATUS AND NATIONAL STRATEGY TO MEET CONSTRUCTION 2020 OBJECTIVES

Investment conditions and volumes

Investment in the construction sector, in particular non-residential property, is the main driving force behindthe country’s investment.60.

Fig. 26. Investment in the construction sector in Lithuania, 2007–2017 (2015=100)

Absolute investment in the construction sector in 2017 amounted to EUR 4 billion, EUR 1 billion of whichwent to residential dwellings and EUR 3 billion into non-residential and civil engineering61.

The transport sector in Lithuania is considered to be strategically important and strongly contributes tothe GDP. The country seeks to become a transport hub between the Nordic countries and Central Asiaand China, but the transport infrastructure still needs to be improved. Only 6.5% of the railways areelectrified, and the rail link from north to south is poorly developed62.

In order to overcome some of these challenges and to strengthen the connections, Lithuania hasallocated EUR 1.1 billion of EU funding for transport infrastructure development for 2014–202063. EUR177 million of the Connecting Europe Facility (CEF64) are allocated to transport projects65.

One of the most important strategic transport infrastructure projects is Rail Baltica, which is part of theEuropean Union’s international transport corridor North Sea–Baltic Sea and part of the transport corridor(TEN-T) connecting the Baltic States with the European railway network66. In addition to EU funds, theNordic Investment Bank has granted a EUR 144 million loan for the construction of a railway line from

60 European Commission, Country Report: Lithuania 2016 // https://ec.europa.eu/info/publications/2016-european-semester-country-report-lithuania_en61 AMECO database // http://ec.europa.eu/economy_finance/ameco/user/serie/SelectSerie.cfm62European Commission. Transport. EU transport Scoreboard. Electrified railway lines //https://ec.europa.eu/transport/facts-fundings/scoreboard/compare/energy-union-innovation/share-electrified-railway_en#201563 European Commission, EU transport Scoreboard //https://ec.europa.eu/transport/sites/transport/files/lt_en.pdf64 CEF— Connecting Europe Facility65 European Commission, Country Report: Lithuania 2016 // https://ec.europa.eu/info/publications/2016-european-semester-country-report-lithuania_en66 http://www.rail-baltica.lt/

0.000.200.400.600.801.001.201.401.60

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Statyba Gyvenamoji statyba Negyvenamoji statyba ir civilinė inžinerija


the Lithuanian–Polish border to Kaunas67. The project is expected to be completed in 2025; this datehas been confirmed in the intergovernmental agreement signed by Estonia, Latvia and Lithuania.

Reductions in EU funds require alternative sources of investment in infrastructure and energy projects.To this end and in order to enable long-term investors to invest in infrastructure and energy projects,the first Lithuanian Energy and Infrastructure Investment Fund—the Energy and Infrastructure BalticFund (BEIF)—was established in 201668. The fund has EUR 100 million, but has not yet made anyinvestments.

In 2017, BaltCap (a private equity and venture capital fund manager) set up the EUR 100 million‘BaltCap Infrastructure Fund’69. The fund is expected to help meet the growing demand for investmentin transport, energy efficiency and renewable energy sectors in the Baltic region. Together with otherinstitutional investors, the European Investment Bank (EIB) has invested EUR 20 million in the fund.

The EIB is an important contributor to Lithuania’s investment in infrastructure. The Bank contributes tothe modernisation of the country’s railways, providing a loan of EUR 68 million for the extension of theKlaipėda railway unit, as well as renewal and electrification of several railway lines70. Vilnius is usingEIB financing, namely a EUR 50 million loan, for urban infrastructure, better roads, rehabilitation of thecity centre, renovation of schools and kindergartens71. The EIB- and state-owned energy companygroup ‘Lietuvos Energija’ has signed an agreement for a EUR 190 million loan for the construction of anew cogeneration plant in Vilnius. The implementation of this project would solve the problem of landfillwaste, reduce energy prices for urban residents, increase energy security and ensure clean energyproduction from renewable and local energy sources. The EIB loan for this project is allocated from theEuropean Fund for Strategic Investments (EFSI)72.

Skills

Although the government seeks to improve the quality and attractiveness of VET, there are stillchallenges to be addressed. The number of students enrolled in VET institutions in 2011–2017 increasedfrom 20,000 to 25,600, but in 2016–2017 school year again dropped to 20,00073. The proportion ofVET students remains relatively low, i.e. 27.2% (in 2016) 74 . VET graduates have a quite highemployment rate of 71.5% (in 2017, although down from 75.6% in 2015); for comparison, the EUaverage is 76.6% (in 2017)75.

In addition, Lithuania is affected by one of the highest skills mismatches in the EU: middle and low-skilled workersface high unemployment risks (13.5% and 29.8% respectively), while the unemployment risk of high-skilled

67https://www.nib.int/who_we_are/news_and_media/news_press_releases/1299/nib_finances_railway_infrastructure_in_lithuania68 https://lordslb.lt/en/fund/baltic-energy-and-infrastructure-fund-3/69 https://www.vz.lt/rinkos/fondai/2017/07/03/baltijos-salyse--naujas-100-mln-eur-infrastrukturos-fondas#ixzz5HeVVg1eN70 http://www.eib.org/infocentre/press/releases/all/2016/2016-017-eib-renews-support-for-lithuanian-railways.htm71 http://www.eib.org/infocentre/press/releases/all/2016/2016-207-eib-to-support-vilnius-urban-investment-programme.htm72 http://www.eib.org/infocentre/press/releases/all/2016/2016-317-european-support-for-cheaper-and-cleaner-heat-and-power-in-lithuania.htm (https://www.le.lt/index.php/naujienos/pranesimai-spaudai/svaresne-ir-pigesne-energijos-gamyba-lietuvoje-sulauke-europos-paramos-/3032)73 During the same period, the number admissions to universities decreased from 33,400 in 2011 to 22,700 in2017; the number of admissions to colleges dropped from 16,400 to 12,000 accordingly.74 Compared to 47.3% in the EU (data only for 2015), in Lithuania the rate was 26.8% in 2015.75 For comparison, the employment rate of higher education graduates in 2017 was 91.5% (up from 88.5% in2015), while the employment rate of general education graduates in 2017 amounted to 73.1% (up from 67.2%in 2015)


employees is very low (4.2%, compared to 6.1% in the EU)76. The skills mismatch has been exacerbated bythe crisis in the construction sector, as a number of jobs were lost. This has led to an increase of thestructural unemployment rate, which was 8.5% in 201777.

Thus, there is a need to improve VET quality, attractiveness and responsiveness to labour market needs.In 2010, the Lithuanian government approved the Lithuanian qualification framework (LQF)78, settingup clear rules and requirements for getting qualification though different forms of education. The VETqualification acquired outside of the formal education and training is planned to be included in the LQF.

Some progress has also been achieved with the introduction of 2014–2016 Action Plan for theDevelopment of Vocational Training, which introduces modular VET training and strengthens work-based learning79.

In order to improve the qualification of Lithuanian construction workers, several initiatives have beenlaunched. Notably, the Guidelines of developing Lithuanian construction sector 2015–202080 set theobjective of encouraging high-skilled training and continuous professional development, including thepromotion of professional qualifications in accordance with market needs, as well as the use of EUprogrammes, such as Build Up and Erasmus+ for developing effective trainings.

Furthermore, as a result of the Build Up skills project81, the Guidelines for the Professional Developmentof Building Workforce in Lithuania82, which aims to create a strategy to meet Europe 2020 targets,including an action plan to identify the need for skilled workers, their training measures and priorities,as well as the certification procedures. In addition, the guidelines seek to establish a voluntary systemfor development and recognition of professional competences and skills of the building workforce inLithuania in relation to requirements for nearly zero energy buildings.

Resource Efficiency / Sustainable Construction

With regard to the progress made in implementing the national targets of Europe 2020 strategy, Lithuania hasachieved the general renewable energy target and has made significant progress in energy efficiency. Accordingto its national energy efficiency target, the country is to reach a 17% reduction in the final energy useby 2020, compared to the 2009 level (740 ktoe less). This entails attaining a level of 6.49 Mtoe ofprimary and 4.28 Mtoe of final energy consumption by 202083. The country is performing well withregard to energy efficiency in buildings, as supported by national funding schemes and EU funds. Moreeffort is needed to achieve the energy efficiency target by increasing the share of renewable energy inthe transport sector.

76 European Commission, Country Report: Lithuania 2016 // https://ec.europa.eu/info/publications/2016-european-semester-country-report-lithuania_en77 AMECO database // http://ec.europa.eu/economy_finance/ameco/user/serie/ResultSerie.cfm78 Government of the Republic of Lithuania, decision ‘On the Approval of the Lithuanian Qualification Framework’,the Gazette, 15/05/2010, No. 56-2761 // https://www.e-tar.lt/portal/en/legalAct/TAR.BC967702800C/TAIS_40532679 Order of the Minister of Education and Science of the Republic of Lithuania ‘On the Approval of the 2014–2016Action Plan for the Development of Vocational Training’ // https://www.e-tar.lt/portal/lt/legalAct/52b2e96047bf11e483c6e89f9dba57fd/jfZEVNfPNc80 Order on the Approval of the Guidelines of developing Lithuanian construction sector 2015–2020 //https://www.e-tar.lt/portal/lt/legalAct/4a443e3087a811e5b7eba10a9b5a9c5f81 European Commission, Intelligent Energy Europe //https://ec.europa.eu/energy/intelligent/projects/en/projects/build-skills-lt82 Guidelines for the Professional Development of Construction Workforce in Lithuania to meet the 2020 energyefficiency targets // http://energinisefektyvumas.lt/wp-content/uploads/2013/08/BUS_GAIRES.pdf83 European Commission, Country Report: Lithuania 2018 // https://ec.europa.eu/info/sites/info/files/2018-european-semester-country-report-lithuania-en.pdf


One of the country’s largest priority projects and the main funding scheme for renovation of residentialbuildings is the Programme for the Renovation (Modernisation) of Multi-Apartment Houses, aiming toencourage the energy efficient renovation of apartment blocks built before 199384. The programmewas initially enforced in 2005, offering state grants of up to 50% of the costs of the renovation works,with the balance provided by commercial banking loans.

Nevertheless, it ran out of funds by 2007 due to limited state resources, and the European Commission,EIB and the government therefore signed an agreement in 2009 to relaunch it using JESSICA85. TheJESSICA Holding Fund was thus set up and capitalised with an initial investment of EUR 227 million, ofwhich EUR 127 million from the ERDF and EUR 100 million from the national budget. The programmeoffered loans amounting to up to EUR 200,000 per building, repayable over 20 years at a fixed interestrate of 3% per annum. A 50% grant to prepare the relevant renovation documentation was alsoavailable, as well as a 100% subsidy on all expenses for low-income applicants. Moreover, beneficiariescould claim a 15% loan rebate from the Holding Fund if the renovated building achieved the minimumenergy efficiency class D (i.e. a 20% reduction in energy costs) and an additional 15% grant from theClimate Change Programme in case of a 40% reduction in energy costs. Eligible costs under theprogramme include the reorganisation of heating and hot water systems, ventilation and recuperationsystems, insulation of roofs, walls, partition, replacement of windows, doors, upgrading of lifts, as wellas management of other engineering systems of general use (sewage, wiring, fire protection, drinkingwater pipelines).

Since its launching in 2005 until 2012, 479 multi-apartment houses were renewed in Lithuania. (Therenovation of multi apartment buildings was funded through the JESSICA initiative until 2013). For theperiod 2014–2020, it falls under the remit of the newly established Multi-Apartment buildingmodernisation fund (DNMF), which provides soft loans through its EUR 74 million allocation. Since theapproval of the new multi-apartment building renovation model in 2013, 1973 apartment blocks havebeen renovated, 533 apartment blocks are currently being renovated and 576 investment plans havebeen reconciled86.

The EIB, in cooperation with Šiaulių Bankas, supports the renovation and modernisation of multi-apartment buildings in Lithuania87. In addition, in order to maximize the funds of the Programme forthe Renovation (Modernisation) of Multi-Apartment Houses, the EIB, together with the Ministry ofFinance and the Ministry of Environment set up a Risk Sharing Fund in late 2016, funded by EUStructural and Investment Funds (from the European Regional Development Fund) and national funds.The fund aims to support investments that promote energy efficiency in order to reduce energy costs.The Fund gives banks the opportunity to increase lending under the modernisation programme, thusincreasing its scope and awareness throughout Lithuania. It is expected that this guarantee will allowbanks to provide up to EUR 500 million in modernisation loans, which would allow upgrading up to32,500 apartments and nearly 1,500 apartment blocks by 2023 and would increase the available public

84 Programme for the Renovation (Modernisation) of Multi-Apartment Houses // https://www.e-tar.lt/portal/lt/legalAct/TAR.AE67B6739526/WThqaVWCcL85 JESSICA (Joint European Support for Sustainable Investment in Cities) is an initiative of the EuropeanCommission, developed in cooperation with the European Investment Bank (EIB) and the Council of EuropeDevelopment Bank (CEB). It provides financial engineering instruments that support sustainable urbandevelopment and renewal projects.86 http://atnaujinkbusta.lt/87 http://www.eib.org/infocentre/press/releases/all/2016/2016-137-eib-and-siauliu-bankas-renew-support-for-urban-renewal-in-lithuania.htm (https://www.sb.lt/lt/naujienos/eib-ir-siauliu-bankas-atnaujino-parama-miestu-finansavimui-lietuvoje/) ir http://www.eib.org/infocentre/press/releases/all/2017/2017-066-lithuania-new-support-for-energy-efficiency-in-multi-apartment-buildings.htm (https://www.sb.lt/lt/naujienos/lietuva-nauja-parama-daugiabuciu-namu-energijos-vartojimo-efektyvumui-didinti/)


resources 5 times, as the demand for energy efficiency investments in residential dwellings growsacross the country88.

In addition, to further comply with the European Energy Efficiency Directive 2012/27/EU, thegovernment approved the Public Buildings Energy Efficiency Programme in 201489. The programmeaims to renovate public buildings by increasing energy efficiency in them and achieve 60 GWh worth ofsavings in annual primary energy consumption by 2020. To this end, the Energy Efficiency Fund(ENEF)90 was set up in 2015, funded by the ERDF with funds amounting to EUR 79.6 million. The Fundencourages investments in energy efficiency projects through the following financial products: softloans for financing the renovation of central government buildings, which will benefit from up to EUR65.1 million, and guarantees of up to 80% on loans granted by commercial banks for street lightingmodernisation projects (up to EUR 14.5 million).

Finally, in line with the targets of the Europe 2020 Strategy, EUR 971 million of EU Structural andInvestment Funds (ESIF) for 2014–2020 were allocated to priority axis 4 ‘Promoting Energy Efficiencyand Production and Use of Renewable Energy’91.

Single market

Lithuania performs well with respect to the metrics of the EU Single Market Scoreboard 92 .Infringements, Internal Market Information System and Trade Integration in the Single Market forGoods and Services indicators report positive scores. Performance in Public Procurement wassatisfactory. Business opinion on corruption in the country has improved, although corruption remainsthe biggest hindrance for businesses, with the second biggest business hindrance being ineffectivestate bureaucracy; complaints have also been received on unclear interpretation of regulations andcomplicated legislation (for more details, see ‘Bureaucracy and corruption’ in Section ‘IV. Main obstaclesin the construction sector’).

In terms of cross-border provision of construction services, Lithuania is regarded to impose someexcessive and unjustified requirements in its national rules, thus hampering the provision of servicesacross the domestic market. The European Commission issued a letter of formal notice to Lithuaniarequesting it to remove its multidisciplinary restrictions on certain construction service providers93.

The professions of architects and civil engineers are regulated in Lithuania, i.e. in line with the regulatedprofession concept defined by Directive 2005/36/EC of the European Parliament and of the Council.Carrying out these activities require certain professional qualifications. An attestation for architects isissued by the Chamber of Architects of the Republic of Lithuania94. Similarly, civil engineers need aspecific authorisation to carry out activities related to the structural part of the building designdocumentation; they are attested by VĮ Statybos Produkcijos Sertifikavimo Centras (State Enterprise

88 http://www.eib.org/infocentre/press/releases/all/2016/2016-224-lithuania-to-generate-up-to-eur-500-million-for-energy-efficiency-with-eib.htm (https://finmin.lrv.lt/lt/naujienos/lietuva-daugiabuciu-atnaujinima-skatins-ir-privaciu-investuotoju-lesomis)89 Public Buildings Energy Efficiency Programme // https://www.e-tar.lt/portal/lt/legalAct/151b04b0793411e49adea948c356b2ec/UHthckFdHG90 http://www.vipa.lt/naujienos/16391 2014-2020 Action Programme for European Union Funds Investments //http://www.esinvesticijos.lt/lt/dokumentai/2014-2020-metu-europos-sajungos-fondu-investiciju-veiksmu-programa92 European Commission. EU Single Market Scoreboard //http://ec.europa.eu/internal_market/scoreboard/performance_by_member_state/lithuania/index_en.htm93 European Commission. Press release database // http://europa.eu/rapid/press-release_IP-16-3646_lt.htm94 Lithuanian Chamber of Architects // http://www.architekturumai.lt/atestavimas/atestavimo-tvarka/


Centre for Certification of Construction Products) 95 . The main reasons given for regulating theprofessions are linked to ensuring the protection of consumers and recipients of services, as well as thepreservation of the natural and urban environment.

With regard to the implementation of Eurocodes 96 , all Eurocode Parts are published as NationalStandards and translated in Lithuanian. Moreover, National Annexes are published on 58 EurocodeParts. The use of Eurocodes is voluntary in Lithuania, and national regulations can be used in parallel97.Their use in Public Procurement is prescribed by the Law on Public Procurement98.

International competitiveness

Lithuania ranks 41st out of 137 economies in the 2017–2018 Global Competitiveness Index99. In termsof internationalisation, Lithuanian SMEs are above the EU average and in the SBA Factsheet achievedthe best result in the EU. Lithuania has been particularly praised for simplified border control proceduresand the availability of trade information, reflecting the strong commitment of the government tofacilitate administrative procedures related to internationalisation. Cooperation between borderagencies also reflects the government’s desire to increase cross-border cooperation and facilitate theaccess of domestic SMEs to the international market100.

Lithuanian construction companies have been increasingly expanding to foreign markets over the lastyears, in order to diversify risks and due to the insufficient demand on the local market Revenues fromcontracts abroad have been growing by an average of 25% annually over the last three years.

The internationalisation of Lithuanian SMEs is being promoted through several initiatives. The NewOpportunities LT (Naujos galimybės LT) instrument provides subsidies to business associations,Chambers of Commerce and cluster coordinators to participate in international exhibitions, fairs andtrade missions abroad. With a budget of around EUR 30 million, the scheme covers up to 50% of eligiblecosts, up to a maximum of EUR 500,000101. The measure supports a variety of projects across differentsectors, such as ICT (information and communication technology), textiles, food and construction. Forinstance, EUR 433,560 has been allocated to the Confederation of Lithuanian Industrialists (Lietuvospramonininkų konfederacijos, LPK) for the project ‘Promotion of the internationalisation of theLithuanian construction, food technology and environmental sectors’. Under the project, SMEs providinggoods and services relating to healthy food and eco-friendly lifestyle will be supported in expandingtheir existing markets and exploring new ones. The project allows 13 companies to present 31 productsin an international exhibition. Exhibitions on construction, food technology and environment sectors inLithuania will be held in Finland, Norway, Lithuania, Latvia, Estonia, Poland and Belarus. Furthermore,EUR 392,950 has been granted to the LPK for the project ‘Lithuanian construction and landscapingsector abroad’. Under the project, 6 companies and their 24 products will be presented in construction

95 Centre for Certification of Construction Products //http://www.spsc.lt/cms/index.php?option=com_content&view=category&layout=blog&id=39&Itemid=6296 Eurocodes, i.e. EU standards for the design of structures and buildings, started to be used in Lithuania as ourcountry became a member of the EU.97 State of implementation of the Eurocodes in the European Union //http://eurocodes.jrc.ec.europa.eu/showpublication.php?id=53798 Law on Public Procurement of the Republic of Lithuania // https://www.e-tar.lt/portal/lt/legalAct/TAR.C54AFFAA7622/tEzUrLXKCg99 The Global Competitiveness Report 2017-2018 // https://www.weforum.org/reports/the-global-competitiveness-report-2017-2018100 European Commission, 2017 SBA Fact Sheet Lithuania // https://ec.europa.eu/docsroom/documents/29489101 2014–2020 Investments of European Union Funds in Lithuania //http://www.esinvesticijos.lt/lt/patvirtintos_priemones/naujos-galimybes-lt


and landscaping international exhibitions in Lithuania, Poland, Belarus, Latvia, Russia, Ukraine,Germany102.

The Expo Certificate LT (Expo Sertifikatas LT) was introduced in 2015 to support certifications forexported goods and services. Through a budget of approximately EUR 2.5 million for the period 2014–2020103, the facility offers subsidies to cover up to 50% of costs related to the certification andtransportation of Lithuanian products and services intended for export. The facility supports a varietyof products from different sectors, including construction products, healthcare, food and ICT. Applicantsintend to export production to Europe, USA, Japan, China, Indonesia, Malaysia, South Korea, Thailand,the Commonwealth of Independent States (CIS) countries104.

X. OUTLOOK

Having successfully recovered from the 2008 crisis, Lithuanian economy has been growing ever since2010. This positive trend is expected to continue over the coming years. Real GDP, which grew by 3.9%last year, is forecast to grow significantly this year and next year (3.2% and 2.7%, respectively)105. Asfor the construction sector, growth is expected to slow down due to limited opportunities in the domesticmarket and gradually completed EU integration projects. It is expected that in the next ten years (2018–2027), the construction sector will grow on average by 2.9% annually106.

The number of workers in the broad construction sector has been experiencing a revival since 2011(with a slight dip in 2016), and this trend is also predicted to continue, as the number of constructioncompanies has been growing constantly since 2010. Value added and turnover are also projected togrow in the broad construction sector.

The housing market has overcome its lowest point in 2010 and the housing prices are now rising,especially in big cities, but while nominal prices continue to rise, real values, adjusted for inflation, areactually decreasing. Demand remains weak, total real estate transactions in 2017 increased by 3%107.Nevertheless, the construction of residential buildings contributes positively to the economic activ itiesof the Lithuanian construction sector.

Civil engineering and non-residential building segments are particularly dependent on publicinvestment, which is mainly supported by EU funds. As the funds from the previous EU funding period(2007–2013) have run out and the implementation of projects funded under the current period (2014–2020) has not yet gained momentum, the flow of EU funds to Lithuania has decreased. As a result ofthis decrease, the value added by the construction sector in 2016 also decreased, mainly due to theconstruction of engineering structures and the construction of non-residential buildings. It is assumedthat 2018 will be marked an increase in funding from the EU support funds, which fell in 2016–2017,and this will increase the activity of the construction sector108.

102 Lithuanian Business Support Agency // http://lvpa.lt/lt/naujienos/skirtas-finansavimas-pagal-priemones-expo-sertifikatas-lt-ir-naujos-galimybes-68103 2014–2020 Investments of European Union Funds in Lithuania //http://www.esinvesticijos.lt/lt/patvirtintos_priemones/expo-sertifikatas-lt104 Lithuanian Business Support Agency // http://lvpa.lt/lt/naujienos/priemones-expo-sertifikatas-lt-kvietimui-pasibaigus-30105 Bank of Lithuania. Lithuania’s economic development and outlook. 25 June 2018https://www.lb.lt/lt/leidiniai/makroekonomines-prognozes-2018-m-birzelis106 BMI Research, Lithuania Infrastructure Report. January 2018 //https://store.bmiresearch.com/index.php/lithuania-infrastructure-report.html107 Global Property Guide, Real property values stable in Lithuania. February 2018 //https://www.globalpropertyguide.com/Europe/Lithuania/Price-History108 Bank of Lithuania. Lithuania’s economic development and outlook. 25 June 2018https://www.lb.lt/lt/leidiniai/makroekonomines-prognozes-2018-m-birzelis


According to the Lithuanian Construction Association, the construction sector outlook in Lithuania isclosely linked to the efficient use of EU Structural Funds. Conversely, it would be difficult to maintain abusiness based solely on internal resources.

Lithuania will have to fill the capacity gap opened by the closure of the main nuclear power plant bycreating new opportunities for electricity and gas connections, as well as renewable energy sources,especially wind. Several projects are currently underway, but their financing and implementation in theenergy infrastructure sector are highly fragmented, suggesting that the sector’s growth will remain slowover the next decade109.

The transport sector is strategically important. Lithuania seeks to take advantage its convenientgeographical position by not only being an important transit country between Russia and the EU, butalso becoming a transport hub between the Nordic countries and Central Asia and China. Several public–private partnership programmes are designed to support road, rail and port projects funded by the EUand Norway. One of the most important strategic transport infrastructure projects is the Rail Balticaproject supported by EU funding. All this leads to a rather bright outlook of the Lithuanian transportinfrastructure sector over the next decade.

In conclusion, it is expected that in the coming years the growth of the Lithuanian construction sectorwill slow down, but the construction sector in Lithuania will remain the largest in the Baltic States. Thedevelopment of the construction sector in the medium term will be mostly determined by thedevelopment of transport infrastructure, as well as housing renovation and non-residential construction(namely the development of hotels and business centres)110.

109 BMI Research, Lithuania Infrastructure Report. January 2018 //https://store.bmiresearch.com/index.php/lithuania-infrastructure-report.html110 Ministry of Finance, Lithuanian economic outlook for 2016–2019 //https://finmin.lrv.lt/uploads/finmin/documents/files/LT_ver/Aktual%C5%ABs_valstyb%C4%97s_finans%C5%B3_duomenys/ERS_aprasymas_20160909_EN_skelbimui.pdf


SUMMARY AND CONCLUSIONS

In 2017 in Lithuania, the total construction output increased by 9.6%, with the highest growth in civilengineering output (16.3%); construction of buildings increased by 4.7%. However, compared to 2008,production is still down. The total number of companies in the broad construction sector grew by 11%from 2008 to 2016, but the total number of people employed dropped by 23%. Profitability decreasedby 19% down to EUR 7.4 billion over the same period and the gross operating surplus increased by 2%to EUR 1.5 billion (2015).

In 2017, construction service exports increased by 22% compared to 2016 (up to EUR 290 million).The main construction services markets were Sweden and Norway, with more than 50% of constructionservices exported to them in 2017.

In 2017, EUR 794 million worth of regulated construction products were imported to Lithuania, andexported for EUR 1 billion were exported. Foreign trade surplus of regulated construction productsamounted to EUR 230 million. The import of regulated construction products has grown by an averageof 8% annually over the last five years, while exports have grown by 9% annually. In 2017, 70% ofthe total export flow of regulated construction products consisted of products of Lithuanian origin.

In 2017, metal bearing structures and their components was the most imported and the most exportedgroup of regulated construction products. The main import markets for regulated construction productswere Poland and Germany, from which almost 40% of all regulated construction products wereimported. Seven of the ten major export markets for regulated construction products are EU countries.The first place and the largest share in exports of regulated construction products is taken the Russianmarket, but 90% of this flow consists of re-exported construction products. Norway, Sweden andGermany are the main export destinations for regulated construction products of Lithuanian origin.

The housing price index increased by 9% in 2017, although it is still 12% down from 2008. In 2017,the number of residential building permits issued fell by 8%, but already exceeds the 2008 level. Theconstruction of 6,420 new residential buildings was completed in 2017, which is 9% less than in 2016,but as much as 59% more than in 2008. Given the limited supply of affordable housing, the Governmentintroduced the Action Plan for the Development of Municipal Social Housing Fund for 2015–2020 tosupport the construction and renovation of social housing buildings, allocating EUR 58.7 million budget.Also, the Law On State Support to Acquire or Rent Housing was passed, providing for compensationfor part of the rent and the possibility to cover up to 20% of the housing loan for selected beneficiaries.

In order to increase investment in infrastructure, EUR 1.1 billion of its EU funding for 2014–2020Lithuania allocates for the development of transport infrastructure. The EIB also strongly supports thedevelopment of infrastructure by financing modernisation of railways, improving the roads in the capital,rebuilding the city centre, renovating schools and kindergartens.

Lithuania seeks to improve the energy efficiency of buildings by implementing the Programme for theRenovation (Modernisation) of Multi-Apartment Houses, financed by the Multi-Apartment buildingmodernisation fund, allocating EUR 74 million in soft loans. In addition, the Energy Efficiency Fundprovides loans for financing central government public buildings renovation and street lightingmodernisation projects through its distribution of EUR 79.6 million of ERDF funds. Various initiativesand strategies for the development of digital construction technologies, such as BIM, have beenintroduced.

The construction market in Lithuania is the largest in the Baltic States, but the growth of theconstruction industry will slow down over the next decade, with the maturation of the housing marketand the completion of EU-funded energy and transport interconnection projects. In the next ten years,


an average annual growth of 2.9% is expected. It should be determined by the development oftransport infrastructure, housing renovation, non-residential construction, as the EU continues to investin the improvement of energy and transport networks. The main obstacles to growth in the constructionsector will remain limited public funding, low demand and a shortage of skilled workers.


Annex 1The definition of the construction sector, presented in ECSO111 country databases and factsheets, isbased on the second, most recent (2008) revision of NACE classification. NACE (from the French term‘Nomenclature Statistique des Activités économiques dans la Communauté européenne’) is a statisticalclassification of economic activities in the European Community. For more information on theclassification methodology, including a comprehensive list of sectoral and subsectoral codes and theirdefinitions, see: http://ec.europa.eu/eurostat/documents/3859598/5902521/KS-RA-07-015-EN.PDF

The definition of the construction sector adopted in the preparation of the database and the leaflet isas follows:

Narrow construction sector: F sector; Construction: as defined in NACE Rev.2:

NACE F—Construction F.41 Construction of buildings

F.41.1 Development of building projectso F.41.10 Development of building projects

F.41.2 Construction of residential and non-residential buildingso F.41.20 Construction of residential and non-residential buildings

F.42 Civil engineering F.42.1 Construction of roads and railways

o F.42.11 Construction of roads and motorwayso F.42.12 Construction of railways and underground railwayso F.42.13 Construction of bridges and tunnels

F.42.2 Construction of utility projectso F.42.21 Construction of utility projects for fluidso F.42.22 Construction of utility projects for electricity and telecommunications

F.42.9 Construction of other civil engineering projectso F.42.91 Construction of water projectso F.42.99 Construction of other civil engineering projects n.e.c.

F.43 Specialised construction activities F.43.1 Demolition and site preparation

o F.43.11 Demolitiono F.43.12 Site preparationo F.43.13 Test drilling and boring

F.43.2 Electrical, plumbing and other construction installation activitieso F.43.21 Electrical installationo F.43.22 Plumbing, heat and air conditioning installationo F.43.29 Other construction installation

F.43.3 Building completion and finishingo F.43.31 Plasteringo F.43.32 Joinery installationo F.43.33 Floor and wall coveringo F.43.34 Painting and glazingo F.43.39 Other building completion and finishing

F.43.9 Other specialised construction activitieso F.43.91 Roofing activitieso F.43.99 Other specialised construction activities n.e.c.

111 ECSO -European Construction Sector Observatory.


Broad construction sector: covers all activities of sector F and other sectors, namely: real estateactivities (NACE L), architectural and engineering activities and related technical consultancy (NACE M),and certain subsectors of production related to the construction sector (NACE C).

NACE L—Real estate activities L.68.1 Buying and selling of own real estate L.68.2 Renting and operating of own or leased real estate L.68.3 Real estate activities on a fee or contract basisNACE M—Professional, scientific and technical activities M.71.1 Architectural and engineering activities and related technical consultancyNACE C—Manufacturing C.16.2 Manufacture of products of wood, cork, straw and plaiting materials C.23.3 Manufacture of clay building materials C.23.5 Manufacture of cement, lime and plaster C.23.6 Manufacture of articles of concrete, cement and plaster C.23.7 Cutting, shaping and finishing of stone C.25.1 Manufacture of structural metal products


Annex 2 List of regulated construction products according to Combined Nomenclature1. Aggregates251710

251720

251730251741251749

271500

381600

Pebbles, gravel, broken or crushed stone, of a kind commonly used for concrete aggregates, for roadmetalling or for railway or other ballast, shingle and flint, whether or not heat-treatedMacadam of slag, dross or similar industrial waste, whether or not incorporating the materials cited inthe heading 2517 10Tarred macadamMarble granules, chippings and powder, whether or not heat-treatedGranules, chippings and powder, of stones of heading 2515 or 2516 (other than marble), whether or notheat-treatedBituminous mixtures based on natural asphalt, on natural bitumen, on petroleum bitumen, on mineraltar or on mineral tar pitchRefractory cements, mortars, concretes and similar compositions (other than preparations based ongraphite or other substances containing carbon)

2. Concretes andmortars382440382450

Prepared additives for cements, mortars or concretesNon-refractory mortars and concretes

3. Thermalinsulationmaterials andproducts680610

680620

680690

Slag-wool, rock-wool and similar mineral wools (including intermixtures thereof), in bulk, sheets or rollsExfoliated vermiculite, expanded clays, foamed slag and similar expanded mineral materials (includingintermixtures thereof)Mixtures and products from heat-insulating, sound-insulating or sound-absorbing mineral substances(other than those of headings 680610, 680620, 6811 or 6812 or Section 69)

4. Concrete,reinforcedconcrete andnatural stoneproducts251511251512

251520251611251612251620251690

680210

680221680223680229680291680292680293

680299681011681091690210

690220

690290690410690490

Marble and travertine, crude or roughly trimmedMarble and travertine, merely cut, by sawing or otherwise, into blocks or slabs of a rectangular (includingsquare) shapeEcaussine and other calcareous monumental or building stone; alabasterGranite, crude or roughly trimmedGranite, merely cut, by sawing or otherwise, into blocks or slabs of a rectangular (including square) shapeSandstonePorphyry, basalt and other monumental or building stones, whether or not roughly trimmed or merelycut, by sawing or otherwise, into blocks or slabs of a rectangular (including square) shape (other thangranules, chippings and powder, whether or already with coin or building stone characteristics withapparent specific gravity > = 2.5, granite and sandstone)Tiles, cubes and similar articles, whether or not rectangular (including square), the largest surface areaof which is capable of being enclosed in a square the side of which is less than 7 cm; artificially colouredgranules, chippings and powderMarble, travertine and alabaster, simply cut or sawn, with a flat or even surfaceGranite, simply cut or sawn, with a flat or even surfaceOther stones, simply cut or sawn, with a flat or even surfaceMarble, travertine and alabaster products, with a flat or even surfaceCalcareous stone, grained, decorated or otherwise workedGranite, polished, decorated or otherwise worked, but not carved, of a net weight of 10 kg or moreMonumental or building stones, of any shape, grained, decorated or otherwise workedCement, concrete or artificial stone blocks and bricks, whether or not reinforcedPrefabricated structural components, used in construction or civil engineeringRefractory bricks, blocks, tiles and similar refractory ceramic constructional goods, other than those ofsiliceous fossil meals or similar siliceous earths containing, by weight, singly or together, more than 50% of the elements Mg, Ca or Cr, expressed as MgO, CaO or Cr2O3,Refractory bricks, blocks, tiles and similar refractory ceramic constructional goods, other than those ofsiliceous fossil meals or similar siliceous earths containing, by weight, more than 50 % of alumina (Al2O3),of silica (SiO2) or of a mixture or compound of these productsOther refractory bricks, blocks, tiles and similar refractory ceramic constructional goodsCeramic building bricksCeramic flooring blocks, support or filler tiles and the like

5. Windows, doorsand otherpartitions392520392530

Doors, windows and their frames, door thresholds made of plasticsShutters, blinds and similar articles and parts thereof, from plastics


392590

441810441820441840441850441860441891

441899

761010761090

Builders’ ware from plastics for floors, walls, partitions, ceilings, roofs, etc.; plastic gutters andaccessories; railings, fences and similar barriers from plastics; large shelves for installation andpermanent installation in shops, workshops, etc. from plastics; architectural jewellery, for example, plasticfriezes; fittings and similar products for continuous installation in buildings, from plasticsWindows, French windows and their framesWooden doors, their frames and thresholdsWooden concrete constructional workWooden shingles and shakesWooden posts and beamsBuilders’ joinery and carpentry of bamboo (excluding windows, doors and their frames and thresholds,stakes and beams, assembled flooring panels, wooden concrete decoration panels, prefabricatedbuildings)Builders’ joinery and carpentry of wood, including glued laminated wood (other than bamboo, windows,doors and their frames and thresholds, stakes and beams, assembled flooring panels, wooden concretestructures, shavings, prefabricated buildings)Doors, windows and their frames, door thresholds made of aluminiumAluminium structures and parts thereof, for example, aluminium, plates, rods, profiles, tubes and thelike, prepared for use in construction (other than those of heading 9406)

6. Glass andproducts700312

700319

700320700330

700600

Cast glass and rolled glass non-wired sheets, made from coloured throughout the mass (body tinted),opacified, flashed or having an absorbent, reflecting or non-reflecting layerCast glass and rolled glass non-wired sheets, not otherwise worked (other than those of heading 700312)Cast glass and rolled glass wired sheetsGlass profiles, whether or not having a reflecting or non-reflecting layer, but not otherwise workedGlass, in the form of sheets or profiles, coated or covered with absorbent, reflecting or non-reflectivecoating, curved, worked edges, engraved, drilled, enamelled or otherwise worked, but not framed orfitted with other materials

7. Roof coveringsand products680300690510690590

Worked slate and articles of slate or of agglomerated slateRoof tilesCeramic chimney covers, enclosures, chimney liners, architectural ornaments and other ceramicconstruction products

8. Wall, ceilingand floorcoverings391810

391890

441873

441874441875441879701610

701690

Floor coverings, self-adhesive or not, in rolls or in the form of plates; wall or ceiling coverings of vinylchloride polymersFloor coverings, self-adhesive or not, in rolls or in the form of plates; wall or ceiling coverings of otherplasticsAssembled flooring panels of bamboo or with at least the top layer (wear layer) of bambooAssembled flooring panels for mosaic floors made of wood, other than bambooAssembled multilayer flooring panels made of wood, other than bambooAssembled flooring panels made of wood (other than multilayer panels and panels for mosaic floor)Glass floor cubes and other small glassware, whether or not on a backing, for mosaics or similardecorative purposesPaving blocks, slabs, bricks, squares, tiles and other articles of pressed or moulded glass, whether or notwired, of a kind used for building or construction purposes

9. Paints,varnishes, grouts,primers andcoatings320810

320820

320890

320910

320990

321410321490

Paints and varnishes (including enamels and lacquers) based on synthetic or chemically modified naturalpolyesters, dispersed or dissolved in a non-aqueous mediumPaints and varnishes (including enamels and lacquers) based on synthetic polymers or chemicallymodified natural acrylic or vinyl polymers, dispersed or dissolved in a non-aqueous mediumPaints and varnishes (including enamels and lacquers) based on synthetic polymers or chemicallymodified natural polymers, dispersed or dissolved in a non-aqueous medium; solutions classified underheadings 3901–3913Paints and varnishes (including enamels and lacquers) based on synthetic polymers or chemicallymodified natural acrylic or vinyl polymers, dispersed or dissolved in an aqueous mediumPaints and varnishes (including enamels and lacquers) based on synthetic polymers or chemicallymodified natural polymers, dispersed or dissolved in an aqueous medium (other than those based onacrylic or vinyl polymers)Glaziers’ putty, grafting putty, resin cements, caulking compounds and other mastics; painters’ fillingsNon-refractory surfacing preparations for façades, indoor walls, floors, ceilings or the like

10. Heating,plumbing and


ventilationinstallations391731391732

391733

391739

391740392210392220392290

691010

691090

732410732421732429732490741820761520841451

732211732219732290

Flexible tubes, pipes and hoses, having a minimum burst pressure of 27.6 MPaFlexible tubes, pipes and hoses, not reinforced or otherwise combined with other materials, withoutfittingsFlexible tubes, pipes and hoses, not reinforced or otherwise combined with other materials, with fittingsFlexible tubes, pipes and hoses, reinforced and otherwise combined with other materials (other thanthose having a minimum burst pressure of > = 27.6 MPa)Fittings, for example joints, elbows, flanges from plastics, pipes, tubes and hosesBathtubs, showers, sinks and plastic washbasinsToilet seats and covers made of plasticsBidets, toilet bowls, toilet containers and similar sanitary ware, of plastics (other than bathtubs, showertrays, sinks, washbasins, toilet linen and covers)Porcelain or china porcelain sinks, washbasins, washbasin pedestals, baths, bidets, water closet pans,flushing cisterns, urinals and similar sanitary fixturesCeramic sinks, washbasins, washbasin pedestals, baths, bidets, water closet pans, flushing cisterns,urinals and similar sanitary fixtures (other than porcelain or china porcelain)Sinks and washbasins, of stainless steelBaths of cast iron, whether or not enamelledBaths of steel sheetsOther sanitary ware and parts thereof, of iron or steelSanitary ware and parts thereof, of copperSanitary ware and parts thereof, of aluminiumFans for table, floor, wall, window, ceiling or roof fans, with a self-contained electric motor of an outputnot exceeding 125 WNon-electric central heating radiators and parts thereof, of cast ironNon-electric central heating radiators and parts thereof, of iron, other than of iron or steelNon-electric air heaters and hot air distributors (including distributors which may also distribute clean orconditioned air) with motor-driven fans or blowers and parts thereof, of iron or steel

11. Reinforcingsteel, inserts andcomponents730110

730120730210730230

730240730290761410761490

732690

Sheet piling of iron or steel, whether or not drilled, punched or made from assembled elements;Welded angles, shapes and sections, of iron or steelRailways and tram rails made of iron or steelRailway or tramway switch blades, crossing frogs, point rods and other crossing pieces, of iron or steelRailway or tramway fish-plates and bedplates, of iron or steelOther components of railway or tramway structures, of iron or steelStranded wire, cables, plaited bands and the like, without electric insulation, with steel coreStranded wire, cables, plaited bands and the like, without electric insulation, without steel coreOther products of iron or steel wire

12. Metal bearingstructures andtheir components721610

721621

721622

721631

721632

721633

721640

721650

721661

721669

721691

721699

U, I or H-shaped sections, of iron or non-alloy steel, with a height of less than 80 mm, not further workedthan hot-rolled, hot-drawn or hot-extruded (extruded)L-shaped sections, of iron or non-alloy steel, with a height of less than 80 mm, not further worked thanhot-rolled, hot-drawn or hot-extruded (extruded)T-shaped sections, of iron or non-alloy steel, with a height of less than 80 mm, not further worked thanhot-rolled, hot-drawn or hot-extruded (extruded)U-shaped sections, of iron or non-alloy steel, with a height of less than 80 mm, not further worked thanhot-rolled, hot-drawn or hot-extruded (extruded)I-shaped sections, of iron or non-alloy steel, with a height of less than 80 mm, not further worked thanhot-rolled, hot-drawn or hot-extruded (extruded)H-shaped sections, of iron or non-alloy steel, with a height of less than 80 mm, not further worked thanhot-rolled, hot-drawn or hot-extruded (extruded)L or T-shaped sections, of iron or non-alloy steel, with a height of less than 80 mm, not further workedthan hot-rolled, hot-drawn or hot-extruded (extruded)Other angles, shapes and sections, of iron or non-alloy steel, not further worked than hot-rolled, hot-drawn or hot-extruded (extruded)Angles, shapes and sections, of iron or non-alloy steel, not further worked than cold-formed or cold-finished, made from flat-rolled productsOther angles, shapes and sections, of iron or non-alloy steel, not further worked than cold-formed orcold-finished:Angles, shapes and sections of iron or non-alloy steel, made from flat-rolled products, cold-formed orcold-finished, and further workedOther angles, shapes and sections, of iron or non-alloy steel, whether or not cold-formed or cold-finished(other than flat-rolled products)


730810730820730830730840730890731700

731811731812731813731814731815731816731819731821731822731823731824731829741510

741521741529741533741539

Bridges and bridge sections of iron or steelTowers and lattice masts of iron or steelDoors, windows and their frames, door thresholds made of iron or steelEquipment for scaffolding, barriers, supports or shafts from iron or steelOther iron or steel structures and parts thereofNails, waisted wicks, drawing pins, edge nails, clutches (other than those of heading 8305) and similararticles of iron or steel, with or without heads of other materials, but excluding products of this kind withcopper headsCoach screws made of iron or steelOther wood screws made of iron or steelScrew hooks and screw rings made of iron or steelSelf-tapping screws made of iron or steelOther screws and bolts, with or without nuts and washers, of iron or steelNuts made of iron or steelOther threaded articles of iron or steelSpring washers and other lock washers made of iron or steelOther washers made of iron or steelRivets made of iron or steelLocks and wrenches of iron or steelOther products without threads of iron or steelNails and tacks, drawing pins, staples and similar articles of copper or of iron or steel, with copper headsWashers (including spring washers) made of copperRivets, crimpers, twine and similar threads, not threaded, of copperScrews; bolts and nuts made of copperOther copper threaded products