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Deconstructing construction business in Lithuania.

VILNIUS -- Skeptics could say that after several years of boost, now the construction industry is in ruins. However, such a statement, despite some gloomy statistics, would be an exaggeration. Lithuanian government tries to help the construction business using money from European Union (EU) funds as well as loans from the Council of Europe Development Bank (CEB). Some of government's plans in this sphere look completely out of touch with reality but there are also some quite sane government's ideas in this area of economics.

According to the Lithuanian Department of Statistics (Statistics Lithuania), in the second quarter of 2009, construction enterprises carried out work by 48--percent less than in the second quarter of 2008. The value of construction work carried out within the country was--1.56 million litas (452 million euros), outside the country--25 million litas. The construction work outside the country comprises 2--percent of total work value.

Based on provisional data of Statistics Lithuania, in the second quarter 2009, 1,642 building permits for the construction of 1,643 residential buildings were issued (of which, only 16 for the construction of blocks of flats), which is by 678--building permits, or 29--percent, less than in the second quarter of 2008. Some 99--percent of all building permits were issued for the construction of one or two-dwelling buildings, while only one percent--for the construction of blocks of flats. In the fall, the government, trying to boost the construction industry, plans to start the total renovation of Soviet-built apartment blocks using EU funds on the pretext of energy saving. Economics experts unanimously say that the project is doomed to failure.

According to the law, the government covers only 15 percent of renovation cost while the rest should be covered by flat owners who will be forced to take bank loans in this difficult time of crisis. This summer, President Dalia Grybauskaite said that she will veto the law on renovation because of human rights controversy in the law. According to the law on renovation, a majority of flat owners can decide to renovate their apartment block without agreement of those flat owners in the same apartment block who do not wish such renovation. The latter will be forced to take bank loans as well. However, Grybauskaite suddenly changed her mind and signed the law.

According Raimondas Kuodis, director of the economics department of Lithuania's Central Bank, it is naive to expect that in times of crisis flat owners will be willing to take bank loans. Kuodis is not some enemy for the current Homeland Union--Christian Democrats-dominated government--he was a candidate to the European Parliament (EP) on that party list during the recent EP election. In the interview with daily Lietuvos Zinios, Kuodis said that if the government would be interested in energy saving, it would renovate heating tracks instead.

According to Arturas Kulakauskas, professor of the Vilnius Gediminas Technical University's Faculty of Civil Engineering, the renovation can be harmful for dwellers' health. "They accent sealing up of houses, but they forget about necessity of good airing. They say that the renovation can save up to 85 percent of energy. Of course, it is possible to immure windows saving even more energy, but it is not a solution," Kulakauskas told the magazine Veidas. He urged instead to build municipality owned and subsidized housing apartment blocks for rent which are so popular among the middle class dwellers in the Netherlands, Belgium and France, but almost non-existent in Lithuania where almost all flats are in private ownership.

A much more sane government step was made on Aug. 26 when the Lithuanian Finance Ministry signed the agreement with the Council of Europe Development Bank (CEB) for the long-term loan of 130 million euros to Lithuania to co-finance public investments in social infrastructure development projects. These funds will be used for co-financing construction or renovation of buildings of cultural, health, education, and sport institutions--more than 60 projects. Total value of these projects is 258.3 million euros.

"The loan will allow securing the planned public capital investments, the benefit of which will also be helpful to the construction sector and labor market," Finance Minister Ingrida Simonyte said. In previous years when the construction industry was booming, Lithuania witnessed some re-emigration process of Lithuanian construction workers from the United Kingdom and Ireland.

However, it was not enough--the labor force for Lithuania's construction industry was imported from Ukraine, Turkey and China. Now the process is opposite with some new trends. The Lithuanian construction labor exile is changing its focus from Ireland and UK to Scandinavia. According to Baltnora a firm which takes care of Lithuanians' employment in Norway, Lithuanians make the third biggest group after the Poles and the Germans among foreign labor in that country while the most popular profession of Lithuanians there is construction work.

Anyway, not all Lithuanian construction industry firms feel the crisis. For example, Hrono Fasadai company, working in installation of aluminum-glass constructions, windows and doors has similar turnover as during the previous year, i.e. 21.5 million litas in the first quarter of this year. "We are searching for niches not only in Lithuania, but also in Scandinavian countries and central Europe. Last year, the projects implemented abroad accounted for 20 percent of our turnover. According to our forecast for this year, the portion of foreign projects will amount to one third of turnover," said Vytautas Vankevicius, Hrono Fasadai director general.

The company equipped the roof of Vilnius' Ozas shopping mall which was opened on Aug. 20. Currently, the Hrono Fasadai is completing the top-class office building Green Hall in the center of Vilnius, the administration building of Swedbank in Vilnius as well as implementing projects in Iceland, Sweden, Latvia, and Britain.
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Author:Tracevskis, Rokas M.
Publication:The Baltic Times (Riga, Latvia)
Date:Sep 2, 2009
Previous Article:Construction market in Latvia--light at the end of the tunnel.
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