THE IMPACT OF LISBON CRITERIA ON BUSINESS DEVELOPMENT IN LITHUANIA

The aim of the paper is to review the Lisbon criteria that are influencing business in Lithuania, and to outline the main perspectives of national businesses in the EU context. To this end, we have analyzed earlier works on the factors and parameters that influence business environment in the EU, compiled a list of most crucial factors influencing the business entities, interviewed the top management of 300 top Lithuanian companies in order to find out the peculiarities of the Lithuanian way to success in business. Managers' opinions were compared to facts stated in internal documents (especially documents contai ning market requirements) as to quality and price; internal costs and efficiency of processes. The follo wing methods of research were employed: metaanalysis, documentation review, triangulation, inter views, basic methods of mathematical statistics.

Over the past 15 years the Lithuanian business envirorunent has faced tremendous changes in terms of business ownership, markets, requirements for quality of products and services, impacts on the environment, financing possibilities, etc. These changes had both positive and negative effects on national economy, business entities, and quality of life of every citizen. Geopolitical changes in Central and Eastern Europe generated many external and internal factors that influenced the development of new values and polices. Later on the new values and policies were implemented by Lithuanian business entities, resulting in the growth of GDp, exports to EU, and other improved indicators. Nevertheless, new crucial factors emerging over time create "bottlenecks" and challenges for Lithuanian business entities.

The EU context
Recently Lithuanian market has become an integral part of the EU market, and it is needed to note -non-homogenous one. To benchmark the factors of business among EU countries we used the Lisbon scores.
While the EU-lS's Lisbon scores provide an insight as to how the existing EU reaches the Lisbon goals, the accession of many new countries, mainly from Central and Eastern Europe, will affect the competitive potential of the EU. Thus, the Lisbon goal of creating conditions for the   EU to become the most competitive economy in the world should now be seen against the background of an enlarged Europe, with 25 new member countries. Achievement of the Lisbon goals will. therefore, require attention on two fronts: getting the laggards within the existing EU up to speed, while also making sure that the accession countries quickly catch up (Blanke, 2004). Thble 1 presents the scores as well as the overall ranking for nine of the 10 accession countries (except Cyprus), as well as for Bulgaria, Romania and Turkey, which are actual or potential future accession countries. There were also included the EU average scores at the bottom of the table for comparison. As in a comparison among the existing 15 member countries, we see a considerable variance in performance among the accession countries in the different dimensions measured.
Estonia is ranked first among accession countries by the Lisbon criteria. Among Estonia's spe-cific strengths are the quality of its enterprise environment and the level of sophistication of information society elements present in the economy, both the areas in which its scores exeed the EU average. Estonia's financial services are modem enough to allow a score close to the EU average. Slovenia is ranked second, with relative strengths in the dimensions of network industries and sustainable development, the areas in which it gets top scores among the 12 countries considered. For most other countries in the top to middle of these relative rankings, there are some notable areas of particular strength, such as the Czech Republic in network industries and Malta in financial services, although, for the most part, the numbers show relative weaknesses as compared to the EU average. Poland, the largest of the accession countries, performs poorly across all dimensions, especially in the areas of information society, social inclusion and enterprise environment.
Thble 1 shows the countries from the first accession wave holding the top nine places in the relative ranking. These nine countries are those regarded as being best prepared to compete, on a relative basis, according to the Lisbon dimensions.
Thble 2 compares the performance of the nine countries that entered the EU in 2004 with the EU's performance. The table makes four distinct comparisons: (1) the average score of all nine accession countries to the average of all 15 EU members; (2) the three best accession countries relative to the EU; (3) the accession countIy average to the four worst-performing EU countries; and (4) the three best accession countries relative to the four worst-performing EU countries. On average, the nine accession countries score lower than the EU average in all Lisbon dimensions measured. However, this overall average masks quite marked differences both among the EU countries and among accession countries. Looking at the second column of the table, which compares the performance of the three best accession countries to the EU average, the difference becomes somewhat less stark. In particular, in the areas of the information society and the enterprise environment, the three best-performing countries come close to the EU average performance. In fact, they score even higher in the area of the business start-up environment.
Taking this type of comparison a step further, the third column of Table 2 shows how well the average of the nine accession countries compares to the average of the four worst performers among the existing EU members. Here we see that the nine accession countries do better on average than these four EU member countries in the dimensions of information society and enterprise environment. Moreover, they do comparatively better in the areas ofthe quality of business start-up environment and one key element of social inclusion, outperforming the worst performing EU coun tries in the area of upgrading skills.
Finally, comparing the three best-performing accession countries with the four worst performing EU countries, the accession countries do better than the EU countries virtually across the board, with the exception of completing the single market and telecommunications, where the differences are quite small. In other words, taken by issue-area, the strongest of the new countries are better prepared to compete than the weakest of the existing EU member countries (considering the Lisbon criteria).
These results are perhaps not surprising. The economies of Central and Eastern Europe have been engaged in a comprehensive process of reforms for over a decade now (Cicinskas, 2003;Solbes, 2001). Initially, these reforms were launched as part of a process in these countries, aimed at replacing the inefficiencies of central planning by institutions and mechanisms of a modem market economy. Subsequently, they were set in a broader political context of EU membership negotiations. The top performers in this group have tended to manage this process with consistency and admirable zeal Estonia early on amended its constitution to mandate a balanced budget. Having thus disposed of the yearly political ritual seen in other countries -most notably in the EU itself -of determining the size of the deficit and dealing with the intricacies of financing it, successive governments have instead tended to focus on structural reforms of the kind identified in the Lisbon Strategy. Having done away with all taxes on international trade, Estonia actually had to introduce import duties to the EU's common external tariff as part of its accession negotiations. It was also forced to introduce agricultural subsidies, having long disposed of its own.
Nonetheless, the "new economy" does offer a significant potential for faster growth and higherproductivity. In Western Europe the biggest help is communication. This communication is well organized and computerized. Post-socialist countries, struggling with market transformation, may achieve a technological and infrastructural leap, which would contribute to acceleration of economic growth and a more rapid reduction of the gap that separates them from developed countries. However, the modern technologies in these countries are very weak and not frequently used, possibly because it is really difficult to change the way of thinking of people in these countries (Borenstein, 2001;Kolodko, 2003).
The "character" of people exerts also another kind of influence. Corruption and crime is a big 42 problem. Losses due to crime as a percentage of total sales are calculated for each country as unweighted averages of individual finn's responses (see Figure).
There is a clear correlation between the corruption indicators and the rates of growth in the countries that were judged to have a better record or a lower level of corruption, showing a more significant growth than their more corrupt counterparts (Muller, 2004;Fries, 2004).
Except for Moldova and Bosnia and Herzegovina, the respondents in Central and Eastern Per cent of total sales European countries identified relatively few general obstacles imposed by governmental or professional associations. By contrast, a subject of great concern for Central and Eastern Europe (CEE) service companies is excessive red tape and cumbersome procedures in state agencies. Seventy percent of respondents in Romania and Moldova, 50 percent in Bulgaria and over two thirds of respondents in Macedonia, Bosnia and Herzegovioa, Croatia and Albania identify this as a serious or very serious problem. Moreover, companies in all CEE countries rank this issue as the most important obstacle related to their export and general activity (Taft, 2004;DiheI, 2004). However, as Table 3 (Steves, 2004) illustrates, there is a great variation among countries in the intensity index and within countries across the three component indices. Now, from these statistics for 2003 and early 2004, excluded were Yugoslavia and Bosnia and Russia, which were part of the study, be-cause these were the countries that were recovering either from periods of substantial impact of economic sanctions or substantial and protracted civil war, and the rebuilding after civil war, so that the findings for growth rates would not be as significant or reliable to serve as a benchmark (Johnston, 2004;Weisenfield, 2003).

Lithuanian business entity context
The Lisbon criteria were analysed in the Lithuanian context using the following research methods: individual interviews with top management and owners of leading companies, their opinions were compared using internal documentation review (especially the documents containing market requirements as to quality and price; internal costs and efficiency of processes). Research results were compiled and presented using the conventional statistical methods. Of course, we had no possibility to cover up all business sectors by the current research because of the large number of sectors and range of problems, the readiness and willingness of managers to exchange their ideas with researchers, as it was important to have statements "as it is" rather than "it should be" (Syrnon, 1998). We managed to perform it in five major sectors: food and drinks; wood processing; textile production; machinery and engineering; construction. There were no respondents from chemical, electronics, services, wholesale and retail. A relatively low number of respondents came from the 44 IT (information technology) sector (the most dynamic one), from the public sector. The top 300 companies were selected based on the annual turnover 2003. Annual turnover does not directly reflect the possibilities to attract capital, but there is an obvious correlation between foreign investments and the size of a company in terms of people, size of traditional market share, available competencies and turnover. The other parameter that is important for attracting capital is profitability, but this parameter cannot fully reflect reality because of "tax planning" practices applied by companies. Practically any company can show a profit that is most appropriate at the moment. The number of people employed and the volumes of turnover gained are changing over time, so we evaluated both of them.
The majority of big and medium Lithuanian enterprises have foreign capital. The fact is considered as an advantage to tackle with barriers of certain markets. Foreign capital formation strategies are vertical and honwntal integration, business diversification, and investment of spare capital. These factors influence improvement of technological and management processes in a company. The final goal and scope of these improvements are different: in case of integration, there are bigger investments allocated for, e.g., plant's long-run benefits, while in just employing the capital short-run benefits prevail In some cases there are no incentives to improve anything in the company after acquisition, and only the market share is of value for new shareholders; it means that the strategy for such investment is to shut-down the competitor. Also, there were many cases when companies were bought just to attract other investors, to receive subsidies or loans, and later to put the company to bankruptcy (Fiscal Policy Dept., 2003;Bank of Lithuania, 2004).
The growth of GDP is as result of investment into production, targeting to niche areas of large EU markets. Over the past two decades western countries have been extensively outsourcing labor-intensive production to eastern countries. Many parameters of business environment in lithuania were favorable and accelerated the establishment and reorganization of existing companies. The future growth of Lithuanian economy is based on an assumption that the long list of Weaknesses and Threats of Lithuanian Economy will be dealt through implementation of newly emerged opportunities of EU single markets (Garuckas, 2002;Garuckas, 2003;Rakauskiene, 2001;Melnikas, 2001).
As companies are selling more products and services, the streamlining strategies are being adopted for company's structure. In companies having more power to buy products and services from others, more and more supportive processes are outsourced to subcontractors, creating demands for supportive processes (Stripeiks, 2004;Cesniene, 2005).
In the early 90s, the majority of Lithuanian companies had to have heavy organization structures and premises in order to satisfy the demands of a single company. A typical production company had catering, cleaning, construction, carpeting, and many other internal services. Over the past years their structures (in tenns of people) have been reduced significantly.
Nowadays, when costs of specialists / workers are increasing in Lithuania, every manager targets at optimizing his/her organization to a minimum. Analysis of company's investment plans showed some trends in investment: first of all a comparably big part of investment were allocated for production of the final products that brought a higher value-added. At the same time, the new machinery were much more productive, ie. investment in technology also enabled to reduce the number of people in the technological process.
According to export statistics, there are competitive products and services that are in demand in EU markets. Nevertheless, the structure of export is rather comparable with the one of developing countries: the relatively high proportion of low value-added products, the prevalence of production requiring unqualified labor, using natural resources and energy. Export statistics of certain industries shows positive trends. These numbers could predict at least a stable competitive position in EU markets.
A burdening factor is new market requirements for quality, safety, environmental impact, stability, etc. Businesses are facing an enonnous flow of requirements and changes in law. Requirements for EU accession are counting 97,000 page-long documents, followed by over 1,000 000 new (for Lithuania) standards for products, processes and systems, and followed by changes in national legislation, which usually exceed 150 legal acts per one-day session of Lithuanian Parliament (Seimas).
A research initiated by Lithuanian Ministry of Economy was performed on the competitiveness of different branches and business sectors. The research showed that Lithuania cannot compete with developed countries because of lowcompetence works. Lithuanian industries mainly require low competence to perform daily operations: 50.6% are such positions, while high competence work places take only 3.5%, versus the EU-12 average 30.4% of low and 16.8% of high competence work places, the US has even a better ratio of high and low competence work places -25.5 versus 18.2 %, respectively.
Innovations, research and development are still lacking significant attention of market players. In most cases Lithuanian enterprises just sell their labor force to Western European companies, which have strong brand names and well prepared designs protected by patents. This factor is especially strong in furniture industry ( dominated by IKEA-furniture retailer), metal processing, electronic and other industries. There are differences in policy statements and factual expenditures in the EU and Lithuania. A significantly bigger part of the budgets is allocated to agriculture and processing, while innovations are almost diminishing. Many leading Lithuanian companies also "forget" innovations, there are no management programs and financing that could boost innovations at least to the average EU levels. Even ISO-certified companies weakly understand the requirements for continuous improvements and take just minimum efforts to conform to them Current announcements about 46 application for EU structural funds show that there is an extremely small number of scienceoriented projects submitted for financing.
There are different numbers found in different studies about the flow of labor and "brains" from Lithuania. According to official statistics, over the past ten years (1994)(1995)(1996)(1997)(1998)(1999)(2000)(2001)(2002)(2003)(2004) about 20,000-23,000 of people left the country to search for a job abroad (Lithuanian Department of Statistics, 2003). Based on the statistics we can estimate that the negative saldo of labor migration is 200 000 people. Other sources estimate the level of labor migration to reach 240 000.
The forecast for the next ten years is a dramatic decrease of the number of young people in Lithuania, because of birth reduction and increased possibilities to move to other EU countries for education and business purposes. One of the most frequent reasons for emigration is and will be differences in disposable income. IT to calculate differences based on official exchange rates, it reaches 5-10 times, and if to evaluate the purchasing power in a certain country, the difference is less -3-5 times. These differences can remain for the following 20-30 years. Emigration of young specialists remains to be one ofimportant negative factors pointed out by top managers. In some business sectors (11; servicing) managers hire students already in the 2 nd or 3rt! course, preparing attractive carrier plans and applying beneficial motivation systems. lOp management is stressing the need for competent workers. Statistics is showing a comparably high unemployment rate in Lithuania, but there is a demand for competent people in production. lOp managers agree that training is important, plans and budgets for training are needed, but only 12 out of 59 interviewed companies had such budgets. None of the interviewed could provide written evidences of carrier plans.
The computer literacy of EU newcomers is still lagging behind the EU average; this statement is supported by a research made in lithuania on national as well as on business entity level Significant measures are taken by businesses themselves, supported by PHARE, other EU funds, alongside the measures taken by national authorities. Nevertheless, computerization does not bring boosting to businesses, because the level of utilization and applicability for business processes is still low as pointed out by top management. In many cases there is an imbalance among hardware, software and the literacy of users.
Interviews with top managers indicated that since the year 2000, the need for qualified specialists emerged sharper than before. Certain sectors of industry started to create alternative strategies to cover up gaps in qualified people: -closer collaboration with training institutions -developing especially tailored training programs; -outsourcing of labor-consuming processes to a) less industrialized regions, and b) to eastern countries; -training and import of employees from eastern countries; -implementation of technologies that require less supervision by people.
The human factor, implementation of a continuous learning environment, investment in people are famous words while communicating with interviewed managers. Only later we observed in internal documents that human resource management processes were inadequately weak in almost all companies, narrowing their activities to performance of compulsory requirements of national authorities, performing trainings mainly in work safety and for "blue collar" workers onJy. An especially sharp question about competences arose after accession the EU. Entrepreneurs face the problem of employing needed people as well as of training existing ones. Many top managers see long-term benefits of trai-niog people on site, but no actual plans could be provided during the current research. Common lags in competence for all companies are IT literacy, management, languages, innovations.
'llying to "catch up" with the other EU countries, lithuania's economy is in a relatively good position to make its own way to success, learning from the experience of EU "pioneers".

Conclusions
1. The first 15 EU countries have been developing their economies based on the main Lisbon criteria. The same criteria are applied to Eastern and Central European countries -"newcomers" and potential members. These criteria proved to be powerful catalysts for the development of economies. The study showed that EU "newcomers" ranked below the EU average in all Lisbon criteria.
2. The structure of competences of existing potential employees does not meet the market requirements. Company managers from industrial Lithuanian regions (Vilnius, Kaunas, Klaipeda) demand by 15-20% more of competent employees than available, while official statistics shows a 6-9% unemployment in the same regions. Official figures of unemployment do not reflect the quality of labor force.
3. The human factor is mentioned among the first three priorities by lithuanian top managers, nevertheless the human resource management processes are inadequately weak in about 80% of companies. Human resource management activities are limited to meeting the requirements of national authorities; training is performed mainly in work safety and for "blue collar" workers onJy.
4. Many top managers see long-term benefits of training people on site, but no actual plans could be provided during the current research. The common lags in competence for all companies are IT literacy, management, languages, innovations. 5. Thking into consideration the trends of work force migration to more developed countries and the prognosis that similar trends will last for 10--15 years, top management should apply the following strategies: -reinforce investment into technological