THE IMPLEMENTATION OF REGIONAL POLICY IN LITHUANIA

There are two types of regional policy - EU regional policy and national (state) regional policy- in place in Lithuania. The common goal of these policies is the same - social and economic cohesion, however, in an EU context, Lithuania is regarded as a single region, while the focus of national regional policy is to address the inter-regional social and economic imbalances in Lithuania. To achieve balanced development as much in Lithuania as a whole as in its regions, the co-ordinated implementation of both policies is very important. The aim of this article is to analyse EU regional policy. as well as the effect of EU structural funds on regional policy in Lithuania, and in this way to highlight the problem of unequal regional social and economic development. Particular atten tion is given to the provisions of Lithuanian regional policy and the mechanisms of its implemen tation. Research aims. To analyse EU regional policy as well as the effect of EU structural assistance on variations in Lithuanian regional policy. highlighting the most important contributing factors. Research object. Lithuanian regional policy and EU structural assistance. Research methods and resources. The following research methods were used: an analysis of academic literature; information comparison, grouping, elaboration and summation, data analy sis techniques. Resources used include academic literature, EU regulations, normative acts of the Republic of Lithuania regulating regional policy and the use of structural funds, and data from the Department of Statistics to the Government of the Republic of Lithuania and the Ministry of Finance.


Relevancy and prior investigation of the topic
The standout feature of the economies of all transitional countries is rapid and wide-ranging changes. These changes are oriented towards a rapid growth of the national economy and strengthening of its competitive ability. The implementation of this provision in Lithuania, through the use of economic development plans, has led to the further strengthening of the most competitive and developed cities in Lithuania. An obvious paradox in this situation is that state investments and market forces in fact only enhance the unequal economic development in the regions. Negative aspects of the further development of the already more developed regional centres, and especially Vilnius, are becoming apparent: real estate prices are rising at an inadequate rate, which in turn affects variation in other markets. The GDP in the Vilnius district is 2.7 times higher than that in the Taurage district. Differentiation in direct foreign investment per capita among the districts in the period between 1997 and 2003 increased 3.8 times (Resolution of the Government of the Republic of Lithuania No. 575, 2005).
Given this context, we should note that between 2004 and 2006 Lithuania received 1.4 billion EUR, or on average 455 million EUR per annum from EU structural funds, while state investment programs made up about 308 mil-lionEUR.
However, Lithuania is not insured against the insufficient ability of those responsibile to make proper use of the assistance of structural funds. This situation may arise from the poor potentials and abilities of businesses and institutions in less developed districts to prepare projects aimed at securing the assistance of EU structural funds. We also cannot disregard the effects of earlier trends in investment policy in Lithuania, where more investments were directed to more developed centres, to further boost their economic situation.
Several foreign authors have already analysed the effects of EU regional policy on the development ofEU countries (Annstrong, Taylor, 2000; Beute~ 2002). R. A Brealey, S.c. Myers (2003) and P.F Boer (2002) have studied the topic of financial assistance and perspectives and its theoretical and practical application in relation to integration processes. Lithuanian academics J. Ciburiene (2003) and R. KrisCiiinas (2003) added to this research this year also. N. Perminiene and V. Vengrauskas (2003) discussed the theories and practice behind EU regional policy programs and also reviewed Lithuania's potentials in the development of its regional provinces. Z. SimanaviCiene and A. Kilijoniene (2004) analysed regional policy 106 evaluation methodology and its implementation.
H. Brozaitis, R. Linartas, V. N akrosis and A. PetkeviCius (2002) also looked at EU regional policy as well as the manage men t of structural funds. The attributes of structural fund management were also analysed by A. PaSkeviCiene and A. MiSkinis (2002). V. Kvedaras, G. Riiskys and G. Umbrasas (2002) examined structural funds in the context of evaluating their effect on the Lithuanian economy since EU integration. We must, however, note that new provisions for regional policy are coming into effect in Lithuania, as is a new mechanism for its implementation and the importance ofEU structural assistance within this policy. These elements have not been adequately discussed or evaluated in the context of regional differentiation.

Regional policy and its aims
In a general sense, we can describe regional policy as policy which seeks to reduce the differences between levels of development in various regions. Regional policy aims to reduce regional economic and social differences. If a country is experiencing an economic recession or a period of stagnation, priority is given to bolstering the economy, and once a certain level of economic growth has been reached, more atten tion is given to equalising its standard of living and living conditions. EU countries administer two regional policies -EU regional policy and national regional policy. EU regional policy is formed outside of national boundaries and implemented in a certain state, while national regional policy is formed by the state itself.
The general and specific aims of the EU regional policy are set out in EU treaty articles. The second section of the EU treaty points out that the European Community must aim towards social and economic cohesion between member states. So, the general aim of EU regional policy is social and economic cohesion.
Article 158 of the EU treaty shows that in an effort to strengthen its social and economic cohesion, the European Community must aim to reduce differences in levels of regional development, as well as the unfavourable conditions and backwardness apparent in rural areas. According to Article 160, the European Regional Development Fund must support the development of less developed regions as well as the expansion of industrial regions undergoing structural changes and / or a recession.
It is also important to note that a country is granted EU structural assistance for the purpose of reducing social and economic imbalances among EU regions and to ensure even and balanced development across the whole EU territory. EU regions can include the total area of a country or only its parts (as in the statistical territorial derivatives NUTS1, NUTS2 and NUTS3).
EU regional policy does not seek to replace national regional policies: states must first encourage infrastructure and financially support investments designed to create employment and in this way solve regional problems using the instruments of regional policy themselves. However, while the European Community's regional policy formulates benchmarks and implements certain principles, it also co-ordinates national regional policies in an effort to avoid the situation where member states would be competing for assistance. It also co-ordinates various policies and EU financial measures hoping to present a "regional dimension", so that less-developed regions would attain a level of steady and promising development.
National regional policy is formulated by countries themselves where they aim to solve interior territorial development problems. It seeks to reduce social and economic imbalances in the regions and ensure their development. Even though EU regional policy is the same for all countries and the regulation of structural funds gives equal opportunities to all countries, their development and how they implement EU assistance programs depends on a stable national regional policy which allows countries to make the most of the funding they receive.
Speaking of the effects of EU regional policy on the development of EU countries, it is important to note that the financing of EU regional policy has grown markedly since 1975. If in 1975 regional policy accounted for only five per cent of the total of the EU budget, we can say that at present the EU regional policy makes up about a third of the total EU budget and is in the second place after the EU Common Agricultural Policy, according to budget allocations for EU public policy. Its budget makes up 213 billion EUR for the period 2000-2006 (Nakrosis, 2003).

Prerequisites for the implementation of Lithuanian regional policy
Integrated regional policy only started being formulated in Lithuania in the middle of the last decade. Differences in levels of economic and social development started appearing under market economy conditions, and it became necessary to reduce these differences. Regional policy was also encouraged by the European Union. The Law on Regional Development was prepared between 1998 and 2000 and underwent several changes. This project's main provisions kept changingfrom emphasizing only European regional policy to emphasizing only national regional policy. The Law on Regional Develop-ment, approved in July 2000, emphasised the regulation of national regional development policy, at the same time forcing EU regional policy (and all EU structural funds) to fit its own narrow regulatory framework. However, this approach was changed at the end of 2002 with the approval of amendments to the Law on Regional Development.
The main documents making up the legal basis for implementing Lithuanian regional policy include the Republic of Lithuania's Law on Regional Development, documents of strategic importance to the state's regional policy (the Longterm Development Strategy of the State, the Longterm Economic Development Strategy of Lithuania, the Ordinary Territorial Plan of the Republic of Lithuania, the Cohesive Development Strategy, the strategy of Lithuanian regional policy up until 2013) as well as various rulings of the Lithuanian Government and acts approved by the Ministry of the Interior that authorise methods for the preparation of regional development plans, identify the criteria of problem territories, and so on. The main regional policy provisions are summarised in the Law on Regional Development approved July 20,2002 (published December 10), in which the state's concept of regional policy is defined, the main aims and tasks of state regional policy are formulated, the institutions and their roles in the implementation of state regional policy are designated, territorial derivatives where state regional policy can be implemented are given, anticipated state regional policy planning documents are also outlined, as is the relationship between state regional policy and EU regional policy and the financial source from which regional policy is to be financed.
According to the currently valid wording of the Law on Regional Development, regional policy is defined as the total of calculated mea-sures designed to minimise the social and economic differences and developmental imbalances among the regions. The main aim of Lithuanian regional policy is to reduce social and economic differences among and within the regions, to encourage an even and stable development within the whole state territory (Law on Regional Development, 2002).
The tasks set out for national region~l policy are: 1. To provide state assistance with the implementation of projects in problem terrritories. 2. To provide state assistance with the implementation of projects in regions having problems in seperate sectors of the economy specific to that region or locality. 3. To create the conditions for the even and stable long-term development in all regions. The Law on Regional Development (2000, No. VIII-1889) states two types of territorial derivatives where regional policy may be implemented, that is, in regions and in problem territories.
Regions correspond to the state territory administrative units -districts (there are 10 districts). The Government decided to create an eleventh region in 2002 -the Ignalina Nuclear Power Plant region, made up of three municipalities. This is an example of how a region and an administrative unit may not always correspond.
Problem territories are relatively temporary zones of various size in individual state territories where certain social, economical and enviromental problems are strongly evident. Territorial derivatives of this type have not yet been identified.
Even though the state's legal framework, institutional system and planning system for re-gional policy are almost formed, the obvious growth of differentiation in regional development shows that the system is as yet incapable of implementing its task. The reason for this is that up to now, Lithuanian regional policy has not been suitably co-ordinated with EU regional policy -no correlation between the elements of the mechanisms of both regional policies has been made. As mentioned earlier, Lithuania is allocated EU structural assistance for economic growth as one region according to separate sectors, which is why social and economic imbalances need to be reduced using national regional policy mechanisms.
In an effort to create the prerequisites for the implementation of calculated national regional policy in Lithuania, the Regional Policy Strategy of Lithuania up to 2013 has been prepared. It is based on an evaluation of the current situation and a strategic analysis of strengths, weaknesses, dangers and potentials and includes the policy's priorities, set tasks and measures for its implementation. We should note that the Strategy identifies the regional centres to be developed until 2013, specifically, the regional centres surrounded by low-level territories which have the economic potential and infrastructure to carry out the functions of regional growth centres, whose development can ensure greater social cohesion not only in the region itself, but also throughout Lithuania. It is also important to note that the Strategy's timeframe corresponds with the seven-year EU regional policy programming period, creating the prerequisites for suitable co-ordination of EU and Lithuanian regional policy. Equally important is that Lithuanian regional policy has a qualitatively different theoretical basis -it is based on land-planning, centre peripheral and growth centre theories. And what is of no lesser importance is that this policy is based on a critical analysis of the experiences of Ireland, the Netherlands, Great Britain, Estonia and other countries (Strategija, 2005).

Social and economic developmental differences in Lithuania's regions
The main indicators used to state regional social and economic development imbalances are: GDP per capita, unemployment levels, direct foreign investment per capita, income per capita, average salaries.
An GDP per capita is one of the main indicators used to give a set description of a country's or region's level of social and economic development. Lithuanian regional development imbalances, expressed as GDP / capita, have grown rapidly over the last few years. Differences in GDP/capita between Vilnius, the strongest district economically, and Taurage, the weakest, grew from 2 to 2.7 times over the 1997-2003 period. In addition, the GDP / capita in all districts except for Vilnius has been falling since 1997 versus the country average. In 2003, the GDP / capita of the Vilnius district was 43.9 per cent greater than the country average, while in 1997 this indicator was 19.7 times greater than the country average. In the Taurage district this indicator fell from 59.5 per cent of the country average in 1997 to 53.5 per cent of the country average in 2003 (see Table 1). The table figures show the growth in differentiation of this indicator among separate regions. Fluctuations of GDP / capita and unemployment levels both directly correlate with material investments per capita in regions, and these differences indicate the vitality of business and industry in the regions. The greatest and fastest growing differences among the regions are visible when evaluating direct foreign investments per capita, which unambigiuosly divide the country into regions that attract more foreign investment and those that attract less. The Vilnius district traditionally attracts the highest direct foreign investment in Lithuania. Direct investment per capita for the Vilnius district was 56.4 times greater than the figure for the Taurage district. During the period of analysis, this indicator continued to grow.
The dynamics of unemployment levels between 1997 and 2003 showed a large degree of territorial differentiational stability.
A summary of the analysis of indicators according to social conditions showed that the least developed regions were Alytus, Marijampole, Taurage and TelSiai.
The growing imbalances in the development of Lithuania's regions further stresses the importance and significance of Lithuanian regional policy and its aim of reducing social and economic imbalances in the country as well as ensuring an even regional development.

EU structural assistance to Lithuania in 2004-2006
EU regional policy is implemented byallocating EU countries financial assistance in the fonn of EU structural funds and cohesion funds, which need to be used in accordance with strictly set guidelines.
During the EU programming period of 2004-2006, Lithuania is receiving structural assistance as one region (NUTS2). Lithuania has been allocated this structural assistance based on the first regional policy aim. That is, assistance is given to those regions where the GDP per capita is 75 per cent or less than the Community average (Council of Europe regulation, 1999). In

2003, the GDP per capita in Lithuania was 46 per cent of the EU average (Resolution of the Government of the Republic of Lithuania No. 575,2005)
The basis for allocation of EU funds is programming. The contents of the Single Programming Document determine how investment funds are allocated. This main document, spanning an average length of time, is authorised by the European Commission after co-ordinating all relevant elements with the country in question. This involves an evaluation of the member state's plan showing the type of fund, strategy and priorities to be considered, the specific goals, and any other fmancial contributions. This document is divided into priorities and measures which detail its implementation.
The The main aim of the Single Programming Document for Lithuania 2004-2006 is to strengthen the potential and create conditions for ongoing long-term national economic growth, increased competitive ability and a more rapid knowledge-based development of the economy, which would affect the growth of Lithuania's GDP and reduce umemployment, which would in turn improve the sense of social welfare and standards of living in the country. The program's tasks were formulated based on an analysis of the advantages, disadvantages, potentials and dangers of developing the Lithuanian economy. We must note, however, that the anlaysis is done at a national and not a regional level, therefore the distinct advantages, disadvantages, potentials and dangers of individual regions are not taken into account. In addition, assistance is allocated not for the social and regional development of individual less-developed regions, but for the economic growth of Lithuania as a single region, according to each of its sectors. This can explain why social and economic imbalances among the regions in Lithuania continue to grow. 822.5 million EUR is the amount of structural funding that has been proposed as part of the Single Programming Document of which 792. 1  According to data provided by intermediary institutions (ministries), from the start of the implementation of the Single Programming Document for Lithuania 2004-2006 to September 30, 2005, the greatest amount of funding was allocated to the projects (according to signed contracts) that are to be put into action in districts where Lithuania's larger cities are found-Vilnius (1020,426 million Lt), Kaunas (173,794 million Lt), Klaipeda (168,897 million Lt) and Siauliai (87,321 million Lt). The data for the Vilnius district need to be evaluated in light of the fact that institutions that submitted the data about these districts did so according to where the project applicant is registered, which, in most cases is Vilnius, for example, projects of national importance that are to be implemented over a large part of Lithuania's terrritory, such as projects by Lithuanian Railways and the Lithuanian Labour Exchange. A part of the financial assistance allocated to the Vilnius district is then redistributed among other districts (see Table 2). How much does each person actually benefit from this funding? According to this indicator, and having eliminated the Vilnius district, the Alytus, Klaipeda and Marijampole districts receive the highest assistance, while the Utena and TelSiai districts receive the lowest.
An analysis of Lithuanian regional policy shows that in this programming period Lithuanian regional policy was not implemented in a calculated manner, there was no clear strategy nor any clear correlation between the mechanisms of EU and national regional policy, and regional social and economic imbalances in the country's interior were in effect ignored. However, the effects of applying EU structural assistance in Lithuania's regions depend not only on 112 its suitable distribution, but also on the ability of insitutions to effectively use this funding to successfully and effectively carry out projects.

The prospects of EU' structural assistance in 2007-2013
Intensive negotiations for the next programming period of 2007-2013 have started in the European Union, concerning the financial prospects, the political priorities and the financial resources needed for their implementation, as well as the principles for distributing these resources. This puts Lithuania into a position of great responsibility, as it is the first time it will take part in negotiations of this nature. Financial prospects include the setting of the main benchmarks and main ceilings or spending limits, or when the maximum spending limits according to separate groupings are defined. Financial prospects also aim to reflect any foreseeable political priorities of EU nations.
It is expected that a large part of the EU budget will be allocated towards cohesion policy, and in fact, it is cohesion policy which will make up the most important part of EU assistance to Lithuania. In addition, the purpose of cohesion policy funding is to increase the levels of social and economic welfare, so it is very important that Lithuania's investment requirements are met and that the potentials for utilising the funding match the amounts of assistance received. During discussions about cohesion policy, Lithuania brought to attention the inequalities in amounts of funding allocated per person, noting that cohesion policy assistance from EU budgets should be greater for less developed member nations and regions. At the time of negotiation Lithuania also noted that after EU expansion, when differences in levels of development of member nations grew, the conditions for utilising structural assistance needed to be improved and not worsened. Cohesion policy investment priorities for the new period have already started being discussed in the EU. The European Commission suggests that structural assistance for the 2007-2013 period be used more strategically, taking into account not only national but also all other EU priorities. Most importantly among these, the Lisbon Strategy.
Bi-Iateral consultations between Lithuania and the European Commission for the compatibility of EU and Lithuanian priorities took place in Brussels on March 4, 2005. During these consultations Lithuania has noted that the implementation of the Lisbon Strategy, support for rapid economic growth and the development of economic competitive ability remain as its priorities. It has also noted that seeking social and economic cohesion, investments in infrastructure are absolutely necessary. So, even though the European Commission will prepare a document with its recommendations for EU cohesion policy priorities, each country must independently decide what its national structural assistance strategy, priorities and financial weight will be.
It is recommended that EU structural assistance is directed towards three new structural (regional) policy priorities: convergence; competitive ability and employment; and co-operation among European territories.
Con v erg e n c e -assistance is allocated to regions where GDP per capita is less than 75 per cent of the EU average. This objective is similar to the current objective 1 which is meant to close the economic gap between the least developed and more developed regions. This can be done by improving conditions for growth and employment, by investing in physical and human resources, innovations and knowledge economy, the ability to adapt to economic and social change, and environmental protection and institutional efficiency.
Competitive ability and employmen t (currently objectives 2 and 3) -assistance is allocated to regions which will not receive assistance based on the convergence priority. The competitive ability objective will act so as to not upset the balance and thus harm the regions missing out assistance from EU structural funds and not receiving sufficient state assistance, so that they do not indirectly experience negative social or economic effects. We should also note that the regions that have made economic gains and thus in 2007 will no longer qualify for assistance based on the convergence objective will be assigned to the current objective 1. However, under this agreement, the assistance they receive will be gradually phased out by 2013.
Co-operation among European terr i tor i e s -assistance is planned to be allocated towards cross-border co-operation within the EU as well as to member nations in the wider transnational zones. The European Community initiative INTERREG seeks to activate co-operation on three levels: in frontier regions implementing common programs; on an interstate territory level; and through the exchange of past experiences throughout the whole EU.
In order to achieve these set objectives, 335.10 billion EUR have been set aside in the EU structural fund reform plan. Convergence has been allocated 264 billion EUR (78.5 per cent), Competitive ability and employment -57.9 bllion EUR (17.2 per cent), and Co-operation among European territories -13. Considering the low level of economic development in Lithuania and the current EU provision that the greatest assistance should be directed towards the poorest EU regions, the EU structural fund reforms are expected to affect Lithuania's receiving assistance from EU structural funds over the 2007-2013 period, because our population's GDP per capita does not reach 75 per cent of the EU average. However, we must not forget that the assistance from EU structural funds will be restricted to 4 per cent of GDp, so funding will be conditioned on the extent of Lithuania's as a small nation's created GDP.
In other words, as has already been indicated by the analysis of Lithuanian regional policy, it is important not only to get as much structural funding as possibile, but also to use it effectively. This is all the more so when the aims of social and economic cohesion in regional policy are at odds with each other, as it were. When forming the monitoring plans for the use of EU struc-114 tural assistance and the effectiveness of regional policy, it is important to consolidate the priority of social cohesion and in each specific case to bear in mind the accepted standards of economic development. Or, to unreservedly keep to the main components of cohesive development This also requires a legal validation of these provisions and their co-ordination with the norms of European Union regional policy.

Conclusions
There are two types of regional policy in place in Lithuania: EU regional policy, whose mechanisms are strictly regulated, and state regional policy, whose provisions and mechanisms of implementation have not yet been fully formed.
According to the concept of EU regional development, Lithuania receives financial assistance for economic growth as one region based on its separate sectors. The assistance is allocated to Lithuania over the 2004-2006 programming period according to the Single Programming Document, whose tasks were set out based on an analysis of the advantages, disadvantages, potentials and dangers of Lithuania's economy. We must note that the analysis is concentrated on a national and not a regional level, which is why the specific advantages, disadvantages, potentials and dangers of individual regions in Lithuania were not evaluated. This creates the conditions for the growth of social and economic imbalances among Lithuania's regions.
As indicators that state the imbalances in social and economic development from the period 1997-2003 show, there is no apparent tendency for these differences among Lithuania's regions to decrease. Not all regions are equally appealing to foreign investment, thus, differences in GDP / capita and levels of employment are growing. As such, it is imperative that more EU assistance is allocated to individual problem regions and localities so as to reduce the obvious differences in social and economic development.
The even development of Lithuania's regions depends on the calculated Lithuanian regional