Despite a decade of determined and radical efforts at transforming the economy and society away from communism and other USSR-imposed distortions, Lithuania still faces challenges of further transformation to bring it into the European Union and NATO.
The so-called second generation reforms to be undertaken center on the modern role of the state in the European country and especially the interaction of public and private sectors in the process of economic development, given Lithuania's strategic economic interests and the nature of modern global economy.
Thus, further privatization of strategically important enterprises in the energy, transportation, and other infrastructure branches is required. Very important are the processes of enterprise exit of unviable enterprises from the Lithuanian economic system so they do not act as a burden to the state budget and release precious human and other resources for more productive uses, e.g. in the new economy. As of 2000, enterprise exit processes have been rather inefficient as about half of unviable firms in the bankruptcy stage stayed in that stage for 2 to 3 years, prolonging the negative consequences of the Soviet legacies. In the coming years, some 16,000 unviable enterprises will have to go bankrupt, hopefully using much more efficient processes. This will still be painful as some 180,000 employees need to be laid off in the process, temporarily pushing the unemployment rate even higher from its 13 percent level. These people will have to be either retired or trained for new jobs in the emerging modern economy.
The emergence of a modern economy will require liberalization of labor laws and other elements of the business environment so the new investments are attracted, especially from Western countries, and the enterprise entry is facilitated. In the digital age, new business models are emerging, and Lithuania badly needs to re-integrate the global economy using such modern approaches and Western investments. Further development of the Lithuanian market economy institutions (e.g. financial) is needed, especially in light of the transparency (e.g. in public procurement ) and other requirements of the European Union. Development steps should include the improvement of the social security finances and putting them on a more sustainable basis. This and other steps will help improve the efficiency of the social safety net and help fight poverty, a big problem especially in the rural areas. Above all, Lithuania needs to put a major effort into preserving and upgrading its very considerable human resources through appropriate reforms of health care and education. Last but not least, Lithuania needs to develop a strategy for long-term development of its competitive advantages within the European and global (digital) economies.
While during 1990-2000 Lithuania made valiant trend-setting efforts to shed the legacies of communism and the Soviet occupation, the next decade will be marked by no less determined efforts to join and work within the European Union, a totally different kind of union than the USSR.