During the period of Soviet control of Lithuania, the government tried to change the economy from one based on agriculture to one based on industry. However, in the post-Soviet era, industry has declined significantly in relation to the other segments of the economy. In 1999 alone, industrial production declined by 14 percent. There have also been deep cuts in employment in industry. For instance, in 1990 there were 25,000 workers in the electronics industry, but by 1997, that number had declined to 10,000. Lithuanian industry suffers from outdated equipment and a reliance on unstable markets in the nations of the former Soviet Union.
Industrial workers on average earn less than the national average of US$267 per month. Workers in manufacturing earn an average of US$260 per month, while construction workers earn about US$242 per month. Ironically, the low wages have been somewhat helpful for Lithuanian industry. Foreign companies have relocated manufacturing plants in the country precisely because labor costs are so inexpensive. Examples of such foreign industrial companies include Siemens of Germany, Sam-sung of Korea, Farimex of Switzerland, Shell Chemical of the United Kingdom and the Netherlands, and Wilhelm Becker of Germany. Hence while most areas of industry are in decline, there are several segments that have grown.
The chemical industry remains one of Lithuania's most profitable sectors. In 1997 it accounted for almost 10 percent of all Lithuanian exports. The main elements of the chemical sector include nitrogen and phosphate fertilizers which in 1997 made-up 41 percent of chemical exports. Other segments of the industry are pharmaceuticals, cosmetics and soap, and glues, oils and resinoids. Most chemical exports (about 50 percent) go to Russia and the former communist bloc nations of Europe. The textile industry also remains profitable. The segment has attracted US$40 million in foreign investment since 1990. In 1997, textiles accounted for 3.3 percent of the GDP and employed some 60,000 people in 100 large companies and 300 medium and small companies. About 75 percent of all textiles are exported. By 2000, almost 90 percent of textile production was done by either international firms or joint ventures between foreign companies and Lithuanian companies. Of the exports, 65 percent go to the EU and 20 percent go to the countries of the former Soviet Union. Although the electronics sector has declined, in 1997 it was responsible for US$120 million in revenue. Among the main electronic products are televisions, electronic measurement equipment, semiconductors, and other computer equipment.
Lithuania also has a significant wood and paper processing industry. In total, Lithuanian plants processed some 3 million cubic meters of timber. These products account for about 5.4 percent of exports. Some of the main wood-based products include furniture, cardboard, and printed boxes. The main export markets are France, Germany, and Denmark. Two international companies, Ochocco Lumber of the United States and Terminal Forest Products of Canada, have established several plants in Lithuania.
The rest of the industry produces diverse goods including consumer durables, e.g. refrigerators, consumer electronics, etc. There are small but growing and technologically advanced biotechnology, computer and Internet industries. Most of the industrial production is exported to the European countries.
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