"The world
has changed, we have changed and now everything will be different - many words
were repeated by many after the first wave of COVID-19. And it was wrong - we
are now living in a constant time of change and transformation, it will affect
not only our businesses but also our lives.
Global trade
continues to be hampered by the effects of the coronavirus pandemic and its impact
on global supply chains. EU business is still feeling the effects of the UK's
withdrawal from the Community.
In addition to all
these consequences, Lithuanian business received an additional blow due to the
beginning of political tensions with China, when our companies were separated
from raw materials and the export of Lithuanian goods was suspended.
The problems of
supply chains will only deepen, the problems of shortages of raw materials and
the prices of energy resources have recently become a matter of continued survival for some companies. The potential for attracting investors is
declining significantly, as we need to recognize that we are on the fringes and
that investors will certainly be cautious and expect greater geopolitical stability.
Already with the
onset of problems with China, business has begun to speak out that decisions,
even on value policies, need to be well thought out and made only after
assessing the implications for all segments operating and developing in the
country. Economists and politicians have repeatedly said that the figures for
our trade with China are insignificant, but it is a policy and thinking of an Microsoft Excel user type. We seem to be talking about small numbers, but those small numbers
have hit many companies hard. Even the closure of one company already means the
dismissal of dozens of workers who have families, children, loans, which means
the collapse of plans for entire families.
Due to an
incomprehensible goal, the Chinese market for the export of Lithuanian goods
was sacrificed. Imports from China of goods needed for the country's economy
have also become more difficult or impossible, and companies exporting to the
EU, where Lithuanian-made components are used in companies in the Member States
and end products are exported to China, have found themselves in a difficult
and unpredictable situation.
The saying that a
business will find new markets and diversify seems simple only to those who
have never done so. After all, this is not the decision to stand at an
intersection and think about which way to turn. Searching for new markets,
establishing oneself in them, product certification takes 5-7 years. After all,
during all that time, companies have to deal with the issues of their survival
- settlements with suppliers, retention of employees, payment of taxes, loans
to banks, for which the business often guarantees with its personal assets. All
of this can’t wait for you to change direction and establish yourself in
another market.
Also, only those
who do not understand the principles of business operation can counter all the
arguments about the blow to business by the fact that Taiwan allocates X amount
and a semiconductor plant will be built. Good news, but will it save our
butchers, for example? After all, they will not adapt their meat processing
lines to the production of semiconductors, and the workers working there will
unfortunately not switch to semiconductor specialists.
If the business
had experienced all these difficulties because of its wrong decisions or
because of the Chinese government’s changed rules of the game, it wouldn’t make
sense to talk about it so much.
But this is the result of ill-considered
decisions by our state officials. This is a consequence of the lack of continuity
in our state policy and a consequence of the policy that exists in election
cycles.
Previous
governments had said that the Russian market was closed and now let us focus on
the Chinese market. The state has set that direction so that business does not
scatter around the world and knows where it can have political support and
state financial resources and financial support. The business started going to
China and spent enough money on it. Less than 10 years passes and business is told
that when going to such markets, businesses need to take risks and be aware
that they may suffer. The question is - what markets? A market without values?
And which markets are with the values?
Let's look at The
Economist Democracy Index: 2020 full democracies account for only 13.8% of the
world and limited democracies for 31.1% of the world. So we live in an
undemocratic world.
If the business
had been told, diversify your businesses, because after 2-3 years you are done in China. The Chinese
market will be difficult for you to access, and then the business would have
had time to reorient it painlessly. Or if it had been an agreed EU decision,
the consequences would probably have been different.
Over 30 years
politicians of independence and membership in international organizations
should already be aware that, in some cases, values are an EU-wide issue.
There has been a lack of enhanced intra-Community geopolitical cooperation to
date. We also lacked the understanding that being a small economy in the
overall context of the EU, in addition to choosing an aggressive foreign policy
(not only rhetorical but also legal) towards dictatorial states will not become
really heavy at EU level.
At least the lesson
of intra-Community geopolitical cooperation after China seems to have been
learned and decisions on Russia and Belarus are now being taken at EU level
rather than at Lithuania's level.
With the outbreak
of tensions with China, business has repeatedly told policymakers that as
geopolitical tensions rise, there are more issues on the agenda: attitudes
towards Russia, attitudes towards Belarus. It is necessary to consider all
possible scenarios, prepare and think about alternative export and raw material
supply markets. We were not heard. Now that we are cut off from raw materials,
products, we are starting to think about alternatives. Clearly, there are also
politicians who insistently reiterate that businesses involved in trade and
business relations with Russia and Belarus must take risks themselves.
Political
decisions of the state closed the world factory no. 1 - China, we have now lost
raw materials from Ukraine, Belarus and Russia. The business is facing a real
shortage of raw materials, logistics roads are unbalanced or completely closed.
In fact, everyone
is now trying to swim in the fog, moving with their intuition and hoping to
reach the shore. Unfortunately, this is the situation in the state, because in
more than 30 years of independence, we have not been able to form a strong
strategic center in the state that would provide forecasts and offer
alternatives to potential threats. If we had had alternative solutions, the
state would have shaped its foreign policies and economic interests, we would
now have alternative markets. Business has repeatedly said that long-term,
sustainable and continuous solutions to export markets are needed, but have we
heard?
How can we ensure
continuity when we in the state now do not even have a unanimous consensus
between the ministries and the head of state on key foreign policy issues.
Thus, looking at what is happening around, a natural question arises - what
shapes the essential foreign policy and what will ensure the formation of a
long-term foreign policy. Political diplomacy must be based on economic
diplomacy. Let's look at the experience of other EU countries - where there is
no economic interest between the state itself and its business (in the normal
world, the business interest is the economic interest of the state), the
diplomatic focus is only on the security dimension.
Lithuania's
foreign policy must be closely linked to the state's economic development and
business development plans. The state must define a clear 10-20 years vectors and
discuss export trends with business, prepare market analyzes, strategies and
follow them. Our economic diplomacy needs to be directed there, and the visits
of ministers and leaders must be planned accordingly. Current short-distance ad
hoc visits do not provide the desired result. Business reads in the press that
one or another minister or head of state visited there and there, promoted
exports, opened markets. And the reality is that he left, discussed something
with someone, but the business usually knows little about what was agreed, and
most importantly, there is very little follow-up.
If this continues
to be the case, then politicians will work for themselves, business for
themselves, businesses will move their businesses to more stable states in
terms of the business environment. Unfortunately, there will be no winners in
this case. Business does not need support, it only needs a predictable and
long-term foreign policy.
The funds that the state plans to spend on rescuing
businesses could be used more pragmatically - to increase pensions or salaries
of public sector employees.
Lithuanian
business, its taxes, jobs and investments cannot be ignored in shaping foreign
policy. Just a reminder: U.S. Government Secretary Mike Pompeo, speaking at the
World Entrepreneurship Forum, said: “People entrepreneurship is the foundation
of a nation’s economy. Business will only be able to create value when the
necessary environment for business development is created. ”
Comment author -
Arūnas Laurinaitis, Vice President of the Lithuanian Confederation of
Industrialists ”
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