LITHUANIA

an effort to avoid spiraling inflation which could erode public confidence in the new government.

Tax Policies: Lithuania has begun to reform its entire tax system. The law on taxes on profits of legal entities of Lithuania, adopted July 31, 1990, established the taxable entities and regulations for taxable profits, tax rates and tax deductions, taxes due and payment rules, and the liability for proper taxation and payment of taxes. The tax rate for legal entities is 29% of the taxable profit.

Profit taxes of joint ventures are determined by the amount of foreign investment in the authorized capital and its type of activity (industrial and commercial activity). The minimum rate of profit taxes is 20 percent and the maximum is 35 percent.

Foreign Investment:

The Law on Foreign Investments was

adopted on December 29, 1990. This law allowed for three forms of foreign investment: ownership interests in a joint venture; firms with foreign capital; and other securities. The intent was to encourage foreign investment mainly through joint ventures with Lithuanian companies.

Joint ventures are exempt from profit tax for a term of three years from the date of the receipt of the profit. Dividends to foreign investors received in Lithuania are exempt from taxes. Income received legally by foreign investors and upon which a profit tax has been paid may be repatriated without any additional tax.

The Law on Prohibited and Limited Spheres for Foreign Investment adopted on May 2, 1991, determines the areas of economic activities where foreign investment is prohibited or limited. Foreign investment is prohibited in areas of defense and security. Foreign investment is also prohibited in state enterprises holding a monopoly in the Lithuanian market. These are defined as enterprises producing more than 50 percent of their goods in the Lithuanian market. Enterprises which exploit existing communications, electricity delivery, gas, oil and water supply, heating and sewage systems are also considered to be monopolistic.

The law also provides for the right to seek international arbitration and appears to permit 100 percent foreign ownership. Foreign representations are not legal persons and thus not foreign investors. The law gives foreign investors the right to lease land for 25 years, but implies that foreigners cannot own the land. The Lithuanian government is working to liberalize the laws affecting foreign investment and has sought guidance from the OECD in this regard.

4. Debt Management Policies

As a former republic of the Soviet Union it is still unclear exactly how much debt Lithuania will be responsible for repaying. Negotiations on this matter are in progress.

The objective of Lithuanian trade policy is to move toward European and world markets. The current task is to change the trade structure which is oriented to the Soviet market and to try to raise the quality and competitiveness of Lithuanian goods. There are few direct barriers to western imports.

Lithuania has high overall levels of trade, which is a result of the centralized planning process which led to extreme specialization. A factor of overiding importance has been the dependence of Lithuania on the Soviet Union. Due to existing quality differentials between Lithuanian consumer goods and world class products, as well as transport costs and market familiarity factors, the natural market will initially remain the countries of the Commonwealth of Independent States (CIS).

A significant barrier to U.S. exports is the continued use of the Soviet ruble as the Lithuanian currency. Since this is not convertible it restricts the ability of Lithuania to buy foreign goods. Another barrier is the absence of a solid infrastructure for trade, such as telecommunications and banking facilities.

6. Export Subsidies Policies

Lithuania has become concerned about maintaining

sufficient scarce goods. Therefore, the government has begun placing greater controls on exports.

7.

Protection of U.S. Intellectual Property

As Lithuania was a former republic of the Soviet Union, it was a member of the World Intellectual Property Organization, the Universal Copyright Convention, the Paris Convention for the Protection of Industrial Property, the Madrid Agreement Concerning the International Registration of Marks, the Patent Cooperation Treaty and the Budapest Treaty on the International Recognition of the Deposit of Micro-organisms for the Purpose of Patent Procedure.

8. Worker Rights

While under Soviet control there were no western style trade unions operating in Lithuania. There was little interest in the creation of safe and clean working conditions.

a. The Right of Association

Prior to the August 1991 coup attempt, Lithuanian workers remained largely subject to Soviet labor law which did not permit the right to associate freely in practice. Since the coup, Lithuania has adopted legislation reconfirming the rights of workers to form independent unions and, with certain restrictions, to strike. On October 4, Lithuania was formally readmitted to the International Labor Organization.

LITHUANIA

b. The Right to Organize and Bargain Collectively

Under Soviet law, Lithuanian workers did not have the right to organize outside the official trade union system and free collective bargaining did not exist in practice. Lithuanian legislation since the coup confirms the right to organize and bargain collectively, but plant level bargaining is only in its infancy. Since the economy is still predominantly in the hands of the state, the unions seek redress at the political level.

C. Prohibition of Forced or Compulsory Labor Compulsory labor was a feature of Soviet-administered prisons in Lithuania; it has since been banned.

d.

Minimum Age for Employment of Children

The Government has retained the minimim age for employment of children at 16 and it has added one year to compulsory education, bringing it to twelve years of schooling. Lithuanian authorities enforce minimum-age and compulsory-education laws through a system of inspections.

e. Acceptable Conditions of Work

Labor conditions in Lithuania were similar to, but sometimes better than, those in the Soviet Union. According to known Soviet statistics, wages in all categories of workers in Lithuania were above the Soviet average. By law, white-collar workers enjoy a 40-hour workweek; blue-collar staff, a 48-hour workweek with premium pay for overtime.

Soviet and Lithuanian laws establish minimum health and safety standards for the workplace. However, worker complaints indicate that these standards seem frequently to be ignored.

Extent of U.S. Investment in Goods Producing Sectors

No sector by sector data is available on U.S. investment in Lithuania.

THE NETHERLANDS

Sources: Central Bureau of Statistics (CBS),

Netherlands Central Bank (NB), Central Planning Bureau (CPB) 1/ Estimated.

2/ Yield on T-bonds with longest residual maturity.

3/ Personal plus business savings.

4/ Data available as of November 1, 1991 in millions of guilders unless otherwise indicated.

The Netherlands has an advanced industrial economy with four-decades of prosperity behind it. Its major economic assets are a skilled, highly productive work force, substantial reserves of natural gas and its geographic location in Northwest Europe at the mouth of the Rhine River. The Dutch are beneficiaries and supporters of the free trade principle, a philosophy which they defend in international fora like the GATT. The Netherlands is a member of the European Community and expects to benefit from the EC's efforts to build a single market by 1992. With Germany as their largest trading partner, the Dutch also expect to gain from the German reunification.

The Dutch economy grew by 3.5 percent in 1990. However, the rate of growth is expected to decline to two percent in 1991 and to a little over one percent in 1992. In an attempt to mitigate the effects of slower growth on its budget reduction program and to ensure that public sector budget reduction objectives are met, the government proposed a package of budget cuts and revenue increases. The restrictive 1992 central government budget is expected to further dampen investment and reduce consumer spending. Exports are forecast to keep pace with world trade growth despite an anticipated slowdown of the German economy. Any economic growth this year and next will therefore primarily be led by the foreign sector.

A government induced inflation flare-up (higher fuel prices and rents) is expected to boost the consumer price rise in 1991 to 3.75 percent from 2.5 percent in 1990. A growing merchandise trade surplus continues to push the current account surplus to over 4 percent of GNP in 1992.

Dutch fiscal policy for 1992 is basically restrictive. The government hopes to reduce the budget deficit to 4.75 percent of Net National Income (NNI) in 1991 and thereafter by 0.5 percentage points annually, eventually reaching its target of 3.25 percent of NNI by 1994. The draft 1992 budget provides for budget neutral income tax measures and a small revenue raising hike in indirect taxes. A tax reform plan to reduce income tax rates and simplify the Dutch tax system is currently awaiting parliamentary approval.

Dutch monetary policy is aimed at maintaining the stability of the exchange rate of the guilder vis-a-vis the German mark through appropriate adjustments in short-term interest rates and money supply. The Netherlands Central Bank (NB) exerts control over money market rates by varying the