Are Lithuanian businesses losing out in Rail Baltica project?

They say that Latvia, which hosts the joint Baltic company in charge of carrying out the European Union-funded project, will reap most of the benefits and that Lithuanian contractors will end up with less work than they could have had due to poor agreements reached by the negotiators of the Lithuanian Ministry of Communication.

Rail Baltica, a 1,000-kilometre European-gauge railway running across Estonia, Latvia and Lithuania, is expected to bring in multi-million-euro contracts for local contractors. However, Lithuanian opposition parties are accusing Vice Minister Arijanas Šliūpas, who heads the Lithuanian team in negotiations with Latvian and Estonian partners, of failing to properly represent the country’s interests.

After the joint Baltic company, RB Rail, was set up in Latvia, the Lithuanian opposition said they have received signals that Vilnius has been losing influence in the project.

“The latest documents suggest that unless something changes and Lithuania stands up for its position, any leverage in Rail Baltica will slip out of Lithuanians’ hands and into those of Latvians and probably to future commercial funds,” MP Šarūnas Gustainis of the opposition Liberal Movement has told Alfa.lt.

“Lithuanian businesses will not win contracts, the Lithuanian state will not collect taxes, our public coffers will not get any of the €4.5 billion of the project’s worth.”

MP Jurgis Razma, of the conservative Homeland Union, agreed that Lithuanian businesses could be blocked from fully exploiting the opportunities associated with the Rail Baltica project.

“After the joint company was set up in Riga, there have been growing pressures to channel the entire project through that company, including public tenders. It is hardly a secret that Latvians play the leading role in the company [RB Rail], which is headed by a Latvian. There’s a danger that Lithuania and Lithuanian businesses could be left overboard,” Razma tells Alfa.lt.

Vice-Minister of Communication Arijandas Šliupas, however, does not see that danger, saying that companies from all the Baltic States will be able to make their bids, irrespective of where the Rail Baltica company is based.

“Public procurement tenders can be organized in either country. Lithuanian contractors, I believe, can offer their services for the parts of the project in any country, Lithuanian, Latvia or Estonia,” said Šliupas.

“Lithuanian companies will have to work beyond Lithuanian borders and compete with entities registered in Latvia or Estonia too,” he said.

Still, Lithuania’s opposition maintains that the government should be more forceful in advancing Lithuania’s interests.

“Our ministry is saying all the right things but I haven’t heard them actively defending our interests or being tough in talks with their counterparts,” Razma told Alfa.lt.

Vice-Minister Šliupas counters that the interests of Lithuanian businesses will be defended and that Lithuania has a veto right on decisions related to the project.

“The European Commission has a clear position: there must be one entity in charge, able to take responsibility for implementing the project in full,” Šliupas said.

He adds that the partner countries are free to decide how to divide up the tasks of the project among themselves and that each will be in charge of Rail Baltica construction in their respective territories.

“We have told our Latvian partners that the value must stay in the country where construction works take place,” he said.

Lithuanian business representatives say they have yet to be informed in detail about the development of the project.

Valdas Sutkus, president of the Lithuanian Business Confederation, said he had raised concerns about how Lithuanian entrepreneurs could be disadvantaged last year.

“If the right to sign contracts and organize public procurement tenders is given to one company run essentially by Latvian citizens, it would mean that all value-added taxes would stay in Latvia,” Sutkus told Alfa.lt. “And when it comes to contracting, contracts would be effectively out of reach for either individual construction companies or consortiums.”

Sutkus agrees that Lithuanian businesses will not necessarily be pushed out of the project entirely but they may end up with crumbs from the table.

He said that the first stage of Rail Baltica which covered a stretch of railway between Kaunas and the Lithuanian-Polish border, was handled entirely by Lithuanian businesses.

“Thirty-five Lithuanian companies took part in the project, five of them were general contractors and 30 were subcontractors. Thousands of Lithuanian employees were involved,” according to Sutkus.

It is important that the general contractors be Lithuanian companies, he said.

“If the general contractors are some big international corporations, all the big added-value jobs will go to to those corporations, including big salaries, project management positions and the like,” Sutkus explained.

“Granted, they will probably hire Lithuanian companies, too, but they’d be given low-pay digging jobs,” he said.

Liberal MP Gustainis is also concerned that once the Rail Baltica railway is built, Lithuania will not be handed the rights to run its operations.

“Lithuania will take on the costs of maintaining a really costly infrastructure, while Latvia will be operating commercial passenger and cargo transportation,” he said.