Are restrictions on foreign businesses hurting Lithuania’s economy?

DELFI / Mindaugas Ažušilis

(Starting on 11 January, this article and others like it will only be available to Private and Corporate subscribers)

The requirements, which have been in effect since November 1st, 2014, increased the minimum requirements for company capital and foreign investments by several times. In order to gain a temporary residency permit in Lithuania through such a company, that company would first have to operate in Lithuania for at least six months, meaning that the foreigner would have to spend their first six months in Lithuania with a visa. Lastly, the company would have to employ at least 3 Lithuanians or foreigners permanently residing in Lithuania.

According to a letter sent by a group of business migrants to DELFI, the president, and other governmental institutions, it is the “3 workers rule” that is the most onerous. In the letter, they explain that the new rules radically changed the way they are forced to do business. They also argued that the laws will have quite the opposite effect than intended, forcing law-abiding businesspeople to leave the country and hurting the Lithuanian economy.

In the conclusion to their letter, the businessmen requested that the “3 workers rule” be removed from the requirements.

The Ministry of the Interior, however, argues that the changes were in the country’s best interests, as the previous laws had been abused to gain entry into the Schengen zone instead of to do business in Lithuania. By forming fake, inactive companies, businesspeople would gain Lithuanian residency and the right to move freely within the Schengen zone.

“We believe that these changes are aligned with the state’s interest, which is to ensure that foreigners arriving to engage in legal activities would be allowed to live in Lithuania by giving them a temporary residence permit – as long as they contribute to the growth of Lithuania’s economy and encourage the public’s engagement by creating jobs,” the Ministry wrote in a statement.

Other critics of the laws believe that the stricter laws reflect a disproportionate focus on national security in the country’s immigration policy. The approach, according to them, may strongly reduce or even eliminate opportunities to develop immigration focused on the attraction of foreign talents and economic growth.

Audra Sipavičienė, the head of the International Migration Organization‘s (IMO) Vilnius office, said that the “3 workers rule” isn’t a problem for all foreign businesses. “If a large business is being formed, those three workplaces aren’t a problem. However, they do cause problems for all sorts of start-uppers and individual programmers. From a certain standpoint they may seem small, but they don’t need those workers all the time, because they hire people for individual projects and the like,” she said.

“Another important thing,” Sipavičienė added, “is that until the changes, individual businessmen could get residency permits with the Blue Card, which they no longer can.” The Blue Card is an EU residence permit for highly qualified third-country nationals.

According to a survey performed in Lithuania in 2015 by the IMO, 73 percent of the experts interviewed said that migration policy is important for the attraction of business and investments to Lithuania. 79 percent of respondents tot hat same survey, however, also said that Lithuania’s migration policies are not being designed to attract businesspeople and investments.

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