The government’s decision to increase allowance rates given to posted drivers needs to be changed, while the EU’s constraints on the transport sector based on the EU Mobility Package must be evaluated responsibly. Otherwise, Lithuania will face long term negative economic and social consequences, TV3.lt portal reported.
This was the warning given by Lithuania’s industrialist confederation and three major freight associations. Together they have sent an open letter to the President’s office, the Parliament, and the Government.
State institutions are also encouraged to be transparent. When making significant decisions related to the country’s economy, the issues raised should be solved constructively and by employing talks and negotiations. All responsible government institutions should be included together with NGOs and business sectors. The final decision should be taken after carefully assessing social, economic and EU political factors.
The letter addressing government institutions was signed by Lithuania’s industrialist confederation president Robertas Dargis, Lithuania’s national road freight association „Linava“ president Romas Austinskas, international transport and logistics alliance general secretary Tomas Jurgelevičius and Lithuania‘s freight union general secretary Sigitas Žilius.
All the signatories reiterated that they are prepared to continue actively participating in discussions and negotiations with the goal of achieving a compromise, acceptable to all sides.
The letter prepared by the signatories can be found here.
A rushed decision by the government
On 16 October, the government adopted a decision to raise the coefficient, applied to calculate the minimum wage size, from 1,3 to 1,65. Paying only the minimum wage makes the employee eligible to receive a tax-free daily allowance of 50% of the minimum wage.
Industry and transport sector representatives noted that the government adopted the decision through heightened expediency and based on just the social and budgetary income motives. The decision on the 1,65 coefficient was made the same day the project was presented and adopted, without analysing the economic impact it would have on the transport sector as well as on the economy as a whole.
“The decision was made without consulting the stakeholders. It also lacked an impact assessment which would show the effect it would have on Lithuania’s economy, exports, investments, public finances and social aspects. Such dismissive behaviour by the government will lead to negative consequences experienced by business and country’s competitiveness,” the letter stated.
Freight industry representatives highlighted that in the near future, the sector will experience additional economic tension due to current geopolitical processes. Primarily due to the unclear outcome of “Brexit”. In addition, if fears concerning a possible recession come true, falling demand among EU and third countries will negatively affect Lithuania’s industries as well as road transport activity indicators.
“We should separately assess the geopolitical tension between the US and China, as well as the trade war between the EU and the US, the impacts of which are already being felt Lithuania’s industry, which is geared towards exports” – states the letter.
The dangers of the EU Mobility Package
The business community also misses more active participation by the government in defending its interests in the context of the planned actions by the EU to stifle the transport sector using the Mobility package.
„The question of minimum wages needs to be addressed in a multifaceted way, and in the context of the impact of the Mobility Package on the transport sector and the wider economy. International research shows that Lithuania, which is on the periphery of Europe and most dependent on road transport in the EU, will experience the most negative impact as a result of the implementation of the package,“ the letter states.
For example, the Polish government actively supports its national freight sector. Through a joint effort between the government and business, as early as in 2017, a study on the Mobility Package and its impact on the social and economic environment was commissioned. Bulgaria is currently considering whether to lodge a complaint with the Court of Justice if it fails to reach a compromise on the contentious questions around the Mobility Package.
The transport sector will shrink
According to the results of a study by the Gdansk University, Mobility Package implementation in Poland and other EU periphery states will reduce the amount of road transport operations by 7 per cent. At the same time, the number of heavy goods vehicles in small and medium enterprises would fall by 50 per cent. In the case of large enterprises, the number would fall by 10 per cent. Due to the increase in expenses, 30 per cent of carries would have to limit or completely terminate their activities. Among the small and medium-sized enterprises, 30 per cent of employees would lose their jobs. In large enterprises, 20% would lose their jobs.
Transport and industry sector representatives underscore that these prognoses are especially significant and should be taken seriously in Lithuania, considering that Lithuania’s transport and storage sector in 2018 made up 13,1 per cent (4.87 billion Euros) of the country’s GDP. Lithuania is the first in the EU based on the road transport sector’s contribution to the country’s GDP, exceeding the average twice.
Lithuania’s international road freight makes up nearly a third of the country’s services export. In 2018 transport companies sold 3,3 billion Euro worth of services in foreign markets, adding nearly 8 per cent to the country’s GDP. Lithuania’s transport and storage sector employ around a tenth of all the employed individuals in the country. At this point, around five thousand companies are engaged in international freight and have around fifty thousand units of transport, which were given the permission by Lithuania’s transport safety administration to engage in international transport operations.