Working Paper Series
Serie 6 Spaces, Territories and Regions
Paper No. 6.06.06
Case Study Report: Vilnius Metropolitan Area
Donatas Burneika*
*Lithuanian Social Research Centre
2014 www.grincoh.eu
This paper was funded under the FP7 project “Growth– Innovation – Competitiveness: Fostering Cohesion in Central and Eastern Europe (GRINCOH)” under the Programme SSH.2011.2.2-1: Addressing cohesion challenges in Central and Eastern Europe; Area 8.2.2 Regional, territorial and social cohesion. Project Nr. 290657 Donatas Burneika, [email protected] Lithuanian Social Research Centre http://www.lstc.lt
Please cite as: Burneika D. (2014), ‘Case Study Report: Vilnius Metropolitan Area’, GRINCOH Working Paper Series, Paper No. 6.06.06
Case Study Report: Vilnius Metropolitan Area
Abstract The report is devoted to the analysis of development of Vilnius metropolitan hinterland. The methodology of the research is similar to other case studies in the same 6th Work package of whole GRINCOH project. It was based on several methods. The empirical statistical analysis of available data at municipal and regional level was the first one. Mostly data of Department of Statistics were used, but also other indirect data were useful (Data of State Tax Inspection, Lithuanian Road Administration and other).
The in-depth interviews (18 in total – c.a. 11 in metropolis; 3- 4 in two specific locations in regional hinterland that represent both local success (Druskininkai and Utena) and failure (Ignalina); though it is quite difficult to unambiguously qualify any of these places as totally successful or totally failure cases. Both of those cities have positive and negative trends or features of development; however most statistical indicators in Ignalina are worse than average, while other cities have either quite good performance history or very positive recent changes (Druskininkai). Representatives of municipalities, planners, local development agencies, business leaders, researchers, higher education institutions and ministry departments were questioned.
Also experience and results of previous studies of author and other researchers were useful when achieving main objectives of this study.
Content
Part 1: Metropolitan region and its constituents...... 2 Part 2: Strengths and weaknesses of the metropolis and the region ...... 4 Part 3. Relationship between the metropolis and the region ...... 7 Part 4. Governance and local/regional development policies ...... 10 The main objective of this part is to assess the impact of local/regional policies and institutional system on metropolis-region relationship ...... 10 Part 5. External interventions: national and eu policies ...... 11 PART 6. Future prospects ...... 12 PART 7. Conclusions ...... 13 References ...... 15 Appendix ...... 16
1 Part 1: Metropolitan region and its constituents Main objective of the part – to identify regional context regarding the spheres of the city influence and administrative structures Vilnius city influence involves whole country. The city is dominant point of destination of migrants throughout the country except those municipalities that are located close to other two gateway cities of the country (Kaunas and Klaipeda). The peripheral geographical location of the city (30 km to Belarus, with still have quite weak service sector) determines that it’s influence reaches beyond state border and Vilnius serves as an important service centre for Belarus citizens (retailing, airport services, tourism destination point, higher education (EHU university) etc). The zone of influence of the city according to interviewed experts and some indirect statistical data (redistribution of income tax, traffic intensity, suburban bus services) can be assessed as follows (fig 1): A. Metropolitan area stretches up to 30 - 40 km from Vilnius centre – zone of “total” commuting (absolute majority of residing working force is involved in commuting to Vilnius, or Vilnius residents are commuting to newly established jobs located there). B. Vilnius city region stretching up to 50 – 60 km from Vilnius centre, where substantial part of population participate in commuting and Vilnius is very important working place, making decisive impact on the development conditions and trends. Actually no one of local dwellers outside metropolitan area perceives themselves as Vilnius residents in this zone. C. Outer commuting range – up to 100 km from Vilnius, where commuting processes exist but more like an exception than a rule and are not playing serious role for development. D. Metropolitan region (dominant regional hinterland) – up to 180 km. Area (technically 3-4 Counties of Eastern Lithuania) where the city is the most important destination point for permanent migrations, studies and retailing). E. Interregional hinterland - up to 300 km. As a capital city, Vilnius is important destination point of migrations, studies, economic relations from all around the country and beyond. Economic relations seek more distant areas. Vilnius serves as important retailing, wholesaling and leisure point for many residents and enterprises in Latvia, Belarus and Kaliningrad area (IKEA, low-cost airport services, international Gariunai market, shopping and entertainment centres attract visitors from neighbouring countries).
2 Figure 1 Structure of Vilnius hinterland. Authors own elaboration based on (Burneika et all., 2012)
There is no common definition of Vilnius metropolitan area. Only few studies have been carried out defining suburbanisation areas around the city. The General plan of Vilnius city defines structure of the city, consisting of 3 structural parts (Central, middle and peripheral), which involve some areas outside the city municipality. However those concepts are not accepted widely. And even peripheral zone involves just a part of actual suburbs of the city. (http://www.vilnius.lt/index.php?3714327801) There is no administrative or statistical counterpart reflecting the area of its influence. The Vilnius County (NUTS 3 region) could be regarded as an area of direct influence of the city. It is an area, which corresponds to the limits of more intense commuting zone the most accurately (though not precisely). There were uncertain plans to establish 3- 6 new NUTS 2 level regions in Lithuania (mainly in order to withdraw Vilnius from EU support schemes). So Vilnius NUTS 2 region could be possibly established in the future, however these plans are very unsettled jet. Existing administrative division of Lithuania does not correspond nor to the city metropolitan area neither to its metropolitan region or hinterland. Metropolitan area is divided mainly by three municipalities (Vilnius city, Vilnius district and Trakai district municipalities, though small parts of metropolitan area could be found even more distant municipalities of Elektrenai, Salcininkai or Sirvintos). Though, having in mind Vilnius’ capital status, whole Lithuania as a small country consisting out of single NUTS 2 region could be regarded as a Vilnius influence (metropolitan) region. Vilnius County (NUTS 3 region) mostly corresponds with Vilnius city region though its peripheral parts have very weak daily relations with the city. Traditionally three eastern NUTS 3 regions (Alytus, Vilnius and Utena Counties) or eastern Lithuania can be perceived as Vilnius metropolitan region. Latest researches show that Panevezys County also could be included in to this area, because Panevezys, the 5th biggest city, is not playing important role at interregional level anymore and relations with the capital city here are more intense comparing with rival Kaunas city (Figure 1 and 2).
3 Figure 2 Distribution of unregistered labour migrants to 3 major cities in 2012 according to redistribution of residents’ income tax and wage differences in major cities (based on data of State Tax Inspection, 2013).
Part 2: Strengths and weaknesses of the metropolis and the region The main objectives of this part: a) to access a degree of dissimilarity between metropolis and its regional hinterland b) to access what types of development factors are crucial for development of metropolitan region Logically and according to the absolute majority of questioned experts the main and most important strengths of the metropolis lays in its capital status and good human resources. It’s the only growing city region. Good logistical situation was also mentioned as an advantage as well as leadership, more proactive role of local government. We also may logically include here such local factors like huge historical and architectural heritage (UNESCO World Heritage List), education and research facilities and other factors common for capital cities. The main factors, which have been the most important in development of metropolitan area in recent years, according to questioned experts are quite common for all capital cities in CEE. It is its capital status, foreign investments, human potential and entrance to the EU. Recent economic crisis made serious negative impact but in the long run this may have also positive consequences (apart from escalation of emigration, what can turn into long lasting disadvantage). Statistical analysis reveals that growing export (in post crisis period), consumption (in most recent years), tourism also are making positive influence on the city area. The main strengths of the regional hinterland are related to the quality of environment and existing natural resources according to questioned experts. Some notices availability of land, social infrastructure and transport accessibility, which is better developed “per capita” than in fast growing
4 Vilnius (at least some parts of it, such as proximity of schools, kindergartens, safety etc.). Other advantages actually weren’t mentioned. The most important weakness, unsurprisingly, is related to human resources, namely week demographic potential, mostly because of emigration of young population. Low levels of entrepreneurship, high proportion of deprived people depending on social aid, social exclusion of people in more distant rural areas are also among disadvantages of peripheral hinterland. Poor or insufficient connection with metropolis in some places is an obstacle, for joining its market. Notwithstanding high unemployment rate, there is a shortage of skilled and “willing to work” people in many places. The development of regional hinterland in recent years have been mostly influenced by depopulation, related to emigration, lack of entrepreneurship, recent crisis, especially within commuting distance from the city. Though statistical analysis show that depopulation rates were more influenced by natural causes, related to aging population, but actually emigration is damaging human potential more than natural decrease. Entrance to the EU and direct support for the agriculture are perceived as main positive factors of development. Positive influence of EU support for regional development is perceived as positive factor, though it mostly helped to improve environmental quality and reduce spending on energy (renovation of housing stock and public buildings). Examples of successful local development in regional hinterland are very few. Places (towns), which were able to use their tourism advantages because of more proactive and reasoned activities of local politic leaders (mayors), are often perceived as a good examples of local development. Druskininkai resort is a classic example, how targeted and proactive role of local political leaders (former businessmen) helped to attract both EU and private investments into resort related activities and to revive the city, which was in the deepest depression in Lithuania after collapse of Soviet Union, which resulted in the loss of the majority of demand of its services. The differences between the metropolitan area and regional hinterland regarding economic and social development aspects are large. This can be illustrated both by the statistical data and by the perceptions of those who participated in qualitative research. Vilnius has got the most positive socio- economic indicators in Lithuania, while its hinterland Eastern Lithuania for a long period has got the least positive trends of development. Most of the statistical indicators of the economic development were the worst in the East Lithuania (except Vilnius city) since the early 1990s. The initial negative impact of economic and political reforms on the East Lithuania and fast development of Vilnius city resulted in the high differences of development levels. Vilnius was the most developed city surrounded by the least developed municipalities in post reform period (Figure 3).
5 Figure 3. Relative differences of added value per capita created by employees in East Lithuanian municipalities in 1996 (Authors elaboration based on data of the Statistics Lithuania, 2013).
Trends of social (especially demographic) development have similar character. There are various reasons for such a negative trends. First of all, historical-geographical reasons determine the processes of peripherisation of this area. It is located on the boundary between East and West Europe and it suffers from the negative processes like all other peripheral regions do. Eastern Lithuania is a part of a bigger international peripheral problem region, which could be found in environs of the East EU border. The eastern parts of Estonia, Latvia, Lithuania, Poland, Slovakia, Hungary and most western, near border parts of European Russia, Belarus and Ukraine can be described as less developed areas of their countries. Whole area, including Moldova, could be called as a Middle European depression zone (Daugirdas and Burneika, 2006). Other reasons of the weak economy of the region may lie on a pure historical context (delayed land use reforms in pre war period, repatriation of most educated, “unreliable” for soviet regime persons in 1945-1946 (Eberhardt 2011)), human factor or poor resources of the region). The area has poor agricultural resources, which used to make a background for the whole economy throughout the ages. Almost all of the rural LAU2 regions of the -East Lithuania have status of ‘unfavourable’ for agriculture. The total area of the unutilised lands increased from 1% till 24% between 1990 and 2007 here (Aleknavičius and Aleknavičius 2010). However the latest researches show, that the positive influence on economy and social development (for example population change) from the Vilnius city is spreading into areas outside metropolitan area, which were developing faster than Vilnius itself during recent years (Figure 4).
6 Figure 4 Relative differences of growth of added value per capita created by employees in Lithuanian municipalities in 1996 - 2011 (based on data of the Statistics Lithuania, 2013)
On the other hand, the influence of the city has got quite limited range (some 60 km) and more distant municipalities are still economically developing more slowly than the city. The further increase of differences between metropolis and its hinterland have been forecasted by all questioned experts. The existing demographic trends and destinations of migration suggest that social differences will increase as well. Deurbanisation trends of the city and migration to the hinterland exists but its more exception than the rule at the moment, however this could have some positive influence on slowing the depopulation processes here. To identification of a relationship between strengths and weaknesses of the metropolitan area and the metropolitan region is not an easy task. The concentration of positive economic and social development factors in the city as well as resulting concentration of incomes (half of countries income tax is being gathered in Vilnius, while it contains 17,5 % of its population) could help (and in some cases is helping at present) to exploit one of the most important advantage of peripheral parts – environmental quality. It helps to attract both new residents (tax payers) and tourists. However due to many reasons (lack of entrepreneurship, good strategies, fast transportation links) this is not a decisive development factor in most municipalities of Vilnius hinterland jet.
Part 3. Relationship between the metropolis and the region The main objective of this part: a) to assess changes in settlement system and its drivers; b) to assess changes in regional production system and its drivers; c) to access changes in labour commuting at regional level and its drivers. The most important links between the metropolis and its surrounding region are related to migration flows to the city. On the one hand it results in loss of human resources in the periphery but it also
7 results in reverse flow of money mostly due to the redistribution of income tax of those officially residing in their home towns. This is quite usual type of behaviour because legal purchases of dwellings are rarely a case for newcomers to the city. This results in increase of municipal budgets (. Commuting flows to the city can be detected as far as 100 km from the city. On the other hand Vilnius plays important role as labour market in settlement located some 60 km and less from the city. Municipalities located inside this range “earn” more than 1/3 of their budgets in Vilnius (Figure 5) Figure 5. Incomes of East Lithuania’s municipal budgets from residents’ income tax, gathered in Vilnius city municipality in 2007-2012 (based on data of the State Tax Inspection, www.vmi.lt)
Vilnius is the most important retailing centre for the residents of its hinterland (except most distant municipalities, which are located closer to foreign regional centres Daugavpils in Zarasai case and Suwalki in case of Lazdijai). This damages local retailing business a lot according to questioned experts. On the other hand, tourists from Vilnius guarantee the existence of many small shopping facilities and other retail services in peripheral municipalities. Local businessmen indicated that shops in rural areas wouldn’t survive without increased demand in summer period. The main changes in regional settlement system are related to the shrinkage of all types of settlements in the hinterland of the city. The decrease is more related to the negative natural change in rural agricultural areas. Emigration of younger population plays more important role in the case of municipal centres and other towns. The decrease of rural population is the fastest and it is related to the changing capacity of agricultural territories to provide jobs. Number of employees in agriculture decreased more than 3 times since mid 90-ies in Lithuania. Other drivers are related mostly to economic reasons and lack of well paid jobs. Negative expectances and bad prospective are also among the reasons for mass emigration of school graduates and other younger population. Other most obvious trend is related to the fast spread of the Vilnius city into Vilnius urban region because of suburbanisation, which was actually nonexistent in Soviet times. This resulted into
8 spread of settlements surrounding Vilnius city, some of which increased several times. However, according to some questioned experts, such spread results not in increase of previous settlements but actually in creation of new ones, because old and new communities actually live separately and have very different trends of social and economic development in many cases. No essential changes in regional production system were noticed during the recent years according to questioned experts. The agriculture is the main job provider in rural municipalities. Number of employees is decreasing, but not so fast as during previous years. Tourism sector here become more important some decade ago but situation during the most recent years is quite stable (partly due to economic crisis but also because of the lack of entrepreneuriship, socially deprived and aging population). The decrease of agriculture because of badly implemented agricultural reform in 1990- ies, which ruined collective farming is being perceived as a main negative break point by most experts. Industry is more important in regional centres (Alytus and Utena) but situation is quite stable here too. Foreign investments are not being perceived as an important factor of change here. Statistical analysis partly confirms expressed opinion though some increase of shares of agriculture and services as well as relative decrease of industry (contrary to the central Vilnius County) is visible during last 5 years. Similarly to whole East Lithuania construction sector was shrinking here as well (Figure 6). The last economic crisis is the main driver of such trends. EU support for agriculture is at least partly responsible for the positive changes in agriculture. The newest trends show some revival of construction sector, especially in Vilnius metropolitan area (Statistics Lithuania, 2014). Figure 6. Changes of employment in peripheral parts of Vilnius hinterland (Utena and Alytus Counties) in 2008 – 2012 (Statistics Lithuania, 2014).
70
60
50
40 2008 % 30 2012
20
10
0 Agriculture and Industry Construction Services forestry
Major part of Vilnius hinterland is involved in commuting flows to the capital city (approx. 100 km from the city, according to interviewed experts), but the intensity of such flows is sharply decreasing starting from 50 – 60 km range. Both experts and previous researches of the author confirm such results. Regional centres of second level (County centres Utena and Alytus) generate commuting flows up to 50 km. Smaller, municipal centres also generate commuting, though mostly inside their own municipality (approx. 30 km). The lack of employment opportunities in rural settlements is mostly responsible for such a type of behaviour. The higher level of the centre the higher supply of better paid jobs is evident therefore the “acceptable” travelling distance is increasing. There are examples (a very few of course) of reverse commuting, when higher class employers (managers
9 mostly) are commuting from Vilnius to regional centres because of a lack of skilled high class employees in periphery. Both cooperation and competition (rivalry) between public administrations of municipalities of Vilnius metropolitan region exit. Everything depends on specific situation. The city and municipalities are presented more or less equally (not according to number of population) in Regional Development Councils, which are responsible for division of certain EU support for regional development (7 % of total EU support was distributed through these councils in period 2007-2013. Mainly it was support for improving local environment, housing quality and similar objectives). Therefore bigger number of smaller municipalities sometimes dominated there. There are examples of cooperation among municipalities as well (project – “The Country of Lakes” for promoting tourism in North eastern Lithuania was developed together by few municipalities). However cooperation between Metropolitan city Vilnius and surrounding municipalities is very limited. Only the projects from central government (for instance construction of transportation links) are planned and implemented for the whole region as one entity. According to the results of qualitative research, opinion that “everything goes to Vilnius” exist in periphery as well as opposite image lives in Vilnius (the city donates regions, common planning of the metropolitan area is actually non existing, neighbouring municipalities ignore needs of the city, make obstacles for investments and etc..) This results in unplanned and uncontrolled fast and fragmented sprawl of the city.
Part 4. Governance and local/regional development policies The main objective of this part is to assess the impact of local/regional policies and institutional system on metropolis-region relationship Regional policy is not making serious impact on metropolis-region relationships, because regional policy is almost non existent as well as regional governing. Local policies pursued by local municipalities are making certain impact, because every player seeks it own immediate interests, as some experts state. However this impact is very fragmented, fast changing and depends on certain political and personal circumstances. There was a very few actions taken in order to increase the positive influence of the metropolitan centre on its surrounding region. The reform of relocation of gathered income tax, implemented just before the last economic crisis, was devoted for relocation of financial resources from the municipal budgets of cities (first of all Vilnius, which generates ½ of all gathered income tax) to more peripheral municipalities, where many city employees officially live. Before the reforms, gathered income tax was distributed to the municipality according to the place of job of employee instead of his place of residence. This reform was not officially declared as a measure of regional policy but actually it made a huge impact. According to calculation of an author, the number of “alien” employees in Vilnius is the same as a number of all employees in third biggest city Klaipeda (or approx. 25 – 30 percent of all employees officially do not live in the city municipality) The was a very few actions taken in order to limit the negative impact of the metropolitan area on its surrounding region as well. The same action, which was mentioned above, was taken for the mitigation of seemingly (or perceived) negative impact of the city. The constant declarations of the need to increase investments and to enhance development in the so called “regions”, is heard in the media. Recently the head of one of business promoting agencies (“Invest in Lithuania”) was changed also arguing that there was too little attention paid to the peripheral regions and actually all new
10 attracted investments came to Vilnius or other main cities. Approximately 10.5 % of all support under “The National strategy for the use of European Union Structural Assistance for 2007-2013” (NS) was devoted to tackle a problem of unbalanced territorial development of Lithuania under the Programme for reducing social and economic differences in Lithuania, developed by the Department of Regional development under the Ministry of Interior affairs (Department…..2014). The programme foresees the support for development of secondary urban industrial centres (Alytus and Utena in our case), 14 problem municipalities (those with long lasting unemployment) and Ignalina nuclear plant region. The operational programme “Promotion of cohesion” of NS had certain priorities, which were designed for development of less developed areas. Action priority “Local and urban development”, was the major financial tool, where majority of measures were devoted for areas outside 5 biggest cities. The main cities were virtually excluded from supporting schemes. The fact that ruling parties in Lithuania are elected basically by voters from peripheral regions (3 biggest cities are voting for different parties as a rule) is always playing a role at least in official political declarations. On the other hand, actual measures for the solution of the main or at least the most “popular” problem, namely outflow of population and money (to lesser extent) to the capital city, are not being taken. According to many experts, there are no real ideas for reversing this widely perceived negative trend of concentration. Such perceptions are very much related to exceptionally positive image of equally developed urban network during Soviet regime. Therefore the collapse of such network is perceived not as a normal transformation process or adaptation of a system to new neo-liberal reality, but as a tragedy. Authors’ calculation show that the impact of the city on surrounding areas is more positive than negative at least in the range up to 100 km. Diminishing of the impact of such a real negative aspect like “export” of socially disadvantaged groups in to more distant periphery (usually with worse local social and natural environment), is not under discussion, though this problem is under the attention of media. The coordination of actions of various actors coordinated within the metropolitan area or within the metropolitan macroregion is very limited because there is almost no common governing and planning of such structures. The metropolitan macro region does not exist in any documents at all. Common planning is implemented only by the central government and its ministries (transportation, health security) but those also are not dealing with metropolitan areas or macroregions, which actually exists. The regional development plan of Vilnius County (region) basically is just a sum of municipal plans. They are being perceived as a “more declaration kind of documents” by the developers of such plans and by municipalities as well. Actually there are no authorities at regional level in Lithuania.
Part 5. External interventions: national and eu policies The main objective of this part is to assess the impact of external intervention on metropolis-region relationship The distribution of EU structural support keeps the main attention of questioned experts, when discussing types of external interventions, which had the most significant impact on metropolis- region relationship; however absolute majority of them were not able to specify some external intervention, which noticeably effected metropolis – region relations. The distribution of the support of EU structural support, concentrating funding for improvement of environment and related tourism or different alternative rural activities could theoretically help peripheral region to offer more services and attract more consumers from the metropolis so intensifying positive relationships.
11 Basically we may assume that the distribution of EU support according to principle that the support for activities, which does not require exceptional human resources or high levels of entrepreneurship or innovativeness (improvement of environment, housing quality, development of tourism activities, local SME) was concentrated to peripheral regions was rational. Though this support did not make essential differences in economic development of peripheral regions, but capacities to attract other types of funding were limited according to questioned experts. The need to adjust infrastructure (transportation first of all, but also higher level health care system, R&D infrastructure, etc.) as well as abilities of development of new R&D activities and related economies was much greater in Vilnius. Cohesion Policy implementation affects social well being in peripheral region to much higher extent than its competitiveness. The situation is potentially opposite in Capital city, which proportionally receives less money per capita, but they are concentrated more in activities with higher added value. On the other hand, the final conclusions about the character of such impact are to be made in the future. The majority of EU support for regional development (7 % of whole support from EU, which actually corresponds to almost whole support for regional development in Lithuania) was coordinated and distributed through regional development councils, where the representatives from municipalities had the decisive voice. Other support, which formally is not devoted for regional development but for the whole country as one single NUTS 2 region, was coordinated and projects implemented directly from the centre (central institutions based in Vilnius). Most experts and author of the report suggest that this principle was logical in this case.
PART 6. Future prospects There are no experts forecasting the diminishing of differences between city metropolis and periphery. On the other hand, most of experts speak about development of economy or demographic trends. Few experts indicated that “quality of life of many living in the periphery not necessary is worse or will grew worse”. The main driver of concentration of economy in the cities will be of economic kind. Better supply of jobs, human resources, demographic trends will keep playing their role. However some statistical indicators, illustrating the depopulation trends and increasing productivity and effectiveness of agriculture, forestry and tourism services suggest that quality of life and economy per capita in peripheral regions could not grew worse in relation to Vilnius metropolitan area. There is very few recommendation for future objectives (spheres) of national development policy regarding metropolis-region relationship but basically they involve more clear and “fair” distribution of support for regional development (EU money mostly). More attention for improve of connections with metropolis (e.g. fast train lines) are among suggestions for future policy priorities. One of suggested future objectives - collaborative planning of metropolitan region but its hardly possible without regional governance of some kind. The policy should seek diminish contraposition between the metropolis (or namely the Vilnius city in the case of Lithuania) and remaining region. Antagonistic worldviews are perceived as a main problem of relations between centre and periphery. Experts in the peripheral part of the region mostly perceive Vilnius as “exploiter” draining human and financial resources from the region, while Vilnius based experts feel the ignorance of requirements of the city, lack of funding. They perceive the city as a financial donor for remaining parts of the region.
12 No clear recommendations for future objectives (spheres) of the EU Cohesion policy regarding metropolis-region relationships were given in this case. Generally the attention for development of communication links, expressed by most interviewed experts could facilitate more intense and mutually useful relations between the metropolis and its hinterland.
PART 7. Conclusions Vilnius, being quite a small city comparing with capital cities of neighbouring countries, initially (right after reforms) was not playing role of important international regional centre nor in practice neither in various urban visions or strategies of the region (for example VASAB vision, which foresaw only secondary role for the city comparing with neighbouring capital cities (VASAB, 2014) http://www.vasab.org/index.php/long-term-perspective )). Faster development comparing with rival centres Riga and Minsk (where market economy is still quite centrally planned) enabled city to become more important regionally and internationally. The city is important service centre not only in Lithuania but also in Belarus, which suffers from limited supply of goods and services. It is playing some, though much less important role for Kaliningrad area and some Latvian or even Polish towns. The main drivers of relative success are related to historical reasons. Relatively small degree of concentration of population and economy in Lithuania until 1990 resulted in fast metropolization and spread of the city. In other words there was a potential for concentration and growth, comparing with Riga or Tallinn. Proactive administration, foreign investments, skilled labour force, gained real capital status (it was just a capital of province in USSR times), good transport connections, new innovative branches of economy are among mentioned reasons for the relative success of the city. No one related it to the existing East Lithuanian hinterland, which is the poorest area in Lithuania. The growth of Vilnius in the middle of this depressed area confirms theory that metropolitan cities are much more dependant on wider context than on their close hinterland. Regional hinterland outside the zone of direct influence of the city (outside commuting zone, basically) has been developing more slowly, especially at the beginning of the analysed period (early and mid 1990 – ies). It still suffers from the big population decline (demographic indicators are poorest in the country), shortage of skilled labour force, emigration of young population, low entrepreneurship (levels of entrepreneurship are among the lowest in Lithuania) and innovativeness. Problems of social exclusion are common for rural areas and towns. Outside secondary regional centres (Utena and Alytus), which perform as a nods of traditional industry, region mostly rely on the use of natural resources. On the other hand, Eastern Lithuania suffers from low quality soils so agriculture is not a favourable land use form here. EU direct support is the main reason of some revitalisation of this activity. Forestry, wood processing and tourism show more positive signs. However the boom of rural tourism seems to be over, mostly because of lack of entrepreneurship of those living in rural areas. The role of migration processes in relation between metropolis and their region is quite one sided. Out migrations of working age and young population is a dominating phenomenon. According to the local experts, virtually all school graduates leave town and go to Vilnius for study or abroad for work. There are examples of counter-migration but the extent is much lower and does not make decisive impact on demographic situation locally. There are examples of young people (families) finding their homes in rural settlements and towns but it is too early to predict the spread of this phenomenon jet. There are also examples of elderly population leaving Vilnius to hinterland but this is also not a wide spread activity making noticeable impact on socio-economic development in periphery. The
13 peripheral part of Vilnius region, just outside the zone of commuting, serves as a kind of social trashcan of the city. Some socially deprived persons loosing their homes in the city move to abandoned or cheap low quality houses. Usually they don’t participate in labour market relying mostly of self sustaining agriculture and state (municipal) social donations so increasing social problems in the region. The most obvious phenomenon is reshaping of settlements from agricultural centres into season tourism towns, reviving at summer time. The main driver of such process is related to expectation of young people to find better opportunities in the city and quite mute images and understanding of the life quality and perspectives in the province, which is not so worse than in the city. Social infrastructure in many cases is closer and more accessible here and environment quality is much higher. Representatives of local governments see the possibilities to transform their towns into residential areas of those working in Vilnius in more “footloose” jobs. Accessibility makes visible influence on development in hinterland inside commuting zone of Vilnius. Growing accessibility increases “potentially” prosperous” area, suitable for residence of those involved in rich Vilnius labour market. The new modernised transportation systems results in appearance of centres of logistics in Vilnius region, facilitates tourism. Sometimes it makes negative impact on retailing services in the periphery reducing local demand. One of potential strategies for well being creation in hinterlands’ municipalities is related to attraction of metropolis residents less dependant on permanent everyday work in the city. In Vilnius hinterland case the main policies for development are related to use of wealth created in Vilnius city by offering the best region could offer – e.g. recreational and natural resources. Experts weren’t able and author as well did not notice any significant interplay between these policies. Every interested party (players – in this case municipalities or central authority and its agencies) pursue their own tasks and any interaction is rather stochastic. From the point of view of coordinated planning and development it is necessary to have some authorities at regional level. Though there were very different opinions expressed by different experts, but generally some king of self-governing would be good, because most socio-economic processes overpass existing municipal borders. There were no experts stating that metropolis and its surrounding region mutually do not need each other. Majority of them expressed that region needs Vilnius more, though generally they were Vilnius residents. Many of those interviewed at periphery indicated that they equally dependant. Only two experts clearly indicated that Vilnius needs region more than region needs the city.
14 References Aleknavičius, A., Aleknavičius, P. (2010). Žemės ūkio naudmenų ploto pokyčių perspektyvos Lietuvoje [Perspectives of farming lands area preservation in Lithuania]. LZŪU mokslo darbai, 86 (39), 28-36. Kaunas.
Burneika D., Ubarevičienė R., M. van Ham, 2012. The impact of growing Vilnius urban reigon on the development of Eastern Lithuania. Evoliucija obščestveno geografičeskoj mysli, Rostov na Donu, p. 37-43.
Daugirdas, V. and Burneika, D. (2006). Patterns and problems of peripherality in Lithuania – borderland of the EU. Europa XXI, 15, 119-133
Department of regional development under the Ministry of Interior Affairs of Republic of Lithuania, 2014, [downloaded: 05.2014]. http://www.nrp.vrm.lt/index.php?id=162.
Ministry of Finances of the Republic of Lithuania, 2014, [downloaded: 05.2014], http://www.esparama.lt/2007-2013/en/eu-structural-assistance-to-lithuania Statistics Lithuania, 2014. [downloaded: 05.2014]. http://osp.stat.gov.lt/temines-lenteles20 Statistics Lithuania, 2013. [downloaded: 11.2013]. http://db1.stat.gov.lt/ State Tax Inspection. (2013). [downloaded at 10, 2013]. www.vmi.lt,. VASAB. (2014). [downloaded: 11.2013]. http://www.vasab.org/index.php/long-term-perspective Vilnius municipality, 2014. [downloaded: 11.2013]. http://www.vilnius.lt/index.php?3714327801
15 Appendix METHODOLOGY The analysis is focused on the period after 1989, however with special attention to recent years. It is focused on NUTS3 region considered as city-region (Vilnius County), so with special focus on capital city. Some of the respondents were asked only on situation in the main city and not in the whole region. The methodology of the research is similar to other case studies in the same 6th Work package of whole GRINCOH project. It was based on several methods. The empirical statistical analysis of available data at municipal and regional level was the first one. Mostly data of Lithuanian Department of Statistics were used, but also other indirect data were useful (Data of State Tax Inspection, Lithuanian Road Administration and other). The 11 in-depth interviews were carried out. Representatives of municipalities, planners, business leaders, researchers, higher education institutions and ministry departments, related to regional development issues, were questioned. Also experience and results of previous studies of author and other researchers were useful when achieving main objectives of this study. 1. INTRODUCTION Vilnius is the biggest city and capital of Lithuania and one of 10 County centres of the state. Counties (regions) do not have any kind of self-governing and present basically statistical administrative units. Vilnius municipality (one of 60 of Lithuanian only sub-national level decision making units) is substantially smaller than Vilnius metropolitan area, which involves also parts of Vilnius district, Trakai district municipalities and at lesser extent Salcininkai district and Sirvintos district municipalities. The remaining (biggest) part of Vilnius County is not urbanised or suburbanised and involves rural areas or medium towns (Ukmerge and Elektrenai most important of them). Traditional Vilnius hinterland, where Vilnius role is more important than the one of other major cities involve 3 East Lithuanian counties (Vilnius, Utena and Alytus Counties). History and location. Vilnius, the capital of Lithuania, lies in the south-east of the country close to the border with the Republic of Belarus (30 km) and some 300 km from the Baltic Sea. The hilly landscape and deep valleys of these rivers form the main features of the city landscape and determine its urban structure. The location of the city between northern, eastern and central European countries used to play both a positive role in its revitalisation and further development and a negative one in less stable politically times. On the other hand, its smaller size and peripheral location within the Baltic Republics (compared to Riga, in particular) are disadvantages in the competition to attract mobile international capital.
The city is situated within the region with the lowest population density and the fastest rates of depopulation throughout Lithuania. This can be illustrated by the statistical data from 1989, 2001 and 2011 Lithuanian Census. Most of the statistical indicators of the economic development were the worst in the East Lithuania since the early 1990s (Burneika 2007). There are various reasons for such a negative trends. First of all, historical-geographical reasons determine the processes of peripherisation of this area. It is located in between East and West Europes and it suffers from the negative processes like other peripheral regions do. Eastern Lithuania is a part of a bigger international peripheral problem region, which could be found in an environs of the East EU border.
16 The location and history of Vilnius city and Vilnius region are closely interconnected. Many times throughout the history city changed its functional role in the region, having more and less prosperous times. The city is located at the very edge of Lithuania, some 30 km from the eastern EU border. Historical events in the 20th century had a decisive impact on the present situation of the city and its socio-economic structure. Those events actually annihilated almost the whole “labour” of previous history in a few years. Frequent shifts in administrative and political possession of Vilnius city and its’ region (this territory belonged to Russia, Germany, Poland, the Soviet Union and Lithuania at various timescales during the 20th century) determined the sudden changes in migration flows, number of population and ethnic composition (Stanaitis and Česnavičius 2010). It also had influence on its hinterland and hence on development conditions. At present big part of traditional hinterland of Vilnius is on the other side of EU border, though it does not mean there are no socio-economic flows between these areas.
The major demographic changes of the 20th century are closely related to the WWII. Population of Vilnius city declined more than twice right after the war. There were two main reasons of these alterations. First, the Jewish population, which played an exceptional role in Vilnius city, composing 25-40 % of its population at various timescales since the 14th century, decreased to only few percentages (from 57 to 2 thousand) because of the Holocaust (Mendelsohn 1983). Second, the repatriation of Polish people took place right after the WWII and 107 thousands former Polish citizens left the city in 1945 – 1947. (Eberhardt 2011, Czerniakiewicz and Czerniakiewicz 2007). The mass industrialization, which began soon after the entrance of the Soviet government, accelerated the growth of Vilnius city and led to a rapid increase of its population, which rose 3.4 times during 1950-1989. Vilnius city was filled up by immigrants from other parts of Lithuania and from more remote areas of the Soviet Union. The impact of the disturbances of the WWII and the later events were much less significant on the surrounding quite poor region. The repatriation from the rural areas, according to Eberhardt, was limited because of the fear of the Lithuanian SSR administration that the depopulation and labour force shortage may occur here. These events determined present multiethnic structure of the Vilnius metropolitan area and whole its hinterland. Such a situation influences political field in the area and makes certain impact on collaboration and development of various municipalities forming the region and metropolitan area in particular.
Lithuania inherited very uniform settlement system without clear dominance of one metropolitan region in 1990. Vilnius was just slightly bigger (less than 20 percent) than Kaunas. The Soviet policy wiped off the majority of granges and small villages concentrating their residents to bigger villages and towns of several hundred residents (“central kolchoz settlements”). In parallel, the prevention of the development of the biggest cities, especially Vilnius, and expansion of medium sized towns into cities, giving them regional functions were carried out. As a result, Lithuania now has 10 Counties. Two of these newly developed cities, at present centres of Counties, are located in Vilnius hinterland – Utena and Alytus). Thus Lithuania became the land of medium towns and cities and it remains the only small and medium sized European country without clear dominance of one metropolitan region, which would serve as a main economic axis of the country and compete with similar ones abroad. As a result, Lithuanian settlement system started to change fast right after the collapse of Soviet Union. All this led to mass intra-national and international migrations. Present process of the rapid decline of the population and its spatial redistribution within the country is at least partly the continuation of the artificially constrained and reshaped processes. According to the statistics, the shrinkage of medium sized cities was one of the main features of the development of Lithuanian urban network
17 during the last two decades (Statistics Lithuania, 2013). Vilnius city municipality lost 7.6% of its population in 1996-2012, while all other cities lost more than 20% (Lithuanian average - 16%). On the other hand, municipalities surrounding 3 biggest cities were the only areas gaining population during the analysed period; therefore the real relative increase in the 3 metropolitan city regions (it was not a case in other cities), especially Vilnius, was higher. As a result Lithuanian urban system was transformed and at present we can distinguish few levels of urban structure:
1. Vilnius as national city
2. Vilnius, Kaunas and Klaipeda as macro-regional cities
3. 10 – 12 biggest regional cities (centres of counties)
4. Other self-governing cities (towns).
5. Centres of LAU 2 regions (settlements without self-government)
6. Other small settlements (smallest town and granges)
Accessibility. Motorways play the most important role in Lithuania's transport, though Vilnius metropolitan region historically can be defined as a St. Petersburg – Warsaw railway (out of operation at present because of Belarus borders mostly) region, cause apart from node Vilnius, the railway axis used to play most important role for development of links inside the region. Vilnius has domestic and international rail services at present, but the rail network is more important for freight transport. The main transit line from Russia to the port of Klaipeda and the Russian enclave of Kaliningrad passes through Vilnius. Recently the role of passenger rail transport increases in international connections with Belarus as Vilnius plays more and more important role as centre of retailing and other services for Belarus residents.
A major motor highway runs between Vilnius, Kaunas, the second-largest city in the country, and Klaipeda, the main port of Lithuania. Another major highway runs 130 km north from Vilnius to meet the international corridor Via Baltica, the transport corridor (now being modernised) that runs between Helsinki, Tallinn, Riga and Warsaw. Motorways of good quality also connect Vilnius with Belarus and Poland. The main road between the Russian enclave of Kaliningrad on the Baltic and Moscow also runs through Vilnius ( Trans-European Corridor IX).
Vilnius International Airport is the main gateway for Lithuania. The airport is located only 6 km from the centre of the city. Although there were a few fluctuation in airport activities the number of passengers constantly grows. It has more than doubled since 2003 till in 2008, when it reached 2 million passengers. Mainly due to the global economic crisis and bankruptcy of the national air carrier FlyLAL, the number of scheduled flights was nearly halved next year. However the main indicators were growing by 20 -30 % since 2011 and airport had 2.3 m passengers in 2012. The low cost airlains Wizz Air and Rayan Air started flights from Vilnius airport in spring of 2011.
Vilnius is also the cultural, educational and scientific centre of the country. Because of its historic old town (a UNESCO World Heritage site since 1995) Vilnius is the most visited place in Lithuania.
18 Basic socio-economic characteristics. Vilnius is the financial and corporate centre of Lithuania and the location of most of Lithuania’s modern industry. Vilnius is also the cultural, educational and scientific centre of the country. Since independence from the Soviet Union most of the traditional industries that used to dominate the economy of Vilnius have shrunk, but manufacturing still bulks large in the economy. Vilnius is the capital and financial centre of Lithuania. Most of Lithuania's modern industry is located there. The vast majority of companies operating throughout Lithuania have their headquarters in this city. According to official statistics the population of the city of Vilnius at the beginning of 2013 was 537,152 or 17,5 % of the total population of Lithuania. The wider region of Vilnius (for which we give the data in this chapter, because data at municipality level are very obscure) has a population of 806,308 at the beginning 2013, and the population of the region as well as of the city is fairly stable comparing with Lithuanian average.
The total number of Vilnius residents actually living in metropolitan area is far higher than cities official population. According to information from the State Tax Inspectorate (State Tax Inspectorate, 2013), at least 25 -30 % of the taxpayers working in Vilnius were residing not in the city municipality (75 -80 thous. workers). Partly these are the commuters from Vilnius region, but majority of them officially live in too distant municipalities to take part in the commuting. Taking into account also students, which usually live in Vilnius unofficially and family members of “illegal” it is reasonable to estimate that some 750,000 live in the city and its suburbs.
The population density of the city is very low, mainly because of the large green spaces within the city's bounds. The green slopes of the deep valley of the river Neris also reduce the proportion of the built-up area.
All the major cities of Central and Eastern Europe (CEE) have followed a similar path of rapid and profound changes in their spatial organization since the demise of the Soviet Union (Novak and Sýkora 2007; Ouředníček 2007; Nuissl and Rink 2005;). The most significant spatial changes in Vilnius are related to the process of urban sprawl to the surrounding rural region that started right after 1990s. What makes Vilnius unusual in an international context is its peripheral location in the East Lithuania region, which has the fastest pace of depopulation in Lithuania and one of the fastest in whole Europe (Statistics of Lithuania, 2013) The lowest density of rural population is in the most distant from Vilnius municipalities (Anyksciai, Ignalina, Zarasai, Svencionys, Varena municipalities) 8 of 13 most sparsely populated municipalities of Lithuania are located in Eastern Lithuania. The pace of depopulation is increasing since 2000 in whole East Lithuania. The highest decrease is evident in peripheral rural areas of Vilnius hinterland, which suffer from depopulation for several decades. Ignalina municipality was losing more than 2 % of its population per year. The 8.5 % decrease of number of population in Eastern Lithuania in 2001 – 2011 was lower than Lithuanian average (12.3%) primarily because of growth of Vilnius urban region. The pace of decrease of residents in peripheral parts of the hinterland was the highest in the state (15–20% and more) (Statistics Lithuania, 2013;). Decrease of population is determined largely by emigration in the biggest cities and towns. Importance of natural change prevails in rural areas. In Ignalina municipality negative natural change caused 70 % of all decrease of the population. Eastern Lithuania (except biggest cities, centres of Counties) has long lasting depopulation trend related to aging population, therefore proportion of potential emigrants is very small. In some settlements age pensioners constitute more than half of population. The only exception is Vilnius metropolitan area, which was strongly influenced by
19 intensive suburbanisation. These processes substantially influence demographic indicators of Vilnius districts, Trakai district and partly Salcininkai and Sirvintos district municipalities. In fact, apart from the Vilnius suburbanization effects, those municipalities suffer from the same processes as the remaining East Lithuania. Analysing range of impact of Vilnius on depopulation pace, we may see that the positive impact (though not necessary the decisive one) can be felt quite far. The most negative trends are in most distant peripheral areas located more than 100 km from the city. Figure 1).
Figure 1 Impact of the cities on depopulation trends in Lithuania in 2001 – 2011 (based on data of Censuses of population, Statistics Lithuania, 2013)
Complicated history created quite unique ethnical landscape in Vilnius region (fig 2). City is dominated by Lithuanians (65 percents), while Polish and Russian minorities are big enough to constantly be represented by their political parties at city municipality. Remaining Vilnius metropolitan area, where city sprawling processes are taking place are dominated by Polish residents, composing up to 90 percent of population in some distant LAU 2 regions. More distant from the city areas of Vilnius city region (40 – 50 km from city centre) are dominated by Lithuanian population once again. Therefore the closest to the city Vilnius district municipality (some 60 percent of population are poles) is under rule of Polish election party, the same like Salcininkai municipality, where poles compose around 80 percents of population. City sprawling is changing such situation and unsurprisingly this raises some tensions from Vilnius district municipality, which complicates regulation and planning of city sprawl processes.
20 Figure 2. Polish minority in Vilnius city region in 2001 and 2011. (based on data of Censuses of population, Statistics Lithuania, 2013)
Economic performance of Vilnius city is fairly good. It was the only municipality with quite stable growth since 1992. The pace of growth of GDP per capita here exceeded Lithuanian average. At present 40 % Lithuanian GDP is created in the Vilnius County. The last economic crisis was the only exception, which damaged city economy more than the remaining country (Fig 3), but the regeneration trends were faster here as well. The Vilnius region (County) consist of quite different spaces. The most modern one, developing metropolitan area, determines the main statistical indicators, but the peripheral parts of the region consist mainly of agricultural lands with very weakly developed economy and quite weak links with the city. Growing (and sprawling) city is influencing development of neighbouring municipalities, which started to develop even more fast than the city itself since late 90-ies.
Figure 3 GDP per capita in Vilnius county and Lithuania. Current prices. (Statistics Lithuania, 2013)
18,0
16,0
14,0
12,0
10,0 Lithuania 8,0 Vilnius region
thous.Euro 6,0
4,0
2,0
0,0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
21 Economic structure of Vilnius county is quite common for capital cities in EU. Service sector dominates here and the last crisis made it relatively even more important in employment structure, because the decrease of employment in other sectors was more serious. (Figure 4)
Figure 4. Employment in main economic sectors in Vilnius County in 2008 – 2012 (thous.). (Statistics Lithuania, 2013).
2008 2012
However the relative role of industry in GVA structure increased the most after the crisis (from 15,7 till 19,4 %) (Figure 5), what permits to make an assumption that finally the crisis made positive influence on labour effectiveness in industry. Negative trend in important sector of business services partly is explained by fast drop of real estate market and decreased financial system after bankruptcy of one of the major banks “Snoras”.
Figure 5. Structure of GVA in Vilnius county in 2008 and 2012, %. (Statistics Lithuania, 2013)
2008 2012
Labour market. Employment has been growing strongly since 2001, with the result that there was virtually no problem of unemployment till the end of 2008. The situation started to change at the very end of the year and the increase in unemployment spread out from the construction sector. The unemployment rate (i.e. those registered as unemployed at Labour exchange) in Vilnius was just below 13% in March 2011. It was permanently dropping since then and reached 9 % in 2012 (Figure 6). Unemployment level based on population survey stood at 12.8 in 2012 or twice as big as in 2008 (6.3%).
22 Figure 6 Registered unemployment in Vilnius city and County (Statistics Lithuania, 2013)
2008 2012
Before the global financial crisis, when rates of unemployment in Vilnius were low and when there were serious skills shortages, the demand for labour in Vilnius was partly met by increasing numbers of immigrants from elsewhere in Lithuania and from other countries in Eastern Europe, above all from countries of the former Soviet Union: Belarus, Ukraine, Russia and Moldova. However, these trends were reversed in 2009. Situation in labour market at the end of 2013 is quite complicated. The level of unemployment is decreasing but still there is quite a big unemployment problems especially in peripheral parts of Vilnius region. The increase of emigration facilitated by the economic crisis now results in shortage of labour force in many sectors. Many experts agree that there is no problem with a lack of working places in metropolitan area. The problem is a shortage of well paid jobs.
Another consequence of the former imbalance between demand and supply in the labour market was that average salaries had been increasing at a rate of 12% in each year since 2000. In 2007 wages rose by 19% and the average salary reached LTL 2,163, or €627 per month, substantially lower than the EU15 average, but about 20% higher than the Lithuanian average. In 2009, however, salaries fell as profits declined sharply at many companies and finance from the state to state-owned enterprises was cut. Small increase again was recorded firstly at the end of 2010. The latest data of department of statistics show the increase of salaries in 2013 by some 5 – 6 percent in Lithuania. The gross salary in Vilnius County reached 704 Euro in 2012 and was 15 percent higher than Lithuanian average. However substantial differences in Vilnius region exist. Average salary in Vilnius city municipality was 732 Euro, while it was just 538 Euro in surrounding Vilnius district municipality where major part of Vilnius metropolitan area is located. More distant Salcininkai municipality had even smaller average salary – 427 Euro, while municipal centre is just 40 km from Vilnius centre. Commuting flows in such situation are inevitable.
Since 1991 Lithuania has enjoyed periods of fast economic growth followed, occasionally, by economic crises; economic policy has been fairly liberal and the state social policy has not been very effective. The overall result has been a dramatic increase in social fragmentation in Vilnius region and throughout the country.
High differences in education level can be illustrated by statistical data. Vilnius is the main high education centre in Lithuanian and the only in whole Eastern Lithuania. The percent of population with university education In Vilnius municipality is the highest as well. Almost 40 percent of all Lithuanian population with the higher education live in Vilnius County. Many experts indicate that
23 the levels of entrepreneurship among population differ substantially in Vilnius metropolitan area and remaining region or hinterland.
Administrative and governance context. Lithuania has got no regional self-government level. State government and municipalities (60) are the only formal decision making levels in the state. The same is true for organisation of most state policies and institutions (education, health care, police, etc). Though some networks of social infrastructure have regional levels (e.g. healthcare, transportation, etc) but their management is divided between central government and municipalities. The organisation of the primary levels of healthcare system and secondary education, local transport networks, public services and similar tasks is the role of municipalities. The higher level education, higher level healthcare, state transportation systems, investment agencies as well as state land ownership is in the hands of central government. An absence of land ownership rights at municipal level is often regarded as a serious development obstacle from the municipal point of view. Former County (NUTS3) governors’ offices (10 regional agencies of Lithuanian government) were annihilated in 2011. Department of Regional Development at Ministry of Inferior affairs exists and has got its regional divisions, but they play very limited role as planners and facilitators of regional development. They are responsible for preparation of Region development plans but actually, as several experts stated, its the simple amalgamation of municipal plans. And the implementation of such plans is in fact fully in the hands of municipalities constituting the region (County). The cooperation among municipalities in this implementation is hardly visible. At present 10 Counties actually represent just statistical administrative division of the country. The only legal body, which represents regions (NUTS3 level) as single units, is Regional development agency (10), whose role is very limited. They are formed by the representatives of municipalities constituting the County and formally are involved in process of formation and implementation of regional policy as consulting organisations. However their most important role is related to distribution of EU funding for regional development (7 % of total EU support in period 2007 - 2012) between municipalities. The major role in this field is played by the various ministries and agencies of state level.
Actually municipalities, constituting Counties (regularly 5 – 7) play as independent actors and collaboration or competition between them depends basically on local interests and on fast changing political situation. Administrative reform, which was started at the end of XX century and aimed to increase of number of municipalities (Lithuania has one of the biggest municipalities in EU, what often is regarded as disadvantage from the point of view of democracy building) was not finished neither it was cancelled. Few new municipalities were established by the way of division of old ones. Therefore Lithuania has got 3 types of municipalities with basically the same rights but different structures and sizes. Those are: city municipalities (6 biggest cities and 4 resorts), district municipalities (central town of 6 – 30 thous. residents and vast mostly rural areas around) and municipalities (without indicating their rural or urban status. They consist of central town of 3 – 15 thous. residents with smaller rural areas around).
Municipal budgets are mostly formed by the income tax of residents of municipalities, not depending on their actual place of work. Therefore situation, when municipalities are not so much interested in attracting business as tax payers is quite common (especially in case of metropolitan regions). Elected municipal councils are responsible for local policy formations. They form administrations of municipalities (local government) and elect mayors (political leaders) of municipalities.
24 Vilnius metropolitan region informally consists of 3 Counties and 18 municipalities (or 4 Counties and 23 municipalities, according to the latest trends). Vilnius city municipality, Vilnius district municipality and Trakai municipality are mostly involved in city sprawling processes. However even in more distant municipalities of Salcininkai and Sirvintos some processes of suburbanisation and periurbanization could be observed. Though technically zone of commuting ranges some 100 km around Vilnius, but it plays more important role just in range of 50 – 60 km from city centre (some 2/3 of Vilnius County).
New municipality of Vilnius was elected in 2011. The ruling coalition is not so firm, available resources limited and debt of the city exceeds 1/3 of its annual budget. The main thrust of the new Vilnius strategic plan (2010-20) is to create city, which is “one of top 3 choices to see, live and work in the Baltic Sea Region. It is a friendly and cosy city, that embraces change and innovation, cherishes its traditions and culture, and promotes continuous progress and perfection. The foremost aim for the coming decade is to make the capital of Lithuania unique for its people: intelligent, intellectual, innovative, inventive, interesting, inspiring, and insightful”. The tentative funding needs for the implementation of Vilnius City Strategic Plan 2010–2020 add up to Euro 2,3 billion. This amount specifies the total financial resources including the Municipal budget funds, the European Union funds, funds of private investors, and other financial sources needed to implement the planned strategic action. The biggest part this funding would be allocated to sustainable development of urban territories and infrastructure (1,4 billion Euro, most of which should be invested into transportation projects). The old strategic plan included ideas to move commercial and office centre from the old city on the left bank of the Neris to the right bank. This goal was at least partly achieved. Public housing developments and restoration are located in all parts of the city, but more on the right bank of the river. Private initiatives (weakly coordinated and planned) in house building tends to be concentrated in the suburbs. Many of those initiatives results in the formal statistical growth of farmers in Vilnius district municipality, because becoming farmers eases procedures of permission for house building in your land of agricultural destination essentially.
2. TRAJECTORIES OF ECONOMIC DEVELOPMENT AND STRUCTURAL CHANGE, SOCIAL COHESION The main objective of this part: a) to analyse development trajectory and structural changes in different sub-periods of transformation) b) to analysis different aspects of social cohesion in the region Vilnius' economy was dominated by manufacturing during the communist era but since that time most of the old factories have either become bankrupt or have been relocated out of the city centre. Thus Vilnius has lost many activities that used to be the bedrock of its economy: traditional machinery, electronics, brewing, metals, food and clothing. Some traditional industries have, however, survived: plastic goods, construction materials, furniture and some types of food processing. Since the beginning of 2000 some new industries have been created in the city and suburbs (brewery, packing materials, biochemistry, production of medical equipment, electronics and other). Industry now constitutes 1/5 of Vilnius county economy. The recent history and the immediate prospects for the economies of Lithuania and Vilnius are heavily dependent on trade flows and the demand for Lithuanian exports. This demand is also affected by political relations with Russia and Belarus.
25 Vilnius was also the principal location of the overheated construction industry and was proportionately more affected by the collapse in the housing market and in construction during last economic crisis. Real estate prices tripled between 2002 and 2008 and the construction sector came to account for about 10% of Lithuania’s total GVA and its growth rates far outstripped rates of economic growth of the whole economy. The collapse of the boom in house construction at the end of 2008 led to a fall of nearly 49% in construction activity in Lithuania in 2009. Most of the construction activity in Lithuania took place in Vilnius, and so the city bore the brunt of the collapse in this sector. Vinlius city region suffered even more, because big part of commuting was related to the jobs in this highly paid sector.
Consequently the share of construction in Vilnius economy dropped from 10 till 5 % in 2012. First signs of revival of this sector appeared only at the second half of 2010.
Vilnius, as the principal retailing centre in Lithuania (and partly in Belarus), was also seriously affected by the sharp decline in household consumption. There were some signs of recovery in this sector at the second half of 2010. Annual increase of retail trade in at the beginning of 2011 reached 21% and consumption began to play major role for GVA grow in 2013.
Vilnius has made concerted efforts to develop high-tech industries on the back of the city's eight universities and several research institutes. These efforts have been fairly successful in biosciences, lasers, ICT equipment and precision machinery.
At present there are ten science and technology parks in Lithuania and four of them are located in Vilnius. Their aim is to attract companies and institutions involved in applied research, innovation and advanced technologies. Most of these parks have been created near existing research institutes and universities and compose parts of science-technology and business centers (so called “valleys”), which have been receiving substantial support from EU recently.
Direct foreign investments from Sweden grew steadily and the country became the largest foreign investor in Vilnius in 2008, when its investments almost reached €1.04bn. At present (2012) Sweden FDI in Vilnius county stands at 8.8 bn and this is almost 4 times higher than the investments from second biggest investment country Germany (2.8 bn). During the financial crisis the ranking of inward investors changed, Germany rising to second and Norway to 3rd place (2.1 bn). Estonia, Latvia, Finland, France are other 4 countries, which investments exceeded 1 bn LTL in 2012 (3.45 LTL = 1 Euro).
Labour market. It is hard to give exact numbers but at least 10% of the Lithuanian labour force is employed in foreign countries, mostly England, Ireland and Norway. The biggest problem in Lithuania’s labour market is related to structural unemployment. There is a shortage of workers in traditional services and manufacturing, which appears mostly to low salaries in this sector (workers prefer not to work, at least officially, or to emigrate). Often there is a little sense to work (especially to commute to work) for minimal salary (1000 LTL since 2013), when various state subsidies guaranty almost similar incomes. The increase minimal salary caused some problems for smaller business especially in rural areas. Also growing immigration from Eastern countries is being discussed as some future inevitability periodically by the economists and business makers.
26 This is another way, apart from international trade, in which the recovery in Lithuania is very dependent on developments in other countries (private persons have transferred to Lithuania €1.2 billion in 2011, what equals to almost ¼ of total net earnings earned in Lithuania)
The economic performance of the region can basically be assessed ambiguously. There are great differences of economic development in the city and metropolitan area, which suffered greater depression at the beginning of reforms. However the trajectory of development is regarded as successful both by most participants of qualitative research and basic statistical data confirms this. Many experts indicate that Vilnius city is the most successful area in the sense of economic performance, though there are some aspects which could have been made better (e.g privatisation of industry and agricultural reform). Experts indicate that this is the reason why many “quite competitive plants were simply sold for metal, and many objects of economic infrastructure were lost”. Absolute majority of experts agree that transformation process is basically over though some remaining of socialist system could be found. One actual remaining is related to unfinished land restitution in the Vilnius region. This is causing both economic problems (minimising land supply) and social tensions. Some mental and spatial structures have their inertia but basically economically and politically region is fully transformed. Some remaining of soviet system could be felt in the economy and society. One expert related this with still quite high part of dark economy, corruption and etc. Some former soviet spaces (like garage areas, factory fields) still exist unchanged. Experts estimate that transformation in the city took place by 6-7 years faster than in the remaining region. The main trend of structural changes in the region is increasing role of services in the city. The rise of business sector is mentioned as an important one, though latest events (namely last crisis and problems in banking sector) made negative impact. The positive signs are related to investment in R&D related industries and IT sector in the city. Investments in new industrial activities outside city (e.g. factory of agricultural machinery or manufactory of packing materials) positively are changing economical structure in Vilnius region. Increasing role of transport economy, logistics is indicated as one of important recent changes. The decrease of industry is mentioned as one of the trends, though statistical indicators show relative revival of the sector during last 5 years. The most peripheral parts of region still mainly remain agriculturally dependant, though employment in this sector is dropping (except the last 2013 year, when it increased once again, Statistics Lithuania, 2014). More and more unused lands are going back to economy with the help of EU support. One expert indicated that the support increased a role of crop-raising, though poor soils are better suited for stock-raising. Region is losing remaining infrastructure from bankrupted industry and agriculture. External factors and EU membership first of all played important role mostly due to improved condition for export related industries (“it opened new markets”, as one expert indicated), improvement of state image (and attractiveness for FDI) and tourism. A few experts indicated possible future negative economic consequences of growing emigration, which will cause shortage of labour force and related social problems in the region. The economic crisis was mentioned and actually it made the biggest negative impact on city and surrounding region during the last years, though it may appear to be a positive one in the long run, because the effectiveness of economy rose, new export markets and investment spheres were found. “Entrepreneurs started to look for a new niches, new markets”, indicated one of experts. Prior to the crisis, investment in real estate were so profitable, that other sectors were losing attention in many cases.
27 Generally majority of interviewed experts do not see essential negative problems in regional labour market. “Employment is reaching 75 %in the city region”, as one of experts said. The social inequality between the city and remaining region are high and last crisis made very negative consequences, because many residents were involved in commuting to Vilnius related to construction sectors. Dropping demand and later salaries made commuting much less affordable. The less mobile population is suffering from social and territorial exclusion. Jobs in the mostly rural region are scarce and much less paid. Crisis facilitated emigration of more skilled workers and this is resulting in shortage of certain labour force in reviving economy. “Supply does not meet demand”. The recent growth of demand for labour force could result in growing social cohesion in commuting zone, though the impact for more distant areas will be minimal. Experts foresee future growth of differences between metropolis and periphery. The social differences in society will not start to change if the states’ economy doesn’t grow fast and social policy doesn’t change. The accessibility of public services is generally perceived as fairly good in Vilnius region with some exceptions. Sprawling residential dwellings were not followed by sprawling objects of social kind. Actually due to the decreasing rural population and saving of public spending networks of schools in rural settlements and network of hospitals in the centre of city were shrinking. Therefore there is some shortage of public kindergartens in the city, schools in the suburbs, healthcare establishments in more peripheral parts. Some experts from peripheral part of the region indicated that social infrastructure in municipal centres is even better than in Vilnius, because dropping numbers of population result in relative oversupply of various objects (like schools, kindergartens, etc), while situation in Vilnius is opposite. However other experts indicated that situation in periphery is not so good, infrastructure is shrinking and many important objects are not existent in such towns (like better hospital services, cinemas, retailing centres.. etc..) The main social problems that usually are mentioned are related to low incomes (or better pain jobs). Housing problem for young families is among topical problem. Big social (and territorial) stratification, big share of deprived persons usually are mentioned among topical problems in Lithuania. The main general source of social inequalities is related to quite liberal (neo-liberal) state policy and laws regulating wage amounts. Lithuania is redistributing the smallest or one of the smallest parts of GDP via national budget. Economy is weak. There are many people with illegal or semi-legal incomes and many persons in need of support. Consequently system of social security is weak, social spending, pensions, etc. are minimal. On the other hand existing system of permanent support does not ensures those deprived persons outside labour market or outside legal labour market (especially in more distant areas) to join it, because difference between minimal salary and social support is minimal. Other reasons lay in interrelated high differences of human resources, education levels, entrepreneurship, language skills, historical pathways, public leadership, poor agricultural resources, badly implemented post soviet reforms, which created big initial differences between formerly quite even population groups. 3. DEVELOPMENT FACTORS The main objective - to identify the most important factors of regional development) Many factors, which have played key role in development of the region in recent years are similar to those affecting whole country. Because Lithuanian is a small state with an open economy largely driven by exports and imports, it is very exposed to developments in the global economy and to developments in the Baltic region. In recent years the value of Lithuanian exports amounted to
28 around ¾ of the country’s total GDP. Therefore any analysis of the Lithuanian economy must take these wider contexts into account.
The fall in demand for Lithuanian exports was one of the principal causes of the recession that started in 2008. This was a global phenomenon exacerbated by the financial crisis in Latvia and shrinking consumption in Russia, which were among Lithuania’s major export partners. The Russian market, however, is also affected by the practice of banning imports of selected products (particularly types of food) from Lithuania, for a variety of reasons. This makes it difficult to predict the development of this market. The revitalisation of export markets is by far the most important factor of economy growth in most recent period. There are no doubts that growing foreign trade is the most important driving factor of economy development since the beginning of 2010 till 2012. Inner consumption regained its role since 2013. All the forecasts of Lithuania’s economy development are as reliable as export markets are.
The cross-border retailing makes also quite important influence on Lithuanian economy because its quite small country. The steep depreciation of the Polish currency led to a sharp fall in retail sales to Poland in 2009. The potential of retail trade with Russia and Belarus is greatly restricted by strict controls imposed by the Russian and Belarus authorities. Belarus, in particular, is less than 20 km from Vilnius metropolitan area and so it is a part of the city’s hinterland. On the other hand, the strict border controls imposed by the Russian and Belarus authorities also prevent the Lithuanian market from being widely opened to the commodities available at much lower prices from these two countries (mostly those with high excise taxes). Though even at those conditions is estimated, that proportion of consumption of illegally sold cigarettes stands at 50 % in Lithuania.
While a revival of export demand and of world trade was a major force behind recovery in Lithuania and Vilnius, relations with Russia and Belarus are always complicating factors.
One of the key factors in Lithuania’s import performance is the country’s need to import energy. The closure of the Ignalina nuclear power station in 2009 made Lithuania an importer of electricity. This means that Lithuania is almost totally dependent on imported energy. The supply and price of the electricity is unpredictable in some cases. Moreover, the country is still quite inefficient in its energy use, both in the residential sector and in manufacturing. Consequently, energy prices have a direct and substantial impact on the level of Lithuania’s imports. Growing oil prices always could play negative impact on countries economy. However, growing oil prices increases consuming in Russia, traditionally one of most important destination of Lithuanian goods.
Among other key factors, which were making very positive impact on Vilnius regions’ economy during most recent years, was raise on new IT related sectors due to the investment of worldwide companies (such as CSC, Barclays, Western Union and other) in opening of their regional divisions in Vilnius. Several thousand workers are employed here and these numbers are increasing fast.
The main obstacles that hinder the development process in the region are, according to questioned experts, diminishing human potential (due to demographic processes and emigration) and diminishing inherited industrial infrastructure. They were mentioned as a possible threat for future development. One of the obstacles, mentioned by experts is inability to cooperatively plan and work in attracting investments in Vilnius and surrounding region. The lack of labour force of certain qualification (IT specialists, for example) is already making negative impact. Soviet heritage (namely
29 avoiding legal business), lack of funding for investment, lack of reasoned strategies in public sector have been mentioned among specific obstacles for development. Complicated spatial planning system was also mentioned as an obstacle for development especially in some areas. Exogenous growth factors. All economy of Lithuania is export oriented, though a few experts indicated, that export is not so important in Vilnius area. Statistically export of goods of Lithuanian origin constituted 18 % of Vilnius county GDP in 2012 and was substantially lower than Lithuanian average (48%); however the export of goods of Lithuanian origin from Vilnius County increased till 7.3 bn. LTL in 2012 comparing to 4.7 bn. in 2008. These growing trends, which were much faster than in the whole country, illustrate the expanding role of the export notwithstanding the impact of the last crisis. The growing productivity is the main driver of such trends. The level of innovativeness of Vilnius city economy was assessed by experts quite well comparing with Lithuanian average; however nobody mentioned this factor as decisive one, determining growth of export or the economy in general. It is the most attractive region for FDI in Lithuania, though many of experts were quite sceptical about its role for present development trends. Generally foreign investments were concentrated very much in Vilnius metropolitan area; therefore the development of the remaining region was not positively influenced by the FDI to noticeable extent. However there is no doubt, that foreign investments are playing very positive role in development of Vilnius metropolitan area. Most of activities of new branches of economy with high value added production wouldn’t appear without FDI. Endogenous growth factors. Innovativeness of Vilnius regional economy is quite difficult to assess. The existing R&D developments are the best developed in Vilnius city and virtually all R&D related economy of the country (laser technologies, biotechnology, biochemistry, components for solar energy production) is concentrated in Vilnius. Some experts say that it is very innovative, some doubt this. Anyway, comparing with the remaining Lithuania, of course it is very innovative and levels of entrepreneurship are the highest in Lithuanian. However the innovativeness and entrepreneurship are very low in the peripheral parts of Vilnius city region. Many of new R&D related producers are concentrated in so called “science and business valleys” established near or with the higher education institutions. SME’s are perceived as a main driver and future factor of development outside metropolitan area. “Small 10 – 20 employer, enterprise in every town and we will solve all social problems in the municipality. That’s everything we need” stated one of the mayors of Vilnius region municipalities. The role of SME’s in the city is important and it is expressed in various visions and strategies developed in various public authorities or agencies. However few experts mentioned SME as a decisive sector for city development. Main clusters appear in the peripheral part of the city (inside its legal limits), where business and science parks have been established or are under development. “Santara valley” for example is a concentration of research institutes and producers of chemistry and biochemistry, ICT related enterprices. “Sunrise valley” concentrated physics and related industries. These new (though quite small jet) business clusters appear at the Northern part of the city, which also is a main side for city sprawl. Southern district of the city remains devoted more for traditional industry, wholesaling, logistics and similar “transport infrastructure dependant” activities. No business clusters outside the city are visible jet.
30 4. GOVERNANCE AND LOCAL/REGIONAL DEVELOPMENT POLICIES Main objective - to assess the impact of local/regional policies and institutional system on regional development Formal regional policy is relatively new and weakly developed branch of state policy in Lithuania. Its’ present origins can be traced to the period of negotiation with EU, when Lithuanian had to prove that it has Regional policy. At present Lithuanian regional policy is sharply oriented in the support for special targeted territories, which have special kind of problems or “potential” and it is very much dependant on EU structural funding. 14 problem municipalities were selected as problem territories because of high unemployment levels mostly. 7 urban centres with potential of being development nodes for surrounding region were selected (basically 6 – 12th biggest cities of Lithuania were taken for granted as a potential development nodes). The special problem area – “Region of former Ignalina nuclear power plant” was established. Those 3 types of areas receive higher funding from EU structural support. One of such problem municipalities is located inside Vilnius region (Salcininkai). 4 other municipalities as well as 3 urban centres are located in Vilnius metropolitan hinterland. The regional development councils are involved in redistribution of EU support for regional development. Mostly those are projects for improvement of environment, housing renovation and similar activities in non urban (big city) municipalities. Regional development strategy is actually irrelevant. Regional development plan prepared at the Ministry of interior affairs is mostly a sum of local municipal plans and its implementation is fragmented among municipalities pursuing their local interests. Experts assessed those plans as “mostly type of declaration”. The existing governance model in the region basically has not been effective and efficient. Though municipalities forming region can cooperate at certain cases, but mostly it’s more an exception than the rule. Regional authorities actually don’t exist. Existing departments at ministry of Interior affair can develop general principles and strategies for regional development but they can make very little influence on the activities of independent municipalities. Though experts indicated that municipalities have learned how to divide “decently” EU money for regional support, but common regional planning and development actually does not exist. The main outcome of recent state regional policy is withdrawal of EU support for regional development money from Vilnius municipality. This resulted in the improvement of environment in non-metropolitan areas but did not make any decisive impact on economical development (parks, streets, squares, waste water treatment sites, sewage systems, houses, etc. were renovated, but very few new jobs created). Local policy made different impact on development of various municipalities, though their role is quite limited. For example the Vilnius district municipality is criticized by experts for making obstacles for suburbanisation of Vilnius industry. While Vilnius city proactive managers managed to make city more attractive for investment and were able to regulated renovation of the city, including development of new right river bank city CBD. Most agree that the proactive role of a mayor of more distant Druskininkai municipality (located in peripheral part of Vilnius hinterland, outside Vilnius metropolitan area) was the decisive factor renovating economy of this resort but successful local policies in municipalities in Vilnius metropolitan area were not mentioned.
31 5. EXTERNAL INTERVENTIONS: NATIONAL POLICIES AND EU COHESION POLICY The main objective of this part was to assess the impact of external intervention on regional development) Assessing impact of various types of policies (regional, sectoral, horizontal policies) on regional development in recent years we found quite unambiguous answers. No one of interviewed experts indicated that regional policy had more important role than structural policies. Many even did not know any measures of regional policy at all. The general economic and social policy of Lithuanian as well as active or passive role of local municipalities was making most important impact in Vilnius region (especially in Vilnius metropolitan region, which is usually criticized in media for taking “everything” from remaining country). Most experts indicated that the municipalities have significant role on attractiveness of their areas for FDI, development of export, innovativeness and entrepreneurship, social cohesion but many municipalities did not made sufficient efforts for improvement of these fields. And they do not work together in the region. Once again big differences between Vilnius city and remaining municipalities were indicated. The external interventions, which are nor regulated or perceived as measures for regional development and which are centrally planned and managed at various state institutions (e.g. investment in transportation, R&D) generally addresses regional needs according to questioned experts (e.g. bypasses of Vilnius city, reconstruction of roads, railways, support for agriculture and rural development, etc.). Mangers of more peripheral municipalities stated, that in many cases supported activities are too complicated too sophisticated for small and quite traditional rural business. The Cohesion Policy resulted in the improvement of economic potential and competitiveness in some cases, mostly in Vilnius. It also resulted in changing ways of thinking in periphery, which started to think more about new ideas rather on simple support for primal needs (e.g. renovation of roof or saunas), as one of experts said. But basically the impact on social well being (or rather quality of environment) in rural areas was much more serious than impact on competitiveness. 6. FUTURE PROSPECTS The main threats for the development of the region that were mentioned: extern instability (export markets, political issues in the east), energy supply, demographic development, aging population, lack of labour force, absence of reasoned clear development vision (both in Lithuania and in the region), shrinking economic infrastructure in many parts. Having in mind the latest events, we also could include instable political field in Eastern Europe among the threats complicating future development in Lithuania. The main opportunities, which were mentioned: tourism, innovativeness, research – these fields could give more use; The opportunity to become interregional centre, mere intencce interregional cooperation in the Baltics, Eastern markets (and threat also), east-west bridge functions, while local entrepreneurs know eastern market peculiarities. The experts had quite different opinion in the city and in periphery on recommended future objectives (spheres) of national development policy. The idea of concentration of efforts, funding for competitiveness and innovative, R&D related industries in metropolitan areas prevail in Vilnius. At the same moment guaranteeing spread of the well being created here to more peripheral region, which cannot gain, “absorb” or master funding for innovative activities. Experts from the peripheral
32 parts state that they should more freely use funding, and decide what activities are to be supported by themselves. Te money should be concentrated in periphery, which is losing population. “We should create jobs here, where we have social infrastructure, space and unemployment, but don’t have traffic jams, polluted air, etc… ”. East European countries should be more active (possibly with the support of EU) attracting and relocating business from the west Europe. “Developing new products and industries, western companies, should open factories producing components for those industries in the CEE countries”. Interviewed experts struggled giving recommendations for future objectives on EU cohesion policy. Few recommendations however are to be mentioned here. “Even higher mobility for people and other flows (money)”.”More attention for metropolitan regions” ; “Development of communication networks, especially energetic ones” ; “Development of new jobs should be a priority”, “Policy should be more country specific. We should find different specialisations for different CEE countries”.”Regional support should guaranty that people would stay in their region”. 7. CONCLUSIONS The main trends in restructuring the regional economy are related to changes, which are generated in Vilnius city. New economic sectors appear in city economy, which have higher value added production (ICT and R&D related). Though they relative weight in metropolitan economy is not great (a few thousand employees out of approx. 270) but they guarantees well paid jobs, lack of which is the main problem of the region. Other trends are related to still spreading relative importance of services. The decreasing Industry started to get more important after the crisis, when more export oriented types of production gained pace. The collapse of the construction service, made a huge momentary negative impact on the economy of whole metropolitan region damaging one of the best paid jobs and related industries. At present the revival of this sector is visible, but it still was almost twice smaller in 2012 than before the crisis. Exogenous factors create main context of development of the economy in whole Lithuania defining main trends of development in all its regions. However locally, actual trends of development in every place are determined by endogenous ones (human potential, skills, leadership, local political situation, status, site factors, images of different places, natural resources), therefore differences of GVA in different municipalities reach a few times. Because the main source of economic development and wealth is very highly concentrated in Vilnius city, locational factor is of the highest importance for the development of remaining municipalities of Vilnius region. The productivity growth has been related to the increase of the innovative capacity of the region, though to quite a limited degree, which is hard to evaluate (at least concerning progressive, radical innovations). It is even more difficult to estimate the changes of innovation capacity concerning small (incremental) innovations. The dominance of the city and the spread of new “innovation dependent” sectors theoretically confirm the importance of this factor. Though the support for R&D infrastructure is increasing (basically because of EU support), it is hard to evaluate how it changed innovation capacity of business sector. The mutual dependence of economic growth (decline) and changing social disparities is obvious, however it is hard to estimate its values. The pre crisis boom in construction created a demand for well paid and relatively low qualified jobs. This resulted in the actual disappearance of unemployment and reduced social disparities in the vast commuting zone. Overheated economy resulted in fast increase of states social spending. However crisis resulted in collapse of labour
33 market, increase of unemployment and decrease of social spending. There was a lot of speculation in mass media that many companies and entrepreneurs were keen to reduce employment and salaries even if they were not having troubles. The salaries of the highest level managers were not reduced the same as profits of many companies. On the other hand, the growth of economy for several years did not result in growing wages or pensions; therefore we may assume that benefits of the growth also went not to the most deprived persons or even middle class workers. There is a little doubt, that the last crisis, similarly to previous ones, resulted in increase of social disparities both structurally and spatially (at least in Vilnius region, because some other regions of the country, with much more intense agriculture and related industries, weren’t damaged so heavily). Regional policy was not successful at all in the sense of economic development (if there was one at all in the case of Vilnius region). Local policies in Vilnius city municipality, which were targeted to attraction of foreign capital in to new branches of economy, into revitalisation of central urban spaces and into improving image of the city, pursued by some leaders of the city, were fairly successful. However generally it is hard to mention some local policies which have made decisive positive impact on development in remaining part of Vilnius metropolitan region. Most local policies are concentrated on sustaining of existing situation, are not pro-active and concentrated on implementation of various “hard” projects making little if any impact on innovativeness, entrepreneurship, attractiveness for business of their places. The impact of FDI and EU support were the main sources of external interventions , which made serious impact on the development trends of Vilnius metropolitan region. The EU intervention was important, because it permitted to keep at least some levels of public investments after the crisis. The states’ investment programme was actually cancelled right after the crisis struck the economy, so EU money was the only source for keeping construction sector at leas a little bit alive. EU money helped to renovate infrastructure and environment so reducing state spending on this sector and improving environmental quality. This could make a positive influence on the possibilities to attract new economies and people in depopulating places. The EU money was important attracting other important sources of external interventions. New FDI into ICT and other sectors of industry in metropolitan area were related to EU support. Many investors stated that EU support (together with other factors) was one of decisive factors for choosing Vilnius instead of other locations in different countries. Summarising one must state, that though FDI was not so important in Vilnius and Lithuanian cases like in other Baltic states (majority of the 20 biggest companies in Lithuania and Vilnius are of Lithuanian capital) they made one of most important role not only creating new jobs but also bringing new ways of doing, learning and behaving in business sector. The Scandinavian companies, which are most important investors made huge impact on labour relations even in Lithuanian companies. Those investments included Vilnius into Baltic Sea business space. Though general trends of development of Vilnius region since 1990 reforms were probably more determined by internal factors, but present economic situation would have been much different without FDI and EU support to lesser extent. REFERENCES
Burneika, D., [2007]. Economic aspects of regional disparities in Lithuania. Folia Geographica 13, 56- 66.
34 Czerniakiewicz J., Czerniekiewicz M. (2007). Resettlements from the East 1944-1959. Wydawnictwo Wyszej Szckoly Pedagogicznej TWP. Warsawa. Daugirdas, V. and Burneika, D. (2006). Patterns and problems of peripherality in Lithuania – borderland of the EU. Europa XXI, 15, 119-133. Eberhardt, P. (2011). Political migrations on Polish territories (1939-1950). Polska akademia nauk. Warszawa. Mendelsohn, E. (1983). The Jews of East Central Europe between the world wars. Indiana University Press, Bloomington. Novak, J. and Sýkora, L. (2007). A City in Motion: Time-Space Activity and Mobility Patterns of Suburban Inhabitants and the Structuration of the Spatial Organization of the Prague Metropolitan Area. Geografiska Annaler Series B Human Geography 89 (2), 147-167. Nuissl, H. and Rink D. (2005). The ‘product’ of urban sprawl in eastern Germany as a phenomenon of post-socialist transformation. Cities 22 (2), 123-134. Ouředníček, M. (2007). Differential Suburban Development in the Prague urban Region. Geografiska Annaler Series B Human Geography 89 (2), 111-126. Stanaitis, S. and Česnavičius, D., [2010]. Dynamics of national composition of Vilnius population in the 2nd half of the 20th century. Bulletin of Geography. Socio-economic series 13, 31-44. Department of regional development under the Ministry of Interior Affairs of Republic of Lithuania, 2014, [downloaded: 05.2014]. http://www.nrp.vrm.lt/index.php?id=162. Ministry of Finances of the Republic of Lithuania, 2014, [downloaded: 05.2014], http://www.esparama.lt/2007-2013/en/eu-structural-assistance-to-lithuania Statistics Lithuania, 2014. [downloaded: 05.2014]. http://osp.stat.gov.lt/temines-lenteles20 Statistics Lithuania, 2013. [downloaded: 11.2013]. http://db1.stat.gov.lt/ State Tax Inspection, 2013. [downloaded at 10, 2013]. www.vmi.lt,. Vilnius municipality, 2014. [downloaded: 11.2013]. http://www.vilnius.lt/index.php?3714327801
35