By Nerijus Adomaitis, Reuters

Lithuania has embarked on reform of its state-owned enterprises, and wants them to generate a sixfold rise in dividends to 540 million litas (156 million euros) next year, representing 0.5 percent of its GDP.

Along with austerity measures and tax increases, the reforms are part of fiscal consolidation aimed at cutting the Baltic state's deficit, which surged to 9.5 percent of gross domestic product in 2009 after an economic contraction of nearly 15 percent the same year.

TARGETS: Instead of privatization, Lithuania's coalition government wants to extract higher returns from its biggest state-owned firms, which operate in the energy, forestry and transport sectors. These companies had a total estimated market value of 21 billion litas in 2010.

Despite a still fragile economy, returns generated by Lithuanian state firms have grown in recent years. In 2009, the net turnover for the state-owned firms amounted to 6.5 billion litas with a mere 42 million litas in dividends.

Higher contributions from state assets that include utility and railway operators doubled dividends this year to 86.2 million litas from 2010.

PROGRESS:

Lithuania, which aims to adopt the euro in 2014, also wants to improve corporate governance and limit political influence on management by including independent professional managers in the boards of these companies.

In October, majority state-owned oil terminal Klaipedos Nafta elected two independent members, including a representatives from a life insurance fund, to its board.

State-owned companies are now expected to report their performance quarterly and annually while the economy ministry has started issuing regular reviews of key sectors.

The government has also ordered an audit of the social role of these companies to uncover, for instance, the cost of operating loss-making railway routes. The aim is to eventually separate the commercial and social functions of these firms.

Political opposition has already thwarted the government's attempt to place all its state-owned assets under a single holding company.

(3.4527 litas = 1 euro)