Knowledge is increasingly crucial for productivity, competitiveness, and growth. While Lithuania has a well-established culture of valuing knowledge, it is using its knowledge assets-human resources, education systems, researchers and entrepreneurs, and so on-below capacity, and so forgoing opportunities to compete internationally as well as potential growth and income. In recent years Lithuania has made progress in a few areas of the knowledge-based economy, particularly in terms of improving the economic and institutional regime and developing infrastructure for information and communications technology. But less progress has been made on improving education systems, and Lithuania has performed poorly in advancing its systems for innovation. The challenge for Lithuania is to develop new engines of growth and to diversify economic activities. Key to improving competitiveness are the systematic generation, use, and communication of knowledge throughout the economy and society-not just in high-tech sectors but also in areas such as textiles, wood processing, and agribusiness. And not just among the educated elite, but among the general population. The ability to network within and outside Lithuania, supported by Internet access, will become increasingly important to accessing and using knowledge.