30 Jun Lithuania is the ideal sandbox for pioneering international innovators
Mantas Katinas, General Manager, Invest Lithuania, says a wealth of talent plus sector-specific incentives are attracting numerous investors to the economic sectors of tomorrow
If we could start by looking at the broader context, we would like to understand your current assessment of Lithuania’s economy and how you think it has been affected by the coronavirus pandemic.
The perspective for the Lithuanian economy coming out of this crisis is quite optimistic. We don’t rely on tourism, so the lack of that does not really affect us. We have a clean and deep economic structure, more related to Nordic Europe, Germany and the Anglo Saxon countries than to the south of Europe. So generally speaking, our export markets are doing quite well when compared to those in other regions. Somehow our independency, which sometimes is looked on as a weakness, is now helping us because we are dependent on export markets that generally perform well. I would say that, although COVID-19 has put every country’s economy at risk, it has not hit this part of the world that badly.
Attracting foreign direct investment (FDI) in the current post-COVID world will be the challenge to many investment promotion agencies across the world. What are the strategic initiatives implemented by Invest Lithuania to turn its current challenges into opportunities?
The first two weeks of the COVID crisis were dedicated to our clients. We spent all our efforts understanding how we could help them and how they felt. Generally, they were all doing reasonably well, so we didn’t face a huge crisis. Over the last two months, we have been doing a lot of research. Each of Invest Lithuania’s teams is dedicated to specific industries like global business services, technology and fintech, manufacturing and life sciences—they have all been talking to a comprehensive list of international experts. The conclusion of these interviews will be put together in a product strategy session. We don’t expect it will change the forecast of our strategy for next year because, although we anticipate that a couple of industries will be more paralyzed by this COVID situation, we see others that are expanding. We need to recalibrate our resources toward the growing industries and slow down with business that is not so easy to attract.
This brings us really nicely to my next question, which is about the government’s recently launched development plan: The DNA of the Future Economy. Can you tell us about Lithuania’s successful bet on digitization over the last decade and how Invest Lithuania is further developing opportunities and cultivating talent pools for sectors earmarked for future smart specialization?
Generally speaking, the entire Baltic region is very strong on information and communication technologies (ICT) as this part of the world created an economy practically from scratch once we regained our independence. Recently, a lot of the younger generation decided that ICT and technology were very good fields to create businesses. One of the reasons was that it’s not easy to sell physical things to some business-to-business sectors in Western markets that are at a good distance. But the story changes when it comes to ICT, especially on the business-to-consumer market, because you can create an app and software-as-a-service company and you can sell many things in San Francisco just by sitting in your own chair at home. That is why this part of the world has a lot of ICT startups and why many people work in the ICT industry.
We are now reaping the benefits of this, because Lithuania’s global business services (GBS) and ICT sectors have grown dramatically in the last eight years— when we talk about new people working in this sector, its almost 400 percent over the period. Lithuania has also attracted a lot of foreign companies in the last four years, such as Uber, Unity, Revel Systems, Fortune 500 companies like McKesson, AmerisourceBergen, Dana, large banks and investment groups that are focused on infrastructure. The digitalization component of our economy is very strong.
When we talk about Lithuania’s economic DNA plan, a lot of the funds and finances are dedicated to putting this plan into action. Some funds are dedicated to our own startup ecosystem development; some are dedicated to FDI attraction and some are dedicated to specific requalification programs, which will help to improve the already good educational infrastructure Lithuania has for ICT. ICT is the number one priority but the plan also focuses on green energy. As a country, we recently approved quite an ambitious renewable energy strategy for the next decade and we think that, in this changing environment, this is a good opportunity.
Lastly, I would like to mention the life sciences sector. Lithuania is historically linked to life science and has local players like Thermo Fisher Scientific that contribute almost 2 percent of our gross domestic product. It is not a huge segment of our economy yet, but not many countries in the European Union (EU) have an ecosystem like ours in this area. We understand that medicine, medtech and life sciences are important—not just from an economic perspective—and that is why we consider life sciences to be one of the priorities for the future.
What would you say are Lithuania’s competitive advantages as an investment destination and which key elements make Lithuania a unique, safe and lucrative destination for investors?
Lithuania’s number one competitive advantage is Lithuanian talent, which already molded for international ICT and GBS businesses with about 40,000 people working in the sectors. In Lithuania, the workforce is particularly young, nearly all English speaking and substantial share of it has degrees from international universities. It is a very international and vibrant audience. In second place would come our business-economy strategy that is similar to those of Ireland and Singapore. Lithuania’s business-economy strategy relies heavily on FDI, so a lot of resources, this agency and our strategy are dedicated to creating a multinational environment for any business. In the last 10 years, Lithuania’s government improved our World Bank Doing Business ranking from 26th to 11th place, which shows strategic discipline—even from a political perspective—to create a very favorable business environment for international governments and a sandbox regime for international companies.
We are also technology savvy. Nowadays, every corporation and company has some kind of ambitious plan and some problems with ICT and digitalization. If you want to change the corporation and company, the talent pool that forms our unique selling proposition can help you. We have a great example in Danske digital bank that, with 1,000 ICT specialists, has created one of the strongest banking platforms in Nordic Europe. In essence, we are trying to sell the idea that if you want to transform your business, we can help you as a region, as a city and as a country.
What specific incentives do you offer foreign investors?
Every industry has intricate, detailed mechanisms and incentives designed especially for it. When it comes to manufacturing, Lithuania has regional free economic zones, which are not just about taxation but also about developing infrastructure. We constantly hear from our clients that speed is very important and, if you are trying to launch any plant, it is important to know how long it will take. The structure and the taxation regime is ready for you in Lithuania. The government has also just launched a specific subsidy mechanism, which could be offered to a client if needed.
If you are creating an ICT business in Lithuania, we have—as an agency—specific instruments that can help you to minimize the risk. If you invest in research and development (R&D) projects, EU mechanisms can help you to subsidize up to 50 percent of your costs. If clients come here, they receive services from us that are all free of charge, such as a legal perspective, data analytics and the ability to negotiate with politicians or regulators. We believe that we must work as an agency, as a service team, to make sure that a company faces no risks by establishing themselves here.
With regard to life sciences, we have one of the most competitive patent-box regimes in Europe. If you produce intellectual property in Lithuania, your profit tax goes down to 5 percent from 15 percent. From an innovation and educational perspective, we have institutes that are designed to facilitate our smart specialization priorities. Companies and institutions work in partnership to be sure that they get the talent they need. Lithuania also foresees a need for more international talent in the future, so we are working to attract foreign experts and to create a more vibrant international environment in our largest city.
A Florida-based developer for cloud computing solutions, CAST AI, has announced the establishment of a development office in Lithuania. The company, which had already raised $4.8 million by the beginning of this year, plans to expand its bilinear space team to 100 people in the next three years. What should our readers know about the business synergies between the U.S. and Lithuania?
The U.S. is still ahead of the EU in ICT and that is why the U.S. is such an important player for Lithuania. We see what is happening there and we want to take part in the action. That is why we have attracted many U.S. companies in the last 10 years, including Moody’s, AmerisourceBergen, Uber and other companies that are already developing ICT products in Lithuania. We think that is important not just for Lithuania but for the whole of Europe, because when we connect these two great continents and interlink them in competence, it helps both sides to grow.
What would be your key message for the international audience of Newsweek?
My last message would be that Lithuania has chosen a path to become a transformational center. We are known as the Sandbox Machine for numerous different innovations, we welcome companies that are trying to create a future economy and we are developing different ecosystems to enable them to become pioneers. I would like to invite companies that wish to create and invest in disruptive business models and inventions to use our country and our region as a sandbox as many other successful businesses have done.