On November 10 Seimas of the Republic of Lithuania approved amendment to the Law on the Organization of the National Defence System and Military Service that authorises the Ministry of National Defence to carry out a new function – funding of experimental development and innovation in security and defence area. The Ministry of National Defence plans providing EUR 15 million to start-ups and companies that design and make products in defence area over the next decade. The money will coordinated by a newly formed Defence Investment Fund which will be tasked with supporting start-ups and companies in the development of novel products and entering the international defence industry market. The Ministry of National Defence plans to sign a contract with „Investicijų ir Verslo Garantijos” UAB (INVEGA) concerning the establishment and management of the Defence Investment Fund.
Why the Fund is needed
“The Defence Investment Fund will fill in as the missing link which will not only galvanize development in defence sector but will also take it to a new qualitative level. This Fund is also intended to ensure that the initiated project do not stop with the prototype phase but continue developing, being tested and commercialised. The initiative will contribute not only to the fulfilment of the needs of the Lithuanian Armed Forces and of international commitments but will also help to increase the potential of defence industry exports,” says Vice Minister of National Defence Eimutis Misiūnas.
Vice Minister underscores that the Defence Investment Fund will not only help the newly establishing companies but also the already existing ones that specialise in defence and security-oriented production. It will help ensuring the ability for start-ups and companies to design innovative products and technologies and later integrate into the international market, start cooperation with major companies of other countries, win tenders and join projects of the European Defence Fund.
Establishment of the Defence Investment Fund is expected to facilitate the development of Lithuania’s defence industry. Lithuania currently has only a few sizeable companies with a clear defence production specialisation. Other companies are either dual specialisation or only capable of producing for the Lithuanian Armed Forces or larger international companies if needed.
The Ministry of National Defence would commit only 0.1% from the entire defence budget for scientific research and promotion of defence innovation so far. More attention was paid to solitary projects that met the requirement in the Lithuanian Armed Forces, however, the projects would only result in prototypes and fall short on financing for further development and commercialisation.
The Defence Investment Fund will receive money earmarked by the Government of Lithuania under the DNA of the Future Economy Plan. 15 million euros of public funds will be given to the approved financial instrument for a 10-year period. The Ministry of National Defence will be the appropriation manager, define the eligibility for funding requirements, will be represented in the Fund Supervisory Committee.
In 2007 the European Council signed strategic NATO and EU documents binding not only to increase defence budget but also to promote defence innovation. The documents include collective investment guidelines which distinguish four key investment areas. One of the areas is research and technology development in defence area and it requires particular attention in terms of increased financing.
Strengthening of the national defence industry is beneficial for several reasons. One of them is Security of Supply: the country needs a secure provision of defence products and services carried out independently or guaranteed by third parties in case of a crisis. Another reason is cultivation of competences of the Lithuanian Armed Forces through product testing and cooperation with developers. Then, increased exports and creation of new jobs. Production of high added value products and collation or cooperation of relative branches of the industry, scientific institutions. And so on.
Competition in defence market, in the EU and worldwide, is great, there are rooted and strong players, therefore Lithuanian companies can only enter with innovative and advanced offers. Laser, semiconductor industry, electro-optics, cyber-security, information technologies (3D, AI, big data, augmented, virtual reality, etc.) can be the areas of competence and successful future projects for Lithuanian companies.
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