Innovation Agency Lithuania recently reported to The Medicine Maker that 8,000 people are now working in Lithuanian life sciences and that the country is home to 15,000 researchers and scientists. There are six universities with life science courses and one in four students in the country is on a STEM course. Lithuania ranks highly in the EU for its share of young people with a higher education degree and placed first in R&D collaborations between business and academia. All it takes now is to set it free.
Moreover, the article reports that “The Lithuanian state is boosting and protecting “emerging enterprises” and priority sectors of the economy writ large rather than specifically targeting the sciences, but it is also fair to say that the Baltic state’s young biotech is a major beneficiary of an impressive range of policies”.
The first protection available to businesses comes in the form of Lithuania’s seven Free Trade Zones, also referred to as Free Economic Zones under the acronym “FEZ.” A business that sets itself up in a FEZ enjoys a decade-long exemption from corporate profit tax, followed by six more years at a 50 percent discount tax rate of 7.5 percent. Until 2045, these companies will also be shielded from real estate tax. Foreign players who invest their money into FEZs enjoy one extra benefit: exemption from dividend tax.
Beyond the FEZs, there is a range of other incentives. There is state support for “exceptional large-scale investments” in the form of a two-decade tax relief program, a dedicated government coordinator, and fast-tracks through admin and migration protocols. There is a “patent box” initiative too, in which profits derived from IP enjoy a reduced tax rate. Many of these exist within the EU, but Lithuania’s rate of 5 percent places it as one of the lowest.
Shouldn’t be forgotten, however, that the role of private markets is becoming harder to see as government expands into more and more sectors. Even in the US, considered by many the embodiment of capitalism, healthcare has ceased to be primarily a market endeavor. Yet even as the government attempts to further crowd out the private sector, the social benefits of market competitiveness remain in the quality of services.
According to state figures, life sciences make up 2.5 percent of Lithuania’s GDP creation as of 2022. The Lithuanian government’s plan is to see that figure hit 5 percent by 2030. Right now the sector is seeing year-on-year growth of 22 percent, with biotech in particular shooting forward at a rate that hit 87 percent in 2020.