Strategically positioned within the EU and on NATO’s eastern border, the defence industry of Lithuania has become a national priority with substantial government backing and strategic importance, creating significant opportunities for international collaboration and investment. Vilnius currently hosts over 2,500 Allied soldiers deployed on a rotational basis, including NATO Enhanced Forward Presence forces, NATO Force Integration Units, U.S. rotational battalions, and a German brigade planned for full deployment by 2027.
Lithuania’s defence industry benefits from streamlined processes to accelerate investment and development. Nearly 100 companies operate in Lithuania’s security sector (+18% over the past three years). These firms include several innovative defence startups and produce a diverse range of products, services, and components, leveraging the country’s strong research base and close ties with international partners.
The Green Corridor initiative offers attractive fiscal policies for companies considering military industry investment in Lithuania, including a 0% corporate income tax rate for 20 years. Additionally, companies in Lithuania benefit from efficient export procedures, with export licenses typically processed in 25 work days or less. This has simplified territorial planning, land procurement, and construction procedures for large-scale investment projects, shortening the setup period for manufacturing facilities from two years to six months.
With steady employment growth of 14% annually between 2018 and 2023 – twice the national average – Lithuania’s military sector is steadily developing its capabilities in high-tech fields, including telecommunications, lasers, and advanced sensor technologies. Strategic partnerships are forming between international and local companies, such as the recent memorandum of understanding between German drone developer Quantum Systems and Lithuania’s Aktyvus Photonics.
Lithuania’s defence industry reached a milestone with German defence giant Rheinmetall to build an artillery ammunition plant. Expected to be operational by Q1 2027, this facility will be the only 155mm ammunition plant in the Baltic region, producing tens of thousands of rounds annually. Additionally, Lithuania has strengthened its defence cooperation through a recent partnership with Northrop Grumman. In September 2024, the US manufacturer signed a Memorandum of Understanding to support local suppliers in producing medium-calibre ammunition for Infantry Fighting Vehicles, with production expected to begin within 18 months.
In 2024, over 45% of the National Defence Budget (nearly €1 billion) was dedicated to modernising the Lithuanian Armed Forces, with approximately €200 million reserved for drone procurement over the next six years. The recent €300 million “Vytis” initiative aims to strengthen the defence industry in Lithuania by promoting innovation and boosting global competitiveness. With targets to triple defence exports and generate over €1 billion in sector value by 2030, Vytis provides comprehensive support from R&D through market entry, creating significant opportunities for companies developing battle-ready innovations.
Complementing this is ScaleWolf, a first-of-its-kind venture capital fund and allied technology accelerator focused on dual-use technologies. With €13.5 million in funding, this initiative accelerates advancements in Baltic defence innovation technologies, supporting companies developing solutions aligned with NATO’s emerging and disruptive technologies priorities.