Defense Resource Agency

Improving defense industrial cooperation framework: recommendations for practical application in Lithuania

10 March 2026 - 8 September 2026

Problem

The war that has been ravaging Ukraine for five years was a primary catalyst for the 2024 adoption of the Law on the Defense and Security Industry of the Republic of Lithuania. This legislation aims to secure the domestic supply of strategic goods for national defense and public security while simultaneously boosting the export of Lithuanian-made defense products. A cornerstone of this legal framework is the implementation of industrial cooperation measures.

The core of industrial cooperation lies in maximizing the strategic return on arms procurement. During large-scale acquisitions, foreign suppliers are required to reinvest a portion of the contract value (up to 30%) back into the Lithuanian economy. This requirement transforms military spending into a powerful lever for local industry development, fostering joint production ventures and attracting direct foreign investment.

Beyond economic growth, these measures address critical operational needs. They facilitate the local production and assembly of essential combat ammunition, explosives, and critical components for major weapon systems, thereby strengthening the self-sufficiency of Lithuanian Armed Forces.

Industrial cooperation provides Lithuanian firms entry into often-exclusive international defense supply chains. Through technology transfer, local companies gain specialized expertise, fostering long-term commercial relationships and export potential that persist long after specific agreements conclude. Furthermore, establishing domestic maintenance and repair capabilities ensures full lifecycle support for military hardware and maintains operational readiness during crises. This ecosystem generates high-value jobs in engineering and research, driving regional expertise and tangible economic value.

Despite its benefits, industrial cooperation introduces specific challenges, most notably the increased cost of military equipment. Because the regulatory framework was only established in 2024, Lithuania currently faces a shortage of practical experience in managing, overseeing, and mitigating the risks of these complex agreements. Without a robust portfolio of completed projects, it is difficult to quantify which measures yield the highest impact. To bridge this gap, Lithuania must draw on the proven strategies of nations like Denmark, Finland, Israel, the UAE, and South Korea.

In 2026, the Create Lithuania project „Preparing Lithuania’s defense and security industry development roadmap„ identified the optimal application of industrial cooperation as a top priority. This current project serves as a direct evolution of that roadmap. Its goal is to develop actionable recommendations to refine the industrial cooperation model, ultimately strengthening Lithuania’s national defense capabilities and accelerating the growth of domestic industry.

Challenges

Lack of experience in industrial cooperation in Lithuania due to the novelty of the law.
Unrefined methods and objectives for the application of industrial cooperation.
An immature organizational environment for the application of industrial cooperation.
Overlapping responsibilities and priorities among the currently responsible ministries.
Limited international cooperation in sharing best practices; lack of public official documents.

Goal

The goal of the project is to create a comprehensive, realistic model of industrial cooperation that does not create excessive bureaucracy, is developed and approved by a government resolution. This model should create conditions to optimally utilize industrial cooperation to strengthen Lithuania’s defense capabilities and grow the local industry.