What should Lithuania do to increase the impact of tech industry on economy?

Lithuania’s information technology sector is frequently discussed as a growing part of the economy, attracting foreign investment, bringing the benefits of job creation and increased taxes for the state.

However, director of IT solutions company Sekasoft, Vytautas Vaškevičius believes that the benefits from the sector would be far greater if the country’s IT resources were redirected to a slightly different direction than it is now – manufacturing and production.

Lithuanian manufacturers add 5-12 times more to Lithuania’s GDP growth than foreign-owned enterprise IT departments, he said.

“Lithuania’s GDP needs to be grown not by attracting foreign capital enterprise units to Lithuania, which are usually established where the labour force is the cheapest and can move to another country after a few years, for example to Belarus, Ukraine or India, but by encouraging young professionals to develop companies in Lithuania, which would provide services and create competitive products in Lithuania and sell them abroad,” said Vaškevičius.

Lithuania would receive far greater benefits if the country‘s IT resources were shifted from foreign investment attraction to manufacturing production, said Vaškevičius.

Vaškevičius said all the IT companies in Lithuania can be divided into 3 groups: foreign-owned enterprise IT departments, Lithuanian IT service providers and Lithuanian product manufacturers. While all of these companies are working in the same IT sector the benefits to Lithuania and its gross domestic product are different.

Foreign owned enterprise IT departments contribute to Lithuanian GDP only through paying salaries to IT professionals and various taxes which other companies pay as well. However, their corporate profits usually go aborad, said Vaškevičius.

“Lithuanian IT companies contribute to Lithuania’s GDP by paying salaries to the directors, the administration, marketing, sales and other professionals, and furthermore, corporate profits remain in Lithuania. However, if we compare Lithuanian service providers and IT product manufacturers, added value by the service providers does not always remain in Lithuania, it depends on the customer,” said Vaškevičius.

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