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Technology investments to boost Turkish defence industry

Interview - August 21, 2013
Murad Bayar, Undersecretary for Defence Industries (SSM) at Turkey’s Ministry of National Defence, speaks to World Report about the Ministry’s aims to expand the sector and its close links with the industry. He also highlights how SSM encourages research and development in the sector, as well as the importance of SMEs and investment in technology.
The growth of Turkey’s defence industry has been truly phenomenal. From a turnover of roughly $1.8 billion in 2006, it has grown to over $4.4 billion in 2011. In addition, the Turkish defence sector exports to almost 60 countries around the world, with a total value of over $1.262 billion in 2012. What role has the Undersecretariat for Defence Industries (SSM) played in instigating this impressive growth in the defence sector?

We are the organisation responsible for the procurement of armament systems for the Turkish armed forces. But we play a dual role – a procurement role and a support and promotional role for the defence industry’s capabilities in the country. We try to balance these two objectives, while meeting the requirements of the Turkish armed forces in terms of equipment. 

We implement a long-term industry strategy in line with that so we can build those technologies and industry capabilities with the armament systems that are required. I think this is an encouraging growth into local industry. As our mission implies, we do support local programs and technology development. In that sense, we are not too different from our counterparts. This is a very typical approach for defence procurement.

In the UK there is the defence equipment and support organisation, which is working towards a goal that is similar to ours. So, in countries where there is a significant armament requirement, you can find similar structures. Governments are also trying to build their industrial capabilities to meet those requirements. 
Turkey’s defence industry does have some ambitious goals, one of which is to increase this number to over $2 billion in the coming years. What do you think needs to be done, or what are your top priorities in order to achieve this?
We publish our strategic plans, and those numbers are included in those plans. They relate to a five-year period. We finished the last period in 2011, so we are now in the second plan for 2012-2016. In this new plan we emphasised technology investments in particular, because you can follow the stages of an industry’s progress by looking at these investments. If you look at the case of Turkey, production was mainly related to licence production for equipment for European countries or American companies, but we are now moving more towards the development of indigenous systems. We have the end product, but we also need the fundamental technologies to support this and deepen industrial involvement, so suppliers and SMEs (small and medium-sized enterprises) are also involved in this manufacturing process.

Therefore, the new focus of our strategic plan is on deepening industrial involvement by suppliers, while investing in technology development. With these two aspects, we plan to achieve the goals set in this new strategic plan.
How do you facilitate this? Do you stimulate the private sector and ICT by making them aware of the ambitious goals you have for innovation in the technology sector and defence? Do you have subsidies for companies that want to invest in this?

We work very closely with the industry. We encourage industry to organise themselves around industrial organisations, which they have done. We communicate with them directly as to our planning going forward and what the requirements are. When it comes to structuring individual projects, we consider the Turkish industry’s capabilities and try to develop our projects based on these capabilities. Thirdly, we support the industry via investment credits, R&D programs and marketing or international cooperation support.

In addition to the programs we have implemented, we also have several initiatives that support the industry and its development.
How much would you say growth in the defence sector reflects on the overall development of Turkey and the economy as a whole?
Some parts of it are very much related to Turkey’s overall GDP growth. I believe the growth in the defence industry’s turnover is above the GDP growth figure. So the defence industry is growing faster than total GDP. That means that our drive towards more local programs and more Turkish systems for the armed forces is actually helping the industry maintain this stronger growth. 
How important are the SMEs in the defence industry to the growth in your sector?
It is very important. We are fully focused on getting SMEs involved in defence programs and growing their capabilities. We are designing some special programs that are targeted towards SMEs to grow their capabilities in technology and investment as well as quality and manpower. We are trying to get suppliers with major equipment and SMEs manufacturing parts and components. Right now, as you mentioned, they are involved in aerospace and defence, and homeland security let’s say.

This is the broader definition of this sector. And they are also manufacturing for commercial aerospace. We feel that SMEs play a very important role in providing the dynamism and competitiveness that we are looking for. They do bring significant value to the sector, not just domestically, but also internationally with some international aerospace programs.
The region has become more unstable in the past couple of years with the events of the Arab Spring and the civil war in Syria. What impact would you say have these events had on Turkey?
It is difficult to establish that correlation in the short term. The industry’s activities cannot instantly react to developments in the region. Unfortunately, our region is going through a restructuring phase, which definitely has some implications on security and defence, but I think planning in Turkey is for the long term. We know and understand that the region has an inherent instability, and from time to time, the symptoms may be different. It is not for short term.

If you go 10 or 20 years back, it would be the Gulf War. It is not just the Middle East – Turkey is located near unstable regions, like the Balkans in the past. So we plan for the long term. The armed forces have to be ready for a spectrum of potential risks that may arise. That is how we look at it. 
How important is Turkey’s role to facilitate peace, not only in the MENA region, but internationally? Do you see this role increasing? 
Consider the scenario, where Turkey was not as it is now – a contributor to stability in the region. Turkey was like our neighbours in the region, like Iraq, Syria or Iran. Imagine if Turkey was like that now. Turkey has a critical role to play, but sometimes it is taken as given. I think it should be appreciated more, and supported.

Sometimes we feel as if we are left alone. Our allies should realise that when Turkey does not or cannot play this role, that it would be a really different world. In that regard, it is not that we feel that we are very important, but it is by virtue of our location. I think we can contribute a lot to the stability, and this is not a slogan. This is a real contribution. 
In May 2013, all eyes of the global defence industry were on Turkey with its international defence industry fair in Istanbul. How would you rate the success of the event itself?
I think it was a success, and it has been very consistent. Especially since we moved it to Istanbul, it has exploded in terms of participation and also the quality of the event in all dimensions. It is much better now, finding its natural potential.
Turkey and the UK have very strong bilateral relations in almost every field, and arguably one of the most important is defence. In 2011, the two nations signed a defence treaty to promise to boost bilateral trade and support this field even further. Could you give us your unique insights on how the UK-Turkey defence relations have grown since this treaty was signed?
I believe there is a very strong potential, which we are not realising fully yet. But we are moving in the right direction, and this brings the sectors and industries of both countries closer together. Since the UKTI made a decision to come to Turkish exhibitions in a more organised way, this is helping companies from both countries get to know each other. Now there are many relationships developing at a company-to-company level. Not only programs in Turkey, but also opportunities in other countries.

Turkish and British companies are working together to address those opportunities. I know there is quite a long list of opportunities, and this is growing. But of course, at the defence ministry level, we are lacking a big flagship program. We have held discussions with the UK defence ministry. We are actually part of two major international programs to get together with the UK: the European A400-M program, where Turkey and the UK are two of the six partners, and the other one is the JSF program, which is a US-led consortium. We are close partners with the UK in those two multinational partnerships and we actively participate in the management of those programs. 
On the bilateral level, we should work harder to find the opportunities where we can fund a common program to use both the British and Turkish armed forces. We looked at complex weapons in the past, but I believe that we can continue with those efforts and find out opportunities between Turkey and the UK.
What other opportunities do you think are available for UK companies?
UK companies can come to Turkey to invest in the commercial and defence aerospace sector for cost-efficient manufacturing to bring some efficiencies for business. And if I can cite one company I would say Rolls Royce, whose CEO was in Turkey recently, is looking for opportunities. They can also partner with existing Turkish companies to look for cost efficiencies for their businesses.
Britain has always been one of Turkey’s strongest supporters of Turkey’s EU accession, which is obviously an on-going process. Where do you see Turkey playing a role, and where do you see this process going?
I think Turkey is a very natural part of Europe. Without Turkey, I do not believe it is possible to establish a defence strategy for the European geography.

This is already reflected within NATO, where Turkey is one of the strongest contributors. It is not a new phenomenon – we have been NATO allies for more than 60 years now. It is an accepted fact that Turkey is part of Europe’s defence strategy. Turkey has been a very strong contributor to NATO missions, with our troops supporting their missions in many parts of the world.

Turkey is a natural defence partner for Europe, but of course the political considerations regarding EU membership are having an impact on Turkey’s EU membership, but without Turkey, the EU would have a significant hole in its defence structures and we would be living in a very different world without Turkey’s defence capabilities in the region.
What final message would you like to send about SSM, the Turkish defence industry or even about Turkey as a whole?
The Turkish defence industry’s capabilities are growing, and that is making Turkish industry a better partner for its counterparts in terms of technology and industrial capabilities. We promote those partnerships and we ask Turkish companies to be competitive players in that market. We encourage our European colleagues and allies to go together with Turkish industry and develop competitive defence products, both for us and for others.