As part of a new incentive package proposed by the Turkish government, military corporations that have become a burden on the economy will either be liquidated or transformed into private-sector companies, despite the opposition this is sure to provoke from the military.
Murad Bayar, the undersecretary for Defense Industries, which is responsible for 90% of Turkish weapons purchases, states that the new policy intends to improve the efficiency of these military firms through downsizing: “The defense industry will be opened to competition. However, in certain fields it will be impossible for multiple companies to produce the same type of products. For example, the Turkish Aerospace Industry [TAI] will remain the only actor in that sector. Otokar will be the only firm to manufacture tanks. In the EU, multinational companies merge to set up consortiums. In the 27-member EU, you have only three aeronautics firms.”
Bayar acknowledged that some of the companies owned by military foundations will be forced to compete, or eventually be liquidated. The funds that were made available to these companies by the Foundation for Strengthening the Turkish Armed Forces (TSKGV) are not known, as the accounts of the companies and the Foundation are not audited.
When asked about reports claiming that some major corporations such as TAI, Aselsan and Havelsan are being mismanaged, Defense Minister Ismet Yilmaz responded by saying that these companies — which until now were awarded contracts with a competitive bidding process — will now have to compete with other firms in open biddings. If they manage to improve their operations, they will be able to survive. In any case, the defense industry is going to open up to the private sector. Some of the smaller TSKGV firms will either merge with private sector firms, terminate their operations or become private sector companies themselves.
Efforts are underway to offer part of TAI shares to the public. Undersecretary Bayar said that 15% of the shares of Aselsan, which specializes in military electronics, are traded in the stock market. It is a profitable corporation, and by going public it will become an even more professional company.
Countries with developed military industries also export equipment and generate added value for their economies. Turkey has been always among the top five highest spenders on weapons. By increasing domestic manufacturing, this imbalance has been somewhat mitigated and Turkey’s has now dropped out of the top five. Turkey exported $1 billion in weapons last year and hopes to increase that number to $2 billion by 2016.
Dependence on foreign weapons technologies has in the past comprised 85% of Turkey’s needs; this figure has now dropped to 48%. Through the government’s new incentive package, Turkey can now focus on producing critical military technologies locally. Undersecretary Bayar said that Turkey has a 35% dependence on external sources for critical military technology.
Turkey is now planning to manufacture critical military technologies such as airplane propellers, engines, composite aluminum and armored steel. Until now, this production has been burden on Turkish economy as the raw materials for the creation of these products have to be imported.
Bayar also pointed to preparations for handing over logistical services for military equipment, such as maintenance and repair operations, to the private sector in the long run. In the meantime, these services will continue to be provided by existing military production centers, although these will not see an increase in investments.
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