TBY talks to İsmet Yılmaz, Minister of Defense, on offset agreements, new developments, and the main players in the sector.

İsmet Yılmaz
İsmet Yılmaz was born in 1961 and studied at the Maritime School of Istanbul in the Department of Machinery, later graduating from Istanbul University Law Faculty in 1987. He later obtained his PhD in Private Law at Ankara University, and has served as Vice Chairman of Türk Telekom, as well as Undersecretary for Maritime Affairs, and Undersecretary of the Ministry of Culture and Tourism. In June 2011 he was elected to parliament from Sivas, and is currently the Minister of National Defense.

Turkey's defense industry has grown significantly since the government's policy to increase investment in local R&D in 2004. How has the use of offset agreements helped to encourage this growth?

It is a remarkable fact that Turkey's defense industry has grown significantly in the last decade, and offsets played an important role in this growth. It should be remembered that, in Turkey, offset policies and applications were identified by our Ministry after taking the needs of our defense industry into consideration. Within this context, two offset directives have been published since 2004 with the aim of directing offset activities toward the defense, homeland security, and aerospace industries to raise the level of local content and increase export capacities, as well as our share in the global defense and aerospace market. Moreover, in order to improve the penetration of the defense sector in Turkish industry, we made the necessary changes in our offset policies to encourage SMEs to be more involved in defense procurement programs. We believe that such changes in the offset policy have encouraged Turkish companies to create their own indigenous designs for defense acquisition projects, which eventually resulted in the growth of the defense industry. It should be kept in mind that offset programs not only create additional business possibilities for defense industry companies, but can also be utilized as a significant instrument to realize new investments in Turkey's defense sector. In such cases, both the investment amount and the exports to be realized as a result of this investment are accepted as offsets.

Which Turkish defense products do you believe are the most competitive on the international marketplace?

I believe that both land and naval platforms are very competitive on the international market, especially the coast guard boats, fast intervention boats, and modern patrol boats produced by our shipping industry. Also, Turkey has reached an advanced level of technology in armored and tactical wheeled vehicles, and those land platforms are highly reputable and widely exported. In addition to those platforms, I would like to mention the Amphibious Assault Bridge (AAB) project, which is being locally developed for the specific requirements of the Turkish Armed Forces. This product has significant potential market, as it is unique in its category.

What steps are being taken to achieve Turkey's aspirations in the aerospace industry? How has TAI helped to boost Turkey's global profile in this industry?

Turkey has given particular attention to aerospace projects, especially in recent years. There has been a remarkable increase in indigenous projects, such as the ANKA and Hürkuş, and Turkey is aiming to have its own fighter aircraft by 2023. Turkey's leading aerospace company, TAI, is a key player in these local projects. While on one hand we are moving to locally designed and manufactured platforms, on the other hand we are supporting the involvement of SMEs in aerospace projects. In the aerospace industry, it is crucial to follow standards, and it takes time to developed local industry up to the necessary levels. Via offsets we encourage foreign companies to work with local industry, especially in areas where the technology is moving toward export potential. SMEs can also benefit from TAI's experience via the Kazan Hub, through which they can easily become sub-contractors for TAI.

How will the new light helicopter program fit into Turkey's growing defense manufacturing capabilities?

Turkey's vision has significantly changed over the last decade from direct procurements to indigenous projects. Turkey now has the vision to establish a local aerospace industry that will have the ability to design, test, manufacture, and export aircraft. The aim is not just to manufacture aircraft, but also to have them manufactured to world standards and made compatible with their competitors. In order to achieve this goal, both industry and government need to harmonize their activities. With TAI being the prime contractor, guiding local sub-contractors, and the SSM governing and directing TAI and the local industry, the helicopter program will be a success story for the coming generation.

What steps are being taken to establish Ankara as a hub for the defense industry?

Most defense industry companies, such as TAI, ASELSAN, HAVELSAN, Roketsan, FNSS, and MKEK are all set up either in Ankara or in its vicinity. We are eager to improve the involvement of SMEs in the defense industry. In that sense, we have initiated the establishment of a hub adjacent to TAI's facilities in Kazan, Ankara in April 2011. An area of 3 million sqm was reserved for the Kazan Hub, and it is expected that 100-200 sub-industry companies and SMEs will benefit from it. This industrial zone will be a clustered and specialized establishment, especially for the aerospace sector, to improve the manufacturing, technological, and management capabilities of the companies present under the leadership of TAI. In addition to this hub, there is another defense and aviation cluster, called OSSA, situated in the organized industrial region of OSTİM in Ankara. This cluster was built in July 2008, and houses 89 SMEs that aim to become preferred sub-suppliers in the international defense marketplace. Running parallel to these initiatives, the Ankara Development Agency has declared Ankara the heart of the defense sector and announced that there will be incentives for clustering activities on offer in the defense sector. By these means, the involvement of local industries in defense procurement programs will be realized in a broader sense.

Are we likely to see the further development of Turkey's warship building capabilities, and in what ship classes is Turkey looking to specialize?

In recent years, Turkey's naval shipbuilding industry has developed extensively and succeeded in producing fast boats, offshore patrol vessels (OPVs), corvettes, amphibious vessels, and auxiliary warships. In addition to the development of surface ships, new submarine production and design capabilities have been developed. The sustainability and development of these capabilities shall be the main objective of future strategies. Within this process, several systems and equipment, such as command and control systems, fire control systems, and sonar have been developed by Turkish companies. Studies such as a national propulsion system have already commenced, and the development of naval defense capabilities shall continue. Turkey has achieved internationally competitive capabilities and has exported fast boats and OPVs to several friendly countries. Furthermore, the MİLGEM class corvette has received strong interest from the international market. In line with international needs and the development of Turkey's naval shipbuilding industry, the country aims to specialize in frigates and submarines in the future, as it has succeeded already in fast boats, OPVs, corvettes, amphibious vessels, and auxiliary ships.