ON ANOTHER LEVEL

Turkey 2013 | DEFENSE & AEROSPACE | INTERVIEW: DEFENSE

TBY talks to İsmet Yılmaz, Minister of National Defense, on the role private companies are playing in defense, promoting Turkish products abroad, and local development projects.

İsmet Yılmaz
BIOGRAPHY
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.

What role has the privatization of Turkey's defense sector had in helping to build the country into a leading defense products exporter?

The Turkish defense sector is composed of institutions that can be gathered under two main categories. Turkish Armed Forces Foundation (TAFF) companies are the first group, which are the dominant actors realizing almost 40% of annual turnover. The other group is the privately owned and managed companies. TAFF companies operate as main contractors in the aerospace, rocket and missile, guns and ammunition, and defense electronics sectors. On the other hand, in naval and land systems, private companies undertake the main contracts. A close environment for collaboration has been established between these groups and they are mostly the solution partners for each other in defense programs. A level below the main contractors, there are SME sub-contractors or suppliers, who we see as the most important and indispensable factor of industrial development. We aim to achieve a certain maturity level especially in terms of design and development skills in SMEs to strengthen the capacity and capabilities of these sub-contractors. Universities and the Scientific and Technological Research Council of Turkey (TÜBİTAK) also play crucial roles, especially in constituting the technological background of the industry. There has been a significant evolutionary progress from the demand side. The direct procurement mechanism turned into co-production models throughout the 1990s. Policies in support of local industry have shown their efforts today in the form of local production projects and indigenous system integration capabilities. We owe this progress to a well-defined and applied industrial strategy accompanied by special privileges granted to local industry and research bodies. The outcome can be summarized as over $4 billion in turnover, 54% local content in defense procurement, and $1.2 billion in exports. Targets for 2016 are almost double the turnover and exports of 2012. We are aiming for a 70% local content percentage.

What role can Turkey's defense exports play in helping to ease the current account deficit?

Taking the latest figures into consideration, Turkey's total export figures are rising, notwithstanding the economic recession that still affects many countries in the world. According to the numbers that were stated by the Defense and Aerospace Industry Exporters' Association (SSI), $1.2 billion in exports was realized by our defense and aerospace industry. As this represents only 1% of total exports, the figure might be considered small. However, we are proud to say that from 2011 to 2012, defense and aviation exports climbed 42%. This number can never be undervalued as it indicates one of the highest jumps among the sectors constituting total exports. When we have a closer look at our export figures, Ankara increased its exports the most—by 10.5%—to reach a total of $6.5 billion. Of this figure, $531 million was accounted for by the aerospace and defense sectors. While the average value per ton of Turkey's exports is $1,600, the same value for Ankara is $23,500. This is because most of our major defense industry manufacturers are in Ankara. Those manufacturers create job opportunities for the supply industry and SMEs. Defense industry manufacturing is based on a high level of capital and technology and, eventually, it will create a high level of value-added. As defense systems are composed of many complex sub-systems, they require the involvement of many professional sub-contractors. This is the reason why the defense industry was underlined as a strategic locomotive sector as part of Vision 2023. One more aspect to consider regarding the current account deficit is defense expenditure. Recently, local producers have taken a larger role in the provision of modern equipment for the Turkish Armed Forces. This figure was 45% in 2009, 52% in 2010, and, finally, 54% in 2011. We are capable of meeting more than half of our own needs through national industry. Through the offset programs that we are implementing, companies have been undertaking offset commitments valued at billions of dollars. Those programs enable us to minimize the outflow of resources.

What steps is the government taking to promote the Turkish defense industry abroad?

Turkish defense industry products have reached a level where they can compete with other products. We have thus started to work on deciding the necessary steps to be taken to promote our industry. The Undersecretariat for Defense Industries (SSM) prepared and published strategic plans for the 2007-2011 and 2012-2016 periods, covering not only institutional but also industrial strategies. We have developed close relations with other related governmental institutions and foreign counterparts to follow developments and coordinate our efforts. In order to realize this objective, we have already officially opened defense offices in three countries to begin with: the US, Saudi Arabia, and Brussels, Belgium, the home of NATO. Furthermore, we are working on opening more defense cooperation offices to directly coordinate our cooperation activities in different regions. Realizing the necessity to establish an organization to unite the companies in the sector, the SSI was established in 2011, with the full support and coordination of the Ministry of Economy and SSM. The SSI successfully organized a conference at the end of 2012, during which defense industry representatives and related governmental officials all came together to discuss and decide the necessary steps to promote the defense sector.

“We are proud to say that from 2011 to 2012, defense and aviation exports climbed 42%."

Turkey now has plans for an increasing number of indigenously developed defense projects, including a jet fighter, a helicopter, and a tank. Why are these plans significant for the long-term development of Turkey's defense sector?

The TX/FX program, involving fighter and training jets, is now at the conceptual design stage. The program focuses on utilizing domestic capabilities in the design and production of these products, which are planned to replace the Turkish Armed Forces' existing T-38 trainers and F-16 fighters from the 2020s. In terms of helicopter programs, we are aiming for the local design, development, and production of civil-certified light utility/training helicopters. Acquiring the complete know-how for tank design, development, system integration, production, testing, qualification, and modification is also a major part of the Altay main battle tank program. Every effort that has been made will come to light in the form of indigenous platforms that are equipped with locally developed sub-systems that primarily meet the Turkish Armed Forces' and our international allies' requirements.

How would you characterize the importance of international partnerships, such as the F-35 joint-strike fighter (JSF), for Turkey's defense sector?

Two international development projects have been carried out under SSM's responsibility for more than 10 years. One of them is the Airbus A400M and the other one is the JSF. The F-35 JSF is one of the programs in which we can underline the importance of international partnerships. Being a part and taking an active role in the JSF's international environment with allied countries around the world brings many advantages. Turkey became one of the program's partners beginning from the concept development phase (CDP) and found a chance to be involved in the management of the program. We are able to reach and share knowledge and information among other partners and actively manage Turkey's requirements. The JSF also opens the collaboration environment among partners. Turkey benefits from the opportunities of this environment. As the biggest international defense project, Turkish defense companies also benefit from a large spectrum of business opportunities, improve their capabilities to a sufficient level to serve the fifth-generation fighter's requirements, and are now taking their place as very important players in the global supply chain. International partnerships add great value to Turkey, both in terms of program management and industrial participation aspects.

What role will Teknopark Istanbul play in promoting R&D?

Istanbul is one of the biggest cities in the world, with a population of 15 million. Recent data shows that with a GDP of about $133 billion, Istanbul's domestic income through its industrial and traditional services is higher than many EU countries, including Romania, Croatia, Ukraine, and Luxembourg. Also, it has a unique and exciting location and it has been chosen as the Europe, Middle East, and Africa (EMEA) headquarters for more than 1,000 multinational companies to manage tens of neighboring countries' operations. Istanbul has 40-plus internationally acclaimed universities providing excellent technology-based training. In light of all these considerations, we can say that Istanbul is undoubtedly a city full of opportunities. This is why we are creating one of Europe's biggest and most eminent science parks here. However, Teknopark Istanbul is not solely a defense-industry focused science park; it also aims to bring an extensive industrial and technological defense industry, which is mainly located in Ankara right now, to Istanbul.