TBY talks to İsmet Yılmaz, Minister of National Defense, on record-breaking exports and the competitiveness of Turkish defense products.

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 sector had a record-breaking year in terms of exports in 2013, but there is still some way to go before achieving the $5 billion export goal for 2023. What efforts are being made by the Ministry to help reach this target?

First of all, reaching the aforementioned goal requires long-term effort. We are expecting much more over the coming years. Our major platforms, such as the Altay main battle tank (MBT), the MİLGEM combat ship, the ANKA UAV, the T-129 ATAK helicopter, and the Hürkuş training aircraft, will shortly reach full-scale production, and we expect these major platforms to play important roles in reaching our 2023 targets. In addition to reaching these targets, we are confidently moving forward by placing more of an emphasis on cooperating with universities, R&D centers, and the Turkish Council for Scientific and Technical Research (TÜBİTAK), and accelerating technology generation, as well as developing cooperation between industries and universities. On the other hand, to promote our defense industry and capabilities, as well as penetrate new markets, we have been opening defense industry contact offices in Riyadh, Washington, DC, Astana, and Brussels. We are also planning to activate a new office in 2014 in Addis Ababa, where we value the important potential for our defense and aviation industry. Moreover, we study financial tools in order to promote export mechanisms, working with TÜRK EXIM Bank to create a defense industry credit mechanism. Governments will then be able to apply for credit when procuring Turkish defense industry products. In addition, the Undersecretariat for the Defense Industry is also drafting a new law to facilitate government-to-government sales of defense and aviation products and services.

How has the nature of joint ventures and partnerships between local and foreign defense companies changed over the past decade?

International joint ventures are becoming increasingly popular in the business world to reduce the risk associated with major procurement programs. Due to recent developments in the Turkish defense industry, product- and technology-based ventures became more possible for both Turkish and foreign companies. These ventures are viewed as a practical vehicle for knowledge and technology transfer from multinational expertise to local companies. Such knowledge transfers can contribute to the performance improvement of local companies. Licensing collaboration and joint ventures will continue to grow in importance for the production of major weapons systems, especially for the first-tier producers.

With the growth of technology and costs, contractors are likely to increasingly turn to licensing collaboration and joint ventures, thereby stimulating the further internationalization of the industry. The changing nature of demand will continue to lead changes in the structure of the industry. Companies will need to restructure further across borders in regard to joint ventures and partnerships with international companies. While defense companies rely on domestic procurement and support for exports, they are likely to continue internationalizing, particularly in their supply chains.

Which international markets do you consider have high export potential for Turkish defense products?

The MENA region and Central Asia are at the forefront due to geographical proximity, high demand, and historic and cultural ties. The South Asian region also represents some of the world's most significant defense buyers. In addition, Sub-Saharan African countries' budgets rose in 2013, and present long-term opportunities for defense companies. Therefore, there is a business opportunity for competitive defense products in these markets. In the long term, we can also foresee Latin America as a market where most nations seek partners other than conventional US and EU defense manufacturers. Therefore, there is huge potential in this region as well.