Hello everyone, today we are going to talk about “How Turkey Strives for
Independent Defense Industry and its Challenges”. Building up Turkey’s defense industry has long
been a priority for the government of President Recep Tayyip Erdogan,
and it has made considerable progress to date. Today, Turkey is ranked as the 14th largest global
defense exporter, with a defense industry that grew to 11 billion dollars, in 2020, according to
(SIPRI) the Stockholm International Peace Research Institute. Despite its success, the industry is
now facing growing pains, and challenges like brain drain, a currency crisis, dependence on
foreign suppliers, and regional political disputes could hamper growth going forward.
Let's first look at the historical development of Turkey's defense industry.
The first initiative in establishing a defense industry in Turkey goes back to the period of
the Ottoman Empire. The defense industry which had a strong position up until the 17th century,
stayed outside the technological developments in Europe since the 18th century and has totally lost
its impact starting from World War I. Thus, no significant defense industry infrastructure was
present during the first years of the Republic and activities in this domain were limited
to the establishment of new facilities near Ankara during the Turkish War of Independence.
Having the view that defense industry is a part of the overall industrialization and development, the
Republican Administration supported the State's guidance in industrialization and therefore the
defense industry during the first planning period. Despite such activities as the in-country aircraft
production, a strong infrastructure could not be established due to internal and external
conditions. In the post-World War II Period, activities in the defense industry initiated
during the first years of the Republic were not sufficient due to lack of State support,
which came to a halt as a result of the foreign military aid received
upon promotion of bilateral relations with the United States and Turkey's membership of NATO.
However, regional problems Turkey faced in the 1960s, Cyprus crises in 1963 and 1967,
Turkish invasion of Cyprus in 1974 and the arms embargo following the invasion
necessitated the development of a defense industry based on national resources.
After 1974, Turkish Armed Forces Foundation was established with this understanding
and some investments, though limited were initiated.
As the number of defense companies grew, the government established the Undersecretariat
for Defense Industries (SSM) in 1985 to re-organize the sector. The SSM’s mission
was to lay the groundwork for a modern defense industry and modernize the Turkish Armed Forces.
Despite limited resources and other hurdles, the SSM has proven quite successful,
enabling the industry to develop steadily over the past 34 years. The sector only really took
off over the last decade or so, however, driven by aggressive government policies designed to ensure
Turkey’s self-reliance and boost its industrial exports. According to the Presidency of Defense
Industries (SSB), the turnover of the Turkish defense and aeronautics sector rose from $1.85
billion in 2006 to around $6 billion in 2016. In other words, sales tripled in just 10 years.
Over the same period, the sector’s exports rose from $487 million to $1.67 billion. However,
for three consecutive years that decade in 2014, 2015, and 2016 exports didn’t break the $1.6
billion mark, raising concerns about the long-term sustainability of the industry’s rapid growth.
To re-vitalize the sector and boost exports, the government adopted new regulatory measures,
bringing several local defense industry bodies under the office of the president,
including, in 2017, the SSM and the Turkish Armed Forces Foundation, which is responsible
for developing the national armaments industry and purchasing weapons, vehicles, and equipment.
According to President Erdogan, the SSB was brought under his office
to boost its potential and improve resource allocation and efficiency.
The government has also repeatedly tasked the diplomatic corps with the mission of
marketing Turkish military equipment abroad and finding new markets for its defense exports.
The year 2018 brought several important developments on this front.
According to a report from SIPRI, Turkey, which it categorizes as an “emerging producer,”
successfully crossed the $2 billion export mark. In fact, defense and aerospace saw
the strongest export growth among all Turkish industries that year. The industry maintained
the trend into early 2019, with a 64.4 percent rise in exports in January compared to the same
period last year. Despite the impressive progress made over the last decade, the sector still has a
long way to go to reach its targets, however. According to Turkey’s procurement authority or
(SSB), the government aims to “make the Turkish defense industry 100 percent independent by 2053,
increase its export capacity to $50 billion, and have at least 10 Turkish defense companies among
100 biggest companies in the world.” Achieving these goals would require a huge effort. SIPRI
warns that “a policy of ambitious arms export growth is difficult to implement in the long term;
particularly as recent history has shown that arms exports by smaller
exporters can fluctuate significantly,” citing examples like Sweden and Brazil.
Furthermore, Turkey also needs to overcome a growing list of challenges,
including brain drain, the need for new markets and massive investment, political factors,
dependence on foreign components, and the depreciation of the local currency. The
last two issues are closely related, as many key components on which the industry relies
are sourced from abroad and priced in foreign currency, increasing costs for local producers.
Brain drain is believed to be acting as a brake on development in some critical areas.
The vast majority of people leaving are young, highly educated engineers,
often with significant experience. According to an SSB survey, many of those who left the
sector cited “limited chance of promotion and professional progress” as the primary reason,
followed by low salaries. Securing much-needed investment is another big challenge. In
normal cases, this could be accomplished by opening the sector up to foreign investors,
but given the industry’s connection with national security, this doesn’t seem to be an option.
Interested investors would likely include the U.S., European countries, Russia,
and China, which would have the effect of limiting Turkey’s defense independence.
To overcome this, Turkey has established a partnership with Qatar, a small, rich country with
which it has strong ties and which doesn’t pose a threat to Ankara. This partnership is expected to
help secure funding to develop Ankara’s defense industry, on the one hand, while also boosting
Doha’s defense capabilities, on the other, thus deepening the alliance between the two countries.
In addition, politics also may prove to be a major stumbling block for the sector.
Many foreign customers do not distinguish between the government’s position on foreign policy issues
and the Turkish defense companies’ interests as private entities. As a result, Turkish firms
are unable to expand into certain markets, and are often sidelined at major regional defense
forums. Following the onset of the Gulf crisis in 2017, Saudi Arabia and the UAE canceled several
contracts with Turkish defense companies as a result of the government’s support for Qatar.
Turkey’s participation in the F-35 program may be threatened by politics as well.
As tensions between Ankara and Washington rise over Turkey’s planned acquisition of
the Russian S-400 missile defense system, it could impact Turkish defense firms,
which are supplying $12 billion worth of parts for the F-35 program.
Although the government has high hopes for the local defense industry,
and seems dedicated to realizing them, there are a number of obstacles that stand in its way. It
is not clear yet how the government will address the mounting challenges; however, priority should
be given to stopping brain drain, securing needed investment, and neutralizing the political factor.
Thanks for watching, and see you in the next videos.