Ümit ENGINSOY Hurriyet Daily News and Economic Review
While many European countries are trying to cut their expenditures in a bid to decrease their public debt, Turkey’s defense spending is about to reach an all-time record of $5 billion in 2011. ‘Thank God, the general economic situation of the country is fine,’ a senior procurement official tells the Hürriyet Daily News.
Turkey will spend close to $5 billion for defense procurement this year, the highest in the country’s history, a senior procurement official said on the weekend.
“Some major spending items have just started or are starting now, including those for the purchase of [around 100] Joint Strike Fighter jet aircraft [JFSs], submarines and utility helicopters,” said the official, who was speaking on condition of anonymity. “As a result, the arms spending is jumping, approaching $5 billion this year. Thank God, the general economic situation of the country is fine.”
In recent years Turkey has spent just over $4 billion a year on defense procurement.
Turkey’s ambitious military modernization program calls for the acquisition of the most sophisticated weaponry for the Land Forces, the Navy and the Air Force. In addition, the procurement office has made local acquisition a priority in meeting the military’s equipment demands.
Two large-scale programs are expected to begin this year; the first is Turkey’s national long-range air- and missile-defense project for which U.S., European, Russian and Chinese companies are vying to be selected as the main contractor. Turkey’s selection for the multi-billion-dollar contract is expected late this year or early next year.
Second, Turkey is preparing to soon select a Landing Platform Dock, which resembles a helicopter carrier and can carry a battalion-sized force of more than 1,000 troops overseas. Three Turkish shipyards and their foreign partners are eyeing the contract, which will be worth between $500 million and $1 billion. Turkey’s decision is expected next summer.
“There’s enough reason to think that the defense procurement budget will continue to increase gradually over the next few years to reach another saturation point,” the procurement official said.
Part of the rise in Turkey’s arms procurement budget is expected to be compensated by a parallel increase in the local defense industry’s export capabilities. The Turkish defense industry this year is expecting to garner between $1 billion and $1.5 billion from exports of defense-related equipment.
The largest sector in the Turkish defense industry’s exports business is armored vehicle makers. Among these companies, FNSS secured a $600 million contract with Malaysia this year to sell its 8X8 Pars vehicles, the largest export deal in Turkey’s history.
Also, under a new measure adopted by Turkey’s defense procurement agency, Ankara is slated to retain at least 70 percent of the money it spends for defense purchases from other countries. For past contracts, this figure was 50 percent.
In a directive released late April, the Undersecretariat for Defense Industries said foreign defense companies doing business with Turkey should agree that 70 percent of the contract’s value be returned through local industry content and offsets.
In other words, if a foreign company signs a defense contract worth $100 million with Turkey, it will agree to return $70 million of this money through its payments to its Turkish partners for their local work on the project or through offsets.
In defense industry contracts, an offset is an industrial compensation. It is a commitment provided by the selling country to the purchasing country to buy defense-related products manufactured by the buying country in return for the main sale.
“Financially speaking, I think we’re doing a good job by keeping the larger part of the contract money in the country, and in the meantime, obtaining knowhow,” said the procurement official.