A New Era in Turkish Defence Industry
Defence Turkey: We wish you the best in your new position as Undersecretary. Along with your appointment, the Undersecretariat for Defence Industries (SSM) is opening a new chapter. Based on the impressions you have gained since starting your position, how would you characterize the Turkish defence industry?
Since my appointment, part of my time has been spent getting to know the industry, and part of it has been spent understanding how things work, including reviewing project figures, direct purchases and development activities. During all of this, one must constantly be posing questions, and as a result, I have been keeping pretty busy. As you ask questions and drill into topics, things consume your time and not all topics get your attention. This is what I am currently faced with, but we are making progress. By making personal visits to companies and having detailed information exchange sessions, it has been possible to form an understanding of the defence industry. So far, I have been able to get a picture based on my prior knowledge, in-house presentations, various meetings and courtesy calls I have received. I can’t say that it is much different than from what I have been expecting. In the past and now, I believe that significant work must be carried out with respect to setting priorities and ranking areas of expertise.
You may set your goals to achieve perfection for all of your outputs within a range of products. However, we have limited resources and therefore, have to list our priorities, state our needs, and work from there.
“The Turkish industry must be competent in all areas”
Defence Turkey: What are your planned vision and strategies for your term in office?
First and foremost, the Turkish defence industry must have a strong foundation. Certainly, as you develop and produce indigenous products, you must have a strong foundation; as these products see critical usages internally and through exports, they must meet strict specifications. And that is directly related to how mature your industrial foundation happens to be. If you cannot evolve your industrial foundation and cultivate powerful industrial organizations in the commercial arena, it may not be that meaningful to state goals of achievement for the defence industry. You cannot have a successful defence industry while displaying subpar performance in other national industries. This would be a misguided perception. If you are after sustained performance, you must cultivate capabilities in all industrial areas, not just the defence industry. Otherwise, however lively a facade you may possess, you will have problems in the long-term achieving commercially viable and long-lasting products.
Defence Turkey: Based on the strategies you have stated, which areas and programs shall have priority in the near future?
All areas shall have priority. However, I am constantly being reminded since my appointment that, my hands are tied as the Undersecretary, and that SSM cannot initiate projects on its own, nor can it call the shots; that SSM is only an intermediary agency, and that we will try to have a product developed and produced only when other agencies assert a need for that product. Needless to say, this perception limits the office of the Undersecretariat for Defence Industries in government-wide prioritizations and planning. I feel this need not be so. The current frame of mind and the decision making mechanisms need to change. Of course, the Turkish defence industry and its future rests with Turkish Armed Forces, who is the primary user; their requirements and needs are essential to the industry’s formation. However, as Turkey is comprised of political, economic and military components, the national policies and strategies are composed of the shared wisdom originating from such a structure. This fact should not be ruled out. As SSM, I feel we should be able to readily initiate projects on our own as part of our strategic vision, beyond those initiated only by the Turkish Armed Forces. So, in that sense, if you are focused on a product incorporating highly advanced technologies, required by modern defence industries, and you need to allocate a substantial portion of your current resources on that program, without possessing any experience in that area, this approach should be questioned. Under such circumstances, tackling a more doable product with less capabilities may advance you further. You need to focus on products that will allow you to make strides forward. Therefore, we need to prioritize products that are doable, products that can be nurtured. I do not want to state specific product names or provide names of specific areas of the industry; however, we need to carefully manage the preparatory process for the Turkish industry, and for those areas of the industry ready to go forward, we need to hit the market running with capable products that will sell.
“We need to establish a line-up that will allow us to play in the major leagues”
Defence Turkey: Your background is in civil aviation, where you have had a long tenure. Do you think it is possible to form a synergy that will combine the dynamic aspects of civil aviation and the established framework of the defence industry? Can we get your views on this?
I think we can be effective in this regard. Such concepts as commercialization and sustainability are highly significant for civil aviation. And this is something that should be possible to do, by achieving transitivity across the military and civilian domains. There are no significant differences among civilian and military products; while there are distinctly different products, a set of fundamental technologies used for those products are identical. However, we may need a new approach for achieving the synergy you mentioned, due to the differences in how the military and the civilian sectors operate. Across the divide, a certain transitivity must be present. When it comes to defence work, it is usually argued that the products in question have strategic and national priorities, that cost is not an issue, and that combat-readiness is more important; however, nowadays costs and successful commercialization are above everything else; this is something we cannot ignore. Accordingly, you may possibly ignore costs in case of a technology that will put you ahead of the pack, but for a developing country as ours, we need to be cognizant of the fact that our resources are limited and accordingly, we should spend those resources carefully. It is critical to form the line-up that will raise us to world-league status. Whether in the defence field or in the civilian field, any company that does not undertake the risks necessary to be a world-league player, and does not believe in its own capabilities, cannot be expected to survive long. We need such companies that can play in the major leagues and we need to work hard to cultivate such companies. And I need to also point out that we need to motivate those companies which are not yet world-class players, by providing the necessary encouragement to them. A company may be described to be very successful; as far as I am concerned, in order for that company to be defined as successful, it should have had successes on the world stage.
Defence Turkey: You are saying that synergy must exist not only with civil aviation; creating synergy in other flagship industries, such as information technologies, the automotive sector and the energy sector, seems to be a priority for you. Can you please expound?
As I mentioned before, the Turkish industry must be viewed as a whole. An eco-system needs to be created. Gaining deep experience in one area shall have effects in a range of other areas. As an example, we have a number of companies operating in the Turkish automotive sector; we need to facilitate their connections to the defence industry. At the same time, the Turkish sub-industries and the industrial eco-system need to move beyond being identified as OEMs and sub-contractors. OEMs and sub-contractors need to strive to have their products accepted across the world, not just in Turkey. This would be a first step. As a second step, even for products that we are proud to manufacture, we need to still question where the designs for those products were first created and where original product analyses, engineering efforts, and conceptual studies were carried out. We need to question how much value we add to a product; is it in the 10% to 20% range? Or is it in the 500% to 1,000% range? As is widely known, manufacturing costs are especially high in the aerospace and defence industries; production costs can amount to 10% or 20% of the sales price, but the remaining difference is attributed to initial development and systems integration activities, where intellectual property is being created. You cannot start from scratch, and need to integrate with worldwide standards. You need to slowly make inroads onto the world stage, by providing added value as well as engineering and analysis support for international products, and even by entering into partnerships for some of those products. Certainly, the process required for this effort will result in the advancement of our workforce. While the workforce may be abundant in numbers, it is the quality of the workforce that is really the critical factor. The workforce may be quantitively abundant, but needs to be improved in terms of its qualifications; when young workers or entrepreneurs first get their start, they should be subjected to a process where they rapidly gain experience. This is how a workforce can be developed. We need to prepare the necessary environment for them. If the necessary environment does not exist and you do not provide the young workforce with opportunities, the workforce will be qualified only up to a certain level; if they don’t have the necessary experience, their industrial competencies will be limited and in turn, they will be less effective. I view this process of education and upbringing as being especially important.
Defence Turkey: Mr. Undersecretary, will you be forming a new department in your agency to establish the needed synergy across different business sectors?
We do have a department, called the Department of Industrialization; but the problem lies elsewhere. The department in question does strive to increase industrialization. But maybe we need to pose the question on whether the human resources are at satisfactory levels. It is essential to document the profile of the human resources available, to get to know the industry, to establish close relations, and to have the personnel at the Department of Industrialization get to know their industry connections on a one-on-one basis. When visiting the same business, someone who is an industry veteran, and a person with no experience, will have different perspectives and differing analysis results. Therefore, we need to keep keep a watchful eye on the industry and observe it closely; we need to take the necessary measures so that smaller business can grow into larger corporations, institute the required quality control practices and ensure that they are in a continuous cycle of improvement. In other words, we need to require that a prerequisite for companies to join in tenders is to possess certain quality certifications, and then we should support them to obtain the necessary qualifications. Small family-owned businesses may achieve limited successes, but may face challanges in sustaining their success, competing in world markets, and maintaining product qualities. While we should support such businesses to focus on specific products and to integrate with the rest of the industry, we should also help them in their growth and in enriching their qualifications.
“There are misperceptions on what the respective roles are in any cooperation between academia and the industry, so that needs to be fixed before anything else.”
Defence Turkey: Mr. Undersecretary, we know that you have a background as a scholar. Can you comment on the relationship between academia and the industry?
The cooperation between academia and the industry is widely commented on. There have been some achivements, but success stories are limited. We are making progress, but it is a slow progress. There is still a disconnect between the two worlds. As a scholar, I myself have been involved in the past in various cooperative efforts; what I saw was the two sides waiting for each other to make the first move. The industry has misgivings about academia; the academia, on the other hand, is waiting for the other side to approach them first. Thus, both sides are being tepid. At the same time, there are problems involving the type of support to be sought from universities and how to go about approaching them for the said support. There are misperceptions on what the respective roles are, so that needs to be fixed before anything else.
“When assessing export figures, it will be prudent to ask how much of production imports are attributable to imported goods”
Defence Turkey: Turkey has stated export targets, as well as a self-defined target for 2023, the centennial anniversary of its founding. As you mentioned, it needs to focus on critical products with high added value. How do you thing this process should be managed?
As I have mentioned, unless you concentrate on high value-added technologies, it may be extremely difficult to achieve the stated goals. As an example, if you have exports totalling $25 Billion, and if $23 Billion of this amount are production inputs from imports, this means that you really have achieved only $2 Billion worth of exports. We should not be fooling ourselves through such numbers. It would be prudent to ask, even now, how much of our production inputs are through imports. And additionally, sub-components of products may be comprised of imported products; this needs to be taken into account. Therefore, when attempting to hit your export goals, one needs to consider the value added figure. If your aviation engine parts manufacturer states exports totalling $20 Million, and the same manufacturer imports $15 to $18 Million worth of production inputs, this is not acceptable. Had only a small fraction of the $20 Million of exports was attributable to imports, that could be considered as real value created.
Such parameters are quite important, and as you embark on ambitious goals, you need to question, in parallel, how effective your efforts are. There are steps necessary to achieve coordination of efforts that need to be taken now for establishing infrastructure for the industry. There are efforts that need to be undertaken today to train human resources. It is nice to establish goals, but the milestones leading to those goals must be well-defined. Lack of coordination needs to be remedied; the goals must be stated and understood clearly; it may be necessary to devise workarounds in case of obstacles; or it may be necessary to postpone a certain approach altogether and look at other solutions. Although it may be attractive to engage in bold talk, it will not get us to our goals any faster; it will only serve to placate us. Yes, we should engage in bold talk, but only after having achieved our goals, after having produced products we are proud of, products that have been manufactured entirely through Turkish industrial efforts; until then, it is too early to engage in bold talk.
Defence Turkey: Since your appointment, you have participated in two defence industry fairs (Eurosatory and ILA) and have engaged in bilateral contacts. What are some of the things that Turkey needs to accomplish to increase its exports, especially in the area of defence?
It is not an easy task to export defence products, technologies and in particular, entire defence platforms. To overcome the obstacles in this area, you need to first establish your reputation; also, excellent relations are required to exist between nations. And for certain countries, good personal rapport and corporate relations may also be required. You need to have proven products without any items contained in the bill of materials that will cause export difficulties. All of these various elements need to work together. While I am aware that we have a long road ahead of us, we do need to be somewhat patient. In addition to platforms and finished products, we also should focus on sub-systems; we also need to make headway in such products as rockets, weapons and ammunition. Our products need to be field-tested and proven, and need to distinguish themselves against competitors; we need to maintain our focus on such topics. In fact, I feel that we may need to market certain critical products at very low prices near production costs, so as to achieve name recognition for ourselves in the marketplace.
Defence Turkey: Mr. Undersecretary, we thank you for taking the time to answer our questions. Once again, we wish you the best in your new position.
