An Overview on Polish Defence Market
During the Cold War era, Central and Eastern European (CEE) countries-Czechoslovakia, Hungary, Poland, and Ukraine were among the major defence industry producers of the world. However, the end of the Cold War and the breakdown of the Warsaw Treaty Organisation (WTO) caused the end of industrial partnership agreements and created significant challenges for the functioning of the countries’ defence manufacturing bases. Production capacities of defence companies were too large for the diminished needs of foreign customers and their own armed forces. As a consequence, CEE governments introduced several measures, including industrial conversion and re-orientation to civilian production, privatisations and severe downsizing. These measures caused the size of the arms industry to be drastically reduced in a very short time period.
As a result of this drastic downsizing, CEE countries’ defence industries experienced a period of stagnation in the post-Cold War era. However, the industry has undergone something of a revival, partially stimulated by political shifts within these countries towards the West. After the historic lows of the 1990’s defence expenditure in the CEE region is expected to remain fairly stable at now-heightened levels, with a slight growth in expected expenditure from 17.5 billion dollars in 2011 to 17.9 billion dollars in 2020. Polish defence expenditure is responsible for over half of this figure, with growth of approximately 800 million dollars over the forecast period.
It is well known that Poland has consolidated its position in the international arena, becoming an important member of the North Atlantic Treaty Organization and of the European Union. During that time, Poland has been actively involved in international operations to stabilize global security and has taken measures to turn its armed forces into a professional army.
In contrast to most CEE countries, the situation in Poland looks promising; Frost & Sullivan experts predict that Poland will continue as the regional leader in terms of defence spending. One of the key drivers is the government’s legal commitment to allocate 1.95 percent of the previous year’s gross domestic product to defence spending.
Act on rebuilding, technical modernisation and financing of Armed Forces , which was adopted by the parliament in 2001 secures 1.95 of GDP solely for the needs of national defence. In fiscal year 2013 budget of MoD is over 31 billion PLN / 7 Billion Euro, 6.7% increases from 2012. It is assumed that in this year 26.2 % of the defence budget (over 2 billion Euro) will be directly allocated to the modernisation of Polish Armed Forces.
Those figures also reflects growth, as in 2012 budget for modernisation was ¼ billion Euro lower. Technical Modernisation Plan 2013/2022 envisages expenditures for technical modernisation on level of over 30 billion Euro within 2013-2022 time frame.
In 2012 President of Poland Komorowski has initiated novelisation of Act on rebuilding document. According to the new regulations, annual growth of GDP reflected in 1.95% reserved for the needs of defence, must be directly expended on building of new Air Defence System for Poland. It is assumed that such regulation will give resources ranging from 2-3 billion Euro in 2014- 2023 timeframe.
Poland plans to spend military budget on operational capabilities development, modernization of the military equipment and weapons, intensification of international defence cooperation, increase of scientific and research potential and development of IT systems in national defence sector.
The main priorities under the procurement programme are: air defence (including missile defence), new utility helicopters, unmanned aerial vehicles (UAVs), command and control systems, training and simulation systems, and the purchase of a new submarine. In addition, the Polish defence market also represents the greatest potential opportunities in terms of support-in-service (SIS) outsourcing among CEE countries. It is estimated that outsourced SIS expenditure will reach 4.09 billion dollars during the forecast period.
Major procurement programmes are multirole helicopters, advanced jet trainers, simulation systems for Mig 29 aeroplanes, C 295 and SW 4 helicopters. Moreover, Naval programmes covering submarines, mine hunters, patrol vessels, frigate and corvettes for coast defence are in the agenda of Polish Procurement Authority.
The state-owned Bumar Group, founded in 2002, is Poland’s biggest defence industry representative. Consisting of twenty three manufacturers of a wide range of defence products, the association is undergoing a significant restructuring and consolidation process. Manufacturers are going to be grouped into four divisions including soldier equipment, ammunition, land vehicles, and electronics to promote integration between companies within the group. Frost & Sullivan expects the government will sell a minority stake in the Bumar Group. Bumar has taken the name of the Polish Defence Holding in May 2013.
As well as Bumar companies, there are also foreign players-such as Avio, MTU Aero Engines, EADS, Pratt & Whitney and United Technologies who are investing into Poland. Sikorsky took over the Polish aircraft manufacturer PZL Mielec in January 2007 to provide a European base for the International Black Hawk Helicopter Programme. Similarly, helicopter manufacturer PZL Swidnik was acquired by AgustaWestland in 2009.
Poland has noted some export successes particularly in India, Malaysia and Indonesia in the past ten years it has struggled to find new foreign customers.
