Improving Technology – Industry Base

Everybody agrees that Turkey has developed a considerable capability in defence industry. The healthy increase in the annual turnover figures, proliferation of exports, indigenous designs of communication equipment, unmanned air vehicles, battle ships, main battle tank, missiles…can be cited to prove this (www.sasad.org.tr). Subject of discussion today is the sufficiency of Turkish industry - technology base to support major platform integration programs in this endeavour. Technology per se does not win wars. But Nations always look for innovations that can offer them competitive advantages over their adversaries and innovation will always be a national security “wild card”.

The defence technology base can be defined as “that combination of people, institutions, information, and skills that provides the technology used to develop and manufacture weapons and other defence systems. It rests on a dynamic, interactive network of laboratory facilities, commercial and defence industries, sub-tier component suppliers, venture capitalists, science and engineering professionals, communications systems, universities, data resources, and design and manufacturing know-how.” (The Defense Technology Base: Introduction and Overview, Congress of the US, Technology Assesment Office,March 1988)

First of all defence technology and industry base is a very complicated structure. It is divided into a series of levels or tiers. At the top tier of the defence industrial base there are prime contractors, often large corporations whose main task is to bring together all the necessary components for a system and integrate them into a whole defence system. On the other hand the majority of production base companies are in the subtiers. The subcontractor tier of the defence production base is the most diverse in terms of size, product, and production technology, and includes both industrial giants and small machine shops. A subcontractor manufactures specialized parts, components or subsystems that are integrated into a larger subsystem or final system. In a major weapon system, several layers of subcontractors might produce hundreds or thousands of individual items. As noted above universities, laboratories, research centres… are important components of the technology base and they are completely different entities with different priorities than industry.

Establishment and development of a defence technology base is a major issue for every individual nation and alliance. Just to indicate the complexity of this controversial area, we may consider the experience of the European Union in past decades. Strategic Defence Initiative-SDI (informally known as “star wars”) was formally introduced in President Reagan’s speech in March 1989. West Europeans, and especially the French, realised the inability of this space–based shield to protect Europe from their threat - short range missiles. In the words of François Mitterrand “West Europeans should initiate an indigenous programme, rather than wasting their talent on a US dominated project”(The European Community and the Security Dilemma, 1979-92  by Holly Wyatt-Walter). Europeans adopted EUREKA (European Research Coordination Agency) charter in 1985. However in the atmosphere of post cold war, allocation of sufficient resource to defence related activities seemed impossible for Europeans and  in the first half of 1990’s, Europe took the back seat to the US & NATO initiative to end the conflict in Balkan’s.

On the other hand efforts for coordinated defence research continued under the umbrella of Western European Armaments Group –WEAG. Thirteen areas were determined to be Common European Priority Areas - CEPA’s. But allocation of approximately 100 million Euros per year was not sufficient; WEAG body closed in 2005. WEAG left a very limited number of programmes (such as FREMM, TIGER, A400M) to be managed under “Organisation Conjointe de Cooperation en matiere d'ARmement – OCAAR”. European Security and Defence Policy (ESDP) sates its aim as creation of a European Defence Technological and Industrial Base (EDTIB) which is capable of providing the bulk of equipment for European Armed Forces “with less European dependence on non-European sources for key defence technologies” (Steering Board of the European Defence Agency, 2007, A Strategy for the European Defence Technological and Industrial Base, Brussels, 14 May 2007, p. 2). But this is a really challenging issue for EU. Because annual spending for military equipment procurement of the US is about $120-140 Billion (2010 figure $140.1 Billion) whereas corresponding figure for the total of EU member states is the range of $30-40 Billion. Hence the US spends 3 times more than EU. For R&D spending the scene is even worse. US RDT&E expenses are above $60 Billion (2010 figure $79.1 Billion); EU spends 10-15 Billion$ and the US/EU ratio exceeds 5.

In Turkey, as expected, major defence projects are given to prime contractor-level system integrators. In parallel we expect to have innovative small enterprises to support main system integrators.  Ministry of National Defence Undersecreteriat of Defence Industry (SSM) has developed a number of incentives and regulations such as local content ratios, SME share ratios, industrial participation schemes…etc. Nevertheless the issue is still challenging. One of the many faces of the problem is financial limitations of these small enterprises. Significant investment requirement for today’s advance technology and employing high quality personnel for extended periods are major handicaps for small and medium enterprises. Another difficulty appears at the marketing stage. Most probably sales to one national system-platform integrator will not be sufficient to recover the costs. Let’s suppose that a valve producer designed the “most innovative” valve for a special defence application and delivered 5-6 of them to a naval shipyard. We can imagine how difficult will be to export this valve in the highly competitive international market.

If we consider the “support” side of the issue we again face a difficulty: “What to support and how to support”. There are a few alternative approaches:

• We collect R&D project proposals; try evaluating them on the basis of technical and economical feasibility; and provide financial support as much as possible. This approach is based on the expectation that R&D projects supported will somehow be useful for major defence programs in the future.
• The second approach starts with determination of technology areas required for major defence projects which are planned for the future. Then various models can be used. In free-market economies companies prepare proposals for R&D projects (Critical Technologies Plan listing of US is a good example). In state-oriented economies some establishments may be “designated” for the work (Republic of Korea is/was an example). If we go further, in state-owned economies, some state institutions may undertake the design and production (as we see in the case of nuclear technology in Iran). Whichever model is applied, this conservative and traditional approach of “area determination” will be successful if we can make a good projection and forecasting for the future.
• The third approach will be the combination of the first two. The supporting organisation will indicate priorities in very broad terms. To evaluate many alternative solutions initially, many (almost all) proposals should be supported with small separate budgets. I believe a good –and unfortunately rather costly- example is DARPA (Defense Advance Research Projects Agency) of US. DARPA states its priority in very broad sense. For example the Active Authentication program aims “to identify the person at the console using unique aspects of the individual through the use of the software based biometrics”. Based on this broad description, candidates are encouraged to imagine very different approaches. Typically the fist phase of DARPA support goes to a number of parallel university research projects. Then promising approaches are carried out to the application phase. DARPA has a budget of $2.5-3 Billion out of the above mentioned $80 Billion defence RDT&E budget of US. Approximately %15 of DARPA budget is allocated to basic research, %43 to applied research and %42 to advance technology development. Also from the organisation and management point of view, DARPA is a very interesting agency. They manage this high technology multi billion dollar business with 120 experts. Scientists and engineers have 3-5 year turn at DARPA.

While we put emphasize on “defence” another important factor is the inseparability of “defence oriented” from “general industry oriented” technologies. Concepts of dual use and contribution of general technology base to defence effort are well elaborated subjects. Here we come to the much debated issue of general R&D expenditure. In Turkey, according to previous plans, the basic R&D parameter, ratio of R&D expenditure over GDP, would be over 1% by 2003 (Türk Bilim ve Teknoloji Politikası 1993-2003, TÜBİTAK). However latest statistics indicate that this ratio could only be increased to 0.86 in 2011.(www.tubitak.gov.tr)

On this issue Frost&Sullivan draws our attention to Czech Republic: “Czech Republic has the highest R&D expenditure (as percent of GDP) among Central and Eastern Europe countries. In 2010, it reached 1.56 percent of the country's GDP, growing from 1.17 percent in 2000. However, compared to the EU27 average (2.0 percent), country's R&D expenditure is still low and far from the 3.0 percent objective set up at Barcelona summit in 2002. Chech Republic started an R&D programme for years 2009 to 2014. The programme named 34 thematic areas, grouped in four thematic priorities, which were the focus of Czech R&D. These included: R&D for competitive industry (10 thematic areas), molecular biology for health and prosperity (4 thematic areas), information society (9 thematic areas) and society and environment (11 thematic areas)”. Dominika Grzywińska (Industry Analyst at Frost & Sullivan) notes that “Almost four years after introducing the reform, there is still a plenty of work that needs to be done. Steps undertaken by the Czech government are without doubt necessary in order to develop competitive and thriving R&D industry. But actual results, translating into increase in scientific quotations, higher employment in R&D and, last, but not least tangible financial outcomes, are still to be seen.”

In parallel to the increasing the importance of “R&D which is not-specific-to-defence” we have a conversion in the role of Government. We are living in a very dynamic and enterprising age. Government is no longer the principal player in the research and development that shapes the character of the modern era. Especially in areas like biotechnology, communication and information systems, private-sector innovations are much higher than government research. These emerging industries are creating products that only science-fiction writers can imagine. With dual-use capabilities they will be transformed to defence and in many cases, national security innovations will come from adapting commercial off-the-shelf technology.

In short we should engage in this contest, contribute this very interesting transformation in defence technology. Or we will be observers only.