Turkish defense sector 'blooms,' says leading CEO in the business.
Turkey's defense industry is growing more confident in its ability to work closely with foreign heavyweight companies in the worlds arms market, the head of a Turkish company in the sector told the Turkish Daily News in an exclusive interview.
The future of the defense sector in Turkey is bright thanks to a combination of advantages Turkey enjoys in human skills, the benefits of being a newcomer to the global market and a determination on the part of state institutions to create growth impetus for domestic companies, said İsmail Başyiğit, the founder and CEO of Milsoft, Turkey's leading defense software company whose annual sales reached $30 million last year.
The days that Turkey used to simply purchase weapons systems are over, he said. Foreign defense companies can only hope to enter the Turkish arms market by forming research and development (R&D) partnerships with Turkish counterparts, said Başyiğit.
“Let me make this clear: Turkey is capable of developing its own technologies and never intends to get hold of technologies produced by others. Our desire is to participate in the manufacturing of joint defense systems with nationally developed technologies and sell them to third parties, together with foreign partners,” said Başyiğit. Turkish exports already cover a wide range of countries from Netherlands to the United Arab Emirates, from Pakistan to the United States, with a total value that reached $350 million in 2006 according to figures of Undersecretariat for Defense Industries (SSM).
Integration with the West is of utmost importance for Turkey's defense industry, said Başyiğit. “It will never be economically feasible for us to undertake some projects. But using our own capabilities within those projects is the right policy to follow,” he said.
“No matter how much Western companies lobby, no matter how hard they try, Turkey will only choose partnership models that will enable it to undertake further modifications, maintenance and developments without reliance on foreign expertise,” he said.
His ambitions are matched by policies of SSM, established in 1985 to create a modern arms industry in Turkey. SSM is resolute in its goal of boosting domestic share of the Turkish military's procurement to 50 percent in 2010. Current domestic procurement level meets 35 to 40 percent of the military's demand, and is deemed “insufficient” in the “2008 Roadmap for Defense Research and Development” document released in January. According to data from SSM, the total production value in the Turkish armament industry reached $1.7 billion in 2006.
Goals ahead, pitfalls to avoid
Başyiğit elaborated the tasks for Turkish defense companies and the strategies to get there. Turkey needs to aim for the high and reusable technology development areas, where it can use highly qualified workforce, like software development and system integration, in order to secure a sound position in the global arms market, said Başyiğit.
Software capability tells the difference between same kinds of weapons platforms, which are usually durable for long years. “We can use weapon platforms like tanks and airplanes for 20 or 30 years, but electronic systems on them develop more rapidly. Software is the main component that will connect the various command and control systems on a platform,” he said.
System integration capability vital
System integration is the second capability that Turkey needs to master, said Başyiğit. “It is crucial to determine various defense industry companies' capabilities, like company A's radar, B's weapons and C's sonar, and to be able bring them together on a common platform,” said Başyiğit.
System integration capability is vital also for avoiding a pitfall that could hamper the growth of the fledgling Turkish defense industry. “Some companies are contemplating on developing a capability that another company already has acquired. I see this as a serious potential risk,” said Başyiğit, adding that gaining a new capability, usually considered an economically unfeasible project, requires subsidies from the state. “Sources of defense companies and Turkey are limited, and they should be used in harmony in order not to duplicate the capabilities within different companies,” he stated and added that SSM allows sufficient space for competition in the development stage of a fresh capability.
Reflecting its sensitivity on preventing duplication, SSM included foundation of “Perfection Centers” to coordinate works of defense related institutions in its 2008 plans.
Competitive sides of Turkish defense industry
The Turkish defense industry can only hope to survive in the sea of global defense market dominated by big fish like Boeing, Lockheed Martin or EADS, by relying on its superior trained workforce. “One of Turkey's advantages over Europe is the popularity of engineering departments of universities among its youth. In the West this is not the case,” said Başyiğit.
Turkish firms' main competitors are companies from countries like India, which benefit from cheap labor to become sub-contractors to global arms industry giants. However when it comes to defense, cheap labor is not always the winner. Milsoft engineers had worked with Sikorsky for some time, when the company called for tenders to install software on a new helicopter it manufactured. Software would track functioning of electronic systems on the aircraft, report any malfunctions to the pilot and record them. “In 2000, we were in the shortlist with an Indian company, which offered much lower prices than we did. But our workforce was much more qualified and we enjoy advanced working infrastructure and quality systems. Sikorsky did not take the risk and preferred us, despite the relatively high price we put before them,” said Başyiğit.
International compatibility obligatory
The rising wages in the Turkish economy spells impossibility of relying on cheap labor to compete with Asian countries said Başyiğit, and urged Turkish companies to work on creating added value.
Milsoft is the first firm in Europe and Turkey that obtained Capability Maturity Model Integration (CMMI) level 5, a U.S. supported system of measuring a company's capability of software development processes. CMMI also establishes a pattern of doing business between firms of different countries.
Meeting international standards is fundamental to benefit from SSM's strategy of providing room for domestic firms to export their products. Offset deals have reached a total value of $6.9 billion and the current number of offset deals that oblige foreign companies to purchase Turkish defense products stands at 54.
Turkish defense industry not ‘hunchbacked'
The second advantage Turkey enjoys is exactly the point that is considered its weakness, namely being a newcomer to the global defense industry, as its firms do not bear the burden of renewing their former working systems to start production of a new technology. “Foreign companies usually try to increase their profits by selling greater amounts of technologies they already possess, since shedding existing products away to concentrate on a new one is expensive. We, on the other hand, have the possibility of starting from the level reached by latest technologies and focus our energy on acquiring more advanced ones,” said Başyiğit.
Milsoft's strategy in climbing top of the ladder in “ship integrated warfare management systems” is a telling example of the merits of that strategy. The company launched an R&D project for ship command and control systems in 2000, with support from Scientific and Technological Research Council of Turkey (TÜBİTAK). “Towards the end of 2003, we noticed that the world is headed towards new technologies in this field. We adopted newly developed but yet unapproved standards and combined them with our four years of experience. As a result we became a major player in the world in this field,” said Başyiğit, emphasizing the leverage Turkish companies may gain over their competitors, since they are not haunted by backward compatibility requirements. "Our advantages can create excellent results when coupled with the will of the SSM to support us. I am very hopeful about the future," said Başyiğit.
source: http://trmilitary.com/esite/