Turkey's defence sector to boost exports as it transitions from arms procurement to manufacture and sale

Turkey has seen a transformation in its defence industry in recent years, with a noticeable shift from arms procurement to arms manufacture and sales. Turkish-made defence equipment has been attracting buyers from around the world, building on growing confidence and skill in a string of related domestic sectors, from automotives to shipbuilding and aerospace. The overall aim of the country’s defence producers is an ambitious one: the goal is to boost exports to $25bn by 2023, from around $1.6bn in 2014. Indeed, they have been rising rapidly, as the defence and aviation sector’s exports were up by 18.7% in 2014.

According to the IHS Jane’s Annual Defence Budgets Report, in 2014 Turkey was ranked 15th in the world with a defence budget of $17.2bn, while the Defence Ministry reported that the country’s defence spending totalled TL29.4bn (€10.4bn) in 2014. Two Turkish companies are listed among the world’s top-100 defence companies too – Turkish Aerospace Industries (TAI) and Aselsan, a military electronics specialist.

Turkish Made

In terms of soldiers, Turkey has the second-largest army in NATO, after the US, at 290,000, according to a 2014 Turkish Land Forces statement. The Turkish army has a fleet of ageing US M48 and M60 tanks, with some of the latter modernised with Israeli cooperation into M60 Sabras, and it also has German Leopard I and IIs. This fleet will be modernised with the addition of a main battle tank (MBT) built in Turkey – the Altay. In partnership with South Korea, 200-250 of these will be produced. This deal is a good example of the transformation taking place, as until recently, South Korea had been a major arms exporter to Turkey. The expectation was that Turkey would also buy the Koreans’ XK2 MBT – but instead, this now forms the basis of the Altay being designed and built in Turkey. In the deal will be a revamp of Otokar, a subsidiary of Koç Holding, which is a producer of light military vehicles, including the Cobra armoured car, which has been successfully exported. The army also draws on Turkish firms for small arms. The Mechanical and Chemical Industry Corporation produces assault rifles, explosives, rockets and other munitions, while also holding a stake in Roketsan, which produces missiles, mortar and other types of shells, along with rockets. Turkey is also expanding its navy, signing an important contract for a landing platform dock programme in early 2014 with Sedef Shipyard, in partnership with Spain’s Navantia.

Top Firms

TAI became the coproducer with General Dynamics/Lockheed Martin of F-16 fighter jets for the Turkish Air Force in 1984. Over 30 years later, it has been in the news as the producer of Turkey’s first indigenous un-manned aerial vehicle, or drone, known as the Anka. Serial production of this is due to start in 2016, with the drone marking a serious advancement in the technological level and sophistication of the Turkish defence industry. The Turkish Armed Forces (TAF) owns 55% of TAI’s shares, with the Under-secretariat of Defence Industries at the Ministry of Defence holding the rest. TAI earned $1bn in exports in 2013, with the business split roughly 50:50 between military and civilian uses. Aselsan, meanwhile, was set up in 1975, with the task of supplying the TAF with its communications equipment. It has since branched out into electronic warfare, radar, guidance systems, microelectronics and other defence-related electronic and digital applications. By 2014 it placed 67th in the world among defence companies in terms of total sales on US-based Defence News’ top 100 list.

Also in 2014, the company signed memoranda of understanding with Rolls-Royce to work on engine control systems, and it signed a framework agreement with Airbus outlining future cooperation on satellites, civil and military avionics, laser systems and secure telecommunications. Havelsan is a Turkish military electronics systems manufacturer, producing reconnaissance and surveillance systems, intelligence suites and flight simulators. Thus the Turkish defence sector has a growing portfolio of products and list of internationally minded partners. State backing for technological advances is also being translated into high performance.

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The Report: Turkey 2015

Industry & Retail chapter from The Report: Turkey 2015

The Report: Turkey 2015

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