Fewer, bigger defense companies for Turkey

Burak Bekdil

Turkey exported arms worth $1.211 billion in the first nine months of 2014, according to official data. The defense industry’s consolidation could further accelerate already-rising defense exports, officials have suggested. DAILY NEWS photo

Turkey is hoping to restructure its local defense industry to have “fewer, bigger” players that would better compete on international markets.

Turkish planners have long been seeking to boost arms exports and now think a better way to achieve that goal is to seek consolidation in the market.

A senior government official said that ideally Turkey should have fewer, but more powerful companies. “One or two leading manufacturers in areas where we plan to specialize will make sure Turkish companies win more international contracts,” he said.

A defense procurement official also admitted that there is currently “an abundance of relatively small companies that lack genuine international competitiveness.” 

“The sector cannot afford to sport dozens of companies competing against each other to win local contracts. The current situation is an obstacle against specialization and better international competitiveness,” he said.

The effort comes at a time when Turkey’s arms exports are rising. Figures from the Turkish Exporters’ Council show that Turkey's exports of weapons systems in the first nine months of 2014 reached $1.21 billion, up 23 percent from $986 million in the same period of 2013.

But defense officials say consolidation in the defense industry could boost exports much faster. “The industry’s export potential is clearly underutilized,” one official said.

A recent audit report released by the president’s office recommended restructuring the local industry “in order to create more powerful companies.”

The auditors also recommended that the state-controlled defense companies should float at least 51 percent of their shares on the stock market.

Of the half a dozen or so state-controlled defense concerns, only military electronics specialist Aselsan, Turkey’s largest defense firm, is listed on the Istanbul stock market.

The presidential auditors also recommended that defense companies producing similar equipment should merge to maximize efficiency.

They said defense companies should specialize in areas “with strategic value.”

Science, Industry and Technology Minister Fikri Işık recently said the government had so far allocated 300 million Turkish Liras in funds to support defense industry programs through the state scientific research institution TÜBİTAK. These funds have largely gone to military programs that require advanced technology, Işık added.