OSTIM & OSSA Creating Joint Competition via Collaboration to Increase Quality, Localization and Nationalization Solutions

In an interview with the Chairman of OSTIM Board of Directors, Orhan AYDIN and the Chairman of OSSA Cluster Board of Directors, Mithat ERTUĞ discuss how clusters benefit from exploring solutions and create industrial order and opportunitiy together by holding joint meetings and discussions

Issue 87

Defence Turkey: Aside from the defence industry, we see that OSTIM has a different position in its contribution to the field of localization and nationalization. Can we discuss OSTIM’s contribution to clustering and industrial developments?

Orhan AYDIN: OSTIM was founded in 1967, and at that time, except for in bureaucracy, the industry was not mentioned in Ankara. After the establishment of Aselsan in 1975, network activities began in the 80s. Because the main contractor companies such as Turkish Aerospace (TUSAŞ), MKEK, FNSS were established in Ankara, OSTIM, like an Ecole, assumed an important responsibility for creating the subsidiary industry which would provide services and materials to these companies. They had very important contributions to increase the quality of small-scale companies in OSTIM. At that time, we needed suppliers for these companies to work on their projects, but the technical information and technological infrastructure were not matured enough. With KOSGEB’s initiative, consulting and test laboratories etc., an ecosystem was created in OSTIM, so small businesses in the field of Defence as well as in almost every field started to use OSTIM as a starting point. In the following years, we conducted a serious study and implemented this cluster model to increase the synergy of this existing infrastructure, not only with our executive staff but also by taking support from the advisory boards of universities. This model appears when you look at how it was done by developed countries and competitive countries. While companies compete individually, they can cooperate and collaborate at the same time, bringing their potential to a higher level. Therefore, by analyzing the potential in our region in a detailed way, we pioneered the establishment of clusters in the fields of Work and Construction Machinery, Defence & Aviation, Medical, Energy, Rubber, Rail systems and Communication Technologies in OSTIM. We have achieved very good results from these clusters. For the development of our companies, we have brought our universities, different technoparks, especially ODTÜ  Teknokent to our region and focused on the training of our companies. As the OSTIM Board of Directors and as an institution, we are making great efforts to be a pioneer, bringing innovations in many areas to our region. As we get the results of these efforts, our energy and confidence increase, and we believe more and more in the accuracy of our work. The conducted studies in the Industrial Cooperation Days in Defence and Aviation (ICDDA), the positive bilateral negotiations between the participant companies, the orders they received and the contracts they signed, showed us that it was worth the work, and this gives us great happiness.

Defence Turkey: Let’s expand more on these clusters? What are the leading projects here? 

Orhan AYDIN: We use our current industry experience in the Defence sector. Of course, the Presidency of Defence Industries (SSB) made a serious contribution to the industrialization in Turkey. It is very valuable that the Presidency of Defence Industries is preserving the sector and closely interested in this eco-system which includes the main industry, the SMEs and the Sub-industry as a whole. This sense of ownership is what lies behind the success of the Turkish Defence industry. You cannot see this in other sectors. This is what we are trying to achieve as OSTIM. This is one of the reasons why we set up these clusters. It doesn’t mean anything alone for the companies to do something by themselves, to collaborate or work on joint projects with universities. Public institutions need to protect these studies, guide and personally take part in them. This is what we’re trying to realize in clusters. Within this scope, we have brought the companies in Work and Construction Machinery, Medical Sector, Defence & Aviation, Rail Systems, Communication Technologies, Rubber, and Energy sector together, which we see as a priority in our region, and set up different clusters. We are trying to bring these clusters together with our universities, public institutions, and organizations and increase their existing cooperation. All developed countries adopted this model during their development stage. Currently, these models are still applied in European Union countries, the United States and Japan. We aim to create a collaboration by trying to give meaning to the concept of what we call joint competition.

Defence Turkey: One of the prominent titles of the clusters is renewable energy, what is its contribution to studies in the field of Defence and Aviation? 

Orhan AYDIN: All of the technologies produced under the title of renewable energy can be used (applied) in the Defence industry. For example, the use of solar and wind energy, storage of energy are all possibilities that can be applied in the field of Military and Defence industry. If you ask whether we can apply these new technologies in the Defence industry adequately, it’s not there yet, but we can do it. At the moment, there are similar projects that we carry out with the support of our state. Our energy cluster receives support from the Ministry of Industry and Technology under the cluster support program. They are trying to increase the quality of our companies, localize and nationalize the concepts that Turkey needs.

Defence Turkey: The work carried out in the construction machinery cluster can be applied to the Defence industry in the same way. What are your activities here?

Orhan AYDIN: Both Work and Construction Machinery and tanks in the military use similar systems. You can use all of the abilities you have acquired in this field. Indeed, when you mention work and construction machines, none of the public institutions and organizations in Turkey can operate these machines without coming to us first, the talent pool we gathered here is really this important. For this reason, all major construction companies have supply centers here. The reason is to sustain the maintenance of their machinery and machinery park by taking advantage of the ecosystem here. We can say that OSTIM is an important center for work and construction machinery in Turkey or even for neighboring geographies. 

Defence Turkey: In 2011, you carried out important work as OSTIM especially within the demining process of the Southeastern Anatolia and the Eastern borders. Later on, as a result of the large-scale conflicts in the region, these studies could not be finalized. What kind of studies did you carry out in this regard?

Orhan AYDIN: There were companies that worked on this issue at the time and made intensive efforts to clear the mines from the aforementioned areas. Recently, many companies in our cluster have been interested in the manufacturing of demining machines. We came up with 4-5 alternatives for the construction of demining machines in Turkey. These projects are still in progress and I don’t have any information on the acquisition process. However, OSTIM possess this capability. Our companies made the design of these machines, some of the companies even made prototypes, it’s not something that can’t be done. Also, a number of alternative solutions came from the military factories, these efforts greatly encouraged us and at the moment we are able to manufacture demining machines in Turkey. 

Defence Turkey: The cluster of rubber technologies is one of the remarkable clusters, especially for the defence industry. What are your current studies on the production of raw materials, which are especially dependent on foreign sources, locally and nationally, and their application in defence industry products under this cluster?

Orhan AYDIN: There is not a single part in a machine in which we don’t use rubber. When we look at it, we find rubber in every tool. Rubber is a very critical material, depending on the situation, even the simplest seals that you see can become very critical. We need to improve the quality of our capabilities and produce new alternatives. We are especially dependent on foreign sources for rubber as a raw material. Our companies working in this cluster started to produce significant alternatives. We investigated the alternative sources of this raw material in the world. There are some studies that indicate that it can be obtained not only from rubber trees but from other plants. We held talks with the GAP Administration to find out if we can produce them in Turkey. We look at every field, we scan every area. We are closely following these studies.

Defence Turkey: There are currently 7 sector clusters under OSTIM. In these clusters, there are companies not only from OSTIM but from all over Turkey. Therefore, you have also incorporated companies focused on Research and Development in addition to your companies that produce predominantly mechanical spare parts. What do you see when you look at the proportional distribution of these companies in the clusters?

Orhan AYDIN: There are 6,200 companies in OSTIM. Not all of these companies are included in clusters. When we say cluster, we mean those companies that have developed their own business, increased their competitiveness and are of a certain quality, these are the companies that can be included in these clusters. Because these companies are innovative and aiming to increase their technology, they are included in our cluster concept. OSTIM is the center point for many of our clusters but in the fields of communication technologies and rail systems, we have clusters that will cover all of Turkey. So why are we dealing with them? Because there’s no one else.

Defence Turkey: So, you are trying to bring your clusters and hence your companies to the point where they can produce critical technologies?

Orhan AYDIN: Yes, because of that we are trying to include the universities and technoparks in the system. OSTIM Technical University will be operational. As a result of all these efforts, universities and knowledge need to be more involved in our work. We need to make knowledge-based production, we cannot create added value from traditional production. The goals and expectations of universities do not always coincide with manufacturers. In order to bring the university closer with industry, we are aiming to materialize a model, which has been constantly voiced so far but cannot be realized, in OSTIM as a prototype. Our legal processes are now complete. We’re preparing the location of our campus. In 2019-2020 academic year, this campus will become operational with its Engineering (machinery, electrical-electronics, software, architecture), Business Schools, Vocational Schools, and Technopark. We will be intertwined with the industry and we will be an exemplary university that carries out the projects of the industry. In the future, we will also start the Vocational School of Aeronautics and Space.

Defence Turkey: Can you also tell us about the OSTIM technology center?

Orhan AYDIN: The construction of our two buildings is completed.  One of them is 15,000 thousand square meters and the other one is 9,000 square meters. We started to accept companies and sign contracts. There are many qualified companies operating in the field of Defence and Aviation. We signed a contract with 8-10 companies. In our technology center building, we built a shared workshop on an area of 1,600 square meters that almost everyone could use. Here, we will enable our university students, industrialists, people with ideas and projects to realize their projects. With the European Union project, equipment such as machine tools, which our industrialists do not have to purchase, will be placed here. We will bring an important center to Ankara and feature examples from around the world. With the construction of the building having been completed, now machinery and equipment are being purchased. We will start our activities here no later than within five months.


Defence Turkey: Mr. Mithat ERTUĞ, as OSTIM’s Defence and Aviation cluster, can you inform us about your activities, current number of your members, your areas of activity and the demographic distribution of your members etc.?

Mithat ERTUĞ: As the OSSA Cluster, we have currently 213 members. However, we compare the OSSA cluster with its capabilities, not the number of its members. We have 213 members in our cluster right now. We have members that can use 50 ERP operating systems and have about 60 AS 9100 certificates and plant security certificates. We define the size of our cluster with the number of qualified companies. When we set up the first cluster, we had 2 companies with AS-9100 certificates. The UR-GE (Supporting the Development of International Competitiveness) support of the Ministry of Commerce has made a significant contribution to increase the quality of our companies and to attain this number. Thanks to them, our companies have reached this quality and the engineering capabilities of our companies have improved a lot. The international exports are fully dependent on this certification and this increased our international reputation and recognition. Our cluster has been using URGE support successfully since 2012.

Defence Turkey: What is your evaluation of the OSSA’s position in cluster in the sector since its establishment?

Mithat ERTUĞ: Public, University and SMEs form the basis of the sector. We felt the support of the Presidency Defence Industries. The decision to give a %30 share to SMEs in Defence Industry projects was implemented by the Presidency of Defence Industries. The fact that we have the Presidency of Defence Industries on our side strengthened our project. Today, the share of SMEs in the projects has increased to almost 50% even 60%. As a result of these important decisions, they realized the value of SMEs in our main contractor companies. Before bringing the ICDDA event to Turkey, we had the chance to observe the effectiveness of this cooperation in Mexico for the first time and we evaluated that it could be very successful if we do this event in Turkey, and we brought it to our country. This was already a part of our project.

Defence Turkey: Within the scope of R&D activities, what kind of support have you provided to your members as OSSA?

Mithat ERTUĞ: We try to express this in every platform thanks to the support of KOSGEB and TÜBİTAK, the number of R&D projects has increased. The embargos imposed on Turkey is one of the major factors which increases the number of R&D activities, this in turn, increased the demand. R&D has a great importance in all of the products and systems that are localized. Domestic and national products would not have emerged if R&D studies were not carried out. When demand came from the state, we forwarded it to our members and showed the feasibility of doing so, and thus increased R&D and improved our engineering staff.

Defence Turkey: This, of course, brings along many success stories. Can you give us some examples?

Mithat ERTUĞ: There are many. The firing systems of armored vehicles, which were previously supplied from abroad, are produced here today. There are also those made by the main contractors, but many subsystems are made by SMEs. Development of these systems is carried out by our SMEs. Our members are working on a number of subsystems in the National Fighter Jet (TF-X) Project. We are working on the localization of valve systems supplied from abroad. We said we can do it and aspired to do it and applied for this project. Many localized parts and subsystems are included in the helicopter project. Again, there are many parts localized by our members for the HÜRKUŞ project. Currently, we are focusing on producing the subsystems here. Today we have companies that can develop software and design smart chips. There was a significant gap in the middle of the pyramid where the main contractors were at the top and the SMEs were at the bottom. Today, here, we are filling that gap in the middle.

Two companies will make the Solenoid Valve together. The company that makes the Electric-Electronic part will join the company that makes the valve. A success story will emerge thanks to the two companies that make the Solenoid Valve, which will be used in the National Fighter Jet project.

Defence Turkey: What are the activities of the OSSA for the promotion of its members abroad? In this context, what activities have been planned for 2019?

Mithat ERTUĞ: We participate in almost 80% of the fairs abroad related to Defence and Aviation. We represent Turkey in almost all of the exhibitions abroad such as Farnborough Air Show, Eurosatory, Aeromart, DSEI, and the Paris Air Show. We do not only participate in fairs abroad but in bilateral negotiations as well; we examine new markets such as Brazil, Morocco, Mexico, Pakistan, Ukraine; we attend events and promote our members’ capabilities.

Defence Turkey: You hosted the fourth ICDDA event on October 23-25. In this context, what are your assessments about this year’s conference?

Mithat ERTUĞ: 260 companies from 60 countries participated and 5,700 registered business meetings were held during the event. If you add the unregistered ones on top of this, we can say that many more B2B interviews were carried out. We only evaluate the registered ones, however, there were also as many as unregistered ones as well.

Defence Turkey: Are there any cooperation agreements signed as a result of B2B negotiations? What can you tell us about the feedback from the participants?

Mithat ERTUĞ: We haven’t received any feedback from the participants yet, but we know that the meetings were very good. I visited all the stands individually and got the opinions of the companies and what I saw was 100% satisfaction. 

Apart from the domestic and foreign companies at ICDDA; we were also pleased with the participation of our valuable institutions such as AFAD, MSB General Directorate of Military Factories and Shipyards, Security Forces, Gendarmerie, Presidency of BTK, DMO, Turkish General Staff, Air - Land - Naval Forces Commands, TSKGV, and SaSaD. In addition, military participants from many countries such as the Ministry of Defence Industry of Azerbaijan, Qatar Armed Forces, Brazilian Air Force, Pakistan Air Force, United Arab Emirates, Qatar, and Kuwait evaluated fields of cooperation with Turkish companies during ICDDA.

Companies said the event was very productive. Following the interviews at ICDDA, we consider the possibility of signing a number of business contracts at the Aeromart Toulouse fair in France between 4-6 December 2018. During the event, many of our companies, which declared that they would not participate in Aeromart Prior to the 23-25 October 2018 ICDDA event, informed us they will participate in Aeromart. We are participating at the Aeromart Toulouse event by organizing and planning our meetings in advance.

Defence Turkey: Within the scope of ICDDA, what are your thoughts on the advantages of the B2B meetings for SMEs and Main Contractors? What are your assessments about the development of ICDDA following these four events?

Mithat ERTUĞ: In the beginning, our main contractors thought we were promoting our subcontractors to them and opposed it. We encountered such problems during our first event. After that, they stated that these interviews were actually quite useful, and they added many subcontractors to their portfolios and as a result, they sponsored every single one of our activities.

Defence Turkey: What is the expected date for this event, which is planned to be held for the fifth time in 2020? Have you already decided on the concept of your next event?

Mithat ERTUĞ: After 2013, I declared the dates of all the three events in 2014 and set a definite date. But the date of this last event coincided with other important events abroad, also some similar activities came out in our country, so we changed our date for the event. We pay close attention not to coincide with the dates of international events. We are planning to hold our event on 13-15 October 2020.

Defence Turkey: In the case of public tenders, because of the companies (most of the time these are under-the-counter companies) that offer the lowest bid even at the expense of profit receive the contract, either the companies cannot complete the work, or the project needs to be restarted from the beginning. The companies have complaints about the need for a change in this process. What are your views on this subject, on the industry side?

Orhan AYDIN: We should divide this issue into two as Defence and Civilian Sector purchases. We are in contact with the State Materials Office for civil purchases. Everyone is right regarding this issue. On the Defence side, they are considering an arrangement to categorize the companies as A, B, C with the EYDEP project.

Defence Turkey: Our qualified companies that invest in a certain capability and have the power to increase their investment capacity also have a complaint. For instance, they can say that “Even if I can get the tender with a bid of 4.90TL, I do not want the bid unless I’m given a 5-10-year purchase guarantee.”  At the last TOBB Defence Industry Assembly meeting, the Minister of National Defence, Mr. Hulusi AKAR, raised this issue. Can you share your views on this topic with us?

Orhan AYDIN: It is an issue where these clusters can find the solution and create order together by holding joint meetings and discussions. Otherwise, it cannot be sustained, and we will continue to complain about each other.


Mithat ERTUĞ: In the Defence Industry we have EYDEP project, however, this is a problem that has been plaguing every sector for a long time. Today, you have to receive a manufacturing qualification certificate from the Ministry of Industry. It is highly crucial to operate this mechanism for this issue, if you do not run it correctly, those illicit and unregistered companies will always be on the agenda.

Orhan AYDIN: Cheap price policy is causing a problem here. To increase the quality, we should stop using the cheap price policy (Dr. Demi - Japan in the 1950s).  We need to use this as our slogan.

Defence Turkey: Thank you very much for sharing your insight with us