Sharp Fall in Turkish Defense & Aerospace Exports, as per November Data

As per the monthly export data announced by the Turkey Exporters’ Assembly – TIM, a sharp fall was observed in November in Turkish Defense and Aerospace Exports, following the upward trend in August, September and October, due to the second wave of the COVID-19 pandemic hitting not only the business world but also our daily lives.

Issue 103

he Turkish Defense and Aerospace Industry achieved exports of US$ 191.547 million in November 2020. This figure indicates a 46.8% decrease compared to US$ 360.283 million announced for November 2019, and a decrease of nearly 33% compared to October exports of US$ 287.184 million (calculated as US$ 287.973 million last month). With this export volume, the Turkish Defense and Aerospace Industry was among the sectors that faced the sharpest drop in exports, followed by Hazelnut and Products with -40.9% and Cement, Glass Ceramic and Soil Products with -24%. On the other hand, the annual decline in defense and aerospace exports was 18.4%. According to TIM data, the 11-month export amount was US$ 2.452 billion in the period between January-November 2019, while this figure was calculated as US$ 2 billion in the period between January-November 2020.

However, as per TIM data, despite the decrease in export revenues, the total weight of exported products has steadily increased. Accordingly, the total weight of defense and aerospace products exported in October 2020 was 4.412 tons, while it was 4.813 tons in November. The total weight of defense and aerospace products exported in November 2019 was 3.691 tons. In consequence, a 30.4% increase was recorded in the total weight of exported products in November compared to the previous year. When we look at the 11-month period, there is an increase of 3.7% compared to 2019. According to TIM data, while the total weight of defense and aerospace products exported in the period of January 1 - November 30, 2019 was 39.160 tons, this figure was approximately 40.606 tons in the same period of 2020.

When we look at the monthly breakdown of the Turkish Defense and Aerospace Industry total exports worth US$ 2 billion in the first 11 months of 2020, it is US$ 166.853 million in January, US$ 173.864 million in February, US$ 141.696 million in March, US$ 160.663 million in April, US$ 112.402 million in May, US$ 167.259 million in June, US$ 139.608 million in July, US$ 177.409 million in August, US$ 281.551 million in September, US$ 287.184 in October million and US$ 191.547 million in November. When we compare these figures with those of 2019, we see there was a significant decrease in sales, especially since March (March 2019 figure is US$ 282.600 million), and in the 3-month period since August, it exceeded the 2019 figures (US$ 175.315 million, US$ 156.463 million and US$ 258.091 million, respectively), and then a substantial decrease in November with the impact of the COVID-19 outbreak, contrary to expectations. We hope that defense exports will exhibit an upward trend again in December and it will be possible to close this year at US$ 2.5 billion. According to TIM data, the industry’s total export value was approximately US$ 2.741 billion in 2019.

The fact that our defense and aerospace industry companies have signed a number of export agreements in recent days despite the pandemic indicates that there will be a potential increase in the export of defense and aerospace products in the coming period. Within this context, Simsoft signed a contract with a Far East country for the development of an air defense weapon system simulator in September, while Otokar announced that two separate contracts were signed in October and early November with two African countries for the sale of ARMA 8x8 and COBRA-II TTZA (US$ 110 million) and the sale of COBRA-II TTZA (US$ 25 million). Katmerciler, armored vehicle manufacturer, exported US$ 3.25 million worth security vehicles to an undisclosed country in September. The company had previously announced its export revenue target as US$ 45 million by the end of 2020. Aselsan, on the other hand, awarded an export contract with a total value of € 118 million for the sale of a defense system solution with an unnamed international customer in early November. Since high added value, indigenous design and production platform-based export has been adopted instead of product-based export (export to an undisclosed country is on the agenda nowadays as a package consisting of subsystems such as public security, cyber security and vehicle tracking systems), it is possible to achieve high export figures in a single batch.

When TIM export data is examined, the top 15 countries to which the Turkish Defense and Aerospace Industry conducted exports between January 1 and November 30, 2020 are: USA (US$ 688.093 million), Azerbaijan (US$ 255.650 million), UAE (US$ 188.203). million), Germany (US$ 144.504 million), India (US$ 127.254 million), Oman (US$ 74.449 million), Qatar (US$ 43.561 million), Netherlands (US$ 39.361 million), United Kingdom (US$ 38.025 million) ), Indonesia (US$ 27.590 million), Bahrain (US$ 25.503 million), Russia (US$ 25.339 million), Poland (US$ 22.650 million), Pakistan (US$ 20.925 million) and France (US$ 20.818 million).

As in the previous month, Azerbaijan maintained its second place position among the top 15 export countries in November. Due to the operation in the Nagorno-Karabakh region, which was initiated against the Armenian forces occupying Nagorno-Karabakh and ended on November 10, 2020 with the Ceasefire Agreement signed by the President of Azerbaijan Ilham ALİYEV and the Armenian Prime Minister Nikol PASHINYAN under the mediation by Russian President Vladimir PUTIN, Azerbaijan had speeded up the procurement of defense and aerospace products from Turkey. Defense and aerospace industry product exports to the brother country Azerbaijan are expected to continue in December as well. However, according to TIM data, exports to Azerbaijan were nearly US$ 31.415 million in November, representing a 69% decrease compared to the US$ 101.209 million export in October. Exports amounted to US$ 101.209 million to Azerbaijan in October and this corresponds to approximately 36% of the total monthly exports, while the US$ 31.415 million exports in November accounts for nearly 16.5% of the total monthly exports. The 11-month export amount of US$ 255.650 million, on the other hand, corresponds to 12.5% of the total annual exports. Amid the clashes that started with the attack by Armenia on Azerbaijan on September 27, 2020, Azerbaijani Armed Forces inflicted heavy blows on Armenian forces also with the support of the weapons produced by the Turkish Defense and Aerospace Industry companies such as BAYRAKTAR TB2-S A-UAVs, MAM-L and MAM-C Smart Munitions, Laser Guidance Kits and artillery rockets. Otokar's RABDAN 8x8 ZMA Project took the lion's share of the US$ 188.203 million exports to the UAE. The FNSS product KAPLAN MT Medium Tank and the Aselsan product ZARGANA Torpedo Counter Measure System and ZOKA Acoustic Torpedo Countermeasure Jammers and Decoys constituted the US$ 27.590 million sale/delivery to Indonesia (ZOKA effectors to be used in Type 209/1400 Class Submarines were delivered to Indonesia in October). I really wonder about the scope of the defense and aerospace exports to the Russian Federation worth US$ 25.339 million.

Another point that attracts my attention on TIM's export report is that there has been no substantial increase in defense and aerospace product exports to Pakistan despite the JINNAH Class Corvette contract (the construction of the two ships has already started). Export to Pakistan in August 2020 amounted to US$ 405 thousand, while the total export amount was US$ 15.964 million in January-August period. In September, it was US$ 2.965 million and US$ 18.930 million in January-September. In October, the export amount was US$ 1.275 million (whereas US$ 33.501 million in the same period of 2019), and US$ 20.205 million in the January-October period (representing a decrease of 42.16% since this value was US$ 34.935 million in October 2019). The export amount of defense and aerospace products to Pakistan in November was calculated as US$ 719 thousand. I think the export figures given here resulted from the delivery of the products of the AGOSTA-90B Submarine Half-Life Modernization project carried out by STM and the delivery of the products of Turkish Defense and Aviation Industry companies to the Pakistan Navy under this project, plus the ALPER LPI Radar and ARES-2NCL Extended EDT/ESM System orders to be delivered by Aselsan for different platforms under separate contracts. 

When we look at the breakdown of the Turkish Defense and Aerospace Industry exports of US$ 2 billion in the first 11 month of 2020 on the basis of country groups, we see the following figures: African Countries US$ 41.092 million (-44.3% decrease compared to 2019), EU Countries US$ 320.751 million (-38.7% decrease compared to 2019), Commonwealth of Independent States US$ 313.168 million (68.6% increase compared to 2019), Other American Countries US$ 28.789 million (264.3% increase compared to 2019), Other Asian Countries US$ 152.307 million (74.3% increase compared to 2019), Other European Countries US$ 12.972 million (-65.9% decrease compared to 2019), North America Free Trade US$ 705.954 million (-8.5% decrease compared to 2019), Oceania Countries US$ 5.577 million (-4.5% decrease compared to 2019), Middle East Countries US$ 356.887 million (-45.2% decrease compared to 2019), Far East Countries US$ 59.840 million (29.4% increase compared to 2019) and Free Zones US$ 2.678 million (-95.7% decrease compared to 2019).