Defence Cluster Companies Coalesced at the TSSK 6th Project Market

The 6th “TSSK Project Market” was held in Ankara under the auspices of the Presidency of Defence Industries, in cooperation with ODTÜ, ODTÜ TEKNOKENT, Teknokent Defence Industry Cluster (TSSK), Ministry of Trade, TÜBİTAK, Ankara Chamber of Industry (ASO) and the Defence Industry Manufacturers Association (SaSaD), hosting more than 900 visitors

Issue 91 - May 2019

Teknokent Defence Industry (TSSK), the leading cluster of defence, homeland security, aviation and the cybersecurity sector in the field of engineering and design, focused on “export” and “localization” issues during the Project Market event organized for the 6th time this year.

Taking the floor at the opening ceremony of the event, TSSK Chairman of the Board Zeynep ÖKTEM pointed out the contributions of both cluster companies and the defence sector in the context of localization. Stating that they are aiming to contribute to the sustainability of the sector and to eliminate the problems caused by the monopoly of foreign suppliers, ÖKTEM emphasized that localization is the only way to achieve independence in the defence industry.

Referring to the indigenous platforms developed by the Turkish defence industry, Vice President of Defence Industries Mustafa ŞEKER said, “Localization is one of the most important issues. Many sub-systems used on these platforms are of foreign origin. This causes a critical problem for our export activities. We have to focus on localization to provide indigenous solutions.” Mr. ŞEKER stated that the relationship between the main contractor and sub-contractor defence industry companies should be established in a healthy way. In addition, he underlined that they are working on a solution which will improve the capabilities of SMEs to meet the high standard product needs of the sector.

Noting the importance of exports to meet the financing needs in the sector, Mr. ŞEKER made the following assessment: “The global defence export market has an estimated value of US$100 Billion. Around 15 countries generate this figure. The US and Russia are in the first league with the highest market share while countries like Germany, England, and France are in the second league. Turkey is currently in the third league and we are aiming to increase our exports in the long term.” Indicating the exports of the sector have increased continuously in10 years, Mr. ŞEKER stressed that the defence sector should aim higher and spend more time and effort to increase this number.

Ankara Chamber of Industry (ASO) Chairman Nurettin ÖZDEBİR stated that the world is rapidly changing and the surrounding geography of Turkey will be at the center of the new world. Mr. ÖZDEBİR emphasized that the activities of the sector companies are highly vital for the survival of our country. “We need to master these changes by producing higher technologies.” Pointing out that defence industry companies made a significant contribution to Ankara’s ecosystem, Mr. ÖZDEBİR stated that 20% of the national high-tech products are produced in Ankara.

ODTÜ Vice President Prof. Dr. Mehmet ZEYREK also stated that TSSK is continuing its efforts to develop domestic and national technologies that will reduce foreign dependence in the defence industry. Underlining that TSSK members undertake important tasks in large-scale projects such as ANKA, MİLGEM, ATAK, HÜRKUŞ, ALTAY, and GÖKTÜRK, Mr. ZEYREK said, “Moreover, various products developed by our members have started to be used in the defence industries of neighboring countries”.

Following the opening speeches, the program continued with panels and booth visits. “The Future of the Turkish Defence and Aviation Sector”, “Export” and “Localization” issues were discussed in the panels attended by prominent names of the sector.

Moderated by SDT Space and Defence Managing Director Fatih ÜNAL, the Future of the Turkish Defence and Aviation Sector Panel took place before the lunch break with the participation of the following panelists; Head of Fixed-Wing Platforms Department Abdurrahman Şeref CAN, Secretary-General of SaSaD Hüseyin BAYSAK, and STM Deputy General Manager Ömer KORKUT.

Head of Fixed-Wing Platforms Department Abdurrahman Şeref CAN, as the initial speaker of the panel, expressed his views on the issues that the Turkish defence sector should focus on in the upcoming years. CAN also presented brief information about the history of Turkish aviation regarding the importance of the TF-X Project for Turkey. “Our aviation adventure begins in the 1910s with the Balkan War. The Turkish Air Force was among the first aircraft users. Following the establishment of the Turkish Aeronautical Association in 1925, we started to manufacture fixed-wing platforms in different places of Turkey such as Kayseri, Ankara, and Istanbul. In 20-25 years, we produced around four hundred aircraft. However, after 1950 we started to buy existing platforms from foreign countries. This situation continued until the 1974 Cyprus embargo.”

Stating that there are three main issues regarding air platforms, CAN emphasized Turkey’s advantages on these issues. “We approach the air platform from three main points. Design, production, and maintenance. Both the civilian and defence sector have excellent capabilities when it comes to maintenance. We provide services not only for our own platforms but for other countries as well. We have Turkish Technic, an association of Turkish Airlines, working in commercial aviation with around 7,000 personnel and a turnover of US$1 Billion. There is this concept called MRO (Maintenance Repair & Overhaul) particularly in commercial aviation. Turkish Technic is the biggest MRO center in Turkey. There are also other MROs in our region, in the Gulf and in Europe, we live in an extremely competitive world.”

Emphasizing that Turkey has a labor advantage in production, CAN also indicated that Turkey has a remarkable talent in delivery and quality. “When we talk about production, our country has the capability to deliver both platforms and sub-components. Turkish companies, especially TAI, are producing parts for two major aircraft manufacturers. The main reason why our companies are preferred in the international market is the man-hour capacity. We’re very competitive in this field and made significant progress in the last 10-15 years. It is not possible for European and American companies to compete against our prices especially in airframe construction. Turkish companies also have a remarkable talent in on-time delivery and product quality.”

In his speech, CAN also pointed out that the Turkish defence industry has the capability to design its own products. “Our country is capable of designing its own platforms. These are mostly sub-sonic platforms such as UAVs, helicopters, and training aircraft (HÜRKUŞ). We have really improved ourselves in the last 10 years. Almost all our companies started to export products. However, when it comes to transonic and supersonic, we still have a long way to go.”

While discussing the TF-X project, CAN stated that they receive design support from a foreign aircraft company. “The TF-X program is an enormous project. Even the US is developing the F-35 project, which is currently the biggest defence and aerospace program in the world’s history, with the joint support (financial and production contribution) of eight countries. We cannot manufacture and sell TF-X on our own, so it should be and will be a joint program. Therefore, we chose BAE Systems as a sub-contractor of TAI. We describe this concept as Foreign Collaboration Company (FCC). Currently, around 70-80 British engineers are working on TF-X design at TAI. Additionally, the engine is one of the problems that must be solved. We established a company called TR Motor to provide a solution for the engine issue. Moreover, exporting our product is very important for us. We do not accept any restrictions while working with a foreign partner.”

In his speech, SaSaD Secretary General Hüseyin BAYSAK mentioned SaSaD’s suggestions for improving the main contractor and sub-contractor relationship to establish an efficient Ecosystem in the defence sector. Explaining the overall structure of the ecosystem, BAYSAK stated that they are facing a complex network. “We can define the ecosystem as a complex network or interconnected system. In this context, it is evident that we are facing a complex network in the defence sector ecosystem with relevant State Institutions, Ministries, Armed Forces, Procurement Authorities, Sector players (domestic/foreign), and Industrial Assets. Therefore, the procurement process has a very critical role in the sustainability of the main contractor and sub-contractor relationship in this complex network.”

Emphasizing that one of the main duties of each State/Government is to defend the country and ensure the safety of its citizens, BAYSAK said, “ The armed forces and independent defence industry are two powers that stand out the most on this matter. In order to coordinate these two powers in a proper way, we should improve the performance of the defence procurement process. Otherwise, the capabilities of the Turkish Defence Industry will gradually diminish, and the important future projects will be procured from foreign sources.”

BAYSAK stated that they focus on three main suggestions to prevent this situation. “As SaSaD, we have three suggestions to improve the defence procurement process. Defining and implementing defence industry policy, improving the procurement process, and strengthening defence procurement management.”

Expressing his views on the definition and implementation of defence industry policy, BAYSAK said, “ The Defence Industry Policy and Strategy Document was published in 1998 with a decision of the Council of Ministers in order to define the defence-related priorities of the country. According to this decree, the Ministry of National Defence will prepare a list of Critical Technologies & Products and update it every year. Consequently, the industrialists can create an investment road map to develop new products and technologies, acquire new skills, build a workforce and start business partnerships. These strategies and policies will provide national and critical defence industry capabilities to strengthen the sovereignty, security and economy of our country.”

BAYSAK also made assessments on the issues of improving the procurement process and strengthening defence procurement management. “Procurement authorities and industrialists should not only follow the contractual process but manage risk sharing between the state and the industrialist and reflect it in the contracts. Authorities should announce the annual procurement programs (with a deadline and budget) for transparency and contact the industrialists both before and during the program.” BAYSAK emphasized that the procurement management needs to be strengthened to meet the requirements of the Armed Forces in a timely, cost-effective and ingenious way, “A Defence Industry Advisory Council should be established to develop the defence industry and manage the procurement process by providing recommendations and annual reports to the president and the parliament.”

Regarding the export figures of the Turkish defence and aviation sector, BAYSAK shared the following information, “According to the Defence and Aerospace Exporters’ Association data, defence industry exports increased by 17% compared to the previous year and reached US$2.035 Billion. This figure indicates a positive picture in sector performance data, particularly Total Sales Amount, Product-Technology Development and Employment considering the steady increase of 3-4% for two years before 2018.”

The last speaker of the panel, STM Deputy General Manager Ömer KORKUT stated that they contribute to the future of the sector by providing creative and sustainable solutions with STM Thinktech. “STM Thinktech was actually established to fill a gap in Turkey. We aim to shape the future of the civilian sector by introducing new technologies with our 28 years of experience in the defence industry. Since November 2017, we organized three seminars.”

Continuing his speech, KORKUT elaborated STM’s vision and future activities on autonomous systems, artificial intelligence and cybersecurity. Noting that the autonomous systems are used extensively in the world, KORKUT indicated that they have already started to replace conventional platforms. “The platforms are now gradually evolving from manned to unmanned platforms they are getting smaller and more effective. While this is more evident in air platforms, the technology that developing countries now begin to build are smaller unmanned submarines. The land platforms are also shifting towards more agile, smaller, and lethal unmanned systems. This is since robotic technologies with artificial intelligence will replace these conventional platforms. Because they want robots to perform tasks defined as “3D” (Dangerous, Dirty and Dull).”

KORKUT addressed the importance of localization concerning the sub-systems and engines and pointed out solutions in the energy issue. “We have made significant investments in autonomous systems, in the last three years. Our attack drone KARGU has already entered the inventory of the Turkish Armed Forces and National Police. Since we could not buy these attack drones from our allied countries when we needed them, we developed a solution with our own resources. The system entered the inventory in a short period of two and a half years. Our studies on fixed-wing platforms are still ongoing.”

Noting the importance of localization for the sub-systems and particularly the engine, KORKUT emphasized that power supply is another issue to be solved. “The engine is the biggest challenge. Although they may seem like simple components, we still buy the engines that meet our performance specs from foreign countries. The same situation applies to batteries as well. When considering the swarm capability (more than 40 drones), we need sub-components to power these systems. We should acquire the ability to mass-produce platforms locally in high numbers.”

Emphasizing that Turkey needs to be proactive in cybersecurity, KORKUT said, “NATO defines the cybersecurity as the 5th domain after the sea, air, land, and space. If we analyze both world wars, these conflicts always occurred as a result of economic disputes. We are witnessing the manifestations of this in cyberspace now. For example, Australia was hit by an overwhelming cyber campaign in the last month. Cyberwarfare is asymmetrical in its core; thus, we must be proactive against it. We can predict and prevent events in the cyber environment with threat intelligence. So far, we have always considered cybersecurity as cyber defence. However, with the introduction of the hack-back concept (counter-attacking against cyber-attackers), we need to think of the offensive measures as much as the defensive when necessary.

Discussing artificial intelligence in the last part of his speech, KORKUT advised that Teknokent companies should focus on sub-technologies in these three areas with innovative approaches. “Artificial intelligence is indispensable for autonomous systems and unmanned vehicles. It is also a new area of expertise in cybersecurity. There is a severe lack of manpower not only in our country but also in the world. We implement artificial intelligence in our cybersecurity activities to close the workforce gap with innovative solutions and approaches. There is significant business potential in this area. Therefore, we recommend that all cluster members, especially Teknokent companies, should focus on these fields.”

Unlike the previous Project Market events, a special section with a guest speaker was held this year. Attending the 6th Project Market as a guest speaker, historian Prof. Dr. İlber ORTAYLI delivered a speech on the “History of the Turkish Defence Industry.” Thus, the participants had the opportunity to listen to Prof. Dr. İlber ORTAYLI for the first time at a defence industry event.

The project markets allowed more than 200 companies to exhibit their products, and hosted over 4 thousand visitors and prepared the ground for nearly two thousand B2B-meetings so far. This year’s event took place with the participation of 55 companies and more than 900 visitors, holding over 300 meetings.