TOBB Defence Industry Assembly Gathered in Ankara on April 9th

Issue 91 - May 2019

The 40th TOBB Defence Industry Sector Assembly Meeting was held at the TOBB Twin Towers in Ankara on April 9, 2019 with the participation of Vice President of Defence Industries Celal Sami TÜFEKÇİ, TOBB Board Member Mehmet BÜYÜKSİMİTÇİ, TOBB Deputy Secretary General Cengiz DELİBAŞ, TÜBİTAK President Hasan MANDAL and the representatives of the defence industry sector assembly members. In the meeting, the brief about sectoral problems was presented by ministries, sectoral economy councils and employment campaign, new incentives and support for 2019 were announced and the outputs of the TOBB defence industry assembly meetings were discussed. The President of the Defence Industries Prof. İsmail DEMİR attended the final session of the meeting and addressed the sector assembly members. 

Taking the floor at the opening of the Defence Industry Sector Assembly meeting, TOBB Member of the Board Mehmet BÜYÜKSİMİTÇİ saluted the members of the defence industry sector assembly and expressed his best wishes to all sector members by adding that the defence industry sector assembly has been one of the most hardworking sector assemblies. 

In his speech, Vice President of Defence Industries Celal Sami TÜFEKÇİ underlined that the TOBB defence industry sector assembly meetings held under the guidance of the Presidency of Defence Industries led to quite effective outputs and added, “By gathering a minimum of twice a year, at these sector assembly meetings, we seize the opportunity to exchange our views on various issues. As you know, here we built the Defence Industry Eco-System Platform. We gather bi-weekly with our shareholders in this platform. Participants from the Ministry of Industry and Technology and TÜBİTAK take part in this platform as well. So far, we completed our ninth meeting. Soon, we will be conducting our executive council meeting with the participation of our President of Defence Industries”. 

Stating that the leading companies of the defence industry such as Aselsan, Havelsan, Roketsan, TUSAŞ, STM collaborated with rather small scaled SME companies within the scope of the eco-system built under the guidance of the Presidency of Defence Industries, TÜFEKÇİ added, “

Here, we aim to make SMEs, which we define as the sub-layer, the second layer of the pyramid, provide value-added subsystems as part of this eco-system. In this platform, we endeavor to reveal new methods to enrich this structure with the feedback we received from the clusters, other relevant foundations and associations”.  

TÜFEKÇİ: “We launched the implementation of the Industry Product and Technology Acquisition concept” 

Noting that they currently have 650 projects in their portfolio and that the total size of the signed and to-be-signed projects approach a value of US$ 80 million, TÜFEKÇİ added that they assessed that a standard industrialization model would not be compatible for launching such projects, adding that they launched the implementation of different mechanisms to this end. TÜFEKÇİ: “According to the former method, we used to say that there would be for instance a 70% contribution to industrialization. We still have not quit doing this. We used to receive guarantees in the old days, we forced the companies which could result in a difficult process experienced by the contractors in the aftermath. In our sectoral strategic document which we prepared in the previous period, we stated the following to all of our departments until the end of the strategic planning period. We told them to own a minimum of three sub systems in their own fields and to assign them to indigenize these sub systems. We cannot assign just the department of industrialization to handle the process”.

Underlining that they decided upon a change in the SK/O (Industrial Participation/Offset) contracts signed at the Industrialization Department, TÜFEKÇİ said, “We will include these in the contracts of our main project departments. In line with the directive of our Presidency of Defence Industries introducing a change in this area, and we made a change. We started to implement the Industry Product and Technology Acquisition concept within this scope”. 

TÜFEKÇİ expressed that there were many non-sector companies wishing to invest in the Defence Industry and added that they aimed to form a structure to gather the investors and industrialists to this end. TÜFEKÇİ said, “There are many non-sector companies wishing to invest in the Defence Industry. Within this scope, we will establish an investment evaluation council and we are building a structure to gather the investors and you with a different type of cooperation model. On the other hand, we are focusing on EYDEP activities as well. We launched an inventory study to form the Defence Industry Capability Inventory but it will not be a standard inventory. We will register the capabilities of our Large and Small scaled companies, yet it will not be a static inventory. We have a defence industry taxonomy which we publish under the guidance of the R&D and Technology Department. We launched a taxonomy study nearly two years ago in order to generate a common language in these categories. We completed this activity a year ago. We should use this taxonomy to classify the technological competence and build a human resources inventory as well. In our inventory we will be able to see the taxonomy classes that each company skill/ class is categorized in and their levels of expertise”. 

TÜFEKÇİ: “We built a credit support system of TL 150 million for our Small Scaled SMEs based upon the Defence Industry Executive Committee’s Decree”  

Stating that they recently formed TL 150 million in credit mechanism geared towards the SMEs active in the Defence Industry, TÜFEKÇİ said, “We established a credit mechanism in line with a Decree of the Defence Industry Executive Committee (SSIK) and with the support of the President of the Republic of Turkey. Commissions, required for this credit support of TL 150 million from which our small scaled companies will benefit more, were established and our colleagues are working on the assessment process”. 

Pointing out that there is a council for indigenization, which includes the Commanders-in-chief of the armed forces and the relevant ministries, and it is focused on resolving the issues faced in the sustainment of the products in the inventory of the Turkish Armed Forces Command, TÜFEKÇİ added that the efforts of the aforementioned council for the indigenization of these required products continue. TÜFEKÇİ underlined that a resource of TL 300 million was allocated to R&D in Turkey and he then concluded his speech by adding that they aim to increase this figure further in the upcoming period. 

Following the opening remarks, Defence Industry Sector Assembly President Yılmaz KÜÇÜKSEYHAN informed the sector assembly members on the views submitted to the ministries regarding the period in review by the sector assembly member companies, the activities conducted and presentations made at the Sectoral Economy Council that ocurred on February 25 with the participation of many ministers. 

KÜÇÜKSEYHAN stated that the notified authorities and shared their solution suggestions with the relevant ministries regarding the problems faced; issues especially regarding the high interest rates of bank credit, the fall in markets experienced in the Middle East, Far East and Africa, the challenge of Brain Drain and the insufficiency of the support given to Defence and Aerospace Industry events. KÜÇÜKSEYHAN expressed that they introduced their following solution suggestions to the relevant authorities as follows: Regarding the high interest rates of bank credit, if an arrangement can be made for contracts so that there is need for credit, such as payment plans that are balanced with advance payments and stage payments. Regarding the market decline in the Middle East, Far East and Africa, visiting the procurement authorities in these target markets, execution of implementation for intergovernmental sales. Regarding ‘brain drain’ problems, supporting the Presidency of Defence Industry Eco-System Coordination platform activities, and regarding the insufficiency of defence and Aerospace Industry event support, the identification of fees associated with renting a stand for SMEs at IDEF 2021 and also increasing the incentives for the participation in international fairs. 

Following the address of the TOBB Defence Industry Sector Assembly President Yılmaz KÜÇÜKSEYHAN, TOBB Deputy Secretary General Cengiz DELİBAŞ made a presentation on the ‘Employment Campaign of 2019’. Within the scope of the employment campaign of 2019, DELİBAŞ mentioned that they launched the implementation of incentives under 8 main titles: New employment wage support (3 months) (until May 2019), New employment Social Security Institution Premium tax support (minimum 12 months), Short – term working allowance, Minimum Wage Support, Support for Regular Payment, Additional support to Development, First on-the-job support then Employment support and Full support for training qualified manpower in line with requirements and shared the details with the sector assembly members. 

After the networking break, another topic of the meeting’s agenda was the final status of the activities conducted within the scope of topics of the agendas of the Ministry of National Defence (MSB) Kırıkkale Defence Industry Assembly Meeting held on 30 October 2018 and the MSB/Presidency of Defence Industries Eskişehir Defence Industry Assembly Meeting on 28 January 2019, the resolved and ongoing issues were shared with the sector assembly members with a briefing from Defence Industry Sector Assembly by President Yılmaz KÜÇÜKSEYHAN. 

KÜÇÜKSEYHAN stated that the problem with guarantee letters continued, adding that the credit interest rates were still too high and underlined the negative effect over the costs shouldered by the industrialists. KÜÇÜKSEYHAN: “At the meeting held on October 30th, our sector assembly members made various presentations and certain issues were introduced to our dear Minister at that meeting. Unfortunately, the support provided to the SMEs for the IDEF event is insufficient. Therefore, our small scaled companies have failed to appear in such events. Personnel expenses, stand rentals, logistical expenses altogether cause a great burden for our companies. This high value add sector needs to receive more support”. 

Moreover, KÜÇÜKSEYHAN said in the meeting that they presented the following issues to the Ministry of National Defence: SMEs active in the defence industry making contracts with foreign currency, facilitating access to STANAGs, facilitating the acquisition of facility security clearance, the requirement for technical staff with international certificates who are trained with hands-on training, organizing the tender specifications in a way to enable competition, implementation of legal filters enabling the exceptional application of urgent procurement method, insufficiency of the staff related with the defence industry’s intellectual property rights and the patent violations emerging with the increase of technological competence. KÜÇÜKSEYHAN also shared with the sector assembly members that STANAGs regarding these headlines started to be published on the official website of the Ministry of National Defence, and he added that they launched the activities related to indigenization, the facility security clearance and production license processes were also facilitated and the products that do not require production license were removed from the list subject to control. 

Yılmaz KÜÇÜKSEYHAN also informed the audience on the issues discussed within the scope of the agenda of 39th Turkish Defence Industry Assembly Meeting held on 28 January 2019 with the participation of the Minister of Defence Hulusi AKAR. KÜÇÜKSEYHAN also mentioned various issues in the presentation, introducing these topics to Minister of National Defence Hulusi AKAR.  Issues such as the collection of companies capable of manufacturing main systems, sub systems, parts and equipment that may be employed in civil aviation vehicle projects within an inventory, providing incentives for investments and certification, structuring of the special incentive implementations for investments for companies to be identified/ selected in space/satellite areas through consolidation of the requirements stated in the space road map and future projections, participation of industry representatives in the Turkish Space Agency and its councils, Turkey’s establishment of its own PMA, encouraging the domestic production of highly qualified machine tools, acquisition of the capacity to manufacture the raw material required in Defence and Aerospace. KÜÇÜKSEYHAN also added that they received instruction to arrange a more extensive meeting in line with the instructions of the Minister of National Defence. 

Upon the completion of the presentations, President of the Defence Industries Prof. İsmail DEMİR attended the final part of the program and delivered a speech addressing the sector assembly members. Prof. DEMİR stated that critical issues were examined at the TOBB Defence Industry Sector Meetings previously held with the participation of the Minister of National Defence for discussing the sector’s problems and said, “Our Minister of National Defence is closely concerned with the problems of the sector. Launching the instructions of the executives may take time due to the bureaucratic circumstances. Bureaucracy creates obstacles. At this point, we have to talk about the feedback, to what extent they were actualized, the changes required to resolve problematic areas with your contribution. Because I believe that awareness needs to be created in order to launch the well-intentioned approaches and initiatives”. 

Mentioning that they expected the support of the sector’s shareholders for the execution of the Industrial Competence Assessment Program (EYDEP), Prof. DEMİR said, “The feedback from your party is quite critical at this point, training was provided, the companies were audited by our auditors. Certain expectations were created in the audited companies. The steps required regarding the actual expectations from the projects should be completed. We need to take rapid steps regarding support, training and cooperation. We believe that this project will clear the way for Turkish companies on a global scale”. 

Stating that they also attached great importance to the inventory studies supporting the EYDEP program, Prof. DEMİR added that they aimed to benefit from the defence industry capabilities to the maximum extent.

Prof. DEMİR underlined that they planned to make maximum use of military factories and the capabilities of the shipyards and added, “The correct analysis of these capabilities and this structure, reaching their actual potential, identification of idle capacities and activities to improve these should be conducted. Our advice to our colleagues working here is to initially focus on these improvement activities”.