The message of Öner Tekin, Chairman of the Board of SaSaD, and General Manager of AYESAŞ and Vestel Defence, for the 200th issue of the Turkish language version of MSI TDR:
MSI TDR, throughout its Turkish edition’s 16-year and 200-issue history and addition of its English edition, has been making important contributions to the development of the defence and aerospace sector, and of other sectors within the ecosystem, by providing the information it obtains from various sources around the clock, and enlightening its readers with accurate and timely news. We congratulate the magazine on behalf of our industries, with full appreciation of the contributions it has made; we wish it continued success.
When we take 2004, the foundation year of MSI TDR, as a reference point, we see that the Turkish defence and aerospace sector gained significant momentum between 2004 and 2019. The expansion and development achieved in that 15-year period has also caught the attention of other countries around the world. As stated in the following lines, this improvement will be demonstrated in fractional increments. As can be seen from Turkish defence and aerospace sector data, Turkey can be classified among the countries with a developed defence sector. Considering the top 15 countries in the defence sector in terms of various parameters, such as exports, R&D spending and production figures in particular, Turkey is placed among the top 10 countries, and can be considered to have a dynamic defence sector, based on my own assessment.
On the list of the world’s largest 100 defence industry companies that is announced every year, the number of companies on the list from each country is also announced. In the rankings based on 2019 data, we find Turkey in 6th position, with seven Turkish defence and aerospace companies on the list, each of which is a member of Defence and Aerospace Industry Manufacturers Association (SaSaD). These companies are: ASELSAN, Turkish Aerospace, BMC, Roketsan, STM, FNSS and HAVELSAN.
Global defence expenditures reached US$1.914 trillion in 2020. Our industry works relentlessly to ensure the perpetuity of our country and the prestige of being a global powerhouse. We firmly believe that these efforts will continue for many years with the contributions of the Ministry of National Defence (MND), the Presidency of Defence Industries (SSB), and other relevant ministries, institutions and organisations, and especially with the official incentives and personal support of our President.
The COVID-19 pandemic, which is affecting the entire world, will undoubtedly affect our sector. When we can collect the data for 2020, we will have a clearer picture of the situation. The sector, however, has a dynamic structure and endeavours not to lose momentum, gained from incentives and support. What we have observed so far is that our sector is the one that has been least affected by the pandemic, when compared to those of other countries.
The MND and SSB have made significant achievements in the development of a state-of-the-art defence sector and the modernisation of the Turkish Armed Forces (TAF). The directive for domestic production of national systems has strengthened the dynamic structure of the sector.
Although the performance figures for 2020 have yet to be compiled, we expect similar figures to those seen in 2019, despite the COVID-19 outbreak. We firmly believe this expectation will be realised thanks to the steps taken to ensure the healthy continuity of the ecosystem by the support of SSB and other relevant institutions, and the studies carried out within the framework of this concept.
As one of the architects of a strong Turkey, the SSB makes the necessary moves in defence and security technologies for Turkey to assume a leading and guiding position in the international arena. We in the sector follow with great interest the studies and activities of SSB as it works to best meet the needs of defence sector with changing and continuously improving technologies, both in its region and around the globe.
Figures Reveal the Progress
I would like to explain how the Turkish defence and aerospace sector has developed over the years in numbers.
When Table 1 is examined, two points stand out. First, since 2002, significant increases can be seen in the performance figures. It can be understood that the Turkish state attributed particular importance to the development of the sector from that year on. Indeed, the number of SSB projects that reaches to 600 is a welcome indicator of the future of the sector.
The institutions and organisations within the Turkish defence ecosystem are the leading supporters of TAF and the security forces in their performance of security tasks and cross-border operations.
The second point that draws attention is the sudden increase of the figures from 2011 onwards, as a result of the inclusion of the data from the civil aviation and space sectors in the sectoral data which was a decision of our Board of Directors approved by SSB.
According to the most recent data we have, the Turkish defence and aerospace sector carried out intensive work in 2019 to meet the operational needs of the security forces.
In 2019, the sector’s turnover (Total Sales) amounted to $10,884,081,347, representing an increase of 24.23 percent from the 2018 figure. The Compound Annual Growth Rate (CAGR) for the last five years has been 16 percent, indicating significant development and growth. The increasing demand due to the operations carried out by our security forces, as well as the highly satisfactory export figures and the related Foreign Sales Revenues, have played a significant role in this growth.
The greatest share of the sector’s turnover belongs to land systems segment, which generated total sales figure of around $3.5 billion, followed by military aviation ($2.4 billion); civil aviation ($1.84 billion); and weapons, ammunition and rockets/missiles ($966 million) segments.
SaSaD reports take into consideration foreign exchange earnings from the engineering, training, maintenance/repair, etc. activities carried out by the sector abroad, as well as the export revenues of the sector. Foreign currency earnings and export figures are grouped together under “Overseas Sales Revenues”.
The export figures announced by the Defence and Aerospace Industry Exporters Association (SSI) also matches “Overseas Sales Revenues” since it includes all the defence and aerospace products that are exported with a Customs Tariff Statistics Position number . In addition, the revenues generated from foreign currency earning services are also added before the figures are reported. As a side note, the SSI and SaSaD have signed a cooperation protocol that will contribute to the development of the sector with incentives provided by the SSB.
In 2019, Overseas Sales Revenues amounted to $3,068,519,809, representing an increase of 40.21 percent from the 2018 figure. While $2,741 billion of this came from exports, $327 million was from foreign currency earning services.
The sectoral exports, on the other hand, reached $2,740,988,087, marking an increase of 34.6 percent on the previous year.
This increase in Overseas Sales Revenues, excluding offset-related markets such as the United States and Europe, is of particular importance. The establishment of potential markets outside the offset markets, indicates the success of sector in marketing and business development. Over the last five years, the CAGR of Overseas Sales Revenues has been 10 percent. This is an important indicator of the role that the sector plays in the global markets.
The fact that our exports meet imports fully, and around 30 percent share of exports in total turnover , can be considered as a proof that the efforts of the sector create a significant amount of added value. 47 percent of the imports were made from Europe, 45 percent from the United States and 8 percent from other countries. These figures necessitate that the sector should give priority to diversifying the sources of supply, and identifying resources that are not subject to such control regimes as ITAR.
,Table 1. Brands of the Turkish Defence and Aerospace Sector
|% Change Compared to the Previous Year||Exports||% Change Compared to the Previous Year||Equities||% Change Compared to the Previous Year||External Source||% Change Compared to the Previous Year||Total R&D Expenditure||% Change Compared to the Previous Year|
The fact that the highest share of imports are made by the military and civil aviation sectors ($648 billion and $564 billion, respectively) while this amounts to around $400 billion for land systems, draws attention to the fact that our aerospace sector is highly dependent on external sources.
The actors in our sector are carrying out basic research studies at a very limited level, with efforts focused on product and technology development. For this reason, we use the term Product and Technology Development Expenditures instead of R&D Expenditures.
Positive developments have been also observed in the product and technology development studies conducted in our industry, in which expenditures amounted to $1,672,052,468 last year, marking an increase of 15.44 percent over the 2018 figure. While $1,423,067,193 of this amount was spent on Product Development, $248,985,275 was spent on Technology Development. Of the total Product and Technology Development expenditure, 19.8 percent ($331,291,055) is equity expenditures.
Of the total Product and Technology Development expenditure $1,340,761,413 is spent through project financing . This figure is a clear indicator of the extent of the importance attributed to the sector by the Turkish state. When we look at the total figures, equity expenditures saw a 14.7 percent increase when compared to the previous year, while project financing resources increased by 15.6 percent.
The new orders received by the sector over the course of the year decreased by 12.56 percent, representing a value of $10,671,519,679. Despite of this decrease in the new orders, it is important to note that there is still a significant number of projects to be carried out by the sector.
While 60 percent of new orders came from the domestic market, 19 percent came from the United States, 6 percent from Europe and 15 percent from other countries. Of the overseas orders, 71 percent were received from companies abroad and 29 percent from end users. Meanwhile, 67 percent of the orders received from the domestic market came from end users and 33 percent from companies.
Employment in the sector increased by 9.71 percent from 2018, totalling 73,771 in 2019. Of these, 25 percent are engineers, 48 percent are technicians/operators, 2 percent are managers, 10 percent are administrative/financial management/procurement staff with a bachelor or higher degree and 16 percent are support/administrative/unskilled staff with lower degrees.
Of all the employees, 43 percent work in production and 21 percent in product and technology development. While 65 percent of the engineers have an undergraduate degree, 31 percent have a graduate degree and 4 percent have a doctoral degree. Of administrative/financial management/procurement staff, 78 percent have a bachelor’s degree, 21 percent have a postgraduate degree and 1 percent have a doctoral degree.
Our Focus is on Exports
To conclude, I would like to emphasise the following point: the performance shown to date encourages us to fully believe that our sector will progress further.
I am confident that our sector, which we are striving to make completely export-oriented, will keep scaling new peaks with export targets that will elevate our country to higher ranks, thanks to new technological developments and appropriate strategies.
I would like to take this opportunity to extend my congratulations to the entire MSI TDR team as it publishes its 200th issue of the Turkish edition, and look forward to their continued contribution to our sector.
Chairman of the Board of Directors at SaSaD
AYESAŞ and Vestel Defence General Manager