Defense Exports in 2011 of Turkey

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Turkey’s defense industry, a prominent maker of armored vehicles, is seeking new businesses that will double the most recent export figures. The official Undersecretariat for Defense Industries is establishing a defense export support agency to help achieve the government’s high goals. Turkey’s defense exports mainly focus on Middle Eastern, Central Asian, South Asian and smaller European countries

Turkey’s thriving defense industry could export $1.5 billion in goods this year, an all-time high for the country which nearly doubles the $832 million in exports from 2009.

“We are expecting larger payments accruing from previous contracts this year,” said one senior official from the Undersecretariat for Defense Industries,or SSM. “Plus, there will be substantial receipts from contracts signed last year and to be signed this year.”

Turkish defense industry exports stood at $200 million five years ago. Official and industry figures both point to a visible rise in international competitiveness for the sector. According to Turkey’s Association of Defense Industry Manufacturers, or SaSaD, local industries exported systems worth $669 million in 2009, up from $576 million in 2008.

SSM’s official exports figure for 2009 was $832 million, but this figure included offsets for the country’s civilian aviation industry. SaSaD counts only defense exports.

An offset, a type of compensation made by a company to a foreign country in exchange for the purchase of the company’s goods or services, can take the form of a contract awarded to a local company in the customer country.

The SSM official said boosting the sector’s export performance was a strategic goal for the government. To achieve that goal, the SSM was establishing a “defense export support agency.”

“We are negotiating any potential deal that may benefit Turkish manufacturers with other countries,” he said. “After the export agency has taken off, it will be tasked to facilitate and negotiate deals on behalf of the Turkish industry.”

Target countries

Industry sources said primary target countries for exports included mostly Middle Eastern, Central Asian, South Asian and smaller European countries.

Sectors where Turkish firms may be most competitive include armored vehicles, electronic systems and software, naval platforms and aerospace. One potential top exporter is Turkish Aerospace Industries, or TAI, which has already sold major civilian aviation equipment under offset arrangements with U.S. and European aircraft manufacturers, including Lockheed Martin, Boeing and Airbus.

The Turkish defense industry’s most successful sector in terms of exports is armored vehicles, with companies Otokar and FNSS both having secured contracts worth more than $1 billion in the last couple of years, including deals worth $850 million with Saudi Arabia alone last year.

Last year, FNSS reached a joint-production deal worth $500 million with Malaysia. As part of this contract, FNSS will sell 48 armored combat vehicles, the Adnan, to Malaysia.

Former Soviet republics are the latest addition to Turkey’s defense export clientele. Turkmenistan signed a 55 million-euro deal in 2010with Turkey’s Dearsan shipyards for two new-generation patrol boats to be used in the Caspian Sea.

One large recipient of Turkish defense equipment is Pakistan, whose older U.S.-built F-16 fighter jets are being modernized by TAI with U.S. permission. Turkey’s military electronics firm Aselsan is selling wireless equipment to the Pakistani army.

At the same time, TAI has also upgraded Jordan’s older F-16 aircraft while Otokar secured a $24 million deal for armored vehicles for Azerbaijan.

Turkey is also aiming to export billions of dollars in attack and utility helicopters. Under a multibillion-dollar deal with AgustaWestland of Italy for co-production of 60 T-129 attack helicopters, both companies hope to sell dozens of gunships to other countries, but no concrete steps have yet been taken.

Similarly, Turkey will soon choose between AgustaWestland and U.S.-based Sikorsky Aircraft for the co-production of 109 utility helicopters for its armed and security forces. Turkey, together with the winner of this multibillion-dollar contract, plans to produce scores of utility platforms for third countries.

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