February 13, 2017    5 minute read

The Defence Industry: Turkey’s Secret Economic Weapon

Aiming High    February 13, 2017    5 minute read

The Defence Industry: Turkey’s Secret Economic Weapon

Turkey’s economy started staggering after more than a decade of steady growth. The glory days of decreasing the country’s inflation rates from over 70% to less than 10% in only a couple of years, while employment rates and exports grew and tourism industry boomed, now sound like history.

From 2002, when the AKP (the Justice and Development Party) first came to power, to 2012, Turkey’s exports more than quadrupled, rising from $36bn to $152bn. However, business confidence in the country is at its lowest point since 2010 and investors are anxiously trying to estimate whether the Turkish economy will be as stable over the next 15 years under Erdogan and the AKP as it was over the last 15.

As Turkey gets more involved in regional politics (especially in Syria and Iraq), witnessing IS and PKK (Kurdish separatist) attacks in major Turkish cities, and approaches a presidential referendum in April, the future of Turkish economy is far from certain. But there is a promising industry in Turkey that has been growing at a rate faster than any other for the past decade, and it could turn the tide.

The Turkish Defence Industry

The Turkish defence industry has been going through a transformation over the past decade. Ankara has a defence budget of approximately $18bn a year, but the country is moving from arms procurement to manufacturing and sales, and it has a growing of portfolio of weapons and defence systems on the market.

Turkish Defense Industry Products 2015-2016 is an impressive 196-page catalogue. From tanks to military drones, rifles to riot control vehicles, the extensive catalogue of defence products is a strong statement of a potential arms manufacturing giant in the making.

Turkish Aerospace Industries (TAI) and ASELSAN, two Turkish defence companies, are already listed among the world’s top 100 defence companies. The growth of this industry is not only a moneymaker for the country but can also afford Turkey huge savings in weapons imports, which total $2bn-2.5bn a year. In other words, it is a win at home and abroad.

$1.2bn was the defence industry’s contribution to the Turkish economy in 2015

For example, over the past couple of years, Turkey has started modernising its tank forces from the ageing fleet of American M48 and M60s and German Leopard I and IIs with Turkish made Altay tanks (MBT). The Turkish military has also been using Bayraktar TB2, a Turkish drone, in its military surveillance missions since 2014.

Turkey’s Arms Sales: Home and Away

Besides its use for the Turkish Armed Forces, Turkey’s defence industry is also receiving international recognition and contributing to the country’s exports at an exponential rate. Turkey’s weapon sales were close to non-existent in the early 1990s. By 2015, weapons sales alone totalled $291m, and in the same year the defence industry contributed over $1.2bn to the Turkish economy.

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While the industry’s growth rate is impressive, Turkey is still far behind its global competitors. In 2014, the United States sold over $10.4bn worth of weapons, followed by Russia with $5.4bn – more than all Turkey’s weapons exports between 2005-2015 combined.

However, if the Turkish weapons industry maintains a similar growth rate over the next decade and meets its goals of starting to locally manufacture warplanes and ships while growing both its product portfolio and customer base, it could well become one of the backbones of the Turkish economy.

Turkey Aims for Self-sufficiency

“Our goal is to completely rid our defence industry of foreign dependency by 2023,” said Turkey’s President Erdogan. It is an ambitious target for the republic’s centenary, and unless Turkey defence locally manufactures fighter jets and warships in the next six years, the target will be nothing but a dream.

Turkey’s geopolitical location is one of the most strategic ones in the world. The country shares an 1153km border with Syria and Iraq and is the easternmost NATO member, with close proximity to many of the conflict areas in the Middle East and North Africa. Currently, the top export markets for the Turkish defence industry consist of the United States, Germany, Malaysia and Azerbaijan.

If Turkey starts taking advantage of its strategic proximity to many conflict areas, the defence industry can expand its global market share and maintain the high growth rate it enjoyed over the last decade.

It is arguably realistic to expect Turkish defence products to become viable and preferred alternatives compared to their more expensive Western equivalents, especially for the MENA and Sub-Saharan regions in the near future. Such a strategy is echoed by the General Director of ASELSAN, Turkey’s biggest defence firm:

“We’re making products better than most in the West. We’re cheaper … We’re ready to share technology. The Turkish defence industry can be a valid alternative to the West”.

Turkey’s defence industry is eager to grow and has set ambitious goals – which some may argue are too ambitious. It remains to be seen how many targets Turkish manufacturers will be able to hit until 2023, but either way, this might become just the medicine the Turkish economy needs so urgently.

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