The FY 2020 Ministry of Defense (MOD) budget is $7.38 billion ($/TL at 7.3). Half of this budget is allocated to procurement of goods and services, including modernization. It does not include spending by the Ministry of Interior’s Gendarmerie, the Coast Guard, defense procurements funded by the Turkish Treasury or the Defense Industry Support Fund. Along with MOD spending, the 2020 proposed budget for the Gendarmerie is $3.15 billion, $150 million for the Coast Guard and $5.3 billion for the National Police is. In 2020,over $15 billion was allocated from the centralized budget on defense and security spending, which is the sum of funds allocated to the MOD, Gendarmerie, Turkish National Police, Coast Guard, National Intelligence and Under Secretariat of Public Order and Security.
Turkey’s goal is to improve its manufacturing capabilities and develop a self-sufficient national defense industry. To attain this, Turkey is trying to maximize local manufacturing capabilities through R&D and technology transfer. Large-scale system integrators along with SMEs, which develop subsystems for system integrators, play a key role in building up indigenous solutions for the defense industry. According to official figures, the share of off-the-shelf direct imports has fallen to 12% from 98% since the 1990s and the share of local production in Turkish Armed Forces (TuAF) procurements has gone up to 68% from 25% since 2003.
According to data released by the Defense Industry Exporters’ Association (SASAD), the sector-wide turnover reached $10.8 billion. The lion’s share of the total revenue goes to land platforms with $3 billion and military air platforms with $2.4 billion.
Turkey’s defense industry has gone through a rapid change in less than a decade as Turkey has become more involved in co-production and co-development projects, which have also brought along export opportunities. With rapid growth over the last 10 years, the industry has reached the point of transition from prototypes to serial production. According to the Defense and Aviation Industry Exporters’ Association, Turkey’s defense exports reached $3 billion in 2019. According to the Stockholm International Peace Research Institute (SIPRI), Turkey’s 2019 military expenditures were $20.4 billion , placing it among the top 16 spender countries globally. Some sources put Turkey’s arms imports in the range of $3 to $3.5 billion per year. While Turkish annual defense exports to the United States are close to $600 million, imports from the United States are in the range of $1.5 billion. The United States is the largest defense export market for Turkey, followed by Germany, Malaysia, Azerbaijan, the UK, the UAE, Qatar and Saudi Arabia. The top export items are aircraft and helicopter parts, engines, parts of tanks and other armored land vehicles, ammunition for other weapons, turbojets for civilian aircraft, hunting rifles, and receiver/transmitter equipment for military use.
Despite the emphasis on localization and increasing national content in major defense procurements, Turkey is still heavily reliant on imported products, especially at the component level. TuAF requirements are met through direct purchases from domestic and foreign markets or through participation in joint production programs. Joint production programs constitute potential export opportunities, as the tendency is to give more emphasis to joint production and joint activities through R&D. Turkey has started taking steps to develop indigenous systems to meet TuAF needs.
It is recommended that US companies, especially those new to the market, work with a local agent for easy access. Local representation, either through an agent or in partnership with a Turkish firm, is viewed favorably by procurement authorities and the Turkish industry or considered as a sign of commitment to the market.
Current Market Trends and Demand
The emphasis on increased localization is expected to continue as the defense industry is a priority sector for the Turkish Government. Particularly at the platform level, other than urgent requirements, tier 1 Turkish OEMs will continue to act as prime contractors. Joint production, technology partnership and co-development will be key project models for future programs.
In parallel with heightened security requirements, the demand for defense products is increasing across the board.
IDEF 2021, 15th International Defense Fair
May 21-25, 2021
U.S. Embassy Ankara Turkey
Senior Commercial Specialist