Poland - Commercial Guide
Defense Industry

Sub-sector best prospects: Include the sub-sectors in which U.S. companies would have the best opportunity of exporting.

Last published date: 2019-10-13

Due to the sensitive nature of the defense industry sector, there are no official statistics available on local production, imports, and exports.  The only data available through public sources is the annual amount of defense expenditures, which is illustrated in the table below.  
Overview 
 
Spending on Defense in Poland 

 
Year 
 
2010 
 
2011 
 
 
 
2012 
 
2013 
 
2014 
 
2015 
 
 
2016 
 
2017 
 
2018 
 
2019 
Approximate Defense Spending 
$ billion 
 
8.38 
 
8.79 
 
 
9.05 
 
 
10.36 
 
10.67 
 
10.30 
 
9.8* 
 
9.5* 
 
10.1* 
 
12.5* 
Source: Ministry of Defense (MON) – Annual Budget 
*Please note that USD value went up in 2016.  
2016 exchange rate: 1 USD = 4.0 PLN 
2017 exchange rate: 1 USD = 3.6 PLN 
2018 exchange rate: 1 USD = 3.7 PLN 
The current exchange rate: 1 USD = 3.8 PLN 

Poland's military is continuously undergoing changes - all of which are designed to transform it into a more capable, mobile, and NATO-compatible force. Change is occurring in every area of operations, to include: force structure, staff organizations, training programs, doctrine, and security procedures.  The Polish army’s modernization plans include improvement of troop capacity/mobility and air defense systems and the further development of a professional army (Poland ended conscription in 2008).  
Poland leads the former East-bloc countries in parting from Soviet-era equipment and has long term plans to replace any remaining Soviet era equipment with modern NATO platforms.  However, the Polish Government’s plans to strengthen and reorganize the armed forces and the Polish defense industry must compete with other reforms that are financed through the state budget.  

The Polish Government annually negotiates its defense budget and the budget parameters are set during these negotiations.  In the 2019 budget, the Polish government allocated 2% of 2018 GDP, an amount equal to about $11.76 billion** (PLN 44.7 billion) for total defense expenditures, of which about $11.5 billion** (PLN 43.8 billion) is dedicated to national defense.  This amount includes $3.28 billion** (PLN 12.5 billion PLN) allocated for arms and technical modernization.   
**based on the current exchange rate: 1 USD = 3.8 PLN 
One of the main expenditures remain salaries (11% higher than in 2018) and pensions.  Spending on Special Operation Forces was increased the most (by 20%), to PLN 355 million, while less money goes to the Territorial Defense Forces (PLN 483 million).  The size of the troops is currently set at 26 thousand instead of the 53 thousand originally planned in 2017 when the Minister of Defense decided to establish this new reserve military unit. 
While Poland is one of the few NATO members to meet the alliance target of spending at least 2.0% of GDP on defense, the government has announced its intent to increase spending up to 2.5% of GDP by the year 2030.  Significant new contracts are anticipated in the areas of air and missile defense, helicopters and unmanned aerial systems (UAS). Poland uses its Foreign Military Financing (FMF) for UAS procurement and sustainment, signal intelligence, airfield navigational aids and tactical airlift support.   
At the end of fall 2016, the Polish government released the "Technical Modernization Plan 2017-2020”.  An updated modernization plan has been released in March 2019.  Poland’s ambitious multi-year defense modernization program (valued at USD 40 billion) will significantly strengthen its military capability and increase interoperability with the United States and NATO. 

Poland currently has 122 active FMS cases, which have been used to procure a wide range of items.  Previous and on-going military procurements include:  High Mobility Artillery Rocket System (HIMARS), PATRIOT air and missile defense system, Head of State Boeing 737-800 aircraft, VIP Gulfstream aircraft, AIM-9 Sidewinder, AIM-120 AMRAAM, F-16 fighter aircraft, Joint Air-to-Surface Standoff Missile (JASSM), JASSM-Extended Range (JASSM-ER), C-130 transport aircraft (EDA), C4ISR enhancements, Air Support Operations Center, Navigation Aids (NAVAIDS), communications, High Mobility Multipurpose Wheeled Vehicles (HMMWV), SIGINT equipment, simulation equipment, Perry-Class Frigates (EDA), small arms accessories, Mine-Resistant Ambush Protected All-Terrain Vehicles (M-ATVs; EDA), and SH-2G Helicopters (EDA).  
FMS Expenditures in $M for CY 2016, 2017, 2018, and 2019 

 
 CY 2016 CY 2017 CY 2018 
FMS Expenditures (in $M) 1,500 186 4,825 

* Sales to date 
Source: ODC, US Embassy Warsaw 
 
Leading Sub-Sectors 

Opportunities for American firms exist mainly in investment, technology transfer, and co-production work.  Polish defense companies seek cooperation agreements or joint venture opportunities with foreign defense companies that, combined with the relatively lower cost of production in Poland (particularly tanks, armored vehicles, artillery, ships, aircraft, and helicopters), will be attractive to potential customers. 

Receptivity to American products is high due to an excellent reputation for high quality products, reliability, and technical assistance.  However, technological advantage is not the only factor determining success in the market.  American companies should focus on educating end-users and other players in the defense sector.  A successful U.S. exporter is expected to support its agent/representative at trade shows, seminars, and conferences.  
Polish officials maintain that the most important factor in awarding a contract is price (which is particularly critical in big-ticket purchases), after which other variables, such as quality, availability of service and training, and technical assistance for the installation, as well as the start-up operation of the equipment, becomes important.  Therefore, superior performance offered from U.S. companies will not always win the deal. 

The Polish government is required by law to hold tenders for major procurements, though there is a national security exception. Financial value, project complexity, international cooperation, and political sensitivity determine the project category.   

American companies that are well informed about upcoming projects are free to submit tenders to the contracting authority directly.  However, direct purchases from foreign suppliers are very rare and we encourage U.S. firms to identify local agents/representatives that can provide necessary assistance.  Selecting an appropriate representative is very important.  The agent should have very close contacts in the military/defense market.  A reputable agent with good contacts can provide important and timely information, which is often not readily available through public sources.  Additional considerations should be given in view of complicated tender procedures and import regulations.  American companies exporting to Poland should be familiar with the country’s Public Procurement Law, Polonization, and Offset Act.  Polonization is part of Poland’s long-term plan to become more self-sufficient, and to increase and promote local industrial production. The bottom line is that it is nearly impossible to effectively sell these products without a competent agent.   
The Office for Offset Agreements at the Ministry of Defense (MOD) coordinates Poland’s defense offsets.  The offset requirements are an important part of defense procurement contracts. On June 26, 2014, the Polish Parliament adopted a new Offset Act -  the “Act on Certain Agreements Concluded in Connection with Contracts Essential for National Security. “  The new Offset Act was signed into law by the President of Poland on 7 July 2014.  The new law covering the use of offsets in defense acquisition brings the country in line with European Union (EU) military procurement rules. 

American companies interested in military procurements in Poland are advised to use various resources to increase the chances of getting their company’s information into the vendor’s databases within the military/defense sector.  We advise American suppliers of military/defense equipment and services to contact the American Embassy in Warsaw as it pertains to information on defense-related business in Poland and current political issues prior to contacting any Polish government agency.  This applies particularly to the Office of Defense Cooperation (ODC) and the U.S. Commercial Service.  

Defense cooperation is considered the integrated package of security assistance and defense cooperation in armaments activities.  The U.S. government security assistance program for the government of Poland is managed by the Office of Defense Cooperation and includes Foreign Military Sales (FMS), Direct Commercial Sales (DCS) and several programs under the auspices of defense cooperation in armaments activities. 
The U.S. Commercial Service identifies the defense industry as one of its sectors with sizeable American sales potential in Poland.  Our office offers several commercial export promotion programs and advice on regulation compliance, the market potential for a product or service, agent/representative vetting, as well as advocacy support. Please visit the Commercial Service in Warsaw for more information on how we help U.S. companies do business in Poland.   

Opportunities 

The modernization of the Polish army includes the improvement of troop capacity and mobility and air defense systems, as well as the development of a professional army.  Poland's military has decreased from 450,000 in 1989 to 144,140 at present including 110,000 in the regular army, 12,000 in the reserves, 5,000 cadets, and 17,140 in the Territorial Defense Forces.  

In 2017, the Minister of Defense decided to establish a new reserve military unit called the Territorial Defense Forces (Wojska Obrony Terytorialnej), and to increase their total number by an additional 26,000 troops.  

Poland's membership in NATO has brought numerous opportunities for U.S. companies in terms of upgrades and adjustments.  In addition, Poland became a close U.S. ally in Europe through its support for and participation international interventions in Iraq and Afghanistan, which also called for upgrades and adjustments in terms of developing a more capable and mobile force compatible with NATO troops.   

Poland's military is traditionally land force heavy.  Currently, the military consists of 110,000 professional soldiers including 47,927 troops in the land forces; 16,428 in the Air Force; 7,020 in the Navy; 2,600 in Territorial Defense Forces, and 36,025 in other segments including, Reinforcements, Military Police, and the Polish Armed Forces Command.   

In addition, in 2019, the Ministry of Defense decided to establish a new Mechanized Division (18 Dywizja Zmechanizowana) and create a new general-military brigade (nowa brygada ogólnowojskowa) by 2020.  
 
At present, over 1500 Polish soldiers and military employees participate in foreign military missions including:  
NATO missions: Afghanistan-RSM, Iraq-OIR, Kuwait-OIR, Kosovo-KFOR , eFP-Latvia, tFP-Romania, and EUNAVFOR-Sophia. 
EU missions: Bosnia-Hercegovina-EUFOR/MTT, EUMM-Georgia, and the Central African Republic.  
 
The revised Polish Armed Forces "Technical Modernization Plan 2019-2026” comprises the following priorities:  Air and Missile Defense, Armored and Mechanized Forces, Navy, Cyber Defense and Territorial Defense, and involves the purchase of military equipment under the following major programs: 

HARPIA Program 
Acquisition of new generation multi-task aircraft operating in anti-access and network-centric environment collaborating with the allied air forces. 

NAREW program 
Acquisition of anti-aircraft batteries of short-range missile systems to combat unmanned aerial vehicles, and destroy missiles.  It is anticipated an extensive use of the Polish defense industry and technology transfer for production of rockets. 

KRUK Program 
Acquiring of modern attack helicopters for Land Forces. 

CYBER.MIL Program 
As a part of the CYBER.MIL operational program it is planned to acquire tools and software to enable the Polish Army to carry out effective operations in cyberspace and the most up-to-date cryptographic technologies.  It is planned to mainly use the capabilities of PGZ and Exatel, and the MOD intends to allocate PLN 3 billion to the program itself. 

WISŁA Program 
This anti-aircraft and anti-missile program of medium-range missile systems will be one of the main elements of the Polish air defense system.   

PUSTELNIK Program 
Acquiring of anti-tank launchers missiles with guided missiles.  Thanks to implementation of the program the Polish Armed Forces will be equipped with new, light, anti-tank missile kits that do not require complicated training. 

REGINA Program 
Acquiring of 155 mm fire division modules to enhance the fire support capability at the tactical level.  The major contractor is Huta Stalowa Wola (HSW).  As part of the Technical Modernization Plan, it is planned to acquire further squadron modules. 

HOMAR Program 
Acquisition of a squad module of multiple rocket launchers, capable of striking targets situated 70-300 km away. 

MIECZNIK Program  
Acquiring a coastal defense ship to replace units withdrawn from service and increase the ability to cooperate with allied and coalition task forces. 

ORKA Program 
Acquiring the ability to damage surface and submarine targets by the New Type Submarine. 
This New Type Submarine will increase the ability to effectively use the armaments and impact potential of ships in the field of combating nautical, underwater and land targets, as well as destroying airborne anti-submarine forces.  It will increase the ability to make effective use of weapons and potential impact of fighting against surface targets and submarines, as well as destruction of air anti-submarine targets.  

PŁOMYKÓWKA Program 
Acquiring of a comprehensive reconnaissance aircrafts. 

GRYF Program 
Acquisition of unmanned aerial vehicles, tactical medium-range class. 

MUSTANG Program 
Acquiring of high-mobility trucks and passenger vehicles. 

WAŻKA Program 
Acquisition of unmanned aerial vehicles intended for use mainly in urbanized areas, equipped with an optoelectronic head that allows observation during both day and night. 

BORSUK program 
Introduction of a new combat vehicle based on a universal modular tracked chassis, developed and manufactured by the Polish defense industry.  It will replace a worn out BWP-1 Soviet construction vehicle.  It will have the ability to swim. 

Source: Ministry of Defense (MON) 
 
The amended "Technical Modernization Plan”  is based on three principles: assessment of Polish military needs, timeframe for delivery of equipment, and Polish industry participation. The priorities include air defense systems, cyber security, and modernization of the Navy, Polish Armed Forces and Territorial Defense Forces. The implementation of technical modernization program has put special emphasis on the importance of using Polish defense industry capacities, with special emphasis on the Polish Armament Group (PGZ).  The newest, updated edition of Technical Modernization Plan was announced in March 2019.  
Foreign investors and joint venture partners with local firms can take advantage of government incentives. Many U.S. businesses in Poland take the form of joint ventures with Polish companies and are specifically set up to handle sales in the market.  Joint ventures are an excellent way to facilitate export sales to the Polish market.  U.S. companies competing for Polish defense contracts are encouraged to look for joint ventures, co-production, and other cooperative opportunities with Polish companies to make their bid offers more attractive. The relatively lower cost of production in Poland has led many foreign defense companies to seek cooperation agreements or joint venture opportunities with Polish defense companies that can produce equipment, which will be attractive to potential customers.  Examples of such products include tanks, armored vehicles, artillery, ships, aircraft, and helicopters.