US embassy cable - 04ANKARA3827

UNCLAS ANKARA 003827 
 
SIPDIS 
 
SENSITIVE 
 
E.O.  12958:  N/A 
TAGS: MASS, PREL, TU 
SUBJECT: RESTRUCTURING TURKEY'S INDUSTRY--A WORK IN 
PROGRESS 
 
 
1. (SBU) Summary: Turkey's Undersecretary for Defense 
Industries Murad Bayar told participants in a defense 
technology conference on June 24 that the Turkish 
defense industry should be restructured.  He encouraged 
Turkish firms to collaborate on both design and 
production and to develop connections with 
universities.  The conference appeared to be designed 
to help Bayar and the Undersecretariat for Defense 
Industry (SSM) develop a new defense industry policy. 
Still a work in progress, we expect to hear more about 
this policy next month.  End summary. 
 
2. (U) During a two-day conference on defense 
technologies held at the Middle East Technical 
University (METU) in Ankara June 24-25, SSM 
Undersecretary Murad Bayar participated in a panel on 
the restructuring of the Turkish defense industry.  The 
5 panelists included managers from the Technical and 
Scientific Research Council of Turkey (TUBITAK), 
Roketsan Missile Industries Inc., Aselsan Electronic 
Industries Inc., FNSS Defense Systems, and Havelsan 
Aerospace Electronic and Trade Inc. 
 
3. (U) In his remarks, Bayar criticized the current 
situation in Turkey by saying that there have been 
serious implementation problems in the Turkish defense 
industry due, in part, to the fact that there were 
ongoing disputes over identifying requirements. Bayar 
believes that technology transfer, which Turkey has 
been pursuing for the last 20 years, was not efficient 
because direct purchase of materials would be cheaper 
and because the sector was too fragmented. SSM has a 
procurement fund of $ 3 billion that could easily be 
used for direct purchases from abroad.  However, 
despite the higher costs resulting from Turkey's 
previous involvement in joint production, this process 
has provided Turkey with the opportunity of training 
personnel in the defense industry. 
 
4. (U) Mentioning the actors in the industry as users, 
the procurement authority (SSM), industry (commercial 
companies) and researcher institutions (universities), 
Bayar stressed that coordination between roles was of 
vital importance as well as using resources as 
efficiently as possible. Bayar believed that 
restructuring the defense industry in Turkey should 
start with system integration for rockets and missiles. 
Overall, he thought the defense sector could be 
consolidated into 3-4 companies. 
 
5. (U) According to Bayar, market share of domestic 
industry was only 20% of Turkey's military 
procurements.  Therefore, the first goal should be 
production for domestic use.  Apparently contradicting 
his earlier statement, he said that a single company 
should not undertake the whole production process. 
Turkish companies should coordinate with each other in 
the design and production processes. Bayar further 
indicated that consideration should be given to direct 
cooperation with universities. Bayar completed his 
comments by saying that he was optimistic about the 
success of the Turkish defense industry considering the 
size of the market, skilled human resources and current 
technologies infrastructure. 
 
6. (SBU) Comment: The impression left by the conference 
was that it had been organized to help Bayar and SSM 
formulate a new government policy on the defense 
industry. Elsewhere, Bayar has stated that he intended 
to change SSM's procurement model to better support the 
development of indigenous defense companies.  He had 
earlier told the Ambassador that the new policy would 
take some time to formulate and suggested he would not 
be ready to discuss it until August.  We will follow up 
then.  End Comment. 
 
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