Cablegate: Restructuring Turkey's Industry--A Work In

This record is a partial extract of the original cable. The full text of the original cable is not available.




E.O. 12958: N/A

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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