Defence and Aerospace Industry Manufacturers Association (SASAD) shared the Defence and Aerospace Industry 2020 Performance Report. Looking at the report in general, the first thing that draws attention is the decrease in turnover, exports and the amount of orders received.
|2014-2020 Defence and Aerospace Data (SASAD 2020 Performance Report)|
|Numbers are denominated in millions of dollars|
The changes in 2020 data compared to 2019 are as follows:
- Turnover: -18,64%
- Export: -26,16%
- Orders Received: -42.13%
- Import: -30,02%
- Product/Technology Development: -25.79%
Turnover And Export
The sector’s turnover has continued to rise since 2001, except for 2009 and 2015, has increased its speed as of 2016 and as a matter of fact, it has made a great leap in 2019. The decrease of 18.63% in 2020 was recorded as the biggest decrease experienced by the industry for many years. However, when considered on a yearly basis, it is seen that it has decreased towards the 2018 data. In the report shared by SASAD, the COVID-19 outbreak was given as the biggest factor in the decline.
Arms, Missiles and Ammunition Turnover
The turnover data on arms and ammunition sales is even behind the 2018 data with a significant decrease like the other sector in general. With the Euphrates Shield Operation in 2016, Turkey’s deficiencies in ammunition production became a current issue and a significant expansion was experienced in the product range in this area. However, there is still an important distance that Turkey has to take in this field, even for its domestic needs. It is expected that the status of the Mechanical and Chemical Industry Company – MKEK will be changed and it will increase its activities in the field of export, as it becomes a public private company. Hereby, turnover in arms and ammunition is expected to increase in the coming period.
Land Vehicles Turnover
As a result of the data announced by the United Nations (UN) Register of Conventional Arms – UNROCA, the information that Turkey delivered 279 armoured vehicles to 9 different countries in 2020 was shared by Defence Turk. In previous years, significant sales successes such as the sale of FNSS PARS 8×8 to Oman and Malaysia, and Rabdan, a derivative of ARMA 8×8 to the UAE, have significantly increased export figures and turnover. With the significant completion of deliveries for these sales, the turnover data started to decline again and there was a 27.10% decrease in 2020 compared to the previous year. It can be expected that the decline will not continue in the coming years as a result of Katmerciler’s significant breakthroughs in Africa, the ongoing activities of FNSS in the pacific region and the increasing interest in Turkish defence products in North Africa.
Sea Platforms Turnover
While the production, domestic purchase and export activities of small boats and related vehicles for marine vehicles proceed, the production of corvettes, frigates or platforms with larger tonnage is disrupted due to embargoes. Especially in exports, while the presence of Turkish companies in the marketing of platforms such as bots and storm boats continues, the desired momentum in the sales of large platforms has not yet been achieved. However, major contracts for Ukraine, Pakistan, India and Qatar, which have been signed, may lead to significant improvements in the table.
Military Aviation Turnover
The continuing rise in military aviation has experienced a relatively lower decline compared to other fields. It is of great importance for manufacturers that the decline in military aviation does not continue, as the COVID-19 epidemic deeply affects civil aviation. In this respect, it is necessary to consider important measures for companies working in the aviation sector.
Per Capita Turnover
Per capita turnover, which has been in the range of 140-160 thousand dollars for a long time, experienced a huge decrease in 2020 and regressed to 114,1 thousand dollars. This decline has also caused a great decrease in foreign turnover per capita.
Turnover – Employment
The report provides the following information about employment: “Despite the negative effects of the epidemic, the sector closed in employment with a 5.14% increase, slightly above the previous year level (from 73,771 employment to 77,566 in 2019).” An important share of the decrease in the per capita turnover data shared at the top is the increase in employment despite the decrease, apart from the decrease in turnover. Although the increase in employment is promising, it is clear that this situation will not continue unless the decrease in turnover in this area is eliminated.
Civil aviation turnover, which was $1.81 billion in 2018, remained unchanged at $1.836 billion in 2019. The turnover of the civil aviation sector, which was most affected by the COVID-19 pandemic, decreased by 27.88% compared to the previous year to $1.32 billion in 2020.
|Turnover – Sectoral Breakdown|
|2018||2019||2020||Change**||Percentage of Change**|
|Arms, Ammunition and Missiles||$887||$966||$855||-$111||-11,49%|
|*:KBRN-P 0.02% | C5ISR 0.62% | Informatics 118% | Logistics Support 1.95% | Space 0.59% | Foreign Exchange Earning Service 1.11%
**: Change from 2019 to 2020
Compared to the significant decline in naval, land, civil and military aviation, there has been a significant increase in security. There has also been an increase in Maintenance, Repair and Overhaul (MRO), although there has been a slight increase compared to other decreases. The biggest decrease in the sector was experienced in civil aviation with 27.88%, an expected improvement in employment.
In the information shared by SASAD, the COVID-19 pandemic was shown as the cause of a significant shrinkage of 18.64% in the sector’s turnover. While it might be normal to show COVID-19 as the main cause, it is not the only factor. According to the Stockholm International Peace Research Institute – SIPRI data, world military spending in 2020 increased by 2.6 percent in real terms compared to 2019 and reached 1.98 trillion dollars. Thus, defence expenditures increased on a global basis. In the data shared by NATO, there is information that NATO countries’ defence expenditures and the share of equipment purchases in defence expenditures have increased. In addition, it should not be overlooked that although Turkey’s defence budget has increased in Turkish Lira, it has shrunk in terms of US Dollars. Thereby, as a subjective assesment, the economic problems and political embargoes experienced by Turkey also have an unknown share in the shrinkage of turnover.
Import and Export Data
As in previous years, the share of imports and exports continued coaxially in 2020. The use of imported intermediate products, subsystems and/or raw materials in the sector has still not reached the desired level and the parallelism in the graph has been preserved.
According to the data announced by the Turkish Exporters Assembly (TIM), the export of the Turkish defence and aerospace industry increased by 16.8% in the period of 1 January-31 December 2020, compared to the same period of the previous year, and became 2 billion 279 million 27 thousand dollars. In spite of that, the export data shared by SASAD is 2 billion 265 million 829 thousand dollars. In 2019 data, the number announced by TİM was 11.97% higher than the number announced by SASAD. In 2020, the number announced by TİM is 0.69% higher than the number announced by SASAD. Thus, the data announced by the two institutions in 2020 is more compatible.
In the information shared by SASAD, it was indicated that 76 companies/institutions participated in the preparation of the report last year, and this year the number increased to 85. This increases the accuracy of the report.
It has been remarked that Civil Aviation and Land Platforms/Systems constitute the highest share in the orders received by SASAD. The most attention grabbing part of the relevant section is as follows:
“Compared to the turnover, it is seen that there is a business potential of less than 1 year in front of the sector players, and it shows that it is necessary to focus on getting new orders and that measures should be taken especially for the development of foreign markets.”
This indicates a critical point for the future of the industry. In order for the sector to continue its existence and not to lose the existing employment network, companies urgently should evaluate new job opportunities. Considering that there is no significant increase in Turkey’s defence expenditures, the importance of exports is seen to meet the deficit.
Considering the imports, most of the them, especially in the fields of civil and military aviation, were made from the USA. 67.94% of military aviation imports worth 624 million dollars were made only from the USA. European countries, on the other hand, have a 20% share in military aviation imports. The fact that the share of European countries and the USA, which imposes the most embargo on Turkey in the field of military aviation, is so high and this is an important proof that there are still great risks for Turkey in terms of embargo. Considering the land vehicles, it is seen that the share of European countries in imports of 451 million dollars is 63.63%. Europe has a 45% share, the USA 45% and other countries a 10% share in Turkey’s $2.16 billion imports.
In 2020, the budget allocated to product and technology development (UGTG) decreased by 25.79% and regressed to 1.24 billion dollars, of which 14%, 174 million dollars, was allocated to technology development. In 2019, UGTG reached 1.67 billion dollars in total. In 2019, the technology development rate in UGTG was 15%, at the level of $249 million. This decrease constitutes one of the most important losses for the future of the sector.
Besides, the impact of COVID-19 will affect potential new orders more than contracted projects, long-term risks can be considered to be greater. However, the report marks that 78.9% of sector managers expect development and growth in the sector in a 2-year period. The rate of those who expect growth over 15% is 43%.
Translator: Melike Günaydın
Author: Fatih Mehmet Küçük