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Our View: Investing for Competitiveness

Sep. 30, 2012 - 04:31PM   |  
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For decades, tiny Sweden has developed some of the world’s most innovative and capable fighter aircraft thanks to government investment in native aircraft builder Saab.

But as Saab prepares to design the next generation of Gripen fighters, the government appears to be balking at its development cost, estimated to be less than $2 billion.

Sweden wants 60 to 80 of the jets, but officials in Stockholm say that if Switzerland backs out of its nearly $4 billion deal to buy 22 planes and be the “super” Gripen’s co-launch customer, and no other partner emerges to replace the Swiss, Stockholm will bail out as well. The Swedish government maintains it can’t cover both nations’ shares without gutting Army and Navy funding.

Switzerland picked the Swedish jet over competing entries from France’s Dassault and the multinational Eurofighter consortium earlier this year. But Dassault is campaigning to derail the Gripen by resubmitting its earlier offer, and Bern plans to schedule a national referendum on whether the nation should buy a new fighter at all.

The Swiss order is critical to Saab in its effort to win another competition in Brazil. Without the Swiss, or another partner to replace it, the future of the company as a fighter-maker is less clear.

Government support helped make Swedish products attractive on global export markets in numerous industries, from autos to planes, but that may be a thing of the past. Officials have allowed cars built by legendary Swedish firms Volvo and Saab to be sold to foreign companies with checkered results.

Failing to invest in Gripen could have potentially devastating results for Swedish defense writ large, with serious diplomatic and foreign policy repercussions, not to mention the loss of high-paying tech jobs. Making world-class aircraft has far-reaching benefits, spurring innovation on everything from materials and components to computer architectures, radars and communications.

The legacy Gripen has proved to be an export success with sales to the Czech Republic, Hungary, South Africa and Thailand, but Sweden is at a defense crossroads. Its senior military leaders have been increasingly vocal that further budget cuts will leave the force too small and too poorly equipped to be useful.

Governments have an obligation to get the best value for their defense investments and must not prop up uncompetitive firms. But nations that fail to invest in companies that make competitive products do so at great harm to their own strategic interests.

Saab has managed to carve out a market against bigger competitors and enormous odds. It shouldn’t have to fight its own government for survival.

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