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Auditors: Turkish Industry 'Has Failed To Develop' Despite Reforms, Billions Spent

Report Blames 'Traditional Approaches,' Bureaucracy

Jul. 26, 2014 - 03:45AM   |  
By BURAK EGE BEKDIL   |   Comments
Gul ()
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ANKARA — Despite the government’s optimism and ambitions for a robust Turkish defense industry, a first-of-its-kind state audit report has revealed that the sector has underperformed in the past years.

The report, released July 15 by the president’s State Audit Board (DDK), was the group’s first assessment of Turkey’s defense industry and procurement bureaucracy. It cited discrepancies between the political and military bureaucracies as the main reason for “insufficient levels of development,” despite billions of dollars invested in the sector.

“Turkey’s local industry has failed to develop despite years of high defense spending,” according to the DDK report, prepared at President Abdullah Gul’s request.

“It is a significant development that the president felt compelled to order an assessment into the industry and bureaucracy,” one foreign observer said. “The findings highlighting several failures are even more significant.”

Reviewing the procurement cycle between 2010 and 2012, the report concludes that the main structural problem hindering the sector was “traditional approaches in the decision-making mechanism.”

A procurement official interpreted the “traditional approaches” as a reference to “failure to reform the procurement bureaucracy.”

“There has been a good degree of reform in the [procurement] process over the past years but apparently the auditors disagree,” he said.

The official declined to further comment on the report. But he said it also acknowledges “improvements in public management [of procurement]” without detailing them.

One foreign arms company executive said the report was a realistic assessment of the sector and highlighted the deficiencies that may block the government’s ambitions.

“If the review is accurate, and I believe it is, then there is a long way to go for the Turks to attain their targets,” he said.

Prime Minister Recep Tayyip Erdogan has said his government aims to make Turkey one of the top 10 manufacturers of weapon systems by 2023, the Turkish republic’s centennial.

But the audit report finds the bureaucratic relationship between the defense industry and politicians is one reason local industry has failed to progress more.

“The bureaucratic structures of the military and defense industry maintained their habits of working without getting sufficient political input on policies and strategies that needed to be put in place,” the report concludes. “As a result, the authorities failed to establish the connection needed between policy and practice.”

The auditors reported that Turkey was the world’s 24th top exporter of arms and 11th biggest importer between 2008 and 2012.

But the auditors warn that, despite a plausible level of research and development spending, Turkish companies have failed to become sufficiently competitive against foreign rivals when bidding for contracts abroad.

“Local companies tend to produce primarily for the domestic market rather than exports,” the report states. “A shrinking domestic market in the future may expose them to serious risks.”

That view comes in slight contrast with export figures released by Turkey’s Defense and Aerospace Industry Exporters’ Association, which said Turkish companies’ arms exports reached an all-time high of $1.4 billion in 2013. They also rose by 17.6 percent to $600 million in the first five months of 2014.

But a DDK analyst has an explanation: “We did not find that exports are not rising. We found that the rise is not in proportion with the level of R&D and other investment in the sector. In other words, Turkish companies should have exported more.”

Two industry officials declined to comment on the report, citing political sensitivity.

And one official from an umbrella association for the defense industry said, on condition of anonymity: “The general view [among industry executives] is that the report lacks a decent level of objectivity. We agree that there are problems in the procurement mechanism. We also agree that the industry could have performed better. But, as a whole, [the report] sounds more negative than objective.” ■


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