HELSINKI — Finland's center-right government plans to link the armed forces' Fighter Replacement Program (FRP) to its National Investment Plan (NIP), an initiative to use the project to generate maximum value in terms of offset, spin-off contracts and job creation.
Connecting the FRP to the NIP will also serve to protect the capital funding element in the project for what is the most costly defense investment in the armed forces ' FAF's history
The Finnish economy was hard hit by the financial crisis in 2008, and has been in and out of recession since. Finnish GDP hasn't grown since 2012, and is facing another year of negative growth in 2015.
The FRP is certain to draw criticism from opposition parties, which will take exception to the estimated US $5.7 billion to $11.4 billion that the new multirole fighter project will cost at a time when Finland is facing in to a new wave of austerity measures under centrist Prime Minister Juha Sipilä's new three-party coalition.
The significant cost of the project will require the government to persuade the national parliament (the Eduskunta) that the capital investment is not only alone required to ensure Finland's long-term defense credibility, but can also be used to stimulate economic recovery, said Ilkka Kanerva of the National Coalition Party, and chairman of the parliamentary Defense Committee. (PDC).
"This is a huge capital investment, but the general cross-party view is that Finland needs this project to strengthen our defense capability and the credibility of our armed forces. The funding element of this program needs to be discussed in a calm and rational way when it reaches parliament. This may not be easy in the current difficult economic climate," Kanerva said.
The level of capital funding required means the fighter replacement project will be funded separately, and outside the scope of the main annual defense budget.
The government's intent to maximize national and local value from the eventual aircraft contract is certain to benefit Finnish defense and engineering sector contractors, but in particular Patria, the state-owned group that capitalized on the final assembly program covering the Air Force's purchase of 57 F-18 C Hornets in the 1990s. Patria has provided continuing life-cycle support capability to the aircraft.
Consequently, the manufacturers of the five candidate aircraft short-listed by the Ministry of Defense — a list that includes Boeing's Super Hornet, Lockheed Martin's F-35 Lightning II, the French Dassault Rafale, the European Eurofighter Typhoon and Saab's JAS Gripen — will be required to beef-up their industrial cooperation and investment offerings. segments of their offers.
Prime minister Sipilä said his administration will, in coming months, examine "every possible way" to extract "maximum value" from the fighter replacement project, adding that the strength of the industrial contracts and job creation potential in the offers will play an important role in the final selection. process as to which aircraft is bought.
Finland is expected to demand countertrade terms above the normal 100 percent purchase contract value, linking additional investment to partnership agreements between the manufacturer/supplier and Finnish firms operating within defense, engineering, and research and development industrial areas.
Finland negotiated a 100 percent offset deal with McDonnell Douglas covering the delivery of 64 F-18C/Ds (57 C models and seven D models) in 1995-2000. Although the F-18Ds were built in St Louis, all F-18C aircraft were assembled in Finland under the countertrade agreement.
Defense Minister Jussi Niinistö made it clear that Finland's deepening bilateral defense collaboration with Sweden would not give did not mean the JAS Gripen has any advantage in the competition.
"Any offer around the Gripen will not form part of our discussions about how to strengthen defense cooperation with Sweden. Neither will it feature as part of ongoing talks about Nordic defense collaboration between Finland and Sweden," said Niinistö said.
A successful FRP, said Niinistö, is of enormous significance to Finland going forward with potentially huge implications for the country's defense organization, military capability and national economy.
The short list of NATO-compatible candidate aircraft does not contain a Russian fighter type because of a situation that has arisen due to the European Union's military equipment embargo on Russia over the Kremlin's activities and actions in Ukraine and Crimea.
"Including a Russian-made candidate aircraft is not an option we can consider because of EU trade sanctions. This situation might be re-evaluated if and when sanctions were to be removed," Niinistö said.
The Finnish government's new project and funding positions on the FRP comes in the wake of a report commissioned by the MoD and conducted by its steering Exploratory Working Group (EWG). The report was presented to the ministry in mid-June.
The report did not provide recommendations on the type, price or number of aircraft to be purchased to replace the Air Force's existing fleet of 62 F/A-18C Hornets. The EWG, which is chaired by the Air Force's former chief, retired Maj. Gen. Lauri Puranen, did, however, conclude that to further extend the life of existing Hornets would not be the most cost-efficient or desirable option.
The EWG's report left open the possibility that Finland might acquire two different, but complementary, fighter types that could potentially include specialist ground-attack or multirole aircraft.
"This is just an idea, not a solution, or even a starting point right now," Niinistö said.
The EWG report recommended that the FRP's selection process should ideally commence in 2017-2018, a time frame that envisages a final decision on the type of aircraft to be purchased by will be made by 2021.
The Air Force is scheduled to retire the last of its current stock of 62 Hornets by 2030.
"A formal decision to proceed with the procurement project will be taken later in 2015. It is the government's intention to follow the report's recommendations," Niinisto said.
It is expected that the precise level of capital funding needed will be determined by a government decision on the number of aircraft to be bought. Neither the MoD nor the Air Force FAF have as yet indicated what this number will be.
"We are not commenting on the number of new fighters at this point, but what I can say is the current number of aircraft that we have has responded well to the operating needs of a country of this size," Puranen said.