Poland’s strategy to favour indigenous defence suppliers remains merely a promise. Polish companies are in a bad mood as they approach MSPO 2015, because the only two major completed modernisation tenders benefit only foreign companies. Thus, a strategy declared by the Polish government to favour indigenous industry remains in a sphere of promises and declarations.
The Polish Armed Forces’ technical modernisation programme for the years 2013-2022 (PMT) is one of the largest projects of its kind in Europe. The Polish government has declared many times that, as much as possible, Polish industry will be involved, not only as subcontractors, but also as leading companies, acquiring foreign technologies. Polish experts agree that the PMT is a great opportunity to receive advanced technologies and to improve the situation of the indigenous defence industry. Every time it is possible and reasonable, orders should be given to Polish companies; even if the supplier is foreign, the Poles should be solely responsible for maintenance, operation, repairs, and even upgrades, which means an access to source codes as well. To implement this Poland-oriented strategy, in 2014 the government changed Polish law, directing profits from offsets to the Polish defence industry only.
However, reality, at least so far, is different. Two already completed tenders seem to promote foreign companies. The first one is the WISLA medium-range air defence procurement programme, where Warsaw previously considered an offer made by Poland’s PHO in cooperation with MBDA and Thales (with PHO as the prime). Another interested contester, Eurosam, also offered high level transfer of technology, and close cooperation with PIT-RADWAR for a Polish-made radar. The Americans, who won the tender, did not offer this much cooperation, which makes a Polish radar for WISLA and NAREW (short-range) doubtful. It is not even sure if the Polish defence industry will produce interceptors as initially planned. Negotiations over offset, carried out between the PGZ (the leading Polish defence company), and Raytheon and Lockheed Martin are only to start. However, it is believed that choosing the PATRIOT system is not only very expensive but it is also a powerful blow to the Polish defence industry.
The same controversy applies to the multirole helicopter tender, which is being heavily contested.
The Polish defence industry does not surrender. It hopes that the future will be brighter and that the setbacks with the WISLA and multirole helicopter fiascos will not become a rule. This might be facilitated with a process of industrial consolidation, which was started in late 2013. Up to now, 34 defence companies were merged under PGZ. Their total turnover is PLN5 billion and they have 19,000 workers. This consolidated group is composed of all state-run companies. It includes Huta Stalowa Wola (HSW), Bumar-Labedy, PIT-RADWAR, and Mesko. PZL Mielec and PZL Swidnik are not included as they are private and foreign. PGZ’s full debut will be made at MSPO 2015.
By 2016, companies consolidated into PGZ, with the main share-owner being the Ministry of Treasury, will receive up to PLN500 million from the Entrepreneurs’ Restructuring Fund. This resource will allow them to adjust their technical and production capabilities in order to be able to provide adequate hardware for the Polish Armed Forces. One of the most important elements is to modernise a gun powder factory in Pionki. Currently, PGZ is preparing a development strategy for 2015-2030. It is hoped that the new strategy will be officially presented during MSPO 2015.
Consolidation has three goals. First of all, Poland wants to increase capabilities of its indigenous defence industry so it can provide better products to the Polish military, which will no longer be forced to negotiate with the whole string of companies to secure a full package of services (i.e. deliveries, maintenance, training, repairs etc.). Now all will be offered by one partner, as PGZ acquired several service and repair companies. Secondly, Poland hopes that the consolidation will end a “Polish-Polish war,” which occurred many times. Thirdly, one powerful group might be more attractive to foreign companies, which will remain very active in Poland in years to come. It is worthwhile to note that most of the PLN130 billion for technical modernisation is yet to be spent. Before MSPO 2015, PGZ declared again its will to participate in all Polish modernisation programmes. In some of them, such as artillery project, (including the HOMAR wheeled multiple rocket launchers and the RAK self-propelled howitzers) or individual soldier’s equipment, PGZ wants to act independently.
PGZ confirms that it wants to acquire advanced foreign technologies which it does not possess. It includes, for example, technologies for the NAREW programme, in which PGZ is one of nine selected companies. PGZ wants to be deeply involved in the WISLA programme. The experience gained might be used in the NAREW project, in which PGZ wants to be a leading company and technology integrator. Poland is currently able to provide not only vehicles but also radars. PGZ also wants licenses for launchers and missiles. A technical dialogue for NAREW is planned for this year. Without a doubt it will be one of the hottest topics during MSPO 2015.
The Polish Armed Forces’ technical modernisation programme for the years 2013-2022 (PMT) is one of the largest projects of its kind in Europe. The Polish government has declared many times that, as much as possible, Polish industry will be involved, not only as subcontractors, but also as leading companies, acquiring foreign technologies. Polish experts agree that the PMT is a great opportunity to receive advanced technologies and to improve the situation of the indigenous defence industry. Every time it is possible and reasonable, orders should be given to Polish companies; even if the supplier is foreign, the Poles should be solely responsible for maintenance, operation, repairs, and even upgrades, which means an access to source codes as well. To implement this Poland-oriented strategy, in 2014 the government changed Polish law, directing profits from offsets to the Polish defence industry only.
However, reality, at least so far, is different. Two already completed tenders seem to promote foreign companies. The first one is the WISLA medium-range air defence procurement programme, where Warsaw previously considered an offer made by Poland’s PHO in cooperation with MBDA and Thales (with PHO as the prime). Another interested contester, Eurosam, also offered high level transfer of technology, and close cooperation with PIT-RADWAR for a Polish-made radar. The Americans, who won the tender, did not offer this much cooperation, which makes a Polish radar for WISLA and NAREW (short-range) doubtful. It is not even sure if the Polish defence industry will produce interceptors as initially planned. Negotiations over offset, carried out between the PGZ (the leading Polish defence company), and Raytheon and Lockheed Martin are only to start. However, it is believed that choosing the PATRIOT system is not only very expensive but it is also a powerful blow to the Polish defence industry.
The same controversy applies to the multirole helicopter tender, which is being heavily contested.
The Polish defence industry does not surrender. It hopes that the future will be brighter and that the setbacks with the WISLA and multirole helicopter fiascos will not become a rule. This might be facilitated with a process of industrial consolidation, which was started in late 2013. Up to now, 34 defence companies were merged under PGZ. Their total turnover is PLN5 billion and they have 19,000 workers. This consolidated group is composed of all state-run companies. It includes Huta Stalowa Wola (HSW), Bumar-Labedy, PIT-RADWAR, and Mesko. PZL Mielec and PZL Swidnik are not included as they are private and foreign. PGZ’s full debut will be made at MSPO 2015.
By 2016, companies consolidated into PGZ, with the main share-owner being the Ministry of Treasury, will receive up to PLN500 million from the Entrepreneurs’ Restructuring Fund. This resource will allow them to adjust their technical and production capabilities in order to be able to provide adequate hardware for the Polish Armed Forces. One of the most important elements is to modernise a gun powder factory in Pionki. Currently, PGZ is preparing a development strategy for 2015-2030. It is hoped that the new strategy will be officially presented during MSPO 2015.
Consolidation has three goals. First of all, Poland wants to increase capabilities of its indigenous defence industry so it can provide better products to the Polish military, which will no longer be forced to negotiate with the whole string of companies to secure a full package of services (i.e. deliveries, maintenance, training, repairs etc.). Now all will be offered by one partner, as PGZ acquired several service and repair companies. Secondly, Poland hopes that the consolidation will end a “Polish-Polish war,” which occurred many times. Thirdly, one powerful group might be more attractive to foreign companies, which will remain very active in Poland in years to come. It is worthwhile to note that most of the PLN130 billion for technical modernisation is yet to be spent. Before MSPO 2015, PGZ declared again its will to participate in all Polish modernisation programmes. In some of them, such as artillery project, (including the HOMAR wheeled multiple rocket launchers and the RAK self-propelled howitzers) or individual soldier’s equipment, PGZ wants to act independently.
PGZ confirms that it wants to acquire advanced foreign technologies which it does not possess. It includes, for example, technologies for the NAREW programme, in which PGZ is one of nine selected companies. PGZ wants to be deeply involved in the WISLA programme. The experience gained might be used in the NAREW project, in which PGZ wants to be a leading company and technology integrator. Poland is currently able to provide not only vehicles but also radars. PGZ also wants licenses for launchers and missiles. A technical dialogue for NAREW is planned for this year. Without a doubt it will be one of the hottest topics during MSPO 2015.
Robert Czulda, PhD, a research associate in the Department of the Foreign Policy and Security Theory (University of Lódz, Poland), cooperates with the Polish defence press, is an expert in international security and defence issues, and a regular contributor to MT.