However, both Turkish and Western defense industry sources told Today’s Zaman that delays in some projects or cuts in the amount of some arms procurement projects can be expected as a result of the depreciated lira.
“Turkish officials will decline to say publicly that the current global economic crisis, also being felt in Turkey, will have an impact on defense industry projects. But we can expect some delays in the execution of some projects while the number of arms to be procured in some projects may face reductions,” asserted an Ankara-based Western defense industry official. For example, the same source said, Turkey may cut the number of long-range missiles that it plans to acquire due to the economic situation.
The Undersecretariat for the Defense Industry (SSM) issued a Request for Information (RfI) last year for the acquisition of four long-range air and missile defense systems (T-Loramids) worth around $1.4 billion. However, it later increased the number of missiles systems it was to purchase to 12, bringing the total cost of the project to about $4 billion.
It is now highly likely that the number of missile systems to be purchased will be reduced to their original amount to lessen the effects of the crisis, a local defense industry source said.
The Turkish currency has lost around 20 percent of its value against the dollar since the beginning of September, when it stood at around YTL 1.18 to the dollar. It has hovered around YTL 1.50 as of late.
The lira saw a 34 percent loss in its value against the dollar between September and October, when it went up to YTL 1.70 to the dollar before dropping down to today’s levels.
Compared to the euro, the lira lost around 10 percent of its value since the beginning of September, dropping from around YTL 1.75 to the euro to today’s value of just under YTL 2 to the euro.
SSM Undersecretary Murad Bayar, answering questions from the press on Tuesday, ruled out any impact of the global financial crisis on the Turkish arms acquisition projects.
He said the SSM fund’s revenues total around $1 billion per year and are immediately converted into foreign currency or Treasury bonds to prevent a possible impact by any loss in value of the Turkish lira against foreign currencies on defense industry projects.
The SSM’s Turkish Defense Industry Support Fund (SSDF) was created in 1986 to generate income for arms acquisition projects. The SSDF’s main sources of income include income and corporate tax, national lottery earnings, horse race betting, light firearms import net proceeds and a fuel consumption tax as well as alcohol and tobacco fees and levies.
Additionally, there have been varying amounts of transfers to the SSDF from the budget of the Defense Ministry. In 2007, around YTL 250 million was earmarked for the fund from the ministry’s budget, an SSM bureaucrat said.
Bayar, meanwhile, confirmed to Today’s Zaman that even if the National Lottery Administration was privatized, a certain percentage of its earnings will continue to be transferred to the SSDF.
Turkey has increasingly been using the euro in its defense dealings, Bayar said, indicating also that defense industry projects are not affected by the crisis because the fall in the lira’s value against the euro is less severe than to the dollar.
Turkey’s arms procurement spending in euros increased recently as Ankara inclined more toward contracting defense projects to European countries. This includes its attack helicopter program, which it signed with Italian Agusta earlier this year at a cost of 2 billion euros ($2.7 billion).
However, several costly projects have been signed with the US, including an additional purchase of 30 F-16 fighters at a cost of around $1.8 billion as well as an acquisition of around $10 billion in Joint Strike Fighters (JSF). Turkey has, therefore, not limited itself to spending only in euros.
Defense fair not to be affected by crisis
Retired Gen. Engin Alan, general director of the Foundation to Strengthen the Turkish Armed Forces (TSKGV), said on Tuesday in response to a question that economic crises were not expected to affect the number of participants at a defense industry fair planned to be held next year in İstanbul.
“On the contrary, the defense industry fair will form a platform to contribute positively to the Turkish economy. We think the global crisis will help create new business opportunities to countries participating in the fair. We think new possibilities will enable new partnerships. Turkey has turned into an important market in the defense industry as it stands among the top five hosts of the largest fairs in the world,” Gen. Alan said.
Alan made the remarks during a press conference held in Ankara on Tuesday by the TSKGV to announce the 9th International Defense Industry Fair (IDEF’09), to be held in İstanbul between April 27-30 of next year.
Gen. Alan cited the unavailability of a large enough venue in Ankara during the time of the fair as the reason for it being held in İstanbul for the first time.
The TSKGV has signed contracts with over 100 local and foreign firms from 39 countries that have committed to participating in the fair next year, while 330 firms have reserved stands, Gen. Alan said.
There has been a 12 percent increase -- from 298 to 333 -- in the number of foreign firms participating in next year’s fair, compared to 2007. This figure has seen a 21 percent increase over the same time period, from 133 to 161 firms, in the number of Turkish firms participating in next year’s IDEF, he added.
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