Piatkowski:
By : Chris Rivituso
Poland may be close to celebrating its first anniversary as a member of the North Atlantic Treaty Alliance (NATO), but the nation is by no means ready and able to meet its defense obligations. So far, unmet challenges include developing the nation's defense industry and delineating clear lines of responsibility between the private and public sectors. Many areas of Polish armed forces need improvement, from working on officers' ability to speak English the language of NATO to obtaining more modern fighter jets. The WBJ's Chris Rivituso met with Krystian Piatkowski, director of foreign affairs and NATO contacts for the Polish Association of Defense Producers to discuss the current state of the country's armed forces and defense industry, as well as what objectives both areas need to meet in coming years. The following is an edited version of their conversation.
Q: How would you define the current state of Poland's defense industry?
A: The state of this branch of industry is difficult at the moment. Difficult is a word that best characterizes it. Difficult does not mean without perspective. What I mean is that we still have underway a certain process of transformation from the old structure of industry, which was based on state ownership, large companies, low production and lack of market environment. These factors are the major problems for today's industry. And, of course, things like privatization, restructuring are just part of the answer to all these problems. One of the key issues at the moment and to decide at the government level is what shape the industry's future will take. We need some sort of long-term strategy as to how things should look in 10-15 years. What sort of ownership structures it should have. Poland is no longer capable of producing the whole spectrum of military equipment and weapon systems. Given the amount of money we have and are going to have in five or 10 years, we simply have to decide what we are going to specialize in.
Q: What areas do you see Poland's defense industry specializing in?
A: Electronics is an area in which we think we can specialize. We have two very capable producers of radars and electronic sensors that are quite successful in international markets, companies like Radwar and the Industrial Telecommunications Institute (PIT). They can compete, they can offer modern products such as three-dimensional radars and long-range ones. These companies need investment just to be able to compete and simply to follow with the current research and development activities. So, this is one of the areas. Given some traditional branches of activities, we can participate in European programs dealing with armored vehicles, for instance. We can either assemble the vehicles or just participate in research and development activities. We have several programs dealing with armored vehicles, with armored personnel carriers. Perhaps the next-generation tank will be an all-European tank, for all NATO armies, and I can see a place for Polish companies to compete. We are very good in supplying engineers. We have a company that is participating in a U.K. tender for a future engineer tank. That company was selected as one of the two remaining competitors. So in this area we also have some capability. I would also say that in some more specialized areas, like protective clothing, for instance, we have something to offer.
Q: In its present condition, can the Polish defense industry make products that meet NATO standards?
A: It varies from field to field. In some areas we are capable of providing products of NATO quality. In other areas we should focus on joining European or transatlantic programs.
Q: What will stimulate that development?
A: Two processes that should be simultaneous privatization and consolidation. If we create a national aviation or aerospace holding, just a big company instead of 10 or 11 existing ones, our bargaining position vs. either European or American companies would be better. And at the same time, such a big company would be able to generate some funds for research and development activities. But in general, I see the future of the Polish defense industry in close cooperation with the Euro-Atlantic area industry.
Q: Does Poland need a defense industry?
A: Absolutely. We have armed forces and we have defense needs and requirements. We have roles to play in the alliance as well. And the armed forces, of course, need new equipment, but also spare parts, upgrades of existing equipment, ammunition supplies and so on. Buying such things on the international market may be cheaper, but it doesn't provide you with the certainty of supply. And certainly the defense industry is or can be a very lucrative part of the economy. Some areas of it are very advanced branches of industry. Normally the defense industry, defense projects, attract new technologies. This would also help develop our national capabilities.
Q: What foreign companies are currently present or have expressed an interest in the country's defense sector?
A: One example is the investment BAE Systems made in Mielec, in one of our aviation factories. We have France's Thomson-CSF cooperating very closely with Radmor, the Polish company that specializes in technical communications systems and radios for the military. We have several companies that provide orders for subcomponents in the Swidnik helicopter plant.
Q: To what degree does the government need to get involved in the defense industry?
A: There are two contradictory factors. On the one hand we are quite aware that the level of governmental involvement will be decreasing. That is sort of a natural trend because once we have defense companies privatized, the capability of the government to influence the industry in a direct way diminishes. This privatization process started last year and according to the government's program will be completed in about five years or so. On the other hand, defense production and trade was, and most probably will be, still closely connected with national governments or perhaps in the future with supranational structures such as the European Union (EU) or NATO. That is obvious armed forces belong to governments. The most preferable way of involvement would simply be through legislation. I see the government's place as providing a good legislative framework for the defense industry. Some sort of control or influence on the decisions of privatized companies should remain given the long-term strategy of controlling certain export activities. I would personally prefer indirect control, rather than direct involvement.
Q: What about government subsidies?
A: Research and development is the area in which I believe government subsidies should remain. And now the area is linked with the necessity of supplying certain military articles in case of war, mobilization, crisis or intensive employment of the armed forces. Again, I am referring to the area of explosives, ammunition and so on. Ammunition is something that is being consumed by the armed forces on a permanent basis. So the military needs to be supplied with ammunition all the time and it also needs such a supply to be expanded very rapidly. Maintaining some capacity of increasing production rates in the ammunition factories is an area that can be and should remain subsidized by the government.
Q: Poland has been a NATO member for about a year now. Have you seen many changes in the armed forces and in the defense industry as a whole?
A: Yes, the first very important change is that the government, the armed forces and most of the organizations or institutions in public life, most of them don't talk about money as freely as they used to. They now realize to a large degree that there is a direct link between money that is allocated for defense and output in terms of equipment. It's a very subjective view, but the government's defense minister began to plan more carefully in terms of investments, procurement plans and to focus on cost-effect relationships.
Q: Can you give me some examples of that?
A: One of the major issues for the past couple of years has been the problem of acquiring new fighters. In this context many people used to speak about very improbable things. That is, people were quite free to say that Poland needs 200 or 250 new aircraft. Nobody seemed to really feel responsible for the effects of such opinions in terms of money to be allocated for such an acquisition. Recently, we have been observing much more modest quotes about the total number of airplanes to be bought. More frequently, people have begun saying that we have this or that amount of money and that we can only afford this number of planes.
Q: What changes have you seen in the armed forces and how would you describe the condition of Poland's armed forces compared to other countries?
A: For the last decade, the armed forces as a whole were underinvested. And the result of it led to the present situation. We have to adjust and reach certain standards of interoperability, which is the basic NATO requirement that has to be met. That refers to the standards of command procedure, English-language proficiency, communications, command and control equipment, which somehow has to be standardized. And the necessity of reaching these minimal levels of interoperability prevents us from investing in other programs relating to the incumbent capability of the troops. In other words, we have to buy computers before we start buying aircraft, tanks and other hardware.
Q: There has been talk in the past about the armed forces obtaining fighter planes from either Lockheed Martin or Boeing. Where do things stand now?
A: I would say that the answer lies in the pocket. We have to have a detailed financial solution. To start seriously speaking about the purchase, we have initiated the selection procedures. Several companies were requested to send information. That includes Boeing, Lockheed, BAE, French Dassault, and German company DASA, which is co-producing the Eurofighter. So, these requests for information were answered. The government has the answers, it has initiated the process of assessment of this information. But to start tender procedures, we have to have the money appropriated. And here the decision by the government is not only involved, but also that of the Finance Ministry. There have been rumors about two or three weeks ago that the Council of Ministers has finally decided about allocating $1.5 billion over a period of several years for that purchase. I can't confirm whether it's true or not, no official government statement was made public.
Q: It sounds as though they want to get the ball rolling.
A: Yes, if we do not buy fighters and whether they are new or used is of secondary importance we can get rid of the existing air force within a couple of years. Because the aircraft that we have at the moment is coming toward the end of its life cycle.
Q: What type of aircraft does the air force have?
A: Three types of combat aircraft. MiG-21s, which are the oldest and will be retired in a very short time. These are just interceptors. We also have fighter-bombers or strike aircraft, which are called Su-22s, and about 20 MiG-29s, which are the most modern. All of these aircraft are of Soviet origin.
Q: Do you see the purchase of new Russian planes or refurbishment of the existing ones as a viable option?
A: Just two points. First of all, it is extremely unlikely that Poland will buy Russian fighters, even the most modern ones. The second point is that the only available option, in my opinion, is to modernize part of these aircraft, in particular the MiG-29s. The problem with new Russian equipment being supplied to Poland, is two-fold. On one hand it is a political problem. Given the Russian attitude toward NATO expansion, toward Polish membership in NATO, it is hard to expect that the Russians would be willing to supply spare parts and subcomponents under every circumstance. And this makes such a purchase very, very risky.
Q: In the next few years, Poland is going to deploy a new radar system along its eastern border that will be able to see some 700 kilometers into the territory of the former Soviet Union. Do you see much more that needs to be done to protect this border?
A: First of all, when we were leaving the Warsaw Pact in the beginning of the '90s, the Polish eastern border had no cover in terms of radar coverage it was not protected in terms of air-defense surveillance systems. So any aircraft flying from the east into Polish territory had free access and was impossible to monitor. From the point of view of the country's sovereignty not mentioning NATO for a moment it is necessary to create such coverage, to provide the capability for surveillance in the areas close to Polish borders. And given the characteristics of modern planes, 700 kilometers or 500 kilometers is not much, it is a sort of standard distance. Secondly and now NATO should be considered when entering NATO, Poland also entered the integrated air-defense system. That means it is also responsible for providing information, providing data to all the allies. Because NATO has an integrated system in Europe, everybody contributes to the surveillance. It is simply impossible to leave such a hole in the alliance coverage or air-defense system.
Q: The total cost for these radar installations could come to zl. 500 million ($122 million). Is Poland always going to get this equipment from NATO or will it have to fund purchases on its own?
A: It is not entirely a free ride, because Poland is contributing to all NATO budgets. Secondly, it has been sort of standard in NATO that the allies fund infrastructure in these countries in which they feel they need some investments. This was the case with Turkey, Portugal and Norway. Poland is no exception to that rule, except that maybe the needs are bigger.
Q: Can you tell me what the defense budget is for 2000?
A: I don't remember the figure.
Q: But has that number been increasing or decreasing in recent years?
A: In real terms it is slowly decreasing. If you express it in actual numbers, it is increasing slightly but even given inflation and the proportion of gross-domestic product (GDP), it is about to decrease, which is a negative trend in the sense that Poland has much to do. And we, as well as most of the defense contractors, believe that this trend should be reversed. We aren't asking for defense spending to account for 3% of GDP, but its should remain at 2.1% or 2.2% of GDP.
Q: What was the level of defense spending under the communist regime?
A: Sometime in the '80s, the level of officially published defense spending was something like 5-6% of GDP. And including all of the hidden expenditures it was 8-9%. So it was four and a half times today's figure.
Q: How do you see the defense industry developing in the next five to 10 years?
A: I would prefer to speak about the 10-year perspective. I believe that the actual shape of the industry, the actual condition of the industry, will be different from today. The industry will be much more closely linked to Western European and perhaps U.S. defense industries as a part of certain multinational consortia or holdings. That is the dominant approach in today's Europe. I would also speculate that several of the existing companies will not survive the next 10 years. I would not like to give particular names. On the other hand, we will perhaps witness a new generation of today's smaller and medium-sized companies, suppliers of advanced components, companies that have some advanced technologies, know-how, to replace today's giants at least in several sectors. I could probably also see some of these companies, these young tigers, rising at the moment. But it is too early to say which of them will survive.
