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A new Perspective, SSM’s Industrialization Department Priorities

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SSM’s Industrialization Department Priorities: Industrial Depth, Technological Competence and Export & Logistics Support

Mr.Bilal Aktaş, Head of SSM’s(Undersecretariat for Defense Industries) Industrialization Department, informed us about its mission, Industrial Participation / Offset Management function, Sector Strategic Management, Clustering Activities and Industrialization Portal for Defence Turkey Readers.

Defence Turkey: Mr. Aktaş, first of all we would like to thank you for your time for this interview. As known, Turkey has taken significant steps during the last decade. Could you please make an evaluation for us on where we stand now and our capabilities so far?

SSM is integrative, constructive and innovative for the design of national Defence industry. For this pupose, it commits to provide best solutions by bringing the forces of stakeholders together. For the sustainability of the sector’s acquisitions, it promotes exportation; gives priority to develop cooperation with friendly and allied countries. 2012-2016 Strategic Plan is part of a holistic approach and determines the objectives within the framework of the vision and strategic objectives. Within the scope of vision to make Turkey superior in terms of defence and security technologies, below are the outstanding topics related with the defence industry:

Program Management Maturity

Industry Sustainability

Technological Competence

Within the scope of this plan, the Undersecretariat for Defence Industries shall focus on studies to provide sectorial depth and lead SMEs and sub-industry companies in order to develop their project management as well as technological capabilities. As you know, the implementation of offset projects has been carried out for many years by the Undersecretariat for Defence Industries. Finally, with the IP/O Directive published in 2011, companies are required to commit 70% Industrial Participation/Offset in the contracts to be signed within the scope of Defence industry projects. In the proposals to be given in this respect, the participation of local industry as well as sub-industry and SME contribution for the sectorial depth shall be encouraged.

Defence Turkey: Could you please inform us about your missions as the Department of Industrialization in accordance with the Strategic Plan?

With the arrangements made in 2011, three Directorates were established under the Industrialization Department namely Aviation and Aerospace, Mechanical Engineering and Naval Architecture, Electronic and Software and they were assigned for the strategic management of the sectors, which are under the responsibilities of sector managers as well as for the follow-up of IP/O activities. Two main tasks of the Industrialization Department are "Industrial Participation/Offset Management" and "Sector Strategic Management".

Through its first main task, the Industrialization Department provides coordination of industrial participation/offset activities performed within the scope of projects, establishment of new policies by taking into account the developments in this regard, monitoring of signed IP/O contracts, preparation of parts related with IP/O arrangements to be included in RFPs and contracts as well as the the award and execution of the contracts.

The tasks of the Department of Industrialization under "Sector Strategic Management" topic are as follows:

To coordinate and monitor sector strategies,

To organize symposiums, workshops and meetings in defence industry field to provide cooperation and work-share between sub-industry companies and industrial organizations,

To ensure maximum utilization of local industry capabilities in SSM projects, to provide information, orientation and support to local companies in this context and to provide necessary coordination between sub-industry and SMEs,

To provide coordination with organizations such as SASAD, TOBB, KOSGEB and etc. for local defence industry activities,

To ensure that relevant studies are made to prepare Defence Industry Inventory promoting the capabilities of companies and establish defence industry product catalogue in this respect.

In addition to these tasks, the Department of Industrialization provides the execution of operations regarding loan agreements and transfer of funds protocols to be signed with local companies for purposes of support in coordination with Finance and Administration Department and fulfilment of tax and duty exemption certificate requests of the companies performing projects that are of vital importance for SSM and defence industry.

Defence Turkey: Could you please tell us how the Industrial Participation/Offset Management is functioning?

With the Industrial Participation /Offset Management, it is aimed to contribute to the balance of international payments by establishing import/export balance in product/service supply, to maintain and develop domestic industry and to provide top-down spread of technology. The Industrial Participation shows the contribution of domestic companies to the project whereas Offset shows the return of expenditures on national economy by allocating work share to local industry for foreign public acquisitions and investments, exporting product or service, technology acquisition and making investment. The IP/O liabilities required for projects conducted by SSM through 2011 IP/O Directive are divided into three categories:

Through 2011 IP/O Directive, the IP/O liability rate required for projects conducted by SSM was increased to 70% of the contract price. With the "Industrial Participation / Offset Evaluation Formula" amended in 2009, the importance given to SMEs was increased. Within this context, through 2011 IP/O Directive, at least 30% of Category-A (Industrial Participation) IP/O liability is stipulated to be as Sub-Industry/SME Work Share and at least 15% is to be as SME share. For crediting IP/O activities under Category-A, the coefficient regarding design and engineering work performed by SMEs is determined as 2.

In addition to this, the portions in the exported products / services performed by SMEs are credited by increasing the multiplier of the corresponding product / service in the Table of IP/O Multipliers by 1 (one).

Defence Turkey: Could you inform us on the Sector Strategic Management?

SSM’s Industrialization Strategy has been shaped around four main elements: Industrial Depth, Technological Competence, Export and Logistics Support.

The Industrial Depth is the most important element in terms of sustainability. Looking at the structure of the Defence industry in general, it is seen that the interests of sub-industry companies and SMEs to defence industry are increasing day-by-day. Through 2011 IP/O Directive, the IP/O share was increased from 50% to 70%, sub-industry and SME shares were increased to 30% and serious penalties were introduced. The aim is to achieve industrial depth.

"Technological Competence" means holding the required technology and managing the technology processes. Today, the design of sub-systems and components that support the main systems as well as the R&D activities are being carried out by our industry, research centres and universities.

Exportation is an important element for the defence industry in maintaining relations with friendly and allied countries and creating mutual dependency. As known, the most important element in defence export is to implement an active foreign policy, make the country a brand and have a product to sell. Looking at the recent period, we see an increase in system exports in parallel with all related elements that began to evolve; significant demands are received even for systems that are under test phases. One of the most critical issues in the projects conducted as per the required costs, schedule and technical requirements is to create cost-effective supportability within the life cycle starting from design phase, based on "Supply Logistics" approach. The objective here is to ensure the utilization of systems by TAF in cost-effective manner and to generate an economic volume for our industry in terms of logistics support. The foundation of an effective logistics support infrastructure is again a defence industry having technological competence and deepness.

Defence Turkey: What are the responsibilities of the Department of Industrialization within the scope of 2012-2016 Strategic Plan Document?

The domestic rate in meeting defence equipment needs of the Turkish Armed Forces was 54% as of 2011 year end whereas the target was 50%. In addition, the defence industry turnover target for 2016 is US $ 8 billion and export target is US $ 2 billion. Within this context, the primary task of the Department of Industrialization is to coordinate and monitor sector strategies. In this respect, our department has been conducting execution and updating studies referenced under the scope of 2012-2016 Strategic Plan Document and 2009-2016 Defence Industry Sectorial Strategy Document.

As per the objectives within the frame of the Strategic Plan as "To develop measures to increase the effectiveness of the defence and security sector" and "To increase the local procurement ratio via creating supply chains spread over tiers", the Department of Industrialization undertakes several tasks.

The project planned as per the "Development of measures to increase the effectiveness of the defence and security sector" target is a "sectorial analysis and restructuring" study where all public institutions and organizations taking part in the defence industry – primarily the MKEK and TSKGV companies - are to be discussed in details. As per "Increasing the local procurement ratio via creating supply chains spread over tiers" target, the aim is to establish main and sub-industry portal for updating and servicing Defence Industry Capability Inventory. By this way, the list of potential local sub-contractors can be obtained.

The activities planned within our Department for 2009-2016 are to update Sectorial Strategy Document, continue Defence Industry 25 Analysis Study in the following years and to give awards in different categories, to inform public institutions on the capabilities obtained through the projects carried out by our Undersecretariat, to organize workshops by making researches on parallel sectors’ infrastructure and technological capacities, to organize Offset Information Workshops for local companies to benefit from IP/O opportunities properly and regularly, to establish Product Development Loan mechanism for the development of product portfolio of Turkish defence industry in main and sub-system levels and for the development of infrastructures in this respect (test, qualification, quality systems, etc.), to include "Potential Domestic Sub-Contractor List" in RFPs for the target technology / sub-system areas and to monitor and support local passenger aircraft development activities.

Defence Turkey: Could you please inform us about your communications with other public institutions and organizations?

We have been organizing meetings with the Ministry of Energy and Natural Resources, Prime Ministry Investment Agency, Ministry of Health, the Ministry of Science, Industry and Technology, Ministry of Economic Affairs and the Ministry of Education to inform them on Industrial Participation / Offset.

One of the responsibilities of the Department of Industrialization is to organize symposiums, workshops and meetings in defence industry field to provide cooperation between sub-industry companies and industrial organizations. These activities aim to inform and guide local companies, and by providing all the necessary support and encouragement to develop the necessary coordination between industry and SMEs.

Through the Defence Industries Presentation Days organized in this respect, our Undersecretariat reviews the capabilities and competences of potential companies in country wide and makes visits accordingly. So far, the companies reviewed are from Tokat, Yozgat, Sivas, Rize, Denizli and Çorum. During these visits, the capabilities of such companies were assessed and reviewed.

Defence Turkey: Could you please make brief descriptions on these visits?

Yozgat-Sivas 13-14 September 2011

On 13-14 September 2011, a study visit was made to Yozgat and Sivas to disseminate and distribute works to the surrounding regions. In Yozgat, Garanti Giyim, Coşkunlar Karoser, Erensan companies were reviewed. In Sivas, Anadolu Tıp, PACO, Gökçeler Makina, Estaş, Nitrocare Yatak, Tüdemsaş companies were reviewed.

Tokat 20 – 21 December 2011 and 18 May 2012

During evaluation and planning meetings held on 20 – 21 December 2011 and 18 May 2012, Ayyıldız Tarım Makineleri, Kaf Su Armatürleri, Şener, Endüstri Grubu, Fener Makine, Özgel Makine, Almanyalı Yedek Parça ve Makine İmalat, AFF Çalışkan Makine companies were visited.

Rize 1-2 April 2012

During the meetings held on 1-2 April 2012, Yazsan Makina, Er-Em Makina, Metal Teknik ve Asilsan companies were visited.

Denizli 28 May 2012

During the Defence Industry Presentation Day held on May 28 2012, Ar Döküm, Ozan Tekstil ve Erbakır companies were visited.

Çorum 21 June 2012

Within the scope of the review for industrial participation made on June 21 2012, Çağıl Makine, Uğur Makine, Yetsan Oto Kalorifer ve Radyatör, Duduoğlu Makine, Yağmaksan Yağlılar Makine, Erdemli Makine ve Taç Makine companies were visited.

İzmir and Bursa

During the study visit made in Bursa on 11-12-13 April 2012 by SASAD, Ermeksan and Yepsan companies; during the study visit made in İzmir on 27-28 September 2012 by SASAD Torma, Tecfyl, Eko Endüstri, İZELTAŞ, Dirinler, BSS Boray, Tepaş Elektrik companies were visited.

Defence Turkey: Could you please inform us about your Clustering activities?

Clustering is defined as the regional concentration of competing, complementary and interconnected companies and institutions. Clustering approach is considered to be a suitable model for the development of the Defence industry. For the development and coordination of Defence Industry as well as establishing clusters and specialized sub-industry; clusters are started to be established in Ankara and other regions of our country.

Clusters which are actively working are OSTIM Defence and Aerospace (OSSA), Izmir ESBAŞ Aerospace (HUKD), Teknokent Defence Industry Platform (TSSP) and Eskisehir Aerospace. Tuzla Shipping and Ankara Kazan Clusters are under the establishment phase.

Defence Turkey: Lately we have heard the term "Industrialization Portal". Could you give us some information on this portal?

In 2012-2016 Strategic Plan, the key element is "Sustainability" and two most important sub-elements are the "Industrial Depth" and "Technological Competence". The Defence Industry Portal has been established to support these two elements. With the data obtained from this portal which will enable the awareness of the companies performing activities in defence industry with each other, increase communications between them and allow the companies that would like to perform activities in defence industry to promote themselves, a database regarding Defence Industry Companies shall be established which is to be updated continuously. Such data shall be the basis for Capability Inventory and Potential Local Subcontractor List, which are foreseen in 2012-2016 Strategic Plan.

In addition, the companies performing activities or want to perform activities in the projects carried out by the Undersecretariat of Defence Industries are required to login to Portal as per IP/O 2011 Directive.

Within this context, the method to be followed for Industrialization Portal membership is apply for a new membership at Giri.

Defence Turkey: Could you please brief us on the volume of the Turkish defence sector?

The production in Turkish Defence Industry increased 25% in 2011 compared to 2010 figures and US$ 4.4 billion turnover was reached.

The Defence and Aerospace exportation activities increased 29% in 2011 compared to 2010 figures and reached US$ 1.09 billion. The defence industry export target anticipated for 2016 within the scope of the Strategic Plan is US$ 2 billion.

The total number of employees in the sector was 23.695 in 2010 and reached at 24.160 in 2011.

Defence Turkey

well i know this interview is a long one but i found it very interesting to read and wanted to share here..
 
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