EUROPEAN DEFENSE FUND AS A CHANCE FOR THE POLISH DEFENSE INDUSTRY

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1 PUBLICATIONS Author: ADAM DUDA EUROPEAN DEFENSE FUND AS A CHANCE FOR THE POLISH DEFENSE INDUSTRY

2 BG(ret.) Adam Duda, PhD European Defense Fund as a chance for the Polish defense industry. 1. A context of the European Defense Action Plan creation After two decades of relative peace in Europe, when the civil war in previous Yugoslavia was concluded and the effects of the world economic crisis were under control, in 2011 the old continent became a witness of a new Arab Spring phenomena in North Africa countries. Destabilization of states systems and social changes in previous Western European countries colonies resulted in a next emigration wave to Europe. Not without meaning for the scale of the event was the American intervention in both Iraq and Afghanistan which additionally destabilized those regions and gave a further migration impulse towards Europe. When Europe was challenged by practically uncontrolled influx of refugees and migrants, Russia, hitherto seen as a democracyfollowing state, annexed Crimea and started special operations in western Ukraine that led to a total destabilization and a loss of control

3 over this terrain by the Ukrainian government. This process was also possible due to separatist tendencies of a part of the western Ukraine society. In secured and partially disarmed Europe, all these events resulted in a re-focus on security and defense issues what was reflected in statements and documents of European politicians. In this European discussion thesis appeared that the member-states would not be able to overcome these new challenges. To guarantee our collective security, we must invest in the common development of technologies and equipment of strategic importance from land, air, sea and space capabilities to cyber security. It requires more cooperation between Member States and greater pooling of national resources. If Europe does not take care of its own security, nobody else will do it for us. A strong, competitive and innovative defence industrial base is what will give us strategic autonomy." With these words the President of the European Commission, Jean-Claude Juncker, in his speech in November 2016, gave a sign that the security issues came back to the agenda of European problems. The European leaders awareness of the necessity to enhance defense capabilities by every member-state and benefits from industrial cooperation in the area of research and development as well as collective purchases of armament led to establish in 2016 the European Defense Action Plan (EDAP). This is a set of activities and instruments to be taken by European states to increase their defense autonomy. 2. A need for cooperation. Among many requirements for stronger, in terms of defense, Europe, there are collective purchases, development and maintenance of the full spectrum of land, sea, air and space capabilities. Analyzing the situation of the European defense industry comparatively to the whole world, it is clear how much Europe needs the strategic autonomy and competitive developments in areas of essential capabilities. It is pointed out

4 as the key, the approach focused on European cooperation in terms of unmanned systems, intelligence, reconnaissance, observation, communication satellites, and space access and permanent the Earth observation. Within the EDAP activities the European Commission (EC) with acceptance of all memberstates leaders proposed to implement defined objectives. The project of the European Defense Fund is a specifically dedicated fund to promote cooperation and generate savings among member-states in implementation of the most advanced defense and armament manufacturing technologies. Collectively cumulated resources of every member-state should result in much better synergy effects than in case of individual engagement. Moreover, it should eliminate duplications of some capabilities in the areas of both R&D (research and development) and manufacture on the European level. A particular role in this project is designated for small and medium enterprises which participate in chains of supply of big armament companies and which, in usual conditions, have limited access to R&D funds. Starting from 2018 the European Union (EU), using the fund s instruments, plans to fully and directly support collective innovative researches in the area of defense technologies and products. States which decide to develop prototypes collectively can count on financial support for these projects from the fund. However, R&D phases don t have to match. The next phase of possible cooperation is collective armament procurement system by memberstates and in such cases the support would be expressed by delivery of financial instruments, unified conditions and frame contracts by the Union agencies.

5 EUROPEAN DEFENSE FUND ASSUMPTIONS Research Development Collective procurement 90m Euro annually by m Euro annually after 2020 Projects financed by states up to 80% - 2bn by 2020 and 4bn after that Projects co-financed by EU up to 20% - 500m by 2020 and 1bn after that Technical support e.g. EDA, OCCAR, unified financial instruments, frame contracts Collective projects only, 3 participants at min. from different states, a part of the budget designated for cross-border projects SME, EU co-finances only a development of prototypes designated for procurement by member-states, projects developed under PESCO co-financed by EU 10% additionally. 3. A chance for Poland Activities taken by the EU institutions are aimed at more effective resources utilization by member-states on R&D. The support for R&D in areas of innovative technologies, including dual-purpose ones, is to encourage to initiate collective international projects but, only these in which other memberstates are interested. The level of European defense R&D financing is over seven times lower than in the U.S. In Poland this level is even lower and in subsequent budgets it does not

6 reach the legally established level of 2.5% of the defense spending. The Polish Armed Forces Modernization Program that has been implemented since 2013 gives a chance, next to a procurement of existing technical solutions, to rebuild the production potential of the Polish defense industry. The task is so difficult because in the last decades the competition environment has gone through the transformation and consolidation processes and, as a result, such giants like Airbus, Leonardo, MBDA, Thales etc. have appeared, making the technological gap between Poland s and European defense companies deeper. The emergence of the European fund designated to cover research costs in the area of defense technologies seems to be a very good tool to supplement our own limited capabilities to support such researches from our national budget. Besides the financial aspect of our companies participation in this fund other benefits are to be pointed out, like an access to modern research methods of perspective partners, processes standardization and benchmarking, modern management and project development methods, participation in the international chain of supply and build up of competencies in chosen areas. The initial areas of interest are: space, cyber security and navy. The space researches are to be focused on satellite technologies what is in accord with our ambitions to have own communication satellites. Common actions together with the leading European companies are the cheapest and fastest route to a success. In a similar way our plans included in the 15. operational program of the Polish Armed Forces Modernization Plan to build both defense and offense capabilities in cyber space might be supported by the European means and knowledge. Concerning navy, the synergy effect of the civilian and military achievements in the areas of a critical infrastructure protection and supervision should be utilized.

7 By special regulations which support small and medium enterprises access to funds there is a specific role designated for them. It creates a particular occasion for Polish companies to take part in these projects. The key part of Poland s defense industry exists within the Polish Armament Group (PAG) which, due to its size, is defined as a medium enterprise. As a result it forms a unique opportunity for companies from the Group to acquire EU funds and already mentioned benefits which derive from a participation in an international project. But as for now, with minor exceptions, neither PAG nor any other private company has not initiated an application procedure to take part in the Fund. It could be understood in the case of small companies out of PAG but it is hard to comprehend why such a large (for Polish reality) staff of states companies is completely still declaring only to monitor actions taken by others in the Fund. The next question that should be asked is which organization in Poland is responsible for coordination and support for Polish business to get an access to the Fund and to make contacts with foreign partners to enable utilization of the Fund s resources. A distribution of the funds is organized on the European level via national experts teams based on applications presented by companies. Yet another question is which Polish institution delegated our national expert to the body, an expert who is to take care of our companies interests. Additionally to national experts the applications evaluation process is conducted by the European Commission s independent experts. How many of them are from Poland? Most probable none. Have we created a training and support system for small and medium enterprises of the defense sector to obtain the funds? Yet such a system already exists in Poland in the area of structural and investment funds in civilian sector. A similar lack of activity can be noticed in a new defense cooperation program in Europe, so called PESCO

8 (Permanent Structured Cooperation) where, in the total number of 17 projects activated by 23 participating states, Poland expressed its access in only 2 NATO forces mobility in Europe, led by Holland and, an elaboration of European radio defined by software (SDR Software Defined Radio), led by France. These examples prove our passivity in the play for European defense funds. Considering the presented situation the coordination training center should be urgently defined, responsible for preparation process of our companies to apply for the funds as well as to organize and conduct a personnel offensive directed towards the decision making and experts bodies. This personnel would be an ambassador of our interests in the European defense funds share. Lack of such activities will cause that the funds will be directed to companies from the leading nations like: France, Germany and Italy and, in the area of new technologies we will stay, as usually, on peripheries with claims that again the rich western Europe does not present solidarity with the new EU members.

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