Defence industry in Eastern Europe: Can India exploit the potential?
Eastern Europe was part of the communist bloc during the cold war era under the influence of the Soviet Union. Following, the fall of the alliance in 1991 most of the countries gained independence meaning that they are UN recognised full-fledged states such as Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Macedonia, Poland, Republic of Kosovo, Republic of Moldova, Romania, Serbia, Slovak Republic, and Slovenia. These countries are broadly categorised as part of eastern Europe and the aim here is to see if New Delhi can utilize its potential as a defence exporter to bolster the armament industry in the region.
Defence Sector in Eastern Europe:
Defence spending in eastern Europe is increasing for instance Bulgaria has stepped up its expenditure by 121.33 percent in 2019 reaching a total of $2.18 billion, Slovakia too enhanced defence disbursement by 43.9 percent arriving at 1.87 billion. Romania, Moldova, Ukraine have also increased by 13 percent. This could be because countries in eastern Europe have plans to modernize their military, threats from an assertive Russia and push by the American goliath for NATO countries to spend at least 2 percent of the GDP on defence.
Countries are spending on enhancing their military capacity that is renewing soviet era equipment for example Poland launched Kormoran II-class minehunter named ORP Albatros in October 2019. Czech Republic bought 12 UH-60M black hawk helicopter from US at the price of $800 million.
Poland:
The polish government intends to modernize its armed forces and for this, it has consistently increased spending in the last decade for instance in 2010, the government spent about $8.38 billion and last year, $12.5 billion was spent for defence expenditures. Since the government in Warsaw has intended to become a NATO compatible force, it is undergoing change at every level that is force structure, training programs, doctrine, and security procedures. It also wants to improve troop mobility, air defence systems and plans to develop a professional army as per the 2020-2035 modernization plan.
According to Bartosz Kownacki, who was the defence minister back in 2017, the armament industry suffers from delays in completing the project, weapons being developed with imprecise and unfeasible specifications and lastly, underfunding which makes it impossible to rely on the domestic setup. As a result, it imports most of the required equipment from the American goliath for example it bought the Patriot missile defence system for $4.75 billion in 2018 and last year Defence minister inked a deal worth 4.6 billion to procure 32 F-35A lightning II fighter jets.
The Indian government can provide the Polish government with cheaper alternatives which will not match America’s quality but on the other hand, it would not leave a big hole in Warsaw’s wallet. With Indian government pushing for private sector involvement, New Delhi could help Poland revive defence industry through production in India or joint ventures.
Hungary:
The government in Budapest wants to revive the defence industry as part of the 2026 national defence and armed forces development program. The governments aims to support the defence industry through manufacturing of weapons, ammunition as well as gunpowder.
As far back as 2013, India and Hungary signed a memorandum of understanding on chemical and biological warfare when Hungarian Prime Minister visited New Delhi. Hungary also sought India’s help in reviving the defence industry in 2016 when Vice President Hamid Ansari visited the country and in meeting with Hungarian Prime Minister Viktor Orban decided to setup a working group which would investigate areas of cooperation in defence matters.
In 2018, Budapest also supported New Delhi’s pitch for a global legal framework to eliminate terrorism and also supported India’s attempt to attain membership of Missile Technology Control Regime as well as the Nuclear Suppliers group. This conveys the fact that Hungary supports New Delhi’s rise as a military power. With Budapest wanting to revive the domestic industry and New Delhi promoting privatisation of the defence industry, the two countries could collaborate on manufacturing of arms through joint ventures.
Bulgaria:
The government planned to privatise the defence industry in 2016 when the cabinet decided that the leading arms maker VMZ spot and arms exporter Kintex will be privatised in 2018 and 2019 respectively. The decision to privatise was taken as VMZ spot was in a bad financial shape and was a victim of various accidents in 2015. However, in 2017 the government reversed the decision to privatise the leading defence manufacturers as VMZ spot was able to boost sales due to demand in Middle East, Africa, and Asia. For instance, VMZ spot posted the revenue of $277.7 million which was an increase of 392.5 percent from the pervious year.
During President Ram Nath Kovind’s visit to Bulgaria in September 2018, he not only signed four memorandums of understanding but also invited the country to become a key partner in defence sector. New Delhi’s attempt proved fruitful as India’s Kalyani strategic system inked a deal with Bulgaria’s Arsenal on 7th February 2020, for manufacturing small arms and ammunition in India.
The production facility will specifically build 7.62 x 39mm assault rifle and 7.62x 51mm machine guns. The joint production would enable Indian defence industry to successfully privatise after years of reliance on inefficient state led firms and in case of Bulgaria it would enable competition within the defence industry and help foster innovation.
Czech Republic:
Prague is equipped with outdated Soviet era weapons and since it became a NATO member in the post cold era, it has decided to modernize its armed forces. Right win extremism, migrant crisis as well as the rise of Islamic state is pushing the country towards modernization. In 2019, the eastern central nation spent 2.9 billion on defence and plans to increase the defence budget to 2 percent of the GDP in the coming years. The domestic defence industry is moderately developed, however with deteriorating security situation around the world, there is scope for the industry to become a world supplier.
During President Ram Nath Kovind’s visit to Prague in September 2018, in meeting with Czech President Milos Zeman he talked about the opportunity for Czech companies to setup joint ventures and utilize the opening of Indian defence sector to enhance their standing as arms exporters. The Indian army uses TATRA trucks which are manufactured in Czech Republic and are assembled in India. The 2003-2012 period data says that about 4,000 trucks were delivered, this manifests that there is a potential for growth and collaboration between the two nations in the defence sector.
Final Viewpoint:
Governments of eastern Europe after years of being in the communist economy have now embraced capitalism and with looming threats such as rise of Islamic State, it is essential to resuscitate the defence industry. They are looking to support those industries as the end of cold war conveyed that the private sector is better placed to manage the economy, so private players are needed to enhance competitiveness. These countries are now members of NATO, with US especially under during former President Trump’s reign pushing the Europeans to take more responsibility, they will have to do more.
These countries could collaborate with New Delhi as India is looking to provide an alternative to defence industry giants such as the United States. While India at present is in no position to provide these countries with top level equipment but it could provide them with cheaper alternatives. Since every country is constrained by the budget, it would be fruitful to have workable equipment which is not too expensive.
End Notes
1) https://saylordotorg.github.io/text_world-regional-geography-people-places-and-globalization/s05-05-eastern-europe.html
2) https://www.insol-europe.org/eastern-european-countries-committee-introduction-and-members
3) https://www.trade.gov/knowledge-product/poland-defense-industry
4) https://notesfrompoland.com/2021/02/17/what-next-for-the-polish-defence-industry/
5) https://www.ft.com/content/a63ad054-8129-11e9-9935-ad75bb96c849
6) https://www.defensenews.com/global/europe/2020/01/31/poland-inks-46-billion-contract-for-f-35-fighter-jets/
7) https://pib.gov.in/PressReleasePage.aspx?PRID=1659746
8) https://timesofindia.indiatimes.com/india/india-israel-to-co-develop-hi-tech-weapon-systems/articleshow/78327521.cms
9) https://www.globalsecurity.org/military/world/europe/hu-industry.htm
10) https://indianexpress.com/article/india/india-news-india/hungary-for-indias-participation-in-defence-film-industries-3086329/
11) https://www.defensenews.com/industry/2016/04/12/bulgarian-government-to-privatize-defense-companies/
12) https://www.defensenews.com/pentagon/2017/05/12/bulgaria-halts-defense-industry-privatization/
13) https://seenews.com/news/indias-kalyani-group-signs-mou-with-bulgarian-arms-maker-arsenal-report-686519
14) https://www.deccanherald.com/international/president-invites-bulgaria-691194.html
15) https://www.globenewswire.com/news-release/2019/07/15/1882454/0/en/The-Czech-Defense-Industry-2019-to-2024-Opportunities-in-Infantry-Fighting-Vehicles-Land-based-C4ISR-and-Multi-role-Aircraft.html
16) https://economictimes.indiatimes.com/news/defence/india-invites-czech-defence-companies-to-set-up-joint-ventures/articleshow/65721397.cms?from=mdr
17) https://www.tatratrucks.com/about-the-company/press-and-media/news/tatra-trucks-makes-the-first-renewed-deliveries-to-the-indian-army/
18) https://www.outlookindia.com/newswire/story/india-hungary-sign-mous-on-defence-cooperation/813926
19) https://economictimes.indiatimes.com/news/defence/india-hungary-back-global-legal-framework-to-fight-terrorism/articleshow/54882911.cms?from=mdr
20) https://theprint.in/defence/buy-weapons-from-us-india-says-as-it-pushes-exports-to-compete-with-china-in-neighbourhood/622216/
Pic Courtesy -tatratrucks.com
(The views expressed are those of the author and do not represent views of CESCUBE.)
