Turkey’s ‘war machine’ and private sector

President Recep Tayyip Erdoğan’s “travel to space” statement hit an absurd note at a time when the poor were collecting food from the garbage, when unemployment had soaring and tradesmen were driven into bankruptcy.

In 2010, columnist Hıncal Uluç wrote that Erdoğan's dream was to dig a “second Bosporus.” Back then, the Kanal Istanbul project was regarded as quite extreme. Today, however, the prospective canal has led to a devastating development bubble, regardless of the project itself.

Do you know what Turkey’s largest and costliest project is after Kanal Istanbul? It is the Ankara Aerospace Industrial Zone (HAB), which was founded after the Afrin operation and quickly built 35 kilometers outside Ankara with an initial budget of $6 billion. It covers 7 million square meters. In the first phase, 160 companies will take part. A section of it is already operational. It will also be the heart of four separate aerospace industry organizational structures currently operating in four separate cities.

An economic overhaul has been ongoing since 2010, which is in harmony with the ever-increasing surge in militarist, nationalist and regionally expansionist rhetoric.

Moreover, this very obvious change cannot be understood through the government’s previous stance. Turkey's capitalism has been forging a “war machine” that was hitherto unequaled. The arms industry, which is usually discussed within the framework of the “government-arms” relationship has now turned into a “capital-arms” relationship.

The military industry, alongside infrastructure constructions and energy, is one of the main sectors that has influenced the structures of both the government and the state in recent years. Yet the “chaotic aspect” created by short-term interests in the construction and energy sectors does not prevail in the military industry sector. Though two major pro-government companies such as BMC and Bayraktar have been formed, the military industry has a highly planned structure. It encompasses major industrial companies and extends to SMEs.

The number of projects has reached 667 in 2018 from 62 in 2002. There is no official data for 2019 and 2020 as of yet, but we know that about 150 new projects have been launched. There is also a significant increase in the financial value of the projects.

The contract value of defense projects increased more than tenfold from $5.4 billion in 2002 to $60 billion in 2018. Today it is estimated at around $80 billion.

The turnover of the companies follows has risen in the same manner. Within 16 years, the turnover increased from $1 billion to more than $10 billion. Another indicator is export volume. While it amounted to $248 million in 2002, it exceeded $3 billion as of 2018. Though the value of turnover and exports may still seem low, the trend is obviously very strong.

The obvious increase in all charts after the 2010s and also after 2017, when the economic crisis began, is significant as it also corresponds to changes in foreign and domestic politics.

As for the corporate front, in 2002, 56 companies were directly producing for the military industry. Today that number is 1,500. It is difficult to determine the number of companies that are indirectly integrated in the sector. Hundreds of them are subcontracted to subcontractors, as are parent companies. For instance, bolts and cables are supplied for a project. Let us examine the case of Aselsan as an example. There is a certain pattern with regards to the distribution of major companies and SMEs of contracts that are signed every year.

After 2017, the increase in the number of companies is remarkable. The boost in the number of SMEs is significant, but the number of major companies is also growing rapidly. While there were 71 major companies in 2012, the number rises after 2016, reaching 119 in 2017, 540 in 2018 and 600 in 2019. When compared to 2017, the increase in the number of SMEs is 280 percent and the increase in the number of large companies is 242 percent.

Let us examine the numbers of a particular project. The domestic production rate in the F-515 TCG Istanbul frigate, which is the "I" class of the Navy, is 75 percent. More than 150 arms, machinery, living equipment and ship hardware, more than 400 building material, 245 km of electrical cables and 2,675 lighting armatures were used. The number of companies working directly on the project is 220. The number of subcontractors is 80. We do not know how many subcontractors there were for subcontractors.

There are 190 major companies that directly and continuously produce the products regularly used by the armed forces. Some of these companies operate in several military areas. Koç, Kale, Nurol have been producing for the military since the 1980s. The experience of certain older capital groups in the production of weapons is quite new. For example, Akım Metal started military production in 2013, Aksa in 2011, Anadolu Isuzu under Anadolu Group in 2017 and Assan in 2016. Most of the machine manufacturers also have recent military industry experience.

Companies producing in the field of electrical-electronics and technology are almost all at the SME level. Two thirds of them became operational in 2010 and mainly after 2016. Their establishment is reminiscent of construction companies founded by engineers who left the public sector after the 1940s and grew by winning state tenders. Most of their founders or executives are those people who have worked for public companies.

Small companies operate in special regions allocated for the aerospace and defense industry in Ankara, Istanbul, Eskisehir and Bursa. For example, Teknokent Defense Industry Cluster (TSSK), founded in Ankara in 2010, has 144 members and is conducting more than 600 projects, including Anka, Milgem, Atak, Hürkuş, Altay and Göktürk. Its annual turnover has reached $2 billion. Also founded in Ankara, 270 companies are operating in the OSTİM Defense and Aviation Cluster (OSSA). The number of members of the Bursa Space-Aerospace and Defense Cluster (BASTEC) is 84. Many companies operating in the automotive subsidiary industry have switched to this field. One of the most important of them is Saha İstanbul Defense & Aerospace Cluster (SAHA), headed by Haluk Bayraktar, the brother of the SİHA (drone) manufacturer Selçuk Bayraktar. SAHA has 600 companies. In addition, similar structures were established in industrial zones in Konya, Elazığ and Sivas.

Without going into detail, let us assume that thousands of companies, large and small, are somehow involved in the military industrial network. And while it does not cover all of them, let us take a look at the data showing the source of financing for companies that are mostly SMEs. Companies continue to produce with powerful incentives.

Finally, let us take a look at the major companies that produce the effective weapons that the military currently uses.

These companies produce all kinds of armored vehicles except tanks used by the military. They also produce armored vehicles that carry artillery systems. Thanks to military operations in Libya, Syria, northern Iraq and in the country, domestically, production has risen to incomparable levels with the past since 2016. For the first time in the world, two private companies, BMC and FNSS, 51 percent of which is owned by Nurol, entered the list of arms companies in the world. It is a well-known fact that the BMC’s success is due to the wars in Libya and Syria.

Turkey has the 13th largest army in the world if one takes its fire superiority into account. Excluding Pakistan and Egypt from the top 15, all of the remaining countries are also global economic powers. This aspect of the issue is of course related to regional policies. The trends in the capital and arms relationships also play a role. Let us note that cooperation with private companies in the military industry, where large amounts of public resources are allocated and infrastructure investments are made, is also a kind of “privatization.” Another fact that is observed is that the flexible structure of Turkey's industry, where SMEs make up 98 percent, is easily adapted to the military industry through state planning.

Military production is not a natural cycle of need. Demand is created by conflicts. It is the policies of the government that will determine how this accelerating change will eventually take form.
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NOTE: The data and information in this piece stem from the Defense Industry Presidency, ASELSAN and SASAD activity reports as well as financial reports and company reports.