F-16 Procurement in the Light of Domestic and National Concepts

The modernization of F-16 fighter jets and the procurement of new ones is a hot topic on the agenda, and it seems that it will continue to be discussed. Many articles have been and will be written about the scope of the project, the approval process, its impact on foreign relations, technical comparisons of the aircraft, etc. What I would like to focus on is to look at the much-debated concept of localization rate in the defense industry through this project. As reported in the press, the financial size of the project deserves to be described as the largest arms procurement project to be realized by Turkey at one time. While the procurement system involves very long and laborious activities such as procurement of materials, production, testing and acceptance processes, another fundamental issue is contract management. As important as the technical aspects of the work, perhaps even more important is the correct contract management. Many years ago, at a meeting in which I was present, an official from the French Ministry of Defence who visited our country said, "The way to keep the defence industry alive or dead in a country is through contract management".

Therefore, even if the sale decision is approved, the procurement process will require longer studies. I believe that both the Ministry of National Defense and the SSB have trained and experienced staff in this regard. Despite all this, the total project amount stated by the US is very large. Considering that the resources allocated by our country for the defense budget last year was approximately 16 billion dollars, the size of the project amount, even if it will be spent over the years, draws attention. The amount to be contracted will surely be different from this, but we do not know for now whether the seller brought such a figure to the bargaining table with the comfort of being the sole source. 

The procurement in question will be carried out through the FMS, or Foreign Military Sales system as defined by the US. Turkey is no stranger to this system. The details of this are not the subject of this article, but the evaluation process in the functioning of the system is closely related to our subject.   In this process, which includes many details, there are two critical issues in the request form. The first of these is "will this sale affect the balances created in the region" and the second is "is there a possibility that the requested materials will be used against US forces and cause damage". Apparently, these assessments were made by the US authorities and no negativity was seen for the sale. These criteria, which cause raised eyebrows on our side, are quite logical from the US perspective. After all, the producing side sets the rules. At this point, the question immediately comes to mind as to how military sales are taking place in our country. Indeed, we are now an important arms supplier source country for some countries. Shouldn't we also create a Turkish-type FMS for sales? For additional information on this issue, please refer to the source cited in the footnote. As for the issue of balance, we need to realize that this issue is no longer an issue in Turkey-Greece relations. There may be other ways to compensate for the advantages provided by the F-35s, but the real problem is the US presence and assurances given by the bases on the Greek mainland and islands in recent years. Indeed, it is reported in the Greek press that the US Secretary of State has sent two letters guaranteeing Greece's security militarily. Therefore, the concepts of balance discussed in the past have disappeared. With this sale based on mutual distrust and enmity, the US is the one who benefits the most militarily, economically and politically from the fact that two neighboring countries spend their resources on armaments at the expense of the welfare of their people. It should not be forgotten that giving assurances to one of the member states in the same alliance outside the scope of the alliance through bilateral agreements would be the beginning of a process to exclude the other from the alliance.

The other dimension of the issue is the concept of localization rate in the defense industry, which we use a lot in our domestic politics. I would like to underline that these concepts, which are very important in terms of security, prestige and economy, are of vital importance for our country. As someone who has personally been a user of these capabilities in the field, the cost of the self-confidence it provides is many times higher than the product costs. However, when this issue turns into a highly profitable discourse and propaganda tool in domestic politics, it opens the door to controversy. In the most recent statements, it has been stated that the localization rate in the Defense Industry has reached 80%. The question then arises as to how this rate is calculated. It seems that it is difficult to find a magic formula for this concept and multi-layered calculations are required. The easiest calculation method is the ratio of the cost of domestic and imported inputs in the total product cost. As a matter of fact, the formula used to calculate the local content rate determined by the Ministry of Industry and Technology is as follows. 

Domestic contribution rate = Final product cost - Imported input cost in the product X100 / Final product cost

This formula, which is also used by the SSB, is slightly more detailed and is roughly calculated by subtracting from the total contract amount imported goods used by the contractor and subcontractors, products procured from a Turkish company but not of domestic origin, and finally any payments made to foreigners in financial transactions. Both procedures envisage a product-by-product calculation method. Considering the production processes, this issue, which involves many details, is not something that can be answered so simply. In addition, since political discourses emphasize the issue by making a comparison with the past, it is a separate obligation to take this method, which has been applied since the past, as a basis. When the general manager of a company producing a wide range of products is asked what the localization rate is in terms of year-end targets and asked to express it with a number, the easiest answer can only be found with this formula. An increase in this ratio is undoubtedly a source of pride for our country and our industry. However, we should not allow populist rhetoric to lull us into complacency. A more accurate method in this regard would be to evaluate the issue according to sub-functional areas. For example, the determination of indigenousness rates in air, land, naval systems or sub-functional areas such as air defense, fire support, reconnaissance surveillance, electronic warfare, etc. can give more realistic figures. I believe that such an approach would be more realistic for those who are working on this issue and developing plans and strategies. Otherwise, there would be a risk of ignoring our weaknesses, if any. 

I believe that the F-16 procurement project, which is the subject of this article, should also be viewed from this perspective. If there are items such as the transfer of technical know-how packages and the establishment of a local production facility within the scope of the project, it should not be forgotten that these will also lead to cost increases. The F-16 aircraft, the first package of which was procured through the FMS and entered the inventory in 1988, was one of Turkey's most expensive procurement projects at that time. The acquisition of a modern project management approach, the training of manpower, and the emergence of some facilities that contribute to the defense industry today are the capabilities acquired through this project. In the procurement of the current package, it was aimed to acquire certain capabilities and to produce them domestically. In that case, the project amounts we are discussing today will need to include expenses such as the purchase of machinery and equipment, construction of facilities, labor, energy and depreciation, which are not directly related to the product price. In the light of these explanations, it is inevitable that the resources to be spent for the procurement of F-16s will have a negative impact on the localization rate, as they will increase the costs of foreign products according to the formula mentioned above. 

I know that it is difficult to find simple answers to such a complex issue in a short article. I would like to end the discussion on the localization rate, which is affected by many variables, with an anecdote I heard from a German officer while on duty. I listened to this anecdote from an officer who took part in the work carried out after the unification of the two Germanies at the end of the Cold War. During the period when Helmut Kohl was chancellor, it was planned for the chancellor to make a public statement informing the public about the restructuring of the German Armed Forces. For this purpose, the Ministry of Defense was asked to carry out a study and determine the amount of armed forces personnel in the coming period and report to the chancellor's office a week later.  The working group worked hard to prepare the requested information, the necessary approvals were obtained and the prime minister announced this information in his speech. He explained the following to me as follows. "We had set the size of the Land Forces at approximately 300,000 for the next period. This figure was accepted and after the Prime Minister's announcement, we were all experiencing the peace of mind of fulfilling the assigned task. After a while, our phones started ringing. We understood the number of soldiers, but they were asking how many brigades and divisions the Land Forces would be. We replied, "We don't know the answer to that yet either, we will see what we can do with it now. We are right to be happy about the localization rate we have reached, but what exactly is included in this figure? I would like to hope that the experts in the field know which sectors and at what rate.