What is new in defence industry at national, regional and global levels? Our research fellow Tomáš A. Nagy addressed this inquiry in an interview with Marián Goga, CEO of the MSM Group.
Q1: Support for the national defence industry is one of the valid commitments within the current governmental memorandum. How would you evaluate the fulfilment of the aforementioned commitment – also within the context of the government´s long-term approach towards the national defence industry?
The defence industry in not only a matter of national pride, but also an exceptionally important part of the country’s primary security and defensive capabilities in the moment of the highest threat. It is indeed a sad fact that in the past we have enabled its significant decline – so much that we may liken it to clinical death. On the other side, numerous defence companies are currently producing growth, investments and employing the labour force. What we would need furthermore is a significant level of cooperation and willingness between state institutions and the government as such, in the exact same way as it is performed throughout the globe. Let’s not be naïve, protectionism is present everywhere, whether one admits it or not. We actually do not need anything beyond the government’s considerations of the national defence industry during the realisation of modernisation projects. Likewise, we need the government’s helpfulness with our foreign-based projects, for which we are seeking participation through international tenders. For their success, governmental assistance is simply a must. We also believe that the government will adhere to its commitments stipulated in its program. The updated National Defence Strategy (of 2017) is an exceptionally important policy document. Having made observations about its draft, we are delighted to see that it grants an appropriate level of space to the issue of the national defence industry’s involvement.
Q2: As a company concentrating its activities and expertise on the markets of the former Eastern bloc, you certainly feel concerned about the situation regarding the EU sanctions against Russia – imposed as a reaction to Russian actions in Eastern Ukraine. What role do potential business opportunities outside NATO and beyond “the West” play in your strategic business considerations? Has it changed anyhow due to the mentioned sanctions policy?
We are fully aware of the geopolitical context and of the fact that we are an integral part of the EU and NATO and as a company, we are acting accordingly. We respect all the international legislative and legal regulations, including the mentioned embargoes and sanction measures. On the other hand, it is true that Slovakia, as a former member of the Warsaw Pact, still has its armed forces based on Soviet-era equipment and capabilities. Likewise, our experts happen to be highly proficient in using and managing such equipment. We must thus continuously seek the right balance between the Western and Eastern markets, and even look for opportunities elsewhere. In that regard, we are currently fulfilling different projects in Africa, Asia and in the Middle East. The diversification of our markets and the resulting diversification of the associated risks is the only way forward.
Q3: Within the portfolio of your company, the segment of armoured vehicles enjoys a truly prominent position. Slovakia (and the broader Central Europe as well) shall be playing a leading role in the modernisation and procurement activities concentrating on the mentioned piece of military equipment. From a future-oriented perspective, do you consider the participation in the Slovak Army-related modernisation process to be an absolute priority for you or “only“ a relevant element in the priorities?
Of course, we have an eminent interest to participate in numerous modernisation activities related to the Slovak Armed Forces. We believe that we can offer truly outstanding products as well as proven and functional production capacities, by which I certainly do not only mean production lines but mainly human expertise.
Q4: The area of unmanned aerial vehicles (UAVs) is current one of the most progressively developing wings of “hardware-oriented” defence industry. What kind of perspective does your company foresee in building technologies for the new generation of UAVs? Is the widening of your company’s portfolio to include the defence technologies of the “21st century“ a strategic objective of your group?
Looking into future, we consider this segment to have a sound perspective. Within our group, we are currently finishing the development of three different kinds of UAVs with the maximal operational range of 18 hours without landing. Our CANTAS drones (in A, S and E versions) are currently undergoing testing and development in the Moravian town of Kunovice. This project is conducted by New Space Technologies Ltd., which belongs to our group. However, we are planning to undertake aviation flights in Slovakia. With our drones we aim to address a wide spectrum of objectives. For example, the potential use of UAVs with observation and monitoring capabilities are not limited to just military units, but also involve possible utilization by the police force and border guard units. On the other hand, the UAVs that possess capabilities of targeting and countering offensive forces are aimed solely at the armed forces. We are simultaneously developing modular systems for the UAV deployment and command process, tools that relate to this technological trend.
Q5: Your company has been connected to the (hitherto insufficiently fulfilled) idea of V4 defence cooperation. Given your past experience with these matters, would you perceive defence procuring and modernisation in V4 countries still as a domain of mainly national policy or is there some potential for a common approach of V4 countries?
A joint modernisation project of, say, two Visegrad countries is, of course, a very interesting opportunity. It is often discussed at various levels of expertise. However, there is a number of problems that relate to this. These include the identification of common needs, defence planning harmonization problems and the problem of balanced involvement of national industrial actors/suppliers. It is indeed true that despite a number of initiated endeavours, we are yet to successfully fulfil such ambitions. In the past, our company joined a V4 consortium aiming to modernize regional 3D radar systems. In the end, at the political level, each country decided to complete the replacement of the respective radar systems on an individual basis. It is rather a pity. However, we still see a good potential in future multi-national projects of this kind.
Q6: The European Union and the European Investment Bank have announced their gradual “offensive” is supporting European defence industry – in the name of R&D and joint innovation project-support for the industry leaders. Does this policy constitute a real opportunity for the leaders of the Slovak defence industry? Be it either with a short-term or a long-term time framework?
It is a rather interesting initiative. The Slovak Republic grants only small financial resources to support defence-related research and development – incomparably, it is even less than in the Czech Republic. However, innovations represent an important feature of the defence industry as well. If the European Union really intends to be a serious global actor, it simply needs to seriously enhance its defence and security dimension, including developing specific defence capabilities it currently lacks or possesses in only a limited extent. The European Research Fund could eventually be the way to go. However, the given support shall not be divided solely between the so-called strong market players, because, paradoxically, they are the ones who need those resources the least. Naturally, our company will be seeking ways to apply for such financial support.