Recently a lot has been written about a need of accelerating technical modernization of our army and arms industry. It would be preferable if we could achieve 1/10 of state of armament and equipment of the US Armed Forces until the end of this year, obviously on comparable level of technical development. In addition, it would be good, if our defense companies could sale 1/10 of what is sold by 20 of the biggest defense companies from the US. A question arises: what to do? Generally speaking - it’s difficult to achieve, but after all, something can be done.
First of all, a current legal situation allows greater flexibility. After considering that a purchase of particular armament system is connected with basic safety interests of the country, a few possibilities may be applied.
Offset related to a particular potential or to the whole delivery. According to the provisions of the new law, offset doesn’t have to relate to the whole delivery agreement, but only to secure for the country a particular potential, necessary from the point of protection of basic safety interests of the country. The agreement on delivery of complicated systems of armament doesn’t have to constitute one agreement itself- it may consist a few agreements concerning particular elements, which may be sometimes amended– for example by buying an effector from another producer or in case of framework agreement, which content is specified in particular contracts. Definition of delivery agreement from the Civil Code concerns things specified as to their kind, which means in defense procurements: ammunition, fuel, maybe rifles or guns, but certainly not complicated systems of armament often modified for specific theatre of warfare. The above definition cannot be applied to modernization purchases made by Armed Forces.
Apart from or alternatively instead of offset, there is a possibility to buy licenses for production of particular armament, for example, rockets or its elements or even a joint-venture with foreign suppliers can be formed. License might cost a lot, and apart from it: machines, processing lines, semi-finished products etc. should be bought. The cost of license depends on planned production, duration of the agreement and its scope. It’s good if a foreign supplier is interested in production and its further sale on third markets and enables a product’s development. Such agreements may be concluded with broadening the scope of license and possibility of securing defense interests of the country, depending on purchased amount of a particular armament. Together with the increase of purchases this scope increases. Source codes and possibility of production development should be obtained. Moreover, it’s important that some part of production is located in chain of production of the foreign supplier. It’s not an easy task, but currently there is no fully independent producer in the world. Even producers of military planes from the US use a base of elements bought in China and titanium elements from Russia. In the chain of these deliveries the whole rocket doesn’t have to be placed immediately, it is possible to start at the beginning with engine.
There is no legal obstacle to connect offset with purchase of license in particular delivery agreement.
Other solutions similar to those used by self-governments in various infrastructural and investment projects should also be considered. A SPV (special purpose vehicle), which main aim is to perform a specific task is established – e.g. Polish military satellite. The Ministry of National Defense concludes with SPV an agreement for example to deliver photos for 20 years etc. Bank finances the project, currently a few new banks are controlled by countries- so they will be willing to make loans. SPV may be established by Ministry of National Defense, PGZ SA or may be a joint venture with a participation of Polish/ foreign technological supplier. Benefits are huge, maybe it won’t be treated as one-time budgetary expense, but as an expense spread over many years- it’s worth to work on that.
A second project is for example camouflage and simulation. In SPO it was noticed that Poland has huge arrears in that scope. Meanwhile it’s inexpensive way to strengthen a defense potential. Our industry possesses one of the best technical solutions in the world- precisely Lubawa Group. Our main ally has big troubles with camouflage. In the Cold War period he had 300 000 soldiers in Europe, while now he has only 30 000 and in the face of increasing threats he must create more apparent targets and conceal those real. It was interesting to see Abrams on winter firing ground in desert-like camouflage. The operator of Kornet-D wouldn’t have any problems with hitting it even after whole week of exploring a well-equipped liquor store.
Other necessary projects for our Armed Forces may be found without any problem.
All solutions may be applied flexibly depending on Armed Forces’ needs and economic possibilities. In current legal situation there is no offset compulsion. It may be applied, but its precise application depends on the choice of Ministry of National Defense and concerns specific capacity, not the whole delivery agreement. When it comes to the offset price, after the interview with the Minister of National Defense, many comments that the offset is not profitable and won’t be always applied appeared. For sure foreign suppliers add offset expenses to the price of production. But because offset is added globally, for whole production, it’s doubtful that concerns will decide on special discount for Poland, which isn’t their biggest recipient. It would be possible only if we stunningly hit the jackpot in diplomacy.
The United States of America officially condemns application of offset, whereas foreign company, in order to supply armament there, is obliged to produce it on place, unless because of important strategic purposes the US government will decide otherwise. These are rare examples. In France a foreign company may attempt to sell equipment produced outside France, but the chances of success without a strong local partner are close to zero. In England the most recent armaments may be sold by companies from the US, but they have also in mind the industrial cooperation. In Germany the situation is similar, with the difference that to the list we add companies from France, England and partner countries, where Germany realizes significant deliveries. Applying offset in accordance with the Offset Act in our country is an important factor for industry and defense development.
Generally speaking, we shouldn’t forget that a private sector is of the same importance for the defense as sector under control of the State Treasury. Personally I’m an adherent of applying preferences for national companies, producing in Poland, without differentiating due to the owners, which will increase the competitiveness and development of the Polish defense industry and increase the level of security of the country.