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DEFENCE I OFFSET

Jarosław Kruk 

POLISH ARMAMENTS INDUSTRY TRANSFORMATIONS – SCENE TWO

23/04/2013

It is mid-April and there is still no information concerning the future of the Polish Armed Forces. I wonder what does this mean… maybe a breakthrough?

Anyways, let’s wait awhile and rather start with some good news first. We have recently agreed with Patria and Rosomak will remainin production for the next ten years. Polish party has been also granted possibility to modify and upgrade the vehicles. Moreover, export possibilities have been broadenwhich is a very good news, as Rosomak has good reputation andwhat’s more it has proved to be successful in action. However, there goes the question: who and where should export Rosomaks? Should it be Bumar? And the direction? Would that beIndia, Malysia or Indonesia?

All answers to these question are still unknown. Unfortunately, on both domestic and foreign markets Bumar has not the best reputation. I am truly curious who will export Rosomaks. Maybe Siemanowice will decide on choosing a partner from the private sector, that operates on particular markets. It would be worth it.  Press release on the possibility of Poland buildingits’ own KTO within the next two or three years, will not rather manage to answer the question of what was the reason for consensual attitude of the Finnish party. It seems, it was the Ministry of Economy consistencyand hard work that was decisive here, since the Ministry securely guarded the implementation of the offset agreements and ensured sticking with Finns.

The second important event, was the agreement on development of wheel howitzer that was concluded between HSW and Israeli company.I’m sure I’m not the only one who wish thatPolish companies wouldget a solid burst of newtechnologies.
In the meantime, it seems that matters connected with transformation of armament sector suddenly stopped. Media activity of opponents Bumar and HSW supported by MON,dropped. It is most likely, that there are fierce conversations and negotiations going on.

As far as I’m concerned the concept of establishing new company is wrong in that situation. In Polish reality, obtaining all necessary concessions and licenses may take over a year. If shares of all armaments companies controlled by the Ministry of Treasury are contributed to a holding company, we will end up in a decisionparalysis.  What we also do not know, is who will be appointed to a Board of Directors of that holding company. Will that be all the new people, or for instance two people from Bumar, and one from HSW? Or maybe someone totally different from the industry? Or maybesome specialist chosen by the government?

Tensions between the companies – fully controlled Bumar, HSW and the head office,  seem to be unavoidable and thus may do lots of harm to the armament industry which, is on the other side, currently waiting for promised modernization of the Armed Forces.

The consolidation should be based on one or two companies andthe Government is to decide on which one. In my opinion Bumar will not be the dominant. Two markets will emerge, as resistance of HSW and WZRP is too highwhich threatenssocial unrests and strikes, and as a consequence may result in drops in polls.As a matter of a fact, if there two markets appear, why not trying to include private capital to the process.We have got some good examples for that, Radmor for instance.

Nevertheless, will the Government have enough courage? Probably not, as the introduction of private capital to the armament industry may cause opposition accusations(bribery etc.). That is why, two holdings will be created eventually.  First one will be Bumar, maybe without Łabędy, and definitely without WLZi and Zielonkato be incorporated. The second will consist of HSW and all the others, rather as a federation than as a true holding. This federation appears to be strange entity and it will be hard to make a real holdingout of it. Time will tell, maybe during Armed Forces transformation, we will see separate right of holdings. Or maybe, the point is to keep the status quo, and the reforms to come are just illusionary.

I have got a feeling that something is in the air, something from the Mediterranean Sea. Apparently, in one of the Mediterranean corporation, one without any worldwide success nor and – as most say–withoutgood reputation either,  wholesale quantities of champagne with subtitles “re Poland” were purchased. Moreover, it is being said, that the company management is going through an intense course of champagne opening.

Interesting isn’t it? We will continue about that story in further parts though.

 

 

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