Transcript Economic Transition and Defence Industrial Transformation

INTERNATIONAL CONFERENCE
“Policy and Models for R&D Management in Support of Defence
Industrial Transformation”
June 28-29, 2007
Sofia, Bulgaria
ECONOMIC TRANSITION AND
DEFENCE INDUSTRIAL
TRANSFORMATION:
BULGARIAN CASE
Issues and Policies
Prof. T. Ivanov
OUTLINE
• INTRODUCTION
• INHERITED AND TRANSITIONAL ECONOMIC
AND SOCIAL PROBLEMS
• ARMY DEMAND
• ECONOMIC CONSTRAINS
• SOCIAL FRAME
• DEFENCE INDUSTRIAL CHALLENGE
• DRIVING ECONOMIC POLICIES
• R&D CAPABILITY AND POLITICS
• CONCLUSION
INTRODUCTION
• Transitional countries (including Bulgaria) must consider new
dimensions of their defence industrial policies into new global
market and security environment
• The right policy have to be based on mixture from relevant
coalitional force capabilities, high productive competitiveness, and
stable social guaranties for involved personnel
• National protective activism could help to solve the existing
problems, but focus on the high competitiveness, based on the
growing innovativeness of the companies, and labor competence
will play the key role for adaptation of the defence industries
• The capacity of the countries to declare and manage of modern
defence R&D innovative policy is a precondition for competitiveness
and security of the country
• New Concept for national DIB is a needed and appropriate part of
the New Strategy for security and Defence of the country.
INHERITED AND TRANSITIONAL
ECONOMIC AND SOCIAL PROBLEMS
• Deep specialization, reaching about 80-90 % of the output of the
production
• Product portfolio based on soviet products, with politically gifted, but
no law regulated licenses
• Sharply narrowing of the old markets
• Considerable for the country defence industrial overcapacity, and
large diversification of the products
• Limited capacity for national own research, and well developed
competence for technological development of the production
• Growth of the social problems, related to the low wages, reduction
of the professional personnel; blockade of education, training, and
development
ARMY DEMAND, FORCE GOALS
AND ACQUISITION
• Army has one third of projected
capabilities for participation into expedition
operations
• Movement to professional Army for 2008
• 11 priority armament modernization
projects started
• Only 5 of the projects in execution (loans
for around 700-800 mil Euro)
• No clear vision for the next projects
ECONOMIC CONSTRAINS
• State budget for 2007 is 20 bill Euro, what is 41
% from the GDP
• Defence budget (DB) is 600 mil Euro, or 2.2 %
from the GDP, and 5.5 % from National budget
• Investment part of DB from 150 mil Euro is only
1/20 from the resources, needed for 11 priority
projects
• Yearly export of traditional products tends to 100
mil Euro (1/6 of DB)
• Increase of the production will depend of the
external markets, not from Army demand
SOCIAL FRAME
• Middle salary of the personnel 1/10 from the
European level
• Country has lost 1.3 mil from his near 9 mil
population in 1989 (15 % of the present
population)
• Blockage of the education of the new specialists,
and mass release of low professional workers
• Minorities unemployment reaches 90 % and
migration from small villages to the big cities
• High social price (for the 2007 4.3 % from GDP,
and 11 % from the state budget)
DEFENCE INDUSTRIAL
CHALLENGE
• Scenario A - to increase the competitiveness of
the companies and this way transformation and
stabilization of the DIB
• Scenario B – to loose competitiveness,
withdrawal from defence market, conversion for
civilian products, and shrinking the DIB
• Scenario C – loosing their actives like many in
transitional period, which is not obligatory means
losses for the national economy, but usual
change of owners, and possible narrowing of
national industrial sector
INTERNAL DRIVING ECONOMIC
INTERESTS AND POLICIES
• Three main group of interest – army, national
defence industry, and trading (importing and
exporting) companies
• The policy model includes transition from
“governing elite preferences” to the “lobbing of
group interests”
• ISDRM system is not guaranteed the rational
strategic resource allocation, because of
discrepancy between system’s and political
decisions.
R&D CAPABILITY AND
TRANSITIONAL POLITICS
• National and defence R&D policy, depends from
the political-economic transitional model, and
transfer and cooperation between national and
global DIB
• Defence R&D expenditures have been reduced
to 0.25 % from the defence budget
• Technological and innovative personnel is
around 1% of the available 6 170 direct involved
people in DIB
Conclusion
• Acceptance of parliamentarian approval and direct
control of the arms modernization plan
• Development of implemented ISDRM and Defence
acquisition system
• Development of New allies' integrated Concept and
Model for management of defence R&D
• Development of New Concept for DIB, based on PPP,
and Public Financial Initiatives, and building up of the
effective democratic administration of the defence
industrial policy
• Enforcing the international cooperation of the companies