2. POLAND is against of “Europeanisantion”
POLAND’S DEFENCE SECTOR
Under the government in power between 2008 and 2015, Poland acquired a reputation as a Europhile nation quickly catching up with the rest of the EU. During this period, Warsaw’s enthusiasm for the EU extended to defence, prompting it to join Berlin and Paris as one of the main sponsors of defence integration. The Polish government advocated the development of PESCO and a planning headquarters for EU operations.
Warsaw also signed up to Eurocorps and participated in numerous EU operations in areas from Africa to Georgia. However, since the election of the Eurosceptic PiS government, Warsaw’s attitude towards European defence initiatives has been at best lukewarm and on occasion openly hostile. The lack of integration between Poland’s defence sector and mainstream European defence industry is mostly the result of three factors:
- the country’s failure to reform its domestic defence industry;
- overwhelming preference for a closer defence relationship with the US;
- and lack of an industrial strategy, which has persisted under all Polish governments since 1989.
Three decades after the fall of Poland’s communist government, state-owned companies that have scarcely undergone reform continue to dominate the country’s defence sector. There are some notable exceptions to this trend, such as the privately owned WB Electronics, which produces drones and advanced communications systems that successfully compete on international markets.
Another exception is Remontowa Shipbuilding, which has turned a profit since becoming a listed company in the 1990s and subsequently undergoing restructuring. However, the vast majority of defence production in Poland is in hands of the state-owned Polish Defence Holding (PGZ), one of the largest defence groups in Europe. It comprises more than 60 companies and employs almost 18,000 people – with its subcontractors employing another 30,000. Its annual turnover of 5 billion zloty (around €1.2 billion) may not be impressive for a group of this size, but it is one of the largest in Europe.
Nonetheless, PGZ is a giant with feet of clay. It produces almost exclusively for the domestic market. In 2016, a relatively successful year for the firm, PGZ exported goods worth a meagre $100 million (around €84m). Its research and development programme remains poor, while some of its signature products, such the T-72 tank – no longer manufactured but under consideration for modernisation – are based on Soviet-era technology.
This is not to say that all PGZ products are outdated. The group is a diverse holding that includes some competitive companies, such as Huta Stalowa Wola, which produces the Crab self-propelled tracked howitzer and is developing the new Borsuk infantry fighting vehicle.
Both of these vehicles are technologically advanced and complex. They are also products of successful cooperation with international partners; for example, the Crab contains components manufactured by Korean firm Samsung and British company BAE. PGZ’s shipbuilding arm also produces some technologically complex equipment, such as the Kormoran-II mine countermeasures vessel, one of the most advanced ships of its kind.
However, weaknesses stemming from PGZ’s ownership structure undercut the group as a whole. It is not only state-owned but also managed by its main customer. Since coming to power, the PiS government has transferred ownership of PGZ from the Ministry of Treasury to the Ministry of Defence (MoD). This has merged the roles of buyer and seller, killing off whatever competitive instruments remained in the system.
Image credit: ECFR.
As a result, the MoD now has a direct interest in ensuring that PGZ has enough orders to occupy it workforce and maintain its operations. Armed with this knowledge, the group no longer has to fear competition or invest in research and development. In this context, PGZ abandoned its plans to develop a new tank and the MoD subsequently placed a large order for supposedly modernised T-72s.
The MoD’s takeover of PGZ also created fertile ground for cronyism and political corruption, potentially turning the industry into a fiefdom of Antoni Macierewicz – a deputy leader of PiS who has strong links to the right-wing Radio Maryja, and who was recently dismissed as minister of defence.
As head of the MoD, Macierewicz had the discretion to make appointments to numerous highly paid positions on the group’s management staff and executive boards. Macierewicz’s most notorious appointment came in April 2017, when Bartłomiej Misiewicz, his former assistant and a political loyalist, joined PGZ’s executive board.
At the time of his appointment, Misiewicz was 26 and lacked a university degree. The rule stipulating that no person without a degree could serve on the board was changed the night before he took up his new position. Due to the media storm created by the appointment, Misiewicz was forced to resign from this lucrative post.
Yet there have been many other cases in which political loyalty appears to have been rewarded with a highly paid role at PGZ. With the departure of Macierewicz, PGZ seems likely to fall under the supervision of Prime Minister Mateusz Morawiecki, which would improve the company’s prospects.
Nonetheless, PGZ has been treated as a vehicle through which politicians enhance their positions and support base.
Although state-owned industry’s resistance to change and dependence on politics is typical of post-communist nations, these problems occur on an unusually large scale in Poland. The strong pro-US preference of the Polish establishment further reduces the prospects for cooperation with European industry.
Poland’s strong tendency to favour US suppliers in military procurement and acquisition processes limits opportunities to develop the country’s domestic industry. For strategic reasons, many European nations have maintained “buy American” defence procurement policies. For example, Germany and Italy had such policies until at least the end of the Cold War – and used the resulting injection of American technology to develop domestic industrial capacity.
Outside the EU, Israel has been so effective in adopting and perfecting US missile technology that it has by many accounts produced equipment surpassing the American originals. However, these dynamics are not yet apparent in Poland, where there seems to be no overall plan to turn the “buy American” policy to the country’s strategic advantage.
Pro-US bias is a bipartisan phenomenon with deep historical roots. Under the Democratic Left Alliance (founded on the remnants of the communist party), Poland sided with Washington over the 2003 US-led invasion of Iraq. It was also under this government that Poland purchased 48 F-16s in 2002, the largest procurement order in the country’s history.
Moreover, Warsaw declined an offer to purchase Mirage 2000 jets from French firm Dassault Aviation, even though the offer included provisions for a significant transfer of technology to Poland’s defence industry. In contrast, Hungary and the Czech Republic opted to procure the BAE Systems/Saab Gripen.
In this way, the pattern of defence industrial cooperation split across central and eastern Europe. The Czech Republic, Hungary, and Slovakia attracted more interest from European companies such as Saab and BAE, which were exploring opportunities for cooperation with domestic industry in these countries. Poland also acquired a degree of interest from European companies such as Airbus and AgustaWestland, but started to develop a reputation for favouring American contractors in its large-scale defence orders.
In 2013-2014, the ruling centrist government announced a technical modernisation plan for the defence sector.
The cost of the initiative was initially estimated to be $15 billion, but this has since grown to more than $20 billion – and will likely continue to grow. The programme’s numerous components include missile defence systems, multi-role and attack helicopters, and even submarines. Although Poland’s domestic industry has no capacity to provide any of the major items required by the modernisation process, foreign suppliers will be forced to cooperate with PGZ, providing the group with both work and technological expertise.
Image credit: ECFR.
- The publication is not an editorial. It reflects solely the point of view and argumentation of the author. The publication is presented in the presentation. Start in the previous issue. The original is available at: eu