Guest article by Dominik Kimla, Ph.D.
The 22nd International Defence Industry Exhibition (MSPO 2014) was a good opportunity to take a closer look at the ambitious technical modernization program of the Polish Armed Forces. Poland is among the very few European countries that has been increasing its military spending, as part of a shift away from Soviet-era gear and toward modern Western systems. The Polish government’s legal commitment to allocate 1.95% of the previous year’s gross domestic product (GDP) to defence spending, and a growing threat perception from Russia, are strengthening Poland’s political commitment.
Even so, the forecast made by the Polish Ministry of National Defence (MoND) appears to be overly optimistic regarding the availability of funds…
Polish Procurement Plans & Realities
Last year, the Polish government announced plans to spend $43.8 billion on the Polish Armed Forces’ technical modernization process by 2022. From the total allocation of $43.8 billion, $30.5 billion will be spent on 14 defined modernization programs. The rest will be allocated to weapon systems and military equipment that aren’t covered by the mentioned operational programs. In addition, Polish President Bronislaw Komorowski declared that the Polish government will meet NATO’s targets by increasing defence expenditure to 2% of GDP, adding about $300 million to defence modernization in 2016, and $2.55 billion by 2022.
Their forecast was based on 2 main factors: high and stable growth of Poland’s GDP, and a sharp jump in procurement spending ratios from 20-21% to 37.3% during 2017 – 2022. In my opinion, those assumptions are far too optimistic. The most doubtful assumption is the projection of a nearly 2-fold increase in procurement spending ratios. Such a rapid growth of capital procurement, although theoretically possible, is unrealistic in current circumstances without very deep, internal reforms of the MoND.
In my forecast, I took more conservative but also more realistic assumption that MoND will be able to increase the percentage allocation on capital procurement to 25% of total MoND budget. Based on this assumption, the Ministry will be able to spend only $30.11 billion on modernization by 2022. Consequently, the Polish Armed Forces will suffer a substantial funding gap, and the scope of modernization will have to be more modest than announced. The program itself requires substantial revision.
Consequences: Programs at Risk
Due to already discussed budget constraints, it’s worth considering some of the projects that seem to be vulnerable to potential cuts.
“Modernization of armoured and mechanised forces” seems to be one. The project’s main aim is to replace outdated combat vehicles like Poland’s T-72 main battle tanks and BMP-1 armored fighting vehicles with new ones based on a “common modular platform.” The first challenge is that second-hand Leopard 2A4/2A5 tanks are entering service. Second, a contract for another 307 “Rosomak” (Patria AMV) wheeled armored personnel carriers has already been signed, with expected delivery by 2019. Finally, the common modular platform concept is at a very early stage, which generally equals greater vulnerability.
Another program whose scope can be narrowed is “Combating threats at sea”. The program contains a few procurement projects such as new corvettes (coastal defence ships), patrol vessels, conventional submarines, and support vessels.
Within the framework of the program, the submarine project is the most costly and complex. It’s also the most important from a strategic perspective, because submarines with conventionally-armed cruise missiles on board would provide substantial deterrence, and increase Poland’s strategic flexibility. Unfortunately, the Ministry seems intent on buying submarines without cruise missiles, which gravely weakens the program’s entire rationale. Decision makers have stated some interest in second-hand submarines that only carry torpedoes, mines, and special forces. That’s one way of reducing the cost. The other option is to simply delete the submarine project.
Finally, there is a high probability that the scope of Poland’s future multi-role aircraft buy will be reduced. According to the MoND, Poland intends to buy 64 new multi-role combat aircraft, with delivery starting in 2020-2021. Although the new combat aircraft program will receive most of its financing from the next financial planning period after 2022, Poland’s desire for that many modern, advanced warplanes is an example of wishful thinking. I expect challenging funding allocations, delays in platform deliveries, and a scaled-back program that drops to 36-48 planes instead.
The Future is Still Bright
Despite my cautions above, it remains reasonable to expect over $30 billion in spending on Polish military modernization by 2022. That will maintain its position as a regional leader in terms of defence modernization expenditure, with significant market opportunities for Western suppliers of weapons and military systems.
One thing to consider is that Polish end users tend to be more price conscious. As such, the life cycle cost of procured systems, and transfer of technology to local industry, are gaining importance as key factors in coming procurement tenders. Decision makers view the defence modernization program as a key tool for maintaining the strength of their indigenous defence sector, which means that prominent partnerships with the Polish defence sector are a very rational market entry strategy.
Dominik Kimla, Ph.D. is an Industry Analyst for Aerospace, Defence & Security practice at an international consulting firm. He can be reached by email here.
DID: Additional Readings
* DID – Alone, If Necessary: The Shield of Poland. Poland’s future 3-tiered air and missile defense system.
* DID – Turkey’s TUHP: $3.5b for 109 T-70 Helicopters – and More. Actually, the S-70i. Turkey has positioned themselves to be able to step into Poland’s prime industrial role for the type, if circumstances allow.
* DID – Poland’s New Advanced Jet Trainer: M-346 Wins. The win ended up being budget-driven, not capability-driven. Will that history repeat?
* DID – Poland to Extend, Improve Its FFG-7 Frigates. Well, one of them, anyway. And the improvements are limited.
* XX Committee (Oct 27/14) – Poland Prepares for Russian Invasion. Author is former intel; measures include recreation of the Home Army paramilitary force. High-level Polish assessments of the USA are chilling.
* Nowa Straegia (Sept 3/14) – Czy mozemy czuc sie bezpieczni? Translates as “can we feel safe”; details modernization plans and discusses major areas.
* DID (Aug 17/14) – Poland’s Balancing Act: A Briefing for the Defense Sector. Looks at other aspects of the issue, incl. a changing industrial landscape and 3 big near-term programs.
* Foreign Policy Association (Sept 18/13) – Beyond Air and Missile Defense: Modernization of the Polish Armed Forces.
* Polish MON (Sept 18/13) – Money for new military equipment guaranteed.
* DID (July 23/13) – German Submarines for Poland? The country’s submarine plans remain murky.
* DID (July 18/13) – Poland Expands Orders for Rosomak Wheeled IFVs. A variant of Patria’s AMV. They’ve also worked with Israel’s Elbit Systems to offer UAV integration.
* DID (Oct 2/12) – Polish Equipment Issues and Consequences. In August 2009, Polish Land Forces Commander Lt. Gen Waldemar Skrzypczak resigned, accusing defense bureaucrats in Warsaw of “serious incompetence” in procurement that was partly responsible for the deaths of Polish soldiers.
* DID (Sept 12/11) – Poland to Modernize 16 MiG-29s. But they seem to have chosen a very basic upgrade.