Key points:
- Poland is currently undergoing a USD$133bn military modernisation plan, as it seeks to update Communist-era military equipment in view of a deteriorating regional security situation.
- The eastern European country has a medium-sized defence industry in comparison to other countries in Europe with a well-regarded reputation in the land systems, electronics and radar, helicopters and light aviation sectors.
- Many of the major players in the Polish defence industry are export-orientated, and actively seek production and research partnerships with foreign firms. As such, global defence primes have used this opportunity to establish a sizable footprint in the country.
- There is growing potential for Australian firms seeking to invest in Poland particularly in areas such as cyber security, space technology, UAVs, land and soldier systems, air defence systems, armoured transports, systems to address naval threats, integrated command and battlefield imaging systems.
- Some Australia firms have already established operations in Poland and this trend is set to expand further in the years ahead, given the intensifying bilateral and economic relationship between the two countries.
Poland may not be well known as a potential market for Australia’s defence industry, but the opportunities are there for firms willing to look beyond the traditional export destinations. In recent years both countries have sought to expand political and economic ties, and this has also resonated strongly in the sphere of defence industry cooperation.
Defence Industry in Poland
Warsaw’s demand for military equipment is expected to remain high into the near future. The country has embarked on a large-scale military modernisation program in recent years, spurred on by renewed regional security concerns, and the need to replace Communist-era equipment not compatible with NATO standards. This year Poland was one of the few NATO states to exceed the mandated target of spending 2% or more of GDP on defence, while its 2020-2025 modernisation plan has been valued at USD$133bn.
As well as modernising its military, Poland has also undertaken efforts to modernise and expand its defence industry. During the Communist era Poland’s defence industry was a major employer, responsible for over 2% of the country’s industrial output and employing around 250,000 people by the late 1980s. During this time, Poland became the eighth largest military exporter in the world by value, with customers primarily in the Middle East and Eastern Europe.
With the fall of Communism, many of these lucrative export markets were lost. Warsaw had to consolidate much of its national military production and research capability into state-owned conglomerates, though significant capabilities were retained. The number of defence industry entities shrank from 11,000 in 1990 to just 1000 by 2005, with the workforce falling to 35,000 in the same period.
Today, Poland has a medium-sized defence industry when compared to its NATO peers – smaller than those of the major economies of Europe, but larger than many of its neighbours, and even some Western and Central European states like the Netherlands and Austria. It specialises in a broad range of defence products, including land systems, electronics and radar, electro-optics, small surface vessels, helicopters and light aviation. The sector has retained its export-oriented focus – according to a US government estimate, 90% of the output of the country’s aerospace industry is sold to overseas clients. These export markets have markedly shifted, with two-thirds of Polish defence exports reportedly purchased by the US in 2013.
The largest conglomerate to emerge from the re-organisation is Polska Grupa Zbrojeniowa (PGZ) or Polish Armaments Group. PGZ consists of over 60 different firms, ranging from ordnance manufacturers, to developers of radar systems and shipyards. It is the main industry partner of Poland’s Ministry of National Defence in the current modernisation program, and aims to expand its capacity by partnering with foreign defence firms.
Poland also has a number of successful privately-owned defence firms, one of the most prominent of which is the WB Group conglomerate. The firm, originally known as WB Electronics, partnered with, and then acquired, several specialist local defence firms to found a conglomerate capable of competing in international markets. Today it specialises in UAV research and production, C4I systems, loitering munitions (suicide drones) and weapons control systems. It has also established a US-based subsidiary, WB America, and exports to a number of different countries in Latin America, North Africa and Southeast Asia. WB Group was responsible for the FONET digital communications platform for armoured vehicles, which was later licensed by Harris and sold to the US military.
Australian Interest in Poland
This military and industrial modernisation offers opportunities for Australian firms seeking to establish a footprint in Europe. Austrade has identified several key areas for exports and joint ventures, many of which are also the focus of the ADF’s current modernisation efforts. These include cyber security, space technology, UAVs, equipment for infantry, air defence systems, armoured transports, systems to address naval threats and integrated command systems and battlefield imaging systems.
The Australian defence sector is already showing some interest in the Polish market. Austrade, and the Defence Department’s export initiative Team Defence Australia, both had a presence at the 2019 iteration of MSPO, Poland’s premier defence trade show. Their displays featured Australian firms Birdon Group, Gaard Tech Targets, Armor Australia, Axiom Precision Manufacturing, Blacktree Technology, CGear, Crossfire Australia, DroneShield, Ideation Product Solutions, Milspec Manufacturing, Ocean Software, Point trading, Radio Frequency Systems, Redarc Electronics, Ronson Gears, Thales Australia, Titomic, Trakka Systems, and W&E Platt.
A number of Australian firms are already engaged in projects with the Polish defence sector. For example, in 2017 Australian electrical cable company Cablex opened an office in Warsaw, citing its proximity to the European supply networks of international clients, and opportunities in Poland’s military modernisation program. Cablex signed an MOU with WB Grouplater that year to “work with local research and development organisations and innovation hubs to develop products that do not yet exist’ with a focus on “niche capabilities in the areas of communication and control systems, and UAVs to benefit the Australian defence force [sic].”
Other projects are also in the pipeline. PGZ has shown interest in Thales’ Australian-made Hawkei protected mobility vehicle, which was shortlisted this year in the Pegaz multipurpose armoured vehicle program for the Polish special forces. In the past PGZ has said that it could also potentially outfit the Hawkei as a ATGM carrier, or a reconnaissance vehicle for the Homar rocket artillery system.
The Polish government has also expressed interest in acquiring knowledge from Australia on submarine procurement and production, as Warsaw will soon begin the process of acquiring three new submarines under project Orka. While it appears that Poland has not yet selected a production partner, one of those shortlisted is the French Naval Group, which is also producing Australia’s Attack-class submarine. Błażej Wojnicz, president of the management board of PGZ, told Polish industry news outlet Defence24.com that information on Australia’s submarine procurement procedure would constitute a “priceless piece of expertise”.
As a whole, Australian economic engagement with Poland has been on the increase in recent years. According to the Australian Department of Foreign Affairs and Trade, 2018-2019 total merchandise trade with Poland (exports and imports) increased 10.2% year over year, while the export of services to Poland increased 8.3%. Australian investment in Poland reached AUD$1.2bn in the same period. This growth has come off a low base, however, as Australia comprised only 0.2% of Poland’s import trade, and 0.3% of its export trade during 2018.
Politically, ties have been distant but warm, based on Australia’s wider engagement with the European Union, the local Polish diaspora, and shared history in the North Africa theatre of World War II. More recently, Australia and Poland have both contributed forces to the Afghan War, and the anti-ISIS coalition in Iraq. Both are also involved with NATO, of which Poland is a member and Australia is a partner.
In 2017, the then minister for defence industry Christopher Pyne visited Poland in 2017 specifically to discuss defence industry cooperation, and ministerial-level visits to Poland by Australian delegations have been a semi-regular occurrence. In 2018, Poland’s president and defence minister visited Australia to discuss trade and security matters, with the two sides pledging to “explore a defence cooperation Memorandum of Understanding” covering “exchange on shared global security concerns, military training and education, and cyber security.” As of late 2020 no information has been publicly released regarding the progress of negotiations.
Field Trip
WA DEFENCE REVIEW had a chance to gain firsthand insight into the Polish defence industry, when a correspondent accompanied a tour by an international business and media delegation to visit key players in Poland’s aerospace industry in September 2019. The tour was organised by the Polish Trade and Investment Agency.
The main site visited was Aviation Valley, which is located in southeast Poland. The area is typical of the Polish defence industry’s drive to innovate, and partner with foreign firms. Its strategy is based on the three pillars of developing new technologies and products, attracting new investors, and building R&D capabilities and research centres. Aviation Valley companies are involved in the production of components for a range of foreign customers including Airbus, Boeing, Lockheed Martin, Bombardier, and Embraer. The area has an array of supporting facilities including forging, special and raw materials processing, and universities and research centres located within close proximity.
Another centre of local innovation visited on the trip was the Institute of Aviation in Warsaw. It is one of the oldest research institutes in Europe, officially established in 1926. The institute operates 30 specialized laboratories, including the largest wind tunnel in Central and Eastern Europe, and employs 1250 people. It undertakes research in areas such as aircraft materials and structures, rocket engines, remote sensing, and UAV technologies. The institute also has a strategic alliance with US defence prime General Electric; operating an engineering design centre for the firm that conducts research on jet aircraft engines.
Future Considerations
There are significant opportunities for a broad range of Polish and Australian defence industry firms to integrate and cooperate. The simultaneous modernisation and expansion of capabilities in the two countries’ militaries offers areas of significant overlap, and the opportunity to transfer expertise and products from one country to another. As a NATO member, Poland is a politically safe destination to export to, and is a market which has much experience in partnering with foreign firms. For an Australian defence firm, there can be few better places in Europe with as much potential for export growth as Poland.
* WA DEFENCE REVIEW acknowledges the generous assistance provided by the Polish Trade and Investment Agency for organising and defraying expenses for our former Defence Writer, Sean Gough, who participated in the guided tour of Polish industry facilities of which excerpts of his observations have been included in this article.
ANALYSIS & COMMENTARY
Australia-Poland Relations: Prospects For Defence Industry Cooperation
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Polish Trade and Investment Agency. Caption: Participants from Australia and other countries attend a guided tour of Polish defence industry facilities organised by the Polish Trade and Investment Agency in late 2019.
Key points:
Poland may not be well known as a potential market for Australia’s defence industry, but the opportunities are there for firms willing to look beyond the traditional export destinations. In recent years both countries have sought to expand political and economic ties, and this has also resonated strongly in the sphere of defence industry cooperation.
Defence Industry in Poland
Warsaw’s demand for military equipment is expected to remain high into the near future. The country has embarked on a large-scale military modernisation program in recent years, spurred on by renewed regional security concerns, and the need to replace Communist-era equipment not compatible with NATO standards. This year Poland was one of the few NATO states to exceed the mandated target of spending 2% or more of GDP on defence, while its 2020-2025 modernisation plan has been valued at USD$133bn.
As well as modernising its military, Poland has also undertaken efforts to modernise and expand its defence industry. During the Communist era Poland’s defence industry was a major employer, responsible for over 2% of the country’s industrial output and employing around 250,000 people by the late 1980s. During this time, Poland became the eighth largest military exporter in the world by value, with customers primarily in the Middle East and Eastern Europe.
With the fall of Communism, many of these lucrative export markets were lost. Warsaw had to consolidate much of its national military production and research capability into state-owned conglomerates, though significant capabilities were retained. The number of defence industry entities shrank from 11,000 in 1990 to just 1000 by 2005, with the workforce falling to 35,000 in the same period.
Today, Poland has a medium-sized defence industry when compared to its NATO peers – smaller than those of the major economies of Europe, but larger than many of its neighbours, and even some Western and Central European states like the Netherlands and Austria. It specialises in a broad range of defence products, including land systems, electronics and radar, electro-optics, small surface vessels, helicopters and light aviation. The sector has retained its export-oriented focus – according to a US government estimate, 90% of the output of the country’s aerospace industry is sold to overseas clients. These export markets have markedly shifted, with two-thirds of Polish defence exports reportedly purchased by the US in 2013.
The largest conglomerate to emerge from the re-organisation is Polska Grupa Zbrojeniowa (PGZ) or Polish Armaments Group. PGZ consists of over 60 different firms, ranging from ordnance manufacturers, to developers of radar systems and shipyards. It is the main industry partner of Poland’s Ministry of National Defence in the current modernisation program, and aims to expand its capacity by partnering with foreign defence firms.
Poland also has a number of successful privately-owned defence firms, one of the most prominent of which is the WB Group conglomerate. The firm, originally known as WB Electronics, partnered with, and then acquired, several specialist local defence firms to found a conglomerate capable of competing in international markets. Today it specialises in UAV research and production, C4I systems, loitering munitions (suicide drones) and weapons control systems. It has also established a US-based subsidiary, WB America, and exports to a number of different countries in Latin America, North Africa and Southeast Asia. WB Group was responsible for the FONET digital communications platform for armoured vehicles, which was later licensed by Harris and sold to the US military.
Australian Interest in Poland
This military and industrial modernisation offers opportunities for Australian firms seeking to establish a footprint in Europe. Austrade has identified several key areas for exports and joint ventures, many of which are also the focus of the ADF’s current modernisation efforts. These include cyber security, space technology, UAVs, equipment for infantry, air defence systems, armoured transports, systems to address naval threats and integrated command systems and battlefield imaging systems.
The Australian defence sector is already showing some interest in the Polish market. Austrade, and the Defence Department’s export initiative Team Defence Australia, both had a presence at the 2019 iteration of MSPO, Poland’s premier defence trade show. Their displays featured Australian firms Birdon Group, Gaard Tech Targets, Armor Australia, Axiom Precision Manufacturing, Blacktree Technology, CGear, Crossfire Australia, DroneShield, Ideation Product Solutions, Milspec Manufacturing, Ocean Software, Point trading, Radio Frequency Systems, Redarc Electronics, Ronson Gears, Thales Australia, Titomic, Trakka Systems, and W&E Platt.
A number of Australian firms are already engaged in projects with the Polish defence sector. For example, in 2017 Australian electrical cable company Cablex opened an office in Warsaw, citing its proximity to the European supply networks of international clients, and opportunities in Poland’s military modernisation program. Cablex signed an MOU with WB Grouplater that year to “work with local research and development organisations and innovation hubs to develop products that do not yet exist’ with a focus on “niche capabilities in the areas of communication and control systems, and UAVs to benefit the Australian defence force [sic].”
Other projects are also in the pipeline. PGZ has shown interest in Thales’ Australian-made Hawkei protected mobility vehicle, which was shortlisted this year in the Pegaz multipurpose armoured vehicle program for the Polish special forces. In the past PGZ has said that it could also potentially outfit the Hawkei as a ATGM carrier, or a reconnaissance vehicle for the Homar rocket artillery system.
The Polish government has also expressed interest in acquiring knowledge from Australia on submarine procurement and production, as Warsaw will soon begin the process of acquiring three new submarines under project Orka. While it appears that Poland has not yet selected a production partner, one of those shortlisted is the French Naval Group, which is also producing Australia’s Attack-class submarine. Błażej Wojnicz, president of the management board of PGZ, told Polish industry news outlet Defence24.com that information on Australia’s submarine procurement procedure would constitute a “priceless piece of expertise”.
As a whole, Australian economic engagement with Poland has been on the increase in recent years. According to the Australian Department of Foreign Affairs and Trade, 2018-2019 total merchandise trade with Poland (exports and imports) increased 10.2% year over year, while the export of services to Poland increased 8.3%. Australian investment in Poland reached AUD$1.2bn in the same period. This growth has come off a low base, however, as Australia comprised only 0.2% of Poland’s import trade, and 0.3% of its export trade during 2018.
Politically, ties have been distant but warm, based on Australia’s wider engagement with the European Union, the local Polish diaspora, and shared history in the North Africa theatre of World War II. More recently, Australia and Poland have both contributed forces to the Afghan War, and the anti-ISIS coalition in Iraq. Both are also involved with NATO, of which Poland is a member and Australia is a partner.
In 2017, the then minister for defence industry Christopher Pyne visited Poland in 2017 specifically to discuss defence industry cooperation, and ministerial-level visits to Poland by Australian delegations have been a semi-regular occurrence. In 2018, Poland’s president and defence minister visited Australia to discuss trade and security matters, with the two sides pledging to “explore a defence cooperation Memorandum of Understanding” covering “exchange on shared global security concerns, military training and education, and cyber security.” As of late 2020 no information has been publicly released regarding the progress of negotiations.
Field Trip
WA DEFENCE REVIEW had a chance to gain firsthand insight into the Polish defence industry, when a correspondent accompanied a tour by an international business and media delegation to visit key players in Poland’s aerospace industry in September 2019. The tour was organised by the Polish Trade and Investment Agency.
The main site visited was Aviation Valley, which is located in southeast Poland. The area is typical of the Polish defence industry’s drive to innovate, and partner with foreign firms. Its strategy is based on the three pillars of developing new technologies and products, attracting new investors, and building R&D capabilities and research centres. Aviation Valley companies are involved in the production of components for a range of foreign customers including Airbus, Boeing, Lockheed Martin, Bombardier, and Embraer. The area has an array of supporting facilities including forging, special and raw materials processing, and universities and research centres located within close proximity.
Another centre of local innovation visited on the trip was the Institute of Aviation in Warsaw. It is one of the oldest research institutes in Europe, officially established in 1926. The institute operates 30 specialized laboratories, including the largest wind tunnel in Central and Eastern Europe, and employs 1250 people. It undertakes research in areas such as aircraft materials and structures, rocket engines, remote sensing, and UAV technologies. The institute also has a strategic alliance with US defence prime General Electric; operating an engineering design centre for the firm that conducts research on jet aircraft engines.
Future Considerations
There are significant opportunities for a broad range of Polish and Australian defence industry firms to integrate and cooperate. The simultaneous modernisation and expansion of capabilities in the two countries’ militaries offers areas of significant overlap, and the opportunity to transfer expertise and products from one country to another. As a NATO member, Poland is a politically safe destination to export to, and is a market which has much experience in partnering with foreign firms. For an Australian defence firm, there can be few better places in Europe with as much potential for export growth as Poland.
* WA DEFENCE REVIEW acknowledges the generous assistance provided by the Polish Trade and Investment Agency for organising and defraying expenses for our former Defence Writer, Sean Gough, who participated in the guided tour of Polish industry facilities of which excerpts of his observations have been included in this article.
About Mitchell Sutton