President of the DSIA (AOBP): if the state wants help from domestic industry in times of crisis, it must maintain its production capacity even in times of non-crisis

President of the DSIA (AOBP): if the state wants help from domestic industry in times of crisis, it must maintain its production capacity even in times of non-crisis
Caption: Jiří Hynek, president of the DSIA
04 / 05 / 2020, 10:00

We interviewed the President of the Defense and Security Industry Association (DSIA) of the Czech Republic, Mr. Jiří Hynek not only about the defense industry in the coronavirus era, but we also asked about EU arms legislation or the ban on lead in ammunition.

  • The coronavirus is the hot topic in recent weeks. To what extent can coronavirus disrupt the establishment of new business relationships in the defense industry worldwide?

It already disrupts, not a little. Almost 90 % of the products of the Czech defense and security industry are exported. In addition, it is an area that is built on creating long-term relationships. Personal ties in our industry cannot be replaced by e-mail correspondence or video conference calls. Gradually, one defense fair after another is being canceled. In addition, the closure of borders, the ban on the export of certain products or their confiscation by other states. This is nothing that would benefit international trade. There is also talk that the borders will be closed for a longer period of time. I have no problem not to pass my holiday abroad. But I can't imagine that salesmen, managers or service technicians could not travel around the world. This would mean the demise of the entire Czech industry, not just the defense industry.

See also: The DSIA requires simplification of military material trading

  • At the moment wouldn't it be best to start using the supplies of Czech arms producing companies as much as possible?

Yes, of course. But we must realize that production capabilities and capacities cannot be guaranteed by any regulation. Many Czech companies have resigned after many years of in vain convincing politicians and officials that it is necessary to buy mainly from domestic producers for security reasons. They either focused on foreign customers or reoriented to another production. In the worst case, they relocated production abroad. If the state wants help from domestic industry in times of crisis, it must maintain its production capacity even in times of crisis. You don't double your production in a day or a week. The more complex the product, the longer it takes to increase production, because you need qualified and experienced employees. In addition, it seems that there is insufficient knowledge on the part of the state about the capabilities of the Czech defense and security industry. This knowledge is important to include in the contingency plans a procedure for activating national production capabilities. We cannot rely on anything else, especially at a time of closed borders. Let the current pandemic be a lesson for us for a next time.

  • As the first option for savings in the state budget the Prime Minister Babiš mentioned military purchases. Do you think such thinking is right?

Whenever there was a problem in the budget, politicians reached for the soldiers' money. Let us remember the floods in 2002. After the floods, the defense budget was significantly affected, and since then it has only been cut and cut. Each time something more important was declared, and subsequently a Government resolution was issued, which guaranteed the armed forces an increase in funding in the coming years. Within a year, the resolution was a piece of paper and defense spending was reduced again. That is why the general meeting of our Association supported the fixing of mandatory defense expenditures in law. The defense and security of the population are the basic tasks of the state. That is why states were actually created. States that have ignored this in history have mostly disappeared. With the shortage of masks, haberdasheries has recently opened so that people could sew masks at home on their own. But it is not possible to defend the country by opening ammunition depots to people in the event of a threat. In addition, there might not be anything in those warehouses during further cuts.

See also: The Army should definitely not fall victim to this crisis – Jana Černochová, Chairwoman of the Defence Committee, says

  • The cuts in the Czech Army budget due to the situation with coronavirus will certainly occur. How do you view a possible change in the structure of purchases for the Czech Army? For example, replacing expensive tracked IFVs with cheaper wheeled ones?

It is said that misfortune never goes alone. We cannot ignore other risks because of one trouble. What is happening on the Greek-Turkish border today is a great danger for the whole of Europe. And there are many more disturbing signals. Fortune favours those who are prepared, so our army must be well prepared. In order to achieve this, the Army must be well-armed and sufficiently trained. Of course, I have noted various considerations such as do not buy, replace, postpone. If we want to get out of the economic downturn after overcoming the coronavirus pandemic, then let's give the industry this work. In addition, so far our experience shows how vulnerable we are to our dependence on imports. Let's take an inventory of our own production capabilities, strengthen the share of the domestic defense industry, but let's not cancel orders. We will weaken our own defenses and damage the economy.

  • Which purchases should the Army primarily make in the current situation?

Those where the largest share of domestic production is. The economy needs to recover, and this is the only option.

  • In the future, it will probably be more difficult to explain to the public that defense spending should take precedence over, for example, the social sphere, where spending is likely to increase significantly. In your opinion, would it help if military contracts were conditioned by the maximum involvement of Czech industry, which would also support the economy?

Of course. Many of the world's economies have just emerged from the crisis with contracts for the domestic defense industry. Each employee of the defense industry generates work for other four additional workers elsewhere. Almost half the money issued from state funds to an arms company is returned to the state in the form of taxes and levies. The more technically advanced the product, the more money the state will have. In addition, the defense industry has great export potential, which is a great benefit to our economy.

  • You are President of the DSIA, what negative factors do you think are most reflected in the functioning of the entire complex of the Czech defense industry?

The atmosphere in the society where morbid suspicion and the search for corruption all around is supported by a reporting system, which is sublimely called "reporting suspected corruption." That is the largest problem. When you are official, you will be careful and cautious when shopping in this environment. Purchasing technology and equipment in the form of a public tender based on the pricing guarantees that you will not have to go to the police for explanations. To be sure, you have testimonials prepared for everything, preferably multiple. In addition, when you see how fast the Czech judiciary is working in the case of former Minister Parkanová (CASA aircraft case), you will above all protect yourself, and you will not think at all about the quality and cost of the life cycle. In this environment, how can the defense industry fulfill its role to be one of the pillars of our country's defenses? In an atmosphere where the user, a member of the armed forces, is afraid to meet the designer of an arms company, it is difficult for the arms industry to develop technologies. We must realize that the defense industry and the armed forces are on the same ship. They cannot exist without each other, and only their mutual cooperation can guarantee the security to citizens. Transparent open negotiations and direct and long-term cooperation are the way forward.

See also: IDET 2019 - International Defence and Security Technologies Fair in Brno

Serious communication with the public must be a matter of course, so that it can be seen that the money that the citizens of the state pay in the form of taxes is used efficiently and responsibly.

  • One of the key elements of the defense industry is state-owned enterprises. At one parliamentary seminar, you opened up the topic of a possible transformation into a joint-stock companies, in which, however, the state would hold a majority. Is it feasible in Czech conditions?

Of course, this is feasible, but there must be political will to do so. The form of a state enterprise makes sense only where almost all the performance of the activities of this enterprise is provided to the state. Where most of the production is intended for customers other than the state, this form is inappropriate. Entrepreneurship is a willingness to bear a certain degree of risk. A manager at the head of a state-owned enterprise cannot take risks by doing business with state property that is entrusted to the state-owned enterprise. At the same time, he must maintain the abilities imposed on him by the charter. Thus, its management can never be as efficient as in a private company. But then its prices are higher and it cannot compete with private companies on the market. The form of a joint-stock company gives significantly greater opportunities for business, although the influence of the state will always lead managers to a certain caution. It is understandable that the state wants to retain control over some arms production, which it would have when holding a majority stake. For example, in the largest Finnish armory, Patria, the Finnish state owns 51% of the shares and the rest is in private hands. But I do not think that politicians will address this issue before the parliamentary elections next year. It would not bring them any votes, on the contrary, they could expect negative articles. Therefore, for a long time to come, private companies will complain that state-owned enterprises are inefficient, slow and expensive, and yet the state prefers them. And directors of state-owned enterprises will lament that they have few contracts from the state, that input materials and subcontracting must compete senselessly under public procurement law, that they are not eligible for European subsidies, and must publish details of trade contracts that competitors may abuse to their detriment.

  • You are a passionate shooter yourself. What do you say to the plan of the European Commission, which wants to ban lead in ammunition by 2022? What goal do you think the EC team is pursuing?

Passionate is a somewhat exaggerated expression. I try to keep my shooting skills at a certain level, which may prove useful. The state should support the military capabilities of its inhabitants much more than it has done so far. It's in its best interest. What the European Commission is doing is directly against it. The ban on lead in ammunition has no effect on the environment, but it will significantly increase the cost of ammunition, making shooting sport inaccessible to people. The defense capacity of the population will be reduced, and thus the defense capacity of the state. To this a media massage is added degrading words such as nation and homeland. Subsidies are promised, from the taxes we pay, on things useless and redundant, and the work is done. Defenseless and surrendered sheep are easily governed.

See also: Defence budget cuts after the Chinese virus crisis

  • Let us return in this context to the controversial arms directive from the EU workshop. Its introduction is intended to reduce international terrorism, but many experts are shaking their heads. Do you see anything positive about the directive itself, or is it simply a "waste"?

The only thing I see as positive about the European arms directive is the gathering of the Czech shooting community against this stupidity. And great support from the ranks of the non-shooting public. I consider it important that we contacted and told Brussels officials what we thought about their work.

  • In this context, what do you think about our arms legislation, which most of the experts consider to be of good quality and sufficient even within Europe? Is it missing anything crucial?

There is nothing fundamental missing in it, it can only be slightly improved. Paper administration could be simplified, given that all records today are operated electronically within the Central Arms Register. At the Ministry of Interior, they are quite well-founded in this area and are certainly preparing for changes.

  • What new key activities is the DSIA preparing for 2020?

We recently launched a mobile application that allows members to track all planned events that we are preparing. And there are a lot of them. For 2020, we had prepared a number of projects to support exports, greater involvement of Czech industry in international projects and some legislative changes that would strengthen the position of domestic producers in supplying their own armed forces. But the coronavirus pandemic significantly changes our plans because all events are canceled or moved. The question is how long the ban on gatherings of more than 30 people and travel restrictions will still apply. That is why we are currently making more use of computer technology and we are planning an our April presidium had the form of a video conference. We will also deal temporarily with some of our foreign activities. But it is a temporary solution, long-term ties cannot be maintained in this way.

  • How satisfied are you personally with the functioning of DSIA, which you have headed for 9 years?

It is not important how satisfied I am, but how satisfied our members are. Within the team of our office, we are constantly trying to find other ways to improve our work for the benefit of the Czech defense and security industry. Given that the number of members is increasing, we are hoping to succeed.

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