„While Poland has developed capabilities in some areas, it has a lot of work to do in others. An example of the strengths of the Polish industry is the production of gun barrels at the Stalowa Wola Steelworks, where technology transfer to these facilities is currently relatively straightforward. […] An example of the Achilles heel of the sector, in the field of tank production, are the engine and components of the drive system,” says Jerzy Aleksandrowicz expert of the Kazimierz Pulaski Foundation in conversation with BiznesAlert.pl.
- „A technology transfer involves many, even hundreds of elements. This is not just about assembling the supplied parts into a ready-made system. This is a gradual production in Poland of more and more components that can be justified from an economic point of view,” explains Jerzy Aleksandrowicz.
- „Poland has gained extensive technology transfer from the British MBDA, which approached the matter very collaboratively. This shows that foreign manufacturers are very open to cooperation. Thanks to this, Polish industry stands a chance to remain competitive on the European market,” says the interlocutor BiznesAlert.pl
- „Locating plants in large cities, such as Poznań, makes the competition for employees tough. Especially the skilled ones. While locating them near the eastern border puts them at risk in case of an aggression. However, the highest unemployment is in the voivodeships located on the eastern wall of Poland, which makes it easier to find employees,” explains Aleksandrowicz.
BiznesAlert.pl: What does the issue of technology transfer look like in armament contracts? Let’s start with asking if it is regulated in any way? On what Polish regulations is the transfer of technology based?
Jerzy Aleksandrowicz: Technology transfer is relatively common in arms contracts. This is a global trend. There are countries like Romania that, due to the cost of the technology transfer, make it clear that they are abandoning it in order to reduce the cost of purchase. Or countries such as Japan, which do not take into account the costs and require a large range of transfer, but this results in the fact that the unit cost of a copy of weapons is horrendous, often higher by several dozen or even 100 percent than in other countries.
But what exactly is a technology transfer?
Well, let’s start with the rules. Without delving into details, for a long time, technology transfer has primarily relied on regulations outlined in offset legislation. Here it is necessary to recall what offset is – a tool to compensate for expenses incurred by a country making arms purchases abroad. An example of this was the offset on F16 in Poland and very often such compensation did not apply to the arms industry. However, the offset in this form was banned in the European Union, among other reasons, because it was considered a tool that distorts the common market. At a time when the transfer of military technology was severely restricted by the European Union, quasi-offset solutions were created. They are designed to avoid conflicts with the European Commission. Interestingly, they are used quite widely by the „old EU countries”. The last major tender, which was supposed to take into account the wide transfer of technology as part of an offset, was the Caracal contract. It was a hybrid of old and new rules. However, despite the difficult legal situation, it was possible to ensure excellent conditions for the transfer of technology directly related to the order. Unfortunately, this was later wasted because entirely unrealistic new requirements were imposed, which should not be the way to treat partners. Currently implemented programs are slightly different, based on agreements between governments, for example, the Republic of Korea and Poland (programs K2 and K9), the United States and Poland (the Wisła program), or the United Kingdom and Poland (programs Narew and Miecznik). American contracts often still enforce rigid and inadequately tailored requirements, but already related to armaments. However, in agreements with the United Kingdom and Korea, the industry mainly obtains the freedom to negotiate technology transfer based on bilateral agreements. The framework of the transfer is determined by the military, based on their needs, as well as the economic account of enterprises. This is a much more effective solution, giving more scope for success, but it also requires a disproportionately greater involvement of the national industry, a greater organizational culture and long-term planning.
Technology transfer is included in the agreement between Korea and Poland. What exactly is hiding behind this term?
The Korean industry seems to be more open to technology transfer than partners from the US or Germany. Only the British and once Israel were as open to cooperation. Actually, Norway offered us a good contract too. But returning to the question, we can see, for example, in the case of the K2 tank, that the Korean side from the very beginning assumed that the Polish industry would be one of the key entities tasked with fulfilling the agreement. The Koreans proposed various models of cooperation, ranging from a close partnership like a joint venture, cooperation based on subcontracts, or a consortium. And it seems that the latter solution was preferred by the Polish side. Hyundai Rotem, as a manufacturer of the tank, publicly declared its willingness to cooperate with Polish state-owned companies, that is, with the Polish Armaments Group, but according to the company’s declarations, it did not rule out cooperation with the private market in the future, where relations with the WB Group have already been established today on the occasion of work on the GF version of tanks. This openness is also exemplified by the visits that representatives of the Korean company have made to Polish universities. Looking at the whole picture, I think that finally, for the first time since 1989, there is a real chance to build a Polish tank.
Until now, in the field of tank technology, the Polish industry has collaborated with the German industry. I am talking about the Leopard tanks. However, the upgrade of Leopard 2 is going very slowly. This causes understandable dissatisfaction not only from the industry, but also from the Armed Forces, which want to maintain the pace of supply and high operational capacity of military equipment.
What are the capabilities of the Polish industry for producing modern equipment, such as tanks or gun-howitzers?
Poland has developed capabilities in some areas, in others it has a lot of work ahead. An example of the strengths of the Polish industry is the production of gun barrels at the Stalowa Wola Steelworks, where technology transfer to these facilities is currently relatively straightforward. In the production of KRAB howitzers, the Polish industry has developed these capabilities almost perfectly, thereby absorbing new technologies without requiring significant costly changes, and relatively rapid absorption is feasible. An example of the Achilles heel of the sector, in the field of tank production, are the engine and components of the drive system So, KRAB is an example of how historically we have been able to nationally integrate over a dozen years quite complex technologies and develop them. May this be an example that is always repeated.
Technology transfer involves many, even hundreds of elements. This is not just about assembling the supplied parts into a ready-made system. It’s about the gradual production of an increasing portion of components in Poland that makes economic sense. Moreover, based on publicly available statements, Korea is open to cooperation in the modernization of a product, and ultimately the creation of what the Koreans call the tank of the future, and in the Polish media space is referred to as K3.
You mentioned the need to restore some of the capabilities of the Polish arms industry. How long can such a process take in the context of the production of advanced weapons?
Again, you can go back to the successful technology transfer from the UK and Korea. Few people remember that it was the now defunct Samsung Techwin company that was responsible for establishing the ability to produce KRAB’s chassis. As part of the KRAB deal, we also received a technology transfer from the UK regarding the AS90 tower. So KRAB’s parents were the Korean and British industries.
I will emphasize once again, because it must be remembered in the era of criticism of technology transfers by some commentators, that this example shows that we are able to establish capabilities in the country quite efficiently. It is encouraging that the president of PGZ is someone with precisely such experience.
Rebuilding capabilities often means de facto building them from scratch. It is difficult to say exactly how long such a process can take, because it is a complex process, where much depends on the first steps that will be taken to obtain the technology. The Polish industry will first receive a proposal to work on the elements that interest it most. With the K2, they were identified and selected with the participation of companies from the PGZ Group. It can be said that introducing Polish elements will take at least a few years.
In the case of drive elements, unfortunately, Poland itself lost such capabilities by liquidating the PZL Wola plant. As a result, it is currently unable to work on its own engines. Although there are operating factories of foreign companies producing engines such as Mercedes, they are intended for the civilian market. These engines are not suitable for all military vehicles, so for howitzers or tanks we now have to buy these engines abroad.
In general, due to the weak domestic engine production, it is with sadness that we note the decision of the Stellantis group to phase out production at the FCA Powertrain plant in Bielsko-Biała. It is a pity that the opportunity was not taken and PGZ did not buy this plant.
Are any Polish solutions used in the currently delivered tanks, or are they versions identical to those used by the Armed Forces in Korea? Can we expect a broad technology transfer and cooperation between Polish and Korean industries in the future?
There are many aspects to it. For example, on the basis of cooperation with WB Electronics, the Korean side acquires communication means for the Gap Filler version, that is, for the unpolonized version but already delivered to the Republic of Poland. The participation of Polish industry will become more and more pronounced– we must remember that technology transfer is a process in which capacities will be acquired gradually, and therefore the share of components produced in Poland will grow gradually. But the Korean side is also interested in acquiring elements developed in Poland. It should be our ambition to also polonize the tanks of the Republic of Korea Army.
The Polish arms industry acquires technologies not only from Korea. What are some examples of beneficial transfers?
First of all, the Narew program should be indicated. Poland will receive a wide technology transfer from the British MBDA in the field of launchers and effectors. This shows that foreign manufacturers are very open to cooperation. Thanks to this, Polish industry can stands a chance to remain competitive on the European market. Other examples, being implemented or in the process of negotiations, are the Miecznik Coastal Defense Ship program or the Kruk program, which concerns the acquisition of attack helicopters. The latter is based on slightly different principles, that is, it is implemented on the basis of offset law. Within its framework, capacities will be transferred, but to a limited extent, mainly servicing. However, it should be borne in mind that the cost of operation in the life cycle of the product is even 50-70% of the total cost of using the weapon system. So with helicopters, it’s a very important technology transfer.
The aforementioned K2 tank and the Narew program will be the most complete transfers, at least in theory, in terms of the scope of technology transfer. They will allow us to build complete national capabilities. This is unlike the Rosomak venture, which did not offer the capabilities needed to develop a national vehicle, because the contracts bound us very unfavorably.
It is worth recalling the history of successful technology transfers. This includes the Naval Missile Unit, which was acquired from the Norwegian Kongsberg – here Polish companies acquired wide competence in the field of servicing, and even developed some of the components themselves. We also got a successful technology transfer from Harris in the area of communications systems. In terms of ammunition production, the production of Spike missiles at MESKO is proceeding with full success.
What are the challenges of bringing technology to Poland?
A big problem is the lack of modernization and development of the Polish industry. For example, until recently, Poland was based on ammunition production lines containing solutions from the 1920s. Investments in this area are currently needed, and they need to be continuous. At some point, Poland lost a forward-looking perspective. The whole of Europe has been deceived into believing that it will never again have a direct experience of war. It should be noted that it’s not just Poland that faces production problems; all NATO countries encounter them.
Apart from becoming financially stable, the Polish arms industry needs to spend better. Currently, the sector spends funds in an efficient but not necessarily optimal way.
The military should also guarantee an adequate volume of orders so that the industry can make the necessary investments under specific programs. Another aspect is human resources. It is necessary not only to find them, but also to train and retain employees. To persuade those tempted by higher wages not to choose the competition. This is combined with another challenge, which is the correct location of the plants. The location of plants in large cities, such as Poznań, makes competition for employees very high. Especially the skilled ones. While locating them near the eastern border puts them at risk in case of an aggression. However, the highest unemployment is in the voivodeships located on the eastern wall of Poland, which makes it easier to get an employee there.
Cooperation between industry and academia is more of an opportunity than a challenge. Academic institutions educate future professionals, and it’s a lengthy process that requires particular attention. If foreign companies place production in Poland, they should also take care of this aspect. And this is already happening, more and more foreign companies are cooperating with technical universities in Poland. Such complex projects as Narew, Miecznik and Wisła also showed that it is necessary to train not only engineers, but also technicians.. welders, turners and blacksmiths. The dynamic educational changes in recent years and more attractive salaries abroad have resulted in a shortage of technicians in Poland. Other examples of caring for the future employee are the dialogue of manufacturers with local governments in order to recreate or improve the quality of technical training – to offer new directions in existing techniques, or to subsidize already implemented directions of training.
The question remains whether technology transfer pays off? It increases the cost of buying equipment.
Yes, of course. It’s a good question because this part is easy to forget about. Transfer costs. Let me go back to the example of an armored personnel carrier. Despite the problems from a business point of view, i.e. export restrictions, for production reasons, our the Rosomak program should be considered a successful technology transfer. It make it possible to service the vehicles. In addition, despite the passage of time, these vehicles are still valued by our soldiers, and Rosomak S. A. has acquired certain competencies. However, from a business standpoint, it was not an export success because, as PGZ has signaled many times, there was no freedom to export to other countries.
Can we produce everything? Yes, we can, but it will be very expensive. And war is also about economics, because if we shoot from something that is relatively expensive to systems that are cheap, then it may turn out that our expensive weapons will run out, because we have less of them than if they were obtained at a more affordable price, directly from the manufacturer. This is what Ukraine is struggling with.
Acquiring technology is generally time-consuming and expensive, as this process involves not only money, but also investments in infrastructure, line purchase, plant reorganization, organizational culture change, technician training, material technology changes, and much more.
Technology transfer is also a challenge for the transferring party, as it is responsible for the product over which it does not have full control. In the complex process of design and production, the owner that transfer the technology must take into account the entities that are tasked with taking on this challenge and delivering the final product to the customer. We must also bear in mind the challenges posed by cultural differences, language barriers or organisational barriers between the parties transferring and receiving the technology. There are many factors that must align with each other, and even more that require constant effort to ensure a proper quality transfer .
In an ideal world, every technology should be based on one’s own capabilities. However, it should be remembered that there are spaces where catching up with your own efforts and at your own expense can take a very long time, and technology transfer can simply speed up this process.
Interview by Marcin Karwowski