The pressing need, importance and benefits of rebuilding the Hellenic Defense Industry

The purpose of writing this article is to propose a “re-establishment”, by fundamentally revamping the structure and purposes of the operation of the state-owned Greek Defense Industry (EAS) and re-establishing it on new bases capable of meeting the modern challenges and needs of the time. In addition, it seeks to highlight the reasons why this industry needs to be emphasized and to list some of the important activities that it can focus on in order to make it cost-effective and flexible and to further develop it by providing numerous benefits to the Greek state and the national economy.

by Zafeirios Karavias

What is EAS

EAS (Hellenic Defense Systems S.A.) is a state-owned company founded in 2004 after the merger of the state-owned companies EVO and PYRKAL. The company was a leading manufacturer of weapons as well as spare parts for more sophisticated weapons systems and also had factories with numerous employees throughout the Greek territory. Today the future of the company is uncertain due to the dire financial situation.

The situation of the company today

According to official reports Kathimerini newspaper published on 14/08/2019 via an article by Vangelis Mandravelis entitled “Poor income and big losses for EAS 2018”, Hellenic Defense Systems (EAS) were in a bad state due to the mismanagement of previous years as well as the constant negative balance sheet in the financial management of the company. Indicatively, the article stated that ‘the payroll of some 500 workers in the industry amounted to € 13.7 million, exceeding marginally the company’s revenue. In addition, total operating expenses of € 29 million were more than double its revenue.

The company reported 2018 revenue of € 13.4 million and losses of € 150,000. The losses would, however, be much higher if the company did not receive a special € 19.5m grant to pay suppliers. However, despite the fact that the company continues to be financed with millions of euros, it shows poor revenue. 99% of the turnover comes from the Ministry of Defense. The company’s exports, according to the financial statements, barely exceeded 400,000 euros.

EAS, based on accumulated losses, has cost the Greek taxpayer more than 1.5 billion euros. In addition, the company has a debt of € 217 million, of which € 65 million had to be repaid in 2019. However, big and important “hurdles” for the Company’s further course are also the diminished commercial interest from overseas buyers, the limited range of products produced, and the limited to non-existent research for the development of innovative products and new technology. And the lack of those elements that would make it competitive and attractive compared to their respective overseas companies is also evident.

 

Why should we invest in the Hellenic Defense Industry

1) Increasing deterrence power for the country – The international system is characterized by anarchy due to the absence of a supreme “police” authority that would enforce laws and punish violators of specific rules. Thus, conflict between sovereign states cannot be completely avoided, so they must always be prepared for war. In addition, in order for a state to prevent conflict it must be strong enough to discourage opponents from engaging it. Therefore, the development of defense industry is an important factor that will strengthen the country’s deterrent capacity to meet current challenges.

2) Creating new jobs – Reorganizing the country’s defense industry and creating new departments for research, design, production support, market research and geopolitical developments in the wider region will help create hundreds of new jobs, helping tackle unemployment and establishing a new industry of strategic importance to the country.

3) The geopolitical conditions of the Balkans, the Middle East and North Africa favor and increase the demand for weapons and search and rescue systems by the states of the region – called upon to safeguard their national sovereignty from possible transnational conflicts, migratory flows, smuggling activities on the coast or land borders, as well as terrorist attacks. From an economic point of view, exports of Defense Industry products abroad will boost foreign exchange inflows into the domestic market.

4) Domestic needs coverage – The existence of a national defense industry capable of producing, maintaining and deploying weapons and tracking and rescue systems will favor supply chain and inventory creation. The development of new equipment related to the operational needs of the Greek authorities could also be used to meet domestic needs. It is important to note that the production of equipment within the national territory makes the country more resistant to external pressures or to any type of embargo.

5) Designing innovative products that may also have commercial interest. Some of the products produced may also have commercial (as with Drones) as well as military interest, the state as a patent holder could sell the production rights to private companies for remuneration, thereby increasing its profits.

6) Reinforcing research – The existence of a Defense Industry will encourage the State to increase its GDP per year share for research and innovation. Experience has shown that weapons technologies can provide innovative solutions to other sectors of the national economy.

8) Stimulating the domestic market – Implementation of equipment programs requires cooperation with a wide range of companies from other sectors of the national economy and especially in the metallurgical, electrical, IT, aeronautical and shipbuilding sectors (in the case of warships).

9) Developing a professional ‘know-how’ – Multi-year research, design and development of defense industry products will provide both the industry and the state with a ‘know-how’, a set of methods, techniques and empirical knowledge that will foster progress.

10) Brain Drain Partial Reversal – Product development in the defense industry is a highly demanding process requiring specialized personnel. Therefore, its function demands the employment of scientists of many specialties such as Electrical Engineers, Mechanical Engineers, Shipbuilders, Aeronautical engineers, IT specialists, etc.

11) Upgrading Greece Strategically – As the country will have its own systems and will strengthen its position as a producer and exporter of defense systems.

12) Making use of the US presence in the country – It has been suggested earlier by the current Deputy Minister of Defense of the current ND government, Mr. Alkibiades Stefanis, that Greece’s conversion into a US military helicopter repair hub could, of course, be extended to other fields.

13) Participation in Common European or NATO arms development programs.

 

What the Greek Defense Industry should focus on

1) Deploying UAVs, Drones and similar, medium or small-sized units for surveillance, search and rescue

2) The development of effective electronic warfare systems

4) Radar – Telecommunication Improvement

5) Internet Security – The Internet security industry is one of the most important sectors of the defense industry as it represents one of the biggest challenges in the defense sector in general, as NATO Review indicates.

Consequently, the continued production of new advanced and effective software and better protected databases will enhance national defense and become an attractive product for foreign buyers. At the same time, if the Defense Industry succeeds in developing such software and innovative related web and electronic products, Greece will enter dynamically in the era of the 4th Industrial Revolution.

5) Production of high-tech materials for the personal equipment of security personnel

6) Upgrading Night Vision and Targetting Equipment

7) GIS (Geographical Information Systems) for military, environmental and rescue use

8) In Smart Anti-Aircraft Systems

9) In Improved Missiles possibly designed to be compatible with various types of weapons that Greece already has

10) Advanced fire control systems for ground weapons (from rifles to tanks) as well as active protection systems.

11) Creating a domestic supply chain (to the extent possible) for Greek warships.

Finally, for the optimum and more efficient operation of the Greek defense industry, it is proposed to re-arrange the sections of the company under the following names and specifications according to the work they perform: I) Production Department, II) Commerce Department, III) Research Department, IV) Product Design and Development Department, V) Marketing and Outsourcing Department, VI) International Relations Department, VII) Human Resources Department, VIII) Financial Management Department, IX) Legal Department, X) Logistics Department. (10 sections in total)

* Zafeirios Karavias is a graduate of the Department of Political Science and International Relations of the University of Peloponnese. He also holds a Postgraduate Degree from the Department of Maritime Studies at the University of Piraeus with a specialization in Marine affaairs and specialization in “maritime business management”.