Study on the Innovative and Competitive Potential of the Defence-Related Supplier Base in the EU12
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European Defence Agency Study on the innovative and competitive potential of the defence-related supplier base in the EU12 Final Report Part 1: Text of the Study EDA contract reference: 08-I&M-005 Conducted by: PwC Polska Sp. z o.o. (PwC), Swedish Defence Research Agency (FOI), Netherlands Organization for Applied Scientific Research (TNO) and ProCon Ltd (ProCon), under contract with PricewaterhouseCoopers EU Services EESV. This document (as a whole or parts of it) is releasable to EDA pMS Governments, NDIAS and Industry. Any further release requires prior consent of EDA. This document does not necessarily reflect the position of EDA, nor does the EDA accept any responsibility for the accuracy or completeness of its content. This document is Part 1 of Final Report: "Study on the innovative and competitive potential of the defence-related supplier base in the EU12” and contains the Text of the Study. The development of the Study has been undertaken by a consortium of PricewaterhouseCoopers EU Services EESV, Swedish Defence Research Agency, Netherlands Organization for Applied Scientific Research and ProCon Ltd., under a Contract No. 08-I&M-005 with the European Defence Agency. Table of contents List of acronyms and abbreviations..............................................................................................5 I. Executive summary .................................................................................................................6 II. Introduction ............................................................................................................................12 1. Background and context of the Study......................................................................................12 2. Purpose of the Study................................................................................................................12 3. Specific objectives of the Study:..............................................................................................13 III. Methodology...........................................................................................................................15 1. Methodology of the Study ........................................................................................................15 2. Validity of the findings..............................................................................................................16 IV. Status and trends of the EU12 defence-related supplier base .........................................18 1. Historical backgrounds.............................................................................................................18 2. Present status and trends ........................................................................................................20 V. Mapping of competences in the defence-related supplier base of EU12 ........................28 1. Introductory information...........................................................................................................28 1.1 Sources ....................................................................................................................................28 1.2 Method .....................................................................................................................................28 2. Results of EU12 competences mapping..................................................................................29 3. Conclusions..............................................................................................................................39 3 VI. Competitiveness and innovativeness of the EU12 defence-related supplier base........40 1. Innovativeness – background ..................................................................................................40 2. Competitiveness and innovativeness ......................................................................................41 3. Innovativeness and competitiveness in the EU12 countries ...................................................46 3.1 Current size of CEE DTIBS......................................................................................................46 3.2 Markets and sales....................................................................................................................47 3.3 Import as a basis for cooperation ............................................................................................51 3.4 Current capabilities ..................................................................................................................53 4. Future demand .........................................................................................................................61 5. Actors and factors driving and hindering innovation and competition in EU12.......................66 5.1 Actors driving innovation..........................................................................................................66 5.2 Factors driving and hindering innovation and competition ......................................................74 VII. Modalities of cooperation and practice ...............................................................................78 1. Identifying modalities................................................................................................................78 2. “The Niche Competitor”............................................................................................................80 3. “The Aspiring Prime” ................................................................................................................82 4. “The Intermediary”....................................................................................................................84 5. “The Flexible High-Tech Company”.........................................................................................85 6. “The Logistics Service Provider”..............................................................................................87 7. “The Low Cost Company” ........................................................................................................87 8. Utilisation of the approach .......................................................................................................89 VIII. Conclusions and recommendations....................................................................................90 1. Conclusions..............................................................................................................................90 1.1 Assessing the current state and the competence of defence-related supplier base in EU12 90 1.2 Finding out the innovative and competitive technological potential of this supplier-base and describing the modalities in which such potential is created, exploited, sustained and accelerated...............................................................................................................................90 1.3 Analysing the potential for competitiveness of the defence supplier base of EU12 within the wider European market and the level of existing and potential integration of this base with the West European defence industry ...............................................................................91 2. Policy challenges .....................................................................................................................92 3. Analysis and recommendations of policy measures to improve competitiveness and innovativeness of the EU12 defence-related supplier base and facilitate its integration into EDTIB.......................................................................................................................................93 3.1 Issues for realising the competitive and innovative potential of the defence industry in the EU12 area – the firm’s perspective..........................................................................................93 3.2 Issues for realising the competitive and innovative potential of the defence industry in the EU12 area – the public policy perspective ..............................................................................98 4 List of acronyms and abbreviations ADS Aerospace, Defence & Security APC Armoured Personnel Carrier C4ISR Communications, Control, Command, Computers, Intelligence, Surveillance, Reconnaissance CEE Central & Eastern Europe CoC Code of Conduct CIS Commonwealth of Independent States cMS Cooperating Member State DG Direction General DTIB Defence Technological Industrial Base EC European Commission EDA European Defence Agency EDEM European Defence Equipment Market EDTIB European Defence Technological and Industrial Base EEA European Economic Area EEIG European Economic Interest Grouping ESDP European Security and Defence Policy ESRAB European Security Research Advisory Board ESRIF European Security Research and lnnovation Forum EU European Union EU12 12 states that joined European Union on and after 1 May 2004 FOI Swedish Defence Research Agency HCSS Hague Centre of Strategic Studies ISSN International Standard Serial Number IT Information Technology LOI Letter of Intent MBE Member of the British Empire MENA Middle East and North Africa MoD Ministry of Defence NAD National Armaments Director NDIA National Defence Industry Association NATO North Atlantic Treaty Organization OCCAR Organisation Conjointe de Coopération en matière d’Armement (Organisation for Joint Armament Cooperation) pMS Partner Member State PwC PricewaterhouseCoopers R&D