View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by Istanbul Sehir University Repository NATIONALIZATION OF THE DEFENSE INDUSTRY IN TURKEY: 2003-2017 A THESIS SUBMITTED TO THE GRADUATE SCHOOL OF HUMANITIES AND SOCIAL SCIENCES OF İSTANBUL ŞEHİR UNIVERSITY BY AYŞE İREM AYCAN ÖZER IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF ARTS IN POLITICAL SCIENCE AND INTERNATIONAL RELATIONS AUGUST 2017 ABSTRACT NATIONALIZATION OF THE DEFENSE INDUSTRY IN TURKEY: 2003-2017 Aycan Özer, Ayşe İrem MA in Political Science and International Relations Thesis Advisor: Assist. Prof. İsmail Yaylacı August 2017, 106 pages This thesis elaborates on the nationalization of Turkish defense industry since the invasion of Iraq in 2003. The objective of this thesis is to understand what explains the recent increasing trend of nationalization of the defense industry in Turkey. It firstly analyzes the regional conjuncture and lack of trust in allies so as to show how it influences Turkey’s investments in the sector. Then, it moves on to explain the domestic structure of the country which enables and inspires the politicians to attribute greater importance to industrial self-reliance in defense. Lastly, it focuses on the political economy of the defense industry and how big of an economy the sector generates at the global level and for Turkey. This thesis concludes that focusing on developing modern technology and production of specific arms of defense is more beneficial for Turkey’s future and position in the international market. Keywords: Defense Industry, Nationalization, Action-Reaction Model, Domestic Structure, Export License, Technology Transfer iv ÖZ TÜRKİYE’DE SAVUNMA SANAYİİNİN MİLLİLEŞMESİ: 2003-2017 Aycan Özer, Ayşe İrem Siyaset Bilimi ve Uluslararası İlişkiler Yüksek Lisans Programı Tez Danışmanı: Yrd. Doç. Dr. İsmail Yaylacı Ağustos 2017, 106 sayfa Bu tez çalışması Türk savunma sanayisinin 2003 Irak işgalinden itibaren millileşmesini etraflıca incelemiştir. Bu tez, savunma sanayiinde son zamanlarda artış gösteren millileşme eğiliminin sebeplerini anlamayı amaçlamaktadır. İlk olarak bölgesel konjönktürün ve müttefiklere olan güvensizliğin Türkiye’nin sektöre olan yatırımlarını nasıl etkilediği analiz edilmiştir. Ayrıca siyasetçilere sektörde yerlileşme olanağı sağlayan ve onları savunmada yatırım yapmaya teşvik eden devletin yerel yapısı incelenmiştir. Son olarak, savunma sanayisinin politik ekonomisi ve sektörün küresel düzeyde ve Türkiye için ne kadar büyük bir ekonomi meydana getirdiği üzerinde durulmuştur. Bu tez, modern teknoloji geliştirmeye odaklanmanın ve belirli bir savunma aracı üretmenin Türkiye’nin uluslararası pazardaki geleceği ve konumuna daha faydalı olacağı sonucuna ulaşılmıştır. Anahtar Kelimeler: Savunma Sanayi, Millileşme, Aksiyon-Reaksiyon Modeli, Yerel Yapı Modeli, İhraç Lisansı, Teknoloji Transferi v DEDICATION To my husband, Ahmet Ubeydullah Özer, who has supported me in every step of the way vi TABLE OF CONTENTS Abstract ....................................................................................................................... iv Öz ................................................................................................................................. v Dedication ................................................................................................................... vi Table of Contents ....................................................................................................... vii List of Tables ................................................................................................................ ix List of Figures ............................................................................................................... x List of Maps ................................................................................................................. xi List of Abbreviations .................................................................................................. xii CHAPTERS 1. INTRODUCTION ........................................................................................................ 1 1.1. Methodology ........................................................................................... 3 1.2. Thesis Overview ............................................................................................. 4 2. LITERATURE REVIEW ................................................................................................ 7 2.1. Political Economy of the Defense Industry .................................................. 10 2.2. Transnationalization of Arms Production .................................................... 16 2.3. Use of Arms as a Political Tool ..................................................................... 19 2.4. Trade-offs of Developing a National Defense Industry ............................... 22 3. APPLICATION OF ACTION-REACTION MODEL ........................................................ 27 3.1. Turkey in the Regional Conjuncture ............................................................ 28 3.1.1. A Historical Outlook at Turkey’s Security Perspective ......................... 28 3.1.2. Changing Conjuncture Boosting Economic Integration with the Region ................................................................................................................................ 31 3.2. Regional Arms Race ...................................................................................... 35 3.2.1. Sectarian Conflict ...................................................................................... 36 3.2.2. Arab Uprisings ........................................................................................... 37 3.2.3. Going Deep into the Regional Rivalries .................................................. 40 3.3. Deteriorating Relations with Israel .............................................................. 43 3.4. Stuck Within ISIS-PKK-PYD Triangle ............................................................. 45 3.4.1. NATO Patriots ............................................................................................ 49 3.4.2. Operations against ISIS ............................................................................. 50 vii 4. APPLICATION OF DOMESTIC STRUCTURE MODEL ................................................. 53 4.1. Meaning of the Defense Industry for Politics .............................................. 54 4.2. Electoral Politics ........................................................................................... 55 4.2.1. Ruling Party: AKP ....................................................................................... 56 4.2.1.1. 2023 Vision .............................................................................. 59 4.2.2. Opposition Parties .................................................................................... 60 4.2.2.1. CHP ........................................................................................... 60 4.2.2.2. MHP ......................................................................................... 61 4.2.2.3. HDP .......................................................................................... 62 4.3. Externalities of National Defense Industry .................................................. 63 4.3.1. Positive Externalities ................................................................................ 63 4.3.2. Negative Externalities ............................................................................... 66 5. THE POLITICAL ECONOMY OF MILITARY DEFENSE INDUSTRY ............................... 69 5.1. Effect of Arms Industry on Economy ........................................................... 70 5.2. Military Expenditures in the World and in the Region ................................ 71 5.2.1. Economy of the Military Industry in the World .................................... 74 5.3. Military Spending of Turkey ......................................................................... 78 5.3.1. Economy of the Military Industry in Turkey .......................................... 80 5.3.2. Problems Associated With Non-national Defense Industry ..................... 84 5.4. The Importance of Political Economy of the Defense Industry ................... 88 6. CONCLUSION .......................................................................................................... 89 BIBLIOGRAPHY............................................................................................................ 94 viii LIST OF TABLES Table 3.1. Military Expenditure by Country in the Middle East (US$ million) ........... 38 Table 4.1. Budgets of Ministries in 2016 (TL) ............................................................. 66 Table 5.1. Share of Military Expenditure in GDP (%) ................................................. 74 Table 5.2. Export Figures on Sectoral Basis-1000$ .................................................... 81 Table 5.3. The Sectors with Most Enhanced Volume of Exports in November ......... 82 ix LIST OF FIGURES Figure 3.1. Turkey’s Exports to Iraq (million USD) ..................................................... 33 Figure 3.2. Turkey’s exports to MENA and Europe-Central Asia ............................... 34 Figure 3.3. Share of MENA and Europe-Central Asia within Turkey’s exports .......... 35 Figure 3.4. Military Expenditure per capita by Region (million USD) ....................... 38 Figure 4.1. R&D Spending