Regional governments recognise the economic potential of increasingly export-oriented domestic firms.
By Klaudija Lutovska for Southeast European Time in Skopje -- 24/02/14
A worker performs quality control of ammunition produced at the UNIS GINEX company in Gorazde. [UNIS GINEX]
Balkan countries are taking measures to support domestic military firms in an effort to improve their economies and develop closer relations with NATO, experts said.
Governments pay more attention to the military industry's economic potential, said Blagoja Markovski, president of the Balkan Security Forum in Skopje.
"It offers extraordinary opportunities to create jobs and help the development of the economy. Individual countries' earnings range from tens of millions to billions of euros," Markovski said.
Officials said the military industry firms are increasingly export-oriented in addition to satisfying the needs of the militaries in their countries.
In Bosnia and Herzegovina (BiH) armaments manufacturing increased five-fold to 100 million euros in the past three years.
BiH's seven leading defence firms manufacture a variety of military products -- but most commonly infantry and artillery ammunition -- that are sold in 30 countries.
"The presence of some major US companies on the BiH market is of particular importance because it guarantees stability of sales in the next four to five years because long-term contracts [with them]," Hasib Salkic, chairman of the Weapons Industry Group at the BiH Foreign Trade Chamber, told SETimes.
BiH authorities invited US producer Howell Machine Inc. last year, which concluded deals worth 65 million euros with local producers Igman from Konjic and Unis Ginex from Gorazde.
Igman supplies US forces in Iraq and Afghanistan with NATO-calibre ammunition.
This year, the government signed a memorandum of co-operation with Howell Machine to take over the management of five of the seven BiH producers.
The partnership allowed Igman to enter a market that exclusively supplies NATO members, said Erdal Trhulj, minister of energy, mining, and industry of the Federation of Bosnia and Herzegovina.
"With the new partner, we will get into new markets and accelerate the introduction of NATO technology and standards, thus bringing BiH closer to membership in the Alliance," Trhulj told SETimes.
Similarly, the Serbian defence industry has grown by promoting exports in the amount of 250 million euros annually in the past two years.
Mile Dragic Production is Serbia's leading defence manufacturer. [Mile Dragic Production]
The two biggest producers, Zastava Weapons and Jugoimport SDPR, focus on North Africa as the main export market.
The military industry is a catalyst for all the leading economies, said Dejan Dragic, production director of Mile Dragic Production, Serbia's leading private defence firm.
Dragic said because the company's core business is to supply Serbia's military and police, it is expected to contribute to the country's security.
"Relations with the government on an operational level are better than before," Dragic told SETimes.
Dragic said his company does not have specific contracts with the government in terms of joint activities or promotions, but has on several occasions accompanied government delegations promoting Serbia's military products abroad.
In Croatia, the defence ministry contracted 21 domestic firms last month to supply the country's military with rifles, equipment, helmets and boots.
The deal is crucial for the development of Croatia's military industry, said Alojzije Sestan, president of the Special Products Manufacturers Group at the Croatian Chamber of Commerce.
"The seven-year contract stipulates the companies are verified for future defence ministry calls for bids. This is very important for acquiring foreign markets where they will automatically have an advantage," Sestan told SETimes.
"We are extremely pleased that Croatian soldiers will be equipped with Croatian products, from underwear to assault rifles," Ante Kotromanovic, Croatia defence minister, said.
Kotromanovic said the move is also important because it allows domestic firms to manufacture according to NATO standards.
The government concluded a similar deal with HS Product from Karlovac in which it co-financed the manufacturing of guns and ammunition according to NATO standards.
Albania also has shown an increased interest to export armaments and use its facilities to repair and service AK-47 automatic rifles, according to Markovski.
"Albania has significantly increased exports of weapons, ammunition and other military assets netting about 40 million euros a year," Markovski said.
In Macedonia, firms try to compete by finding niche markets, particularly for NATO militaries, he said. Vinka from Vinica and Edinstvo from Valandovo produce uniforms and clothing items for the Dutch and British armies, while Eurokompozit from Prilep exports body armour to Serbia.
Markovski also said an important aspect in developing the military industry is that regional countries promote responsible export controls and arms transfers, which is the underlying NATO concept.
This is particularly the case in issuing licenses for exporting dual-use goods based on laws harmonised with EU legislation.
"Manufacturing military-related products helps them better integrate with NATO and develop better relations based on trust with NATO members," Markovski said.
Contributors Ivana Jovanovic in Belgrade, Kruno Kartus in Zagreb and Ana Lovakovic, in Sarajevo contributed to this article.
What can the Balkan countries do to better support domestic military industry firms? Share your opinion in the comments section.