Military spending is set to change. Arms industry must think about exports

• Deloitte predicts that defense spending in Poland will remain at 4 percent of GDP for many years.
• Newly purchased equipment will then have to be maintained and serviced. The cost of maintaining the personnel of a significantly enlarged army will also be higher.
• According to Mariusz Ustyjańczuk, an expert from the analytical company Deloitte, the domestic arms industry should increasingly focus on arms exports.

The war in Ukraine is ongoing, and defense spending in Poland is growing rapidly, but despite this it may seem that strengthening and expanding the country's defense industry is proceeding slowly. The neglect of the past has proven to be a significant burden.

The cost of maintaining the army will increase

- For the past 30 years, we have not invested in defence, nor have we invested in the army, nor have we invested in the defence industry - points out Mariusz Ustyjańczuk, partner, leader of the defence sector at Deloitte in Central Europe during a conversation at the 17th European Economic Congress in Katowice .

This changed only after Russia invaded Ukraine in 2022. Since then, Poland has rapidly increased its defense spending from around 2 percent of GDP to 4.7 percent of GDP.

- These expenses will continue in the perspective of the coming decades - assesses Mariusz Ustyjańczuk. And all because newly purchased equipment will then have to be maintained and serviced. Maintaining the staff of a significantly enlarged army will also cost more.

He cites Deloitte's calculations, which indicate that the level of defence spending will amount to around 4 percent of GDP over the next 10 years .

He also points out that although at the moment, due to very large equipment purchases, financing army personnel absorbs about 40 percent of defence expenditure , in the long term it can be as much as 50 percent.

- If the army is to grow to 300,000 (soldiers – ed.), this will also involve additional costs - Ustyjanczuk points out.

We must take care of the export capacity of the Polish arms industry

Why are there problems with the rapid expansion of the production capacity of the domestic arms industry? For over 3 years of war in Ukraine, it has not been possible to launch even a second production line of the Krab gun-howitzer or a real artillery ammunition factory.

- Up until now, this area has been neglected - Mariusz Ustyjańczuk emphasizes once again. - Our industry was not ready to accept such large funds and transform at such a fast pace. Now we have both political and social consent to invest in this area. This is very good, because we will finally rebuild our deterrence and defense capabilities.

- We will rebuild the arms industry - he adds. - We just need a moment to gain momentum here.

However, is there not a risk that due to the rising costs of maintaining the army we will soon run out of money for new arms contracts?

The Deloitte expert points out that the contracts already signed will be implemented for many years, so there is no need to constantly sign new contracts for new equipment to reach the army.

- It will be a longer perspective, but it is true that we will not buy this equipment at this level indefinitely . At some point we will achieve sufficient deterrence and defense capabilities. However, the structure of expenditure will change, it will be necessary to actually maintain and service this equipment - says Mariusz Ustyjańczuk.

In his opinion, when thinking about the domestic industry, we should not assume at all that the volume of equipment purchases will remain at the current level. In time, our arms industry should therefore switch from meeting the needs of the army to deriving income from exports.

- And this is and this is an element of the national strategy of the defense industry , which the Ministry of Development and Technology is currently working on. I hope that this strategy will appear by the end of the year and it should result in what capabilities we should produce in the country, what capabilities we should export in the spirit of the future - sums up Mariusz Ustyjańczuk.