insights

Defense budget increase: an extraordinary opportunity to organize and strengthen the defense industrial and technological base

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Aerospace and Defense

The foreseeable increase in the defense budget in the coming years, as a result of the commitment reached by NATO members at the Madrid summit, offers a unique opportunity to generate the necessary defense capabilities with a high degree of strategic autonomy and entails extraordinary industrial and technological dimensions due to the tractor effect on the industrial sector as a whole.

But in order for this opportunity to materialize in an intelligent, sustainable and integrating growth of the Spanish defense technological and industrial base, while guaranteeing the best use of public funds, the Public Administration must contribute to the organization of the sector.

To this end, it must promote the alignment of the growth of budgets with the necessary investment of private enterprise, avoiding unnecessary duplication and the risks derived from immature technologies that, only apparently, are national technologies.

The development of new operational capabilities in a complex and rapidly evolving technological environment requires maintaining an adequate level of investment, as well as mechanisms that allow the company to plan effectively in the medium and long term.

The business response to this extraordinary opportunity requires decisive political support, materialized in a legislative and budgetary environment that is as stable and predictable as possible, with regulatory measures, among which at least the following should be mentioned as essential:

  • A law on multi-year financing of defense investments thatguarantees the level of certainty needed to undertake the necessary long-term investments.
  • Financing of R&D costs required to generate the industrial capabilities as real strategic national industrial capabilities, with the aim of finalist character (not as an advance) and charged to the budgets of the Ministry of Industry, Commerce and Tourism and Ministry of Science and Innovation, and leaving the financing of recurring production costs to the Ministry of Defense.
  • Approval, within the expenditure ceilings of the armament procurement programs, of the amounts for logistical support and in-service support, which enable the entry into service and effective operation of the costly weapon systems. These amounts are estimated in depth during the so-called Feasibility Determination phase of military planning, but the approval of the spending ceiling does not include them, which generates quite a few difficulties when the weapon system enters service.

Let us hope that this unique opportunity to organize the defense sector is considered as a national strategy within a State pact and is not wasted this time due to the urgency of obtaining capabilities or other dysfunctions.

Salvador Álvarez, Managing Director in Grupo Oesía