Romanian defence industry to benefit from cooperation with foreign companies
The current security situation in Europe continues to put pressure on the development of the defence industry of individual European countries. Romania is no exception and has recently been working hard to strengthen its domestic defence industry, which has often been overlooked and significantly underfunded in the past. Germany's Rheinmetall, as well as Turkey's Otokar and South Korea's Hanwha, will play an active role in the development of the local defence industry.
For almost thirty years, the defence industry was not one of the main areas of interest of the Romanian political representation. The statistics on defence spending prove this. Between 2013 and 2016, defence spending did not exceed 1.5% of GDP. Romania started increasing its defence budget in 2017, when spending reached 1.73% of GDP. This increase was the result of a broad agreement between the Romanian political parties, which agreed in 2015 to keep defence spending at 2% of GDP for the next ten years. Following the Russian invasion of Ukraine at the end of February 2022, the Romanian government decided to invest 2.5% of GDP in defence from 2023 onwards, in order to modernise the armed forces in line with NATO commitments, as well as to develop the defence industry. Last year, Romanian defence spending already amounted to 2.26% of GDP and it is expected that over the next two years this expenditure could rise to 3%.
Regarding the development of the Romanian defence industry, European projects and partnerships with foreign companies can provide a major boost. In this respect, Romania has an interesting perspective. Last year, the European Commission evaluated projects under the ASAP (Act in Support of Ammunition Production) initiative, which aims to kick-start the production of large-calibre ammunition on the European continent. One of the projects, in which the European Commission plans to invest €47 million, is the construction of a gunpowder and artillery ammunition production plant near the Romanian city of Victoria. The construction of the factory will be carried out by the munitions division of the Germany based conglomerate Rheinmetall, in cooperation with the Romanian state-owned company ROMARM. The cost of building the production infrastructure is expected to be around €400 million. Romania will thus become the next European country to produce the much demanded artillery ammunition and the Romanian defence industry will gain another valuable production capability.
According to the available information, it seems that the upcoming years will also be interesting for the Romanian defence industry in terms of development and may also contribute to the implementation of the plans of the local government to modernise the army and the military-industrial infrastructure. In mid-March, the Turkish armoured vehicles manufacturer Otokar announced the establishment of a subsidiary, Otokar Land Systems SRL, directly in Romania. According to the Turkish company, this step follows a contract with the Romanian Ministry of Defence for the delivery of 1,059 COBRA II 4x4 armoured vehicles from last November, with the aim of producing most of the ordered vehicles directly in Romania with the participation of domestic companies such as Romtehnica.
In addition to Turkey's Otokar, the South Korean company Hanwha is also expanding into Romania and plans to build a plant in Dambovita province to produce K9 howitzers and K10 ammunition vehicles. This intention follows a contract from the summer of 2024, when Romania ordered 54 K9 howitzers and 36 K10 ammunition vehicles from this South Korean manufacturer.
According to Hanwha Global Defense CEO Michael Coulter, the Romanian facility will produce the greater part of the contracted weapons for the Romanian armed forces and may eventually become a regional centre for the production, repair and servicing of weapon systems manufactured by Hanwha. However, according to the available information, Hanwha will first produce 18 K9 howitzers and 12 K10 vehicles in South Korea, which will then be delivered to Romania due to the urgent need to modernise the local army. The potential regional centre could employ up to 2,000 people depending on the total number of orders.
