The stakes in the defence industry

The Defence minister, Sorin Frunzaverde, managed early this week to stir up new waves in a sector many call “delicate,” the arms and ammunition industry.

He decided to take the bull by the horns and restructure the industry to the bone, in a downsize that would leave it with 12.000 to 15,000 employees, from 78,000 today, under the umbrella of the future National Company for Defence Technologies.

The announcement was presently answered by the Minister of Industries and Trade, Radu Berceanu, who is shepherding over part of this industry. He found that the restructuring programme was “instigating” to the employees in the sector, as the 66,000 people are threatened to lose their jobs. Berceanu lashed at Frunzaverde for having “ignored completely” the Trade and Industry Ministry’s proposal to reorganise the industry, submitted to Prime Minister Mugur Isarescu two weeks ago.

Naturally, a reaction had to come from the trade unions, which, after tens of strikes and spontaneous protests are saying privatisation is not suitable for a handful of plants that received no investment for ten years. A proof is the decline of civil production in these plants. For instance, Tohan bicycles are enjoying less demand since similar imports have appeared on the market. The same goes for washing machines made in Cugir, no longer able to keep up with competition, especially with the military industry subsidy included in their price.

On the other hand, ministers who control the sector are dickering with the same intensity as in the time when the Defence Ministry was led by Victor Babiuc, who jumped ship from PD to PNL.

But unlike his predecessor, after announcing a determined restructuring plan, Frunzaverde is retreating and seems willing to give up all of the defence industry to Berceanu. To appease both Berceanu and the unions, he said the new company would “function, in principle, in subordination to the MIC” and that the optimal variant for restructuring the defence industry would be established after specialists in the two ministries consult with unions.

Thus will be decided the fate of the “Army Arsenal” Autonomous Regie, coordinated by the Defence Ministry, and of the Romarm national company, controlled by the Trade and Industry Ministry (MIC). To these two units, which comprise several plants, add the three large aerospace plants – IAR Ghimbav, Aerostar Bacau and Avioane Craiova, which also manufacture for the military. These latter plants are stand-alone companies. The Defence Ministry also coordinates the Romtehnica foreign trade regie.

The question, albeit rhetorical, is why the defence industry arouses so much controversy? Because it is a known fact that factories have drastically reduced activity in the last ten years. Public statements indicate that there are no more orders from the foreign or domestic markets, and when a contract is signed, these companies feel in the seventh heaven.

This sector, which has undergone no major restructuring, is periodically taken aback by strikes and protests, one more spontaneous than the other, and most employees are sitting at home, waiting for pay day to collect their technical unemployment dues. In fact, these are the only “news” coming through to the public from the defence industry. It is a mystery why the budget keeps supporting a bankrupt industry. And if two defence ministers and one industry minister fight so direly over control of these factories, there must be a stake somewhere.