The Politics and DV Engineering working group analyses current political developments in the defence sector. It provides independent facts and interpretation from the technological knowledge and experience of engineers.
The Politics and Defence Engineering Working Group of the Royal Institute of Engineers (KIVI) has the following questions and recommendations on the Defence Ministers' Outline Letter of 11 February 2022. These have been prepared based on publicly available documents and knowledge and experience in the field of defence technology. The comments and questions concern technological or related aspects only.
The working group generally welcomes this Outline Letter. It reflects an ambition to put the Armed Forces in order and to strengthen it technologically and materially in various respects. However, many of the intentions will have to be made concrete and quantified in the announced defence memorandum. Hopefully, the new minister and state secretary will succeed in realising their ambition in the unruly reality.
The working group does still have the questions and comments below. These are potentially important for the elaboration of this outline letter into a defence memorandum.
Page 2 - European average 1.85% GDP
The coalition agreement budgets 16.061 billion euros for defence in 2024 and states that this will be 1.85% of GDP in that year. By dividing those two numbers on top of each other, it can be deduced that the coalition agreement expects the size of GDP in 2024 to be 868.2 billion. However, the CPB's Medium-term MEV gives an expected GDP size in 2024 of 954.1 billion. That is 10% more and would therefore imply a more than 1.5 billion higher defence budget.
Pag.2 - Range of amounts for investment
The amounts set aside for investment over this cabinet period appear to be substantial. However, for the restoration of the armed forces' striking power, based on the evolving threat from superpowers and in the ring of instability around Europe, it is probably insufficient. This is supported by the Defence Vision 2035, which indicated that a total of 4-7 billion more is needed structurally, instead of the currently allocated 3 billion per year on average.
Choices must therefore be made or other forms of funding found. With knowledge of the financial sector, efforts can be made to pay for large investments during use instead of paying for them in advance. Several pension funds and insurers are interested. Therefore, it still seems relevant to implement the Belhaj motion of 30 Oct 2019.
Pag.3 Business cooperation
The letter indicates that Defence wants to further strengthen the concept of deploying reservists from the business community. However, that concept seems to work one way. Is it conceivable that technically trained military personnel could also be deployed to companies if there is a temporary surplus in a certain category?
Pag.4 - Ready for the future / bureaucracy
One of the impediments to modernising the armed forces is the stifling bureaucracy, which is constantly growing. From the perspective of technology, we see this strongly in equipment acquisition, but in many other areas it also seems to be an issue. This limits agility and flexibility.
Pag.4 - Personnel / labour force
The letter does not address the personnel shortage. In particular, the severe shortage of technicians is distressing. This is not just about working conditions. Meaningful and challenging work is often even more important. Other solutions, such as betting on a low-labour workforce in every equipment purchase, can also reduce this shortage. This was one of the intentions in the Defence Vision 2035, published in late 2020.
Pag.6 - Modernising IT
In recent years, large-scale IT projects have been tendered in a manner common to Defence. These are not entirely uncontroversial and the method of procurement and project management used does not fit the modern agile & scrum development methodology. There is a reason why these are being adopted all over the IT sector. The increasing degree of integration of IT systems, with big data, artificial intelligence, cloud solutions and cyber security unavoidable, necessitates a rethink of the design of IT projects.
Page 6 - Maintenance and renewal of equipment / sustainability and energy transition
The letter only discusses the major challenges for sustainability and energy transition in the case of real estate, even though Defence will also have to meet the climate goals for 2030 and 2050. Like no other ministry, Defence acquires resources that must remain deployable on a planned basis well beyond 2050. The energy supply of ships, aircraft and vehicles is hardly adaptable if this is not already taken into account during construction and development. New procurement should therefore already take into account the 2030 and 2050 climate targets for large operational systems with a long service life now.
Page 7 - Targeted enhancement / new threats
This paragraph gives the impression that cyber and the information domain are the only new areas of threat, while new threats, such as hypersonic weapons, ballistic missiles, manoeuvring munitions, etc. are developing rapidly and concretely. Furthermore, strengthening defence against existing threats with resources that have been cut away in the past is not mentioned at all. Surely, due to the development of new threats, it seems desirable to replenish previously economised away numbers and means of defence, such as Patrol Aircraft, frigates and combat vehicles. Possibly in a revamped form, unmanned or even operating autonomously.
Page 7 - Strengthening specialisms / military threat
The impression is given in this paragraph that the Netherlands will specialise in cyber and intelligence. However, defence is more than these two aspects, in which the Netherlands does not currently excel to any great extent in a European context either. The military threats are great. Also in kinetic terms. These cannot be combated with cyber and intelligence alone.
Page 7 - Joint deployment / Community or intergovernmental
Contrary to what this heading might suggest, this section is not about Community, but intergovernmental deployment. This complicates composition, armament, logistics and deployment. Would it be conceivable for the Rapid Deployment Capacity proposed by the European Commission to become a community capacity?
Pag.8 - Making good use of the European Defence Fund (EDF) in joint research and development
One of the tricky issues of the EDF is co-financing. Defence now has 20 million available to support companies in this and EZ also has 20 million euros. However, this is only very limited compared to the 8 billion euros of co-financing needed Europe-wide to properly implement EDF policy. As a result, the Netherlands cannot participate equally. The amount for co-financing would then have to be around 400 million. Besides greatly increasing direct contributions, it would also make sense in promising projects to replace the direct contribution with a guarantee scheme.
Page 8 - Joint development of defence capabilities
The intention to develop and procure complete capabilities jointly with other countries almost always encounters insurmountable problems in practice. Differences in planning and desired delivery period, national operational requirements, procurement and political approval procedures and industrial lobbies usually prove impossible to overcome.
This may only be possible if budget, procurement and approval procedures, national requirements, etc. are adjusted. The Netherlands could also join the LOI group and OCCAR.
Page 9 - Strategic autonomy and a vital technological and industrial base
Strategic autonomy cannot be achieved if the Dutch defence industry would only become a supplier of components to foreign companies. Four aspects are essential for a vital defence sector and strategic autonomy:
- A strong knowledge position in the field of complex and innovative weapon systems at the knowledge institutes,
- A powerful organisation within Defence to manage projects and direct industry. The DMO should be strengthened to effectively act as a 'smart buyer' and 'smart integrator' of weapon systems.
- Companies should develop and produce complete marketable systems and not just components. after all, ⅔ of the defence industry's production is exported.
- In addition, if companies are expected to have their own commitment and involvement, a high degree of market certainty is important. Among other things, tenders under Art. 346 TFEU and launching customership are suitable instruments for this.
Page 9 - The ecosystem of Defence, knowledge institutes and industry - ESG criteria in financing
For the ecosystem to function properly, companies' access to private financing is of great importance. However, this is hampered by the Environmental, Social and Governance (ESG) criteria that the European Commission is going to make applicable to private investment. Defence scores very poorly on these criteria, as do tobacco, gambling and fossil fuels, among others. If a company generates more than 5% turnover from defence products, access to financing will be made more difficult. This could also affect the government, with demand for "green bonds" rising sharply and bonds no longer able to be given a "green" label if the principal could possibly be spent on defence products. This hampers government policy mandated on democracy and the rule of law. It seems undesirable, that the European ESG taxonomy hinders European self-defence. In any case, it seems necessary to improve the defence sector's reputation on ESG criteria.
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The Hague, 21 February 2022
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Disclaimer: The facts and opinions given are based on open sources and on the knowledge and experience of working group members.
As part of the professional association KIVI, the working group is independent of political parties, governments and companies.
This is not an official position of KIVI. The association accepts no liability for anything put forward by the working group or its members.
Photo: Lower House
