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Hungarian Military Industry

Minister of Defence I István Simicskó said March 29, 2018 that during the revival of Hungarian defence industry, they intend to shape the defence industry capacities primarily in cooperation with the V4 countries, and to develop their military capabilities by multiplying each other’s strength. The minister said that a working group of experts was also involved in making the decision to enter into an agreement with the Czech Republic on the manufacturing of small arms. The weapons produced under this licence have already been tested by soldiers and policemen.

Minister of Defence Simicskó and Czech Defence Minister Karla Slechtová announced March 29, 2018 that Hungary will manufacture small arms for the infantry. The corresponding licence agreement was signed in Budapest by David Höfer, the CEO of Ceská Zbrojovka Export, and Roland Kránicz, the CEO of MoD ARZENÁL Co. István Simicskó said that based on a Czech licence, Hungary will initially only assemble the weapons, and then, from January 2019, the full production will start in Hungary. This will create some 200 new jobs, he added.

Speaking at the opening of a professional conference March 2, 2018 , Minister of Defence Simicskó emphasized that in accordance with the armed forces development plan of the Hungarian Defence Forces, the Hungarian defence industry, too, has several possibilities and tasks. István Simicskó told his audience that the various force majeures of the 20th century, the two world wars accelerated the Hungarian defence industry. Due to the occupation, however, the defence industry was almost completely “dismantled” and, among others, the weapons and ammunition were taken away. Since then, the Hungarian defence industry has tried to get back on its feet several times, and still exists, the minister noted, pointing out that the government is doing its best to provide the Hungarian defence industry with possibilities again.

He said that the dependence of the country must be reduced, as part of the Zrínyi 2026 National Defence and Armed Forces Development Program, and the manufacture of weapons, ammunition and gunpowder is also needed. In this regard too, a new era – the period of development – has started in the Hungarian Defence Forces, the minister emphasized.

On 17 December 2018 Airbus Helicopters and Hungary signed a Memorandum of Agreement to create an industrial cooperation for long-term aviation projects that will initially focus on the production of certain high precision mechanical parts for helicopter dynamic systems. This project is part of the 'Zrinyi 2026' armed forces development program supporting Hungary’s national security goals of developing independent defence capabilities. “This partnership is in line with our European cooperation strategy at Airbus and a demonstration of our commitment to accelerate our collaboration with one of Europe’s fastest growing economies,” said Bruno Even, Chief Executive Officer of Airbus Helicopters. “This project has been made possible thanks to Hungary’s industrial expertise and commitment to innovation, which will now thrive in Airbus´ global supply chain.”

The agreement intends to create a sustainable and integrated plant within Airbus. The green field production unit will start by manufacturing mechanical parts that will then be delivered to the major component assembly centre for dynamic parts to be fitted on to the various helicopters of the Airbus range that are operated in more than 150 countries worldwide. The agreement will also rely on a local supply chain being qualified to perform certain tasks such as surface treatment.

Hungary had been a long-standing supporter of Airbus’ civil and military products, which found a home in a wide range of defense and civil applications. The Hungarian Ministry of Defence has recently purchased 36 helicopters, among which 20 H145Ms and 16 H225Ms, and it also operates two A319 aircraft. Wizz Air, one of the largest European airlines and an all-Airbus customer, operates a large fleet of more than 100 aircraft, with over 260 in the order book.

In the late 1980s, the government's defense industry produced only a small amount of the HPA's needs. Major weapons were obtained from the Soviet Union. Communications and instrumentation equipment made up about three-quarters of the country's military production, while artillery and infantry weapons and ammunition made up another 12 percent. The production of vehicles and aviation components contributed about 8 percent, while chemicals and light industrial products formed the remaining 5 percent.

Compared to other countries in the region, Hungary had a relatively small defence industry within the Warsaw Treaty Organisation (WTO), even during the ‘boom’ years of the late 1980s. At its peak in 1988, Hungarian factories had a total military output of $370 million, representing only 3 percent of Hungarian industrial production, as compared to Czechoslovakia, where 11 percent of total industrial production was military-related.8 The Hungarian defence industry’s structure, size and production pattern was determined by the defence needs of the WTO, which gave priority to the telecommunication, transport and chemical industries. This situation shielded military production from economic realities.

In early 1989, military industries anticipated a 31 percent decline in production compared with the previous year because of the slashed military budget and a drop in exports. Factories that produced mostly military equipment were expected to be hard hit. Military orders, mostly long-range microwave equipment and accessories, made up about 80 percent of the production of the Precision Mechanics Enterprise. Military orders for handguns made up 35 percent of the Weapon and Gas Appliance Factory's production and 25 percent of the orders for the Diosgyor Engineering Factory. The Machine Factory at Godollö, which produced components for military vehicles and tanks and repaired army equipment, was owned by the Ministry of Defense and operated by soldiers. In January 1989, it was operating at 50 percent of capacity because orders from the other Warsaw Pact countries dropped by 50 percent and a cut in sales to the HPA was anticipated.

After the dissolution of the Warsaw Pact in 1991, tough external market conditions and a sharp fall in the number of orders caused the country’s defence industry to shrink considerably. Hungary’s defense industry lost its main markets: the Soviet Union and the Warsaw Pact countries. The defense industry also lost its domestic market since defence procurement expenditure diminished substantially as a direct consequence of the dramatic downsizing of the Hungarian armed forces. In the 1990s, the workforce of Hungarian defence production dropped from 18,000–20,000 employees to only 1,500–1,600.

The military production of the Videoton telecommunications factory, valued at US$132 million in 1988, was expected to fall to US$84.9 million in 1991, and more than 2,000 of its 7,000 workers were expected to be released, resulting in a 40 percent idle manufacturing capacity. The effects of cutbacks in military procurement on the euphemistically named "Lamp Factory" (Lampagyar), which produced pistols and automatic rifles, and the Danuvia Factory, which manufactured machine guns, was not known.

The Hungarian defence and security industry has seen a great many changes in recent years- changes to which it has worked very hard to adapt. Over time, even understanding of the terms „defence” and „security” have evolved to meet new challenges. On one hand, changing demands have led to an increasing diversification of product portfolios. On the other, a growing market has seen a broadening of the customer base to include not only the military, but also a wide variety of state and non-profit organisations. Nowadays when the defence industry market is becoming smaller, the collaboration has more importance. As a consequence of the crisis, it will be shortly proved which companies are that ones who are able to live on this tough market.

According to a 1999 report by the Ministry of Economic Affairs, there were about 60 arms industry-related companies operating in Hungary. Dr Géza Péter Kovács, chairman of the Defence Industry Association, comments that of these 60, only about ten are true defence companies (these account for more than 90 percent of the industry’s turnover) and only ten to fifteen companies consistently receive orders from the Ministry of Defence in any single year. By 1998, only fifteen companies remained in majority state ownership, nine of them supervised by the Ministry of Defence.

By 2014 there are about 480 -500 corporations registered for defence industry activities, (2012 : 493, 169 only for trading), with 1,726 employee direct involment. Some 3-400 companies could take part in defence, high-tech, or dual use industry. Approximately 120 companies take part in defence industry in real. Continuous direct involvment included 10 - 20 companies, occasional defence industry participation were 20 companies at most. Expected (virtual) defence industry participation with 10-15 companies more.

The Defence Industry Association of Hungary (MVSZ) represents Hungarian companies with a common interest in developing and selling goods and services into the defence and security markets. The MVSZ is a not for profit association, to improve the business possibilities of our members in Hungary and internationally. It organizes industry specific seminars, regular meetings, conferences and trade shows, for our members locally and internationally, and try to explore new business opportunities worldwide, through foreign companies, agents, associations, exhibitions. The MVSZ represents the Hungarian defence industry in NIAG, in addition to co-operating with other defence industry associations in several countries. It is looking for partners interested in Hungarian defence industry products, services, and/or collaboration with the developers, producers.

It builds relationships with NATO to work in the projects of the international organization. It provides advice and technical knowledge by teamworking with NIAG, which is an organization inside the NATO with 19 members including technicians and pressure groups. It develops relationships with foreign organizations. It has seminar with the Defense Industry Export Association of Dutch and ABM AMRO Bank, with some members of Ministry of Defense and Ministry of Economy. It holds discussion on private defense sphere and financial sources for the development of military technologies. Its members list includes Az ACIS Benzinkuttechnika Kft, Aerotechnika M&T Zrt, ARNITEL Radiotechnikai Ipari es Kereskedelmi Zrt, Atlantisz-Hungaria Tanacsado es Biztositasi Alkusz Kft, B-Consulting Service Vagyonvedelmi Kft, Cisco Systems Magyarorszag, Detektor Plussz 11 Loszermentesito Kft, etc.

In Hungary, the Soviet-made Mi-8 and Mi-17 helicopters were modernized by the Hungarian airplane manufacturer, Dunai Repulogepgyarto, or the Danube Aircraft Company, with the installation of the "friend-or-foe identification system, a navigation system used only by NATO. Also the same company is planning to cooperate with international contractors to upgrade the country's 28 MiG-29 fighters. The main problem lies, on the other hand, in the deprived economic situation of Hungary. Although its per capita GDP is nearly twice the figure for Turkey, the 10 million nation's economy is in such a bad shape, that it is not able to adequately pay its troops.

By 1997 a number of the world's leading aircraft manufacturers had tightened their grip on Hungary as well as on the Czech Republic and Poland, promising to help these countries gain a smooth entry to both NATO and the EU, the "European" newspaper announced in November 1997. While the US firm, Lockheed Martin, was pushing this newly evolving market with its own F-16 jet fighters, another U.S. consortium, Boeing-McDonnel Douglas was racing with its F/A-18 models, the French Dassault with its Mirage 2000-5, and the consortium of Swedish Saab and British Aerospace with its Gripen fighters.

Hungarian defense industry companies established a network in April 2012 they hoped would help them win big state tenders. The network, dubbed Hungarian Defense Business Cluster, was established with the participation of four defense industry companies owned by Hungary's Defense Ministry.




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