Poland has its sights set on developing its military equipment manufacturing, in a move that could prove a boon for its economy. The country has the highest level of defence spending as a share of GDP in Nato, but finance minister Andrzej Domanski told GlobalMarkets how Poland was using a significant chunk of that cash to boost its own production of weapons.
“We will allocate over 50% of the money to purchase equipment but also to develop our own production capabilities,” said Domanski. “We also want these huge investments to create space for the use of innovative solutions in other sectors of the economy.”
Poland is the world’s second largest maker of batteries. It is becoming a destination for foreign direct investment in chip manufacturing and it is a European hub of electric vehicle manufacturing, and therefore of electric motors. These components are also used in military drones. There is also a possibility of manufacturing Ukrainian missiles in Poland.
The European Investment Bank in May said it would waive a previous requirement that dual use projects eligible for financing of security and defence derive more than 50% of their expected revenues from civilian use.
The development bank also made EU companies whose activity is partly in defence eligible for financing using EIB-backed intermediated credit lines.
The measures are expected to speed up investment and improve access to a further €6bn of EIB Group financing for the European security and defence sector. Poland seems in a prime position to lap that up.
“We believe that strengthening the capacity of the European defence industry should be our main objective now,” said Domanski. “We could benefit here from the help provided by the European Investment Bank. This is not only about defending peace in Europe, but also about the competitiveness of our economy and jobs.”
He said he saw an opportunity to raise awareness of financing prospects and thus encourage private capital investment in the defence sector.
In civilian technology, EV manufacturing may become a brighter spot for Poland’s economy after the European Commission said earlier this month that it had garnered enough support in an EU vote to impose tariffs of up to 45% on imports of Chinese-made electric vehicles. Poland was one of 10 member states that backed tariffs. Five including Germany voted against, with 12 abstentions. The majority believed Chinese state subsidies for EVs were unfair and supported tariffs to level the playing field for the European car industry.
Domanski was clear, though, that this was only part of the solution.
“We will be competitors,” he said. “And the outcome of this competition will depend not by how successful we are in containing or de-coupling each other, but by our ability to keep up with or even outperform China in areas that will matter most for our future.”