RUSSIA CZECH REPUBLIC. 8.4% (1999 est.) Current value of external debt 5 $68,198 million (2000) Unemployment rate 6

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1 4 Poland Baltic Sea RUSSIA LITHUANIA BELARUS Warsaw GERMANY CZECH REPUBLIC UKRAINE SLOVAKIA Poland data profile Population million (2000) Territory 2 312,685 km 2 GDP 3 S$162.2 billion (2000) Inflation rate 4 8.4% (1999 est.) Current value of external debt 5 $68,198 million (2000) Unemployment rate 6 11% (1999 est.) Defence budget (percentage of GDP) 7 2.0% (1999) 4.1 Introduction DURING THE COLD WAR, Poland was the third largest military producer within the Warsaw Treaty Organisation (WTO), after the Soviet Union and Czechoslovakia. The defence industry was dominated by a few large companies whose wide production range was subordinated to the needs of the Warsaw Pact and, to a lesser extent, to those of friendly less developed countries. In 1989, 128 companies were involved in military production, 39 of which manufactured final products and 89 produced dual-use goods or were engaged in repairs and maintenance. After the end of the Cold War, a significant decline in national orders, international agreements on the reduction of 1 The World Bank Group, The World Bank Group, 4 Consumer prices. 5 The World Bank Group, Jane s Sentinel,

2 2 ARMS PRODUCTION, EXPORTS AND DECISION-MAKING IN CENTRAL AND EASTERN EUROPE conventional arms and shrinking foreign markets put military industrial capacity under pressure and forced massive lay-offs. As a consequence, defence-industry employment shrank from 180,000 in 1988 to 85,000 in Poland has undergone a process of deep economic and political reform in recent years. Despite the country s impressive macroeconomic growth, in the late 1990s the arms industry was struggling to survive. The industry is currently being transformed through a combination of restructuring, consolidation, privatisation, foreign investment and strategic partnerships and some government assistance. A new programme of restructuring and privatisation of the defence industry, which aimed at stimulating investment through specialisation, was approved in early More recently, comments by the Polish Treasury indicate that the privatisation of arms companies will be tied to the procurement of military equipment for the Polish Armed Forces and offset agreements. The Treasury claims this is the only method of selling arms and aviation companies; Jozef Nawolski, director of the Department for Companies of the Defence Industry at the Treasury noted that: Hitherto experience shows that straightforward selling of arms companies is practically impossible. Investors demand contract guarantees from the government. Once they fail to obtain them, they either pull out of bids or submit very unfavourable offers. 10 Reforms within the defence sector have been supported by the Agency for Industry Development SA, whose main task is helping companies to adjust to new market-economy conditions. 11 The Departments of Export Promotion within the Ministries of Economy and Foreign Affairs have also assisted companies with financial aid in the marketing and export of Polish military equipment, and the government has placed orders with domestic companies to help the industry survive. In order to increase co-operation in the defence sector, national defence manufacturers established a Polish Chamber of Producers for National Defence (PIPROK) in September The chamber, which currently comprises some 200 member companies, is a voluntary and self-governed organisation which aims to increase the production potential in the so far narrow range of co-operation products, increase production and supply to domestic and foreign markets and facilitate collection of funds for the restructuring and modernisation of the defence industry. The chamber also works to prepare Polish industries for integration with NATO and European structures. It has developed close links with NATO defence-industrial groups (such as the NATO Industrial Advisory Group) and is developing bilateral links with EU industrial concerns. Since 1998, the chamber has represented Poland s military industry within NATO. In 1999, Poland joined the NATO alliance. In 2001, the Polish Parliament approved the Defence Plan to pave the way for the reorganisation and modernisation of the Polish Armed Forces to bring them into line with Western standards. 13 However, defence experts have raised concerns that the current economic slowdown, in conjunction with defence budget cuts, may kill the modernisation programme and bring the defence industry to its knees. 14 NATO membership has produced mixed reactions. The accession to NATO has created opportunities for the industry, including participation in NATO bids, more orders from the Polish Ministry of Defence and profits from offset agreements. 15 However, defence experts have also warned of the danger of 8 The Bulgarian Defense Industry Strategic Options for Transformation, Reorientation & NATO Integration, (the Atlantic Council of the United States, July 2001), p An earlier programme, the Programme of Restructuring the Defence and Aviation Industries in the Years , was not implemented due to lack of funds. 10 Polish Treasury Ministry says offset a precondition for arms plant sales [in Polish], Warsaw Rzeczpospolita, 27 December 2001, source: David Isenberg s Weapons Trade Observer. 11 Agency for difficult cases [in Polish], Rzeczpospolita, 15 May Polish Chamber of the Producers for National Defence, 1998/1999 catalogue. 13 Country briefing Poland, Jane s Defence Weekly, 26 September 2001, p Ibid, p It is estimated that the benefits resulting from offset agreements in connection with the purchase of multi-function planes for the Polish Air Force will total $1 billion by Interview with Witold Misiowiec, Director of the Department for the Industrial Defence System at the Ministry of Economy [in Polish], Michal Likowski, Warsaw Nowe Panstwo, 31 August 2001, pp 13 14, source: David Isenberg s Weapons Trade Observer.

3 SAFERWORLD ARMS & SECURITY PROGRAMME 3 take-overs and asset stripping by larger EU and US defence firms. The main trend so far has been for minority shareholding (20 30 percent) by foreign companies. 4.2 Normative and regulatory framework Commitments to international control regimes Legally and politically binding commitments undertaken by Poland Year Nuclear Non-proliferation Treaty Nuclear Suppliers Group 1975 Zangger Committee 1974 Chemical Weapons Convention Biological Weapons Convention Australia Group 1994 Wassenaar Arrangement 1996 Conventional Forces in Europe Treaty 1991 Ottawa Landmine Convention EU Code of Conduct 1998 EU Joint Action on Small Arms and Light Weapons 1999 OSCE Criteria on Conventional Arms Transfers 1993 OSCE Document on Small Arms and Light Weapons Legislation governing arms production and export The Polish Government has introduced various new laws and regulations concerning the control of transfers of arms and related technology since A Law On the Rules of Particular Control of the Foreign Trade in Goods and Technologies in Connection with International Agreements and Obligations 20 was passed in 1993 and became effective when Poland was removed from the Committee on Multilateral Export Controls restriction list on 25 March This law was supplemented by a Law of 11 December 1997 On Administering of the Foreign Trade in Goods and Technologies and on the Arms Trade. 22 A set of executive regulations and instructions created rules for the registration of companies which can participate in arms transfers and the documents needed for such transactions. 23 The handling of arms exports and imports by Polish companies and the transit of arms through Polish territory 24 and export restrictions were also covered by the regulations. 25 Since 1 January 2001, the international trade in strategic goods, technologies and services has been regulated by a new Law On International Trade in Goods, Technologies and Services of Strategic Significance for State Security and Maintenance of International Peace and Security. 26 The new law makes important changes to Polish arms export controls. The most important elements of the new law are: Date ratified. 17 Date ratified. 18 Date ratified. 19 Date signed. Poland signed the Ottawa Landmine Convention in 1997, but has not yet ratified the treaty. Poland has not revealed information about its stockpiles of antipersonnel mines, and, to the best of the authors knowledge, had not begun destruction of its antipersonnel mine stockpiles at the time of writing. The NGO Landmine Monitor describes Poland as a country likely to have large stockpiles. Landmine Monitor Report 2001 (Landmine Monitor), Executive Summary. 20 Official Journal Dziennik Ustaw No 129, The Co-ordinating Committee on Multilateral Export Controls (CoCom) was the Cold-War-era organisation which performed similar functions to the Wassenaar Regime, the export control regime which replaced it in Dziennik Ustaw No 157, Order of the Minister of Economy On definition of the Pattern of Register of Legal Persons Engaged in Special Trade with Foreign Countries, Methods of Conducting It, and the Application Procedure for Registration and Definition of the Required Documents and Information, which should be Submitted with the Application (19 January 1998, Dziennik Ustaw, No ). 24 The Minister of Economy Decision, 22 December 1997, The List of Goods and Services, the Foreign Trade of Which Requires Licensing (Dziennik Ustaw No 162, 1997). 25 The Council of Ministers Decision No 30/94, 27 May 1994 On Limitations in Foreign Special Trade gave the government the authority to draw up a list of countries subject to embargoes. 26 See appendix 1, section The new law has replaced the law of 11 December Recent changes in Polish export control law, SIPRI,

4 4 ARMS PRODUCTION, EXPORTS AND DECISION-MAKING IN CENTRAL AND EASTERN EUROPE All aspects of export control for conventional arms and dual-use items have been brought together under one legal act. The introduction of a new licensing system, including Individual Licences, General Licences and Global Licences for trade in dual-use goods. The existing state register of enterprises authorised to carry out trade has been replaced with a company certification system. Companies are obliged to establish internal control systems to ensure compliance with the law and to collect information that assists in end-user verification, including a requirement to ascertain whether the arms might be used to violate human rights, threaten peace and regional stability and facilitate or encourage terrorism or international crime. The law introduces the catch-all principle, for the control of technologies that are not on arms control lists but can be used in the production of military goods. A comprehensive definition of brokering services which are subject to licensing requirements. 28 The introduction of a mechanism to control intangible technology transfers. A more detailed system of criminal and administrative penalties for violations of the law. 29 The new export control law has been complemented by eight decrees from the Ministry of Economy 30 and one from the Ministry of Finance, 31 which provide the operative provisions for the implementation of the legislative framework. The Council of Ministers Decree of 14 September 1999 on Special Purpose Trade Ban and Limitation has remained in force. The decree lists arms categories whose international trade may be subject to bans and limitations, and includes a ban on the export and transit of arms and technologies to proscribed countries The decisionmaking process and administrative structure for policy implementation The Department of Export Controls at the Ministry of Economy is responsible for the arms export licensing process and for regulating the export of military equipment and related technology. 33 Before authorising an export licence, the Ministry of Economy consults the Ministries of Foreign Affairs, Defence, Internal Affairs and Administration and the State Protection Office. The licences are examined against Poland s international obligations, such as embargoes and other restrictions, regional stability, national security and the economic interests of Poland. 34 The law provides that trade in strategic goods can be conducted only on the basis of an export, import or transit licence and a licence for agency, commercial consultancy 28 These are defined in Article 3 as: agency services, commercial consultancy services, contract negotiation assistance services and participation in any way in any type of transportation of strategically significant goods across the border of Poland, in particular as a result of export, import and transit contract and/or a deed of gift, leasing, loan, cession or contribution in kind to a company, including actions taken outside Polish territory. 29 Penalties for violating arms export regulations vary according to the gravity of the offence and may include fines, seizure of property, restriction of liberty or imprisonment from one to ten years. 30 Decree on the list of goods of strategic importance, 23 May 2001(Dziennik Ustaw No 77, item 660/2001); Decree on the manner of introducing a register for trading in strategic goods, 16 March 2001 (Dziennik Ustaw No 77, item 199 / 2001); Decree on the list of bodies entitled to certify and control the control system and trade management, 16 March 2001 (Dziennik Ustaw No 17, item 200 / 2001); Decree on the method of running the register of individual licences and companies using global and general permits, 16 March 2001 (Dziennik Ustaw No 17, item 201 / 2001); Decree on individual licences for trading strategic goods and a pattern of import certificate, 9 February 2001 (Dziennik Ustaw No 10, item 78 / 2001); Decree on fees for individual licences permitting trade in goods of strategic importance, for the issue of import certificates and confirmation of end user s declaration, 9 February 2001 (Dziennik Ustaw No 10, item 79/2001); Decree on the sample of a certificate verifying the supplies and the method of certificate records, 9 February 2001 (Dziennik Ustaw No 64, item 648/ 2001). 31 Decree on the list of customs offices where export, import and transit of goods of special importance may take place, 1 June 2001 (Decree by Minister of Finance on the list of customs offices where export, import and transit of goods of special importance may take place, 1 June 2001 (Dziennik Ustaw No 64, item 648/ 2001). 32 See appendix 2, section Between 1989 and 1996 arms exports were licensed and controlled by the Department of Special Trade. In 1997, as part of a comprehensive reform of the central administration, the Department of Special Trade and the department responsible for the control of dual-use equipment were unified to form a new Department of Export Control. 34 Two additional bodies are consulted during the decision-making process: the Main Customs Inspectorate and the National Nuclear Agency.

5 SAFERWORLD ARMS & SECURITY PROGRAMME 5 and/or contract assistance services. 35 In the case of dual-use goods, such permits may be of three kinds: individual licences, which cover either a specific dual-use good or a related service, and the country (countries) with which the applicant enterprise may enter into trade general licences, which cover a type or category of dual-use goods which may be traded with one or more countries global licences, which cover a type or category of dual-use goods which may be traded to unspecified countries Global and general licences are issued by the Minister of Economy by way of decree. They can only be granted to companies which can prove the existence of an internal sales control and management system for at least three years. Any trading activity, or intermediary service in connection with arms and ammunition, requires an individual licence, issued by the Department of Export Controls, which is non-transferable and valid for a period of one year. Each export application needs to be accompanied by an import certificate and/or end-user declaration which includes, amongst others, a clause prohibiting the transfer of goods to any other consignees without prior consent of the trade control authority. A new electronic system of recording, processing and circulating all the documentation required in the licensing process was introduced in Since 1997, the new system, called PELTS (Polish Export License Tracking System), has linked the Ministry of Economy with the Ministry of Foreign Affairs, the Ministry of Defence, the Ministry of Internal Affairs and Administration, the State Security Office and the Chief Customs Office Government guidelines and official policy on small arms and light weapons Poland is a signatory of the EU and OSCE documents on SALW, and participated in the UN Conference on the Illicit Trade in Small Arms and Light Weapons in All Its Aspects, in New York in July In Poland s statement at the conference, their representative highlighted concerns regarding the links between criminality and SALW trafficking. Poland actively participated in work on the UN Convention on Transnational Organised Crime, with the Polish draft of the convention providing a basis for discussions. The law enforcement aspect of export controls also featured in the Polish statement, and the dangers of the often unclear distinction between legal and illegal trade were emphasised. Poland noted that: National export control systems should be harmonised and mutually compatible in order to restrict freedom of action in the grey area. It is high time for the countries that have not done this so far to institute, as rapidly as possible, efficient export-control systems. 37 The Polish Government co-hosted two regional conferences in Warsaw in 2000 devoted to SALW. The first, Controlling Small Arms and Light Weapons Flows From and Through an Enlarged EU: Developing a Joint Action Programme for EU and Candidate Countries, was organised jointly with Saferworld and Polish NGO the Institute for Public Affairs. This conference resulted in the Warsaw Call for Action, in which the participants appealed for greater collaboration between European countries to combat the uncontrolled spread of SALW. The second conference was convened jointly with Canada under the Euro-Atlantic Partnership Council (EAPC) initiative, Disarmament and Peacekeeping Operations, and reflected the importance of incorporating the SALW issue in the mandates of peacekeeping operations Law of 29 November 2000 Concerning International Trade in Goods, Technologies and Services of Strategic Significance for State Security and Maintenance of International Peace and Security, and Amending Selected Laws, article 6, paragraph The system was created with the help of foreign governments, particularly the USA. 37 See appendix 4, section Statement by HE Mr Stefan Meller, Undersecretary of State Ministry of Foreign Affairs, Republic of Poland, United Nations Conference on the Illicit Trade in Small Arms and Light Weapons in All Its Aspects, New York, 11 July Ibid.

6 6 ARMS PRODUCTION, EXPORTS AND DECISION-MAKING IN CENTRAL AND EASTERN EUROPE 4.3 Transparency and parliamentary/ public accountability arrangements In recent times, general information on the Polish arms industry has become more widely available. Although the information is rarely comprehensive, especially with regard to SALW transfers, public transparency has increased in comparison with previous years when all information on military production was treated as strictly confidential. The Ministry of Economy, the Treasury and the Ministry of Defence have made public a range of information on the defence industry and its performance: information is usually disseminated at defence-related events, such as the launching of the Programme of Restructuring the Arms Industry. The Ministry of Economy publishes periodical reviews of the state of the economy, reporting on the performance of all sectors including the defence industry. 39 Data about the defence sector can also be obtained from the publications on industry and trade produced by the Central Statistics Office. 40 In addition, some information can be obtained from defence companies promotional and advertising materials, such as exhibition and defence catalogues and a growing number of military magazines and other periodicals. 41 The Polish press, from newspapers to magazines and specialists publications, has reported on the state of the defence industry. 42 Unofficial data presented by the media provides an opportunity to verify official data and statements, as well as to highlight those activities that would fall under the illicit trade category. Corruption is also a concern: Polish newspapers have published articles containing allegations or suspicions of corruption in the areas of defence tenders and the privatisation process. 43 In a positive development in public transparency, the Polish Government has been working on its first annual report on arms exports which will contain information about Poland s policy on arms export controls and non-proliferation as well as statistical data on arms exports. The report is due to be published in Arms production Poland is one of the largest arms producers amongst the EU associate countries of CEE. The Polish defence industry currently employs some 63,000 workers who represent about 2.5 percent of total employment in the industrial sector, and it produces approximately 1.3 percent of total goods and services. Since 1990, 38companies, in which the state holds a controlling proportion of shares, have been considered the core of the Polish defence industry. 44 In July 1999 the Polish Parliament passed two bills for the privatisation and restructuring of its defence industry: the first bill foresaw the government maintaining a controlling interest in seven of the plants, and the second tied larger foreign purchases to offset deals promoting domestic defence industry. While advantageous for the defence industry, the new offset law is rather off-putting for suppliers to the Polish Government, and was held responsible for killing a radar contract. 45 The major shake-up following this reform will involve the sale of factories, the writing off of large debts, thousands of redundancies and the injection of foreign capital Poland s Report: Economy in 1998 (Ministry of Economy, Warsaw, 1999); Poland s Report: Foreign Military Trade in 1998 (Ministry of Economy, Warsaw, 1999); Poland s Report: Industry in 1998 (Ministry of Economy, Warsaw, 1999). 40 Yearbook of Industrial Statistics and the Statistical Yearbook. 41 For example, Polska Zbrojna, Mysl Zbrojna, WojskoIWychowanie, the monthly Raport: Wojsko, Technika, Obronnosc, or Wprost, Polityka, Zycie Gospodarcze and the weekly Nowe Zycie Gospodarcze. 42 Rzeczpospolita, Gazeta Wyborcza, Trybuna, Polityka, Wprost, Przegląd, Zycie Gospodarcze, Polska Zbrojna, Wojskowy Przegląd Logistyczny, Nowa Technika Wojskowa Raport. 43 Mr Minister s Moneymaker [FBIS translated text], Warsaw Nie, 9 November 2000, source: David Isenberg s Weapons Trade Observer; Romauld Szeremietiew s assistant demanded bribes on his behalf from arms firms [in Polish], Warsaw Rzeczpospolita, 7 July Poland, Pawel Wieczorek and Katarzyna Zukrowska, Arms Procurement Decision Making, (SIPRI, Oxford University Press 2000), vol 2, p 123. See appendix 3, section 5.7.3, for a full list of Polish arms manufacturers. 45 Poland passes privatisation bills, Jane s Defence Weekly, 7 July 1999; Polish offset law kills ITT s radar contract, Jane s Defence Weekly, 1 August Op cit Jane s Defence Weekly, 7 July 1999.

7 SAFERWORLD ARMS & SECURITY PROGRAMME 7 Three companies, Cenrex, Cenzin and Bumar will remain fully state-owned, the state will retain 100 percent of shares in one company and more than 50 percent in another eight, while private capital will be allowed to have a controlling interest in the remaining 22 enterprises. The revenues from privatisation will be allocated to cover restructuring costs and additional purchases for the Polish armed forces. 47 There are few private defence companies in Poland as yet. In recent times, the Polish Treasury has succeeded in privatising PZL Warszawa-Okecie, 48 while the privatisation of PZL Swidnik has been postponed. 49 Poland has been a traditional developer of military equipment for land, air and naval forces. The 1998/99 PIPROK catalogue lists eight companies specialising in the production or repair/maintenance of aircraft, including PZL Warszawa-Okecie SA, 50 WSK 51 PZL Mielec SA and WSK PZL Swidnik SA 52 Two companies are listed as concentrating on ship building: the naval shipyard Stocznia Marynarki Wojennej in Gdynia and the northern Stocznia Polnocna SA in Gdansk. 53 The catalogues lists 18 companies specialising in armour and vehicle production, including: 54 Huta Stalowa Wola (HSW),which currently employs 14,000 people and produces a wide range of products, including building machines, as well as tracked and wheeled combat vehicles, howitzers, and armoured personnel carriers. The Polish Army is to receive new 98mm mortars from HSW, together with 122mm rockets for multiplelaunch rockets systems and ammunition for 122mm self-propelled howitzers. In September 2000 HSW and Italy s OTOBreda signed an agreement for the development of a new light turret intended for use on a Polish Army IFV, and HSW has also concluded agreements with the German Rheinmetall DeTec for the licensed production of 35mm guns to be used on the new Polish Loara anti-aircraft system. 55 Zaklady Mechaniczne Bumar Labedy SA mechanical works, producer of a range of armoured equipment, including the PT-91 Hard main battle tank, a locally built upgraded variant of the Russian-designed T-72M1. 56 Twenty-four companies are listed as providing electronic, opto-electronic and communication equipment. 57 In an interview with Polska Zbrojna in September 2001, Slawomir Kulakowski, chairman of the Polish Chamber of Manufacturers for National Defence, highlighted the importance of the electronic and communication sectors for the Polish defence industry: We should concentrate on the domains in which we can export successfully. We could specialise in computer optics (PCO) and radar systems (given our two leading research and production centres, Radwar and the Industrial Institute of Telecommuncations). We are doing well in telecommunications systems (for example, Radmor has transmitted the manufacturing technology for the 3501 radio station to the Czech Republic and Lithuania, and it has an opportunity to launch the manufacturing of these products in Slovenia, Romania and India). Indeed PCO, the Industrial Centre for Optics, is preparing to sign a contract to modernise Indian T-72 tanks by equipping them with night vision cameras and fire control systems. 47 Polish privatisation presses ahead, Jane s Defence Weekly, 17 March PZL stands for Panstwowe Zaklady Lotnicze, or National Aviation Works. 49 According to Jane s Defence Weekly, the only bidder, the Italian Finmeccanica/Agusta has not presented a final offer yet. Op cit Jane s Defence Weekly, 26 September 2001, p On 17 October 2001, two Spanish firms, CASA (Construcciones Aeronauticas SA) and Avia System Group, completed the acquisition of 51 percent of the shares of PZL Warszawa-Okecie as part of the offset agreements with the Polish government in their purchase of eight CASA C-295 military transport aircraft. Over the next two years, CASA, which is part of the largest European aviation company EADS (European Aeronautic, Defence and Space Company), will increase its stake in the Polish aircraft company to 85 percent, with the remaining 15 percent in the hands of the company s employees. EADS CASA takes controlling interest in Polish aircraft company, 22 October 2001, Spanish firm buys majority stake in Polish aircraft maker [in English], Warsaw PAP, 1553 GMT, 28 August 2001; EADS Takes Over Polish Aircraft Manufacturer: Executive Board Announces Expansion of Transatlantic Business [in German], Gerhard Hegmann, Financial Times Deutschland, 30 August 2001, p Stands for Wytwornia Sprzetu Komunikacyjnego, or Transport Equipment Corporation. 52 PIPROK 1998/1999 Catalogue, pp Ibid pp Ibid pp Op cit Jane s Defence Weekly, 26 September 2001, p 20; HSW and OTOBreda to develop light 25mm turret for BMP-1, Jane s Defence Weekly, 27 September 2000; Poland s HSW ready to produce KDA air defence guns, Jane s Defence Weekly, 29 November Op cit PIPROK pp Ibid pp

8 8 ARMS PRODUCTION, EXPORTS AND DECISION-MAKING IN CENTRAL AND EASTERN EUROPE Worth $100 million, this will be one of the biggest Polish arms contracts in recent years. 58 In April 2000 the Czech Republic and Poland formed a joint commission to ease co-operation in the defence sector; both countries see room for co-operation in the existing modernisation of infantry fighting vehicles and T-72 main battle tanks. The commission will also promote further co-operation between the armed forces of the two countries which both became members of NATO in 1999, and promote the interests of the two in introducing new members to NATO Small arms and light weapons production A number of companies are also engaged in the manufacture of SALW and ammunition. In 1999, the major small arms producer was Zaklady Metalowe Lucznik SA, which employed a workforce of about 1,600 people and manufactured a range of small arms, including pistols, assault rifles and submachine guns. Despite attempts by the government to rescue the company by placing an order for 4,000 assault rifles for the country s border guards, it was declared bankrupt in November Other manufacturers whose range of products also includes SALW are: Fabryka Broni Gucznik, which is to provide all Polish services with a new generation of assault rifles and submachine guns; 60 Zaklady Mechaniczne Tarnow SA, which produces antiaircraft guns, machine guns and grenade launchers; H. Cegielski Poznan SA, whose production range includes PKM machine guns; and Zaklady Metalowe Dezamet SA. Poland s major small arms ammunition producers include Zaklady Metalowe Mesko SA, which has long experience in manufacturing military ammunition, and Zaklady Tworzyw Sztuczynych Pronit SA Arms exports According to SIPRI data, between 1992 and 2001, Poland exported the following major weapons (see table opposite). The main clients of Polish arms and military equipment are the states that use post- Soviet technology, in particular Asian and African countries. 62 For many years, one solid market has been India, which Poland supplies with finished products, spare parts and repair services. But Poland has also been active in South East Asia, including Malaysia and Indonesia. In March 2002, the Malaysian government confirmed that it would buy a significant number of Polish PT91 main battle tanks. 63 In March 2001, there were reports that Indonesia was considering buying a wide range of Polish armaments, including fighter jets, under counter-trade agreements. The Indonesian Defence Minister, Muhammad Mahfud, was quoted as saying: Poland and Russia have offered armaments to us on easy terms, without money, through counter-trade or in exchange for sea or mining exploration licences. 64 New markets are also emerging in South America. Over the past few years, Poland has sold M-28 Skytruck light transport aircraft to Venezuela and officials hope that Poland will be able to pay off its debt to Brazil through the export of military equipment. 65 According to SIPRI, in 1995 the value of Polish exports totalled $187 million, exactly the 58 Interview with Slawomir Kulakowski [in Polish], Ryszard Choroszy and Maciej Janislawski, Polska Zbrojna 2 September 2001, source: David Isenberg s Weapons Trade Observer; Quiet hopes for new orders [in Polish], Z.P., AMAC and A.B., Warsaw Rzeczpolita, 10 October 2001, source: David Isenberg s Weapons Trade Observer. 59 Czechs and Poles form joint commission, Jane s Defence Weekly, 19 April Op cit Jane s Defence Weekly, 26 September 2001, p Small Arms Survey 2001 Profiling the Problem, Small Arms Survey, p Op cit Warsaw Nowe Panstwo, 31 August Malaysia yesterday confirmed that it will buy the PT91 main battle tank from Poland, The Star, Kuala Lumpur, 24 March 2002, source: David Isenberg s Weapons Trade Observer. 64 Indonesia mulls counter-trade in arms with Poland and Russia, AFP, Jakarta, 13 March 2001, 0706 GMT. 65 Ibid.

9 SAFERWORLD ARMS & SECURITY PROGRAMME 9 Polish Exports of major conventional weapons by recipient country, Table created by Pieter Wezeman (SIPRI) for Saferworld, 23 November ( ) Uncertain data or SIPRI estimate Year of No Recipient No Weapon Weapon order/ Year(s) of delivered/ Country ordered designation description licence deliveries produced Comments Angola 52 BMP-2 IFV (52) Ex-Polish Army Cambodia (50) T-55AM-2 MBT Ex-Polish Army Czech Republic 11 W-3 Sokol Helicopter Exchanged for 10 ex-czech Air Force MiG-29 fighter aircraft Djibouti 1 An-28TD Bryza-1TD Light transport ac (1995) India (1) TS-11 Iskra Jet trainer aircraft (1998) 1998 (1) Ex-Polish Air Force 12 TS-11 Iskra Jet trainer aircraft Ex-Polish Air Force; deal worth $5.1 m 44 WZT-3 ARV 1999 Deal worth $31.1 m Iran 104 T-72M1 Main battle tank (1993) Latvia (4) Mi-2/Hoplite Light helicopter (1994) (4) Second-hand (2) BRDM-2 Recce vehicle (1992) Ex-Polish Army Lithuania 5 Mi-2/Hoplite Light helicopter Ex-Polish Air Force; gift 11 BRDM-2 Recce vehicle (1994) Ex-Polish Army; gift 10 MT-LB APC (2000) Ex-Polish Army; aid 3 P-37 Bar Lock-A Surveillance radar Designation uncertain; ex-polish Air Force 2 P-40 Knife Rest-B Surveillance radar Ex-Polish Air Force 2 PRV-11/Side Net Surveillance radar Designation uncertain; ex-polish Air Force Myanmar 22 Mi-2/Hoplite Light helicopter (1990) Russia 1 Ropucha Class Landing ship (1980) Originally ordered by Soviet Union and delivered to Russia after end of Soviet Union Sudan 20 T-55AM-2 Main battle tank (1998) Ex-Polish Army; export licences for 50 given for delivery to Yemen but after first 20 illegally diverted to Sudan the rest kept in Poland. Togo 20 BMP-2 IFV (1996) Probably ex-polish Army Uganda 7 MiG-21bis/Fishbed-N Fighter aircraft (1999) Ex-Polish; deal worth $8.5 m (to fund Polish Su modernisation programme); incl. 1 2 MiG-21UM trainer version; modernised in Israel before delivery Uruguay (3) MT-LB APC (1998) Ex-Polish Army; delivered via Czech Republic; No delivered could be 6 Venezuela 2 M-26 Iskierka Trainer aircraft For National Guard 6 M-28 Skytruck Light transport ac (1995) For National Guard 12 M-28 Skytruck Light transport ac (12) Deal worth $20 m; for National Guard (18) M-28 Skytruck Light transport ac (1999) (12) Yemen 3 Deba Class Landing craft Deal worth $50 m; including Lublin Class landing vessel 1 Lublin Class Landing ship This register lists major weapons on order or under delivery, or for which the licence was bought and production was under way or completed during Year(s) of deliveries includes aggregates of all deliveries and licensed production since the beginning of the contract. Sources and methods for the data collection, and the conventions, abbreviations and acronyms used, are explained in SIPRI Yearbooks. Entries are alphabetical, by supplier, recipient and licensee.

10 10 ARMS PRODUCTION, EXPORTS AND DECISION-MAKING IN CENTRAL AND EASTERN EUROPE same as Czech exports, while in 1999 sales decreased to the value of $51 million saw contracts for the supply of 43 WZT-3 armed technical support vehicles and 12 used Iskra jet trainers to India, seven MiG-21s to Uganda, and 20 T-55AM tanks to Yemen. 67 Exports in 2000 fell to $40 million. Sales included individual modern radars from the Warsaw-based Industrial Institute of Telecommunications which were sold to India, while PZL Mielec completed the supply of 24 M-28 Skytrack planes to Venezuela. In addition, Poland exported explosive materials, firearms and ammunition. 68 In 2001, in addition to ten new MT-LB armoured personnel carriers and various other materiel sold to Lithuania, Poland reportedly sold two landing crafts, as well as several hundred Star military trucks to Yemen, as part of two contracts concluded in The first contract involved the sale of 550 military trucks made by the Star Starachowice company and worth approximately $20 million. The second contract, signed by the Navy Shipyard in Gdynia, consisted of the export of four landing craft worth approximately $50 million. The government provided state treasury guarantees for the two contracts and the Handlowy Bank reportedly lent $70 million. The Central Bank of Yemen is due to pay off the loan over a 10-year period. 69 In recent years, a large portion of Poland s export proceeds has come from military equipment and arms withdrawn from service. Poland has exported significant quantities of decommissioned armaments to various countries. In August 1998, the trading company Cenzin signed a contract to sell 50 T-55 tanks to Yemen. The first 20 tanks were exported to Yemen in April However, when it emerged that the tanks had been re-exported to Sudan, a country which has been under an EU arms embargo since 1994, Poland cancelled all further deliveries to Yemen. A year later, recalling the sale of tanks to Yemen, Bronislaw Komorowski, Chairman of the Sejm Defence Commission, declared: Poland should conduct trade with Yemen just like with all the countries that are not under embargo. However, it should conduct the trade in a way that would not threaten our interests. That is because it is generally believed that Yemen is a kind of black hole out of which arms are sent in various directions, including to countries under embargo. This is why individual contracts and recipients ought to be verified. The profit from selling a couple of tanks is smaller than the serious consequences that Poland may face if its tanks go to an embargoed country. 71 One of the most lucrative transactions in surplus weaponry was the sale of seven fully serviceable and equipped MiG-21 II planes to Uganda in The planes were sold for approximately $1 million each. 72 The Baltic states have also been an important market for decommissioned Polish weaponry and provide market opportunities for the future. Equipment such as assault rifles, mortars, BRDM-2 reconnaissance cars, radio stations and Mi-2 helicopters, has gone to Lithuania. The Military Property Agency (AMW), the government body responsible for selling excess weapons, is expected to receive several hundred T-55 tanks that the army is to withdraw from its armoured units. Many of them are in good condition and will either be sold abroad or destroyed in line with CFE obligations. According to Marian Luczak, Director of the Special Turnover Team at the AMW: it is better to sell than to destroy. In Luczak s opinion, there is still some demand for T-55 tanks, particularly in developing countries and the sale of tanks would be a success Nostalgia for Past Glory [in Polish], Michal Likowski, Warsaw Nowe Panstwo, 31 August 2001, source: David Isenberg s Weapons Trade Observer. 68 Op cit Warsaw Nowe Panstwo, 31 August Trade under special supervision [in Polish], Warsaw Rzeczpospolita, Anna Marszalek, Piotr Adamowicz, DK and ZP, 3 March 2000, source: David Isenberg s Weapons Trade Observer. 70 Ibid. 71 Ibid; Yemen receives Russian and Czech main battle tanks, Jane s Defence Weekly, 26 July Decommissioned armaments up for grabs [in Polish], Zycie Warszawy, 5 April 2001, source: David Isenberg s Weapons Trade Observer. 73 Ibid.

11 SAFERWORLD ARMS & SECURITY PROGRAMME Small arms and light weapons exports According to customs data transmitted to the UN COMTRADE database, the average annual value of military firearms exported through Polish customs between 1994 and 1998 was $5 million. Recent reports have highlighted that Poland has 30 million rounds of surplus ammunition of various calibre in its stocks. 74 The army has handed over all redundant ammunition to the AMW, which has, so far, exported 20 percent of all surplus equipment. Buyers have been countries in Africa and, less frequently, in Asia Arms fairs and exhibitions Three arms exhibitions are held in Poland every year: the Logistics Fair and the International Exhibition of the Defence Industry (IDIE/MSPO), 76 both of which take place in Kielce, as well as the Baltic Military Expo, which is held in Gdansk. 77 Another arms fair, the Radom Air Show, was held in the town of Radom in September 2001.The MSPO, which is held in Kielce every two years in September, has become the biggest and most comprehensive presentation of Polish military hardware and its foreign exhibitors have grown in number since Poland joined NATO. The September 2001 exhibition moved MSPO to the forefront of arms exhibitions in Central Europe, and 250 firms from 22 countries were represented. 78 Polish companies also participate in exhibitions of military equipment abroad. In March 2001, a dozen Polish arms companies presented their products at the Idex 2001 international defence exhibition held in the United Arab Emirates (UAE). 79 The Mesko plant presented Grom anti-aircraft missiles, while Radwar displayed the Nur 22M selfpropelled radar station, and Huta Stalowa Wola showed the Chrobry howitzer (manufactured in co-operation with the UK). The 3501 radio station produced by Radmor was expected to be an export hit. The Polish Ministry of Economy provided financial support to cover part of the participation costs, as the UAE exposition is not only one of the biggest, but also one of the most expensive in the world, with 1m 2 of exhibition space costing as much as $1,000.The exhibition of Polish goods was co-ordinated by the national industry lobby, PIPROK, which has been promoting the arms industry for the last five years. Polish military producers have attended other military exhibitions, such as Eurosatory in Paris, IDET in Brno, LIMA in Malaysia and IDEF in Ankara. The table overleaf details the attendance of Polish companies at the main arms fairs and exhibitions between 1990 and Conclusions The new arms trade law, which came into force in January 2001, introduces important changes and helps provide the framework for an improved arms export control regime in Poland. Significantly, it requires companies to collect information that assists in end-user verification. Along with the development of the legal basis for arms export controls and the structures responsible for their implementation, the Polish Government has given priority to the need for strengthening awareness of the new regulatory framework amongst exporters of defence goods. In recent years, the Export Control Department at the Ministry of Economy has organised several information campaigns for this purpose. Poland s electronic mechanism of recording and circulating documentation on arms exports, PELTS, has also contributed to the creation of a more modern and effective arms export control system. 74 Ibid. 75 Ibid. 76 MSPO stands for International Defence Industry Exhibition. 77 The next exhibition is planned for June The fair is small and attended mainly by Polish firms. However, according to defence analysts it may increase in significance. 78 Development despite government destruction [in Polish], Warsaw Raport, 26 October 2001, source: David Isenberg s Weapons Trade Observer. 79 Our people in the Emirates [FBIS translated text], Warsaw Trybuna, 15 Mar 2001, p 11.

12 12 ARMS PRODUCTION, EXPORTS AND DECISION-MAKING IN CENTRAL AND EASTERN EUROPE Arms Fair Africa Defence Aerospace Services Euro- MSPO/ & Defence Defendory Asia Satory Expomil FIDAE Hemus Ideas IDEF IDET IDEX Milipol IDIE Shot Show Czech Company South Africa Greece Malaysia France Romania Chile Bulgaria Pakistan Turkey Republic UAE France Poland USA Gamrat Zaklady Tworzyw 1999 Sztucznych SA Albi Sp z oo Joint Venture 1998 Beskidzki Instytut Tekstylny 1998 Bydgoskie Zaklady Elektro mechaniczne Belma SA CNPEP Radwar SA Cenrex Trading Company Ltd 2001 Cenzin Co Ltd (Foreign Trade Enterprise) 1995 H. Cegielski-Poznan SA (Zaklady Przemyslu Metalowego H. Cegielski) Huta Stalowa Wola SA Military Communication 1998 Institute/Wojskowy Instytut Lacznosci Military Institute of Armament Technology Military Institute of 1998 Engineering Moratex ITWW 2001 MUT Military University 1998 of Technology/Wojskowa Akademia Techniczna Obrum 2001 Polish Chamber of the Producers for National Defence Polskie Zaklady Lotnicze Co Ltd 2000

13 SAFERWORLD ARMS & SECURITY PROGRAMME 13 Pronit SA (PlasticWorks Pronit Joint Stock Company) Przedsiebiorstwo Handlu 2001 Zagranicznego (Bipromasz Bipron Trading Co Ltd Przemyslowe Centrum Optyki SA (PCO SA Warszawa) Radmor SA Research and Development Centre Skarzysko Tlocznia Metalli Pressta SA/ 2001 Press PLant Pressta SA Wifama/Widzewskie Zaklady 1998 Maszyn Wlokienniczych Zaklady Mechaniczne Tarnow ZMT Zaklady Metalowe Dezamet SA/Mechanial Factory Dezamet SA Zaklady Metalowe Lucznik SA Zaklady Metalowe Mesko SA/Metal Works Mesko Zaklady Produkcji Specjalnej 2001 (ZPS) SP zoo (Special Production Plant Zaklady Sprzetu Precyzjnego 1998 Niewiadow SA/Niewiadow SA Precision Zaklady Tworzyw Sztucznych/ Erg-Bierun SA/Plastic Works JSC ZCh Nitro Chem SA ZE Warel SA 2001 ZM PZL Wola SA 2001 Note: This table only provides an illustration of the companies that have attended a selection of MSP exhibitions (Military, Security, Police) between 1990 and It does not provide a totally comprehensive list of companies or exhibitions. Many companies will have attended other exhibitions and may have attended the selected exhibitions in different years. Table provided by the Omega Foundation.

14 14 ARMS PRODUCTION, EXPORTS AND DECISION-MAKING IN CENTRAL AND EASTERN EUROPE Poland has been involved in various international initiatives devoted to SALW at the UN, the OSCE and EAPC, and has also collaborated with NGOs on the issue. The country has played an important role in efforts to improve dialogue between the EU and the countries which have aligned themselves with the EU Code of Conduct. In January 2001, it hosted a meeting for EU and EU associate country officials to strengthen information exchange and co-operation in arms export controls. The meeting initiated the so-called Warsaw Process. While these are important steps forward, there remains scope to further tighten arms export controls in Poland. The government has only partly addressed the purposes of export controls by requiring companies to consider a number of export criteria before applying for an export licence. However, the criteria are not nearly as comprehensive as those in the EU Code of Conduct and the responsibility for their assessment will lie with the arms companies and not the government. In a welcome development of public transparency and government accountability, the Polish Government is due to release its first annual report on arms exports. It is to be hoped that the quantity and quality of the information provided will be sufficient to enable parliamentarians and the public to assess how the government is implementing national export controls and the EU Code s criteria. This is particularly crucial at a time when, after years of decline, exports of new military equipment are rising and significant quantities of armaments are being decommissioned and could be sold abroad.

15 SAFERWORLD ARMS & SECURITY PROGRAMME Appendices Appendix 1 Law of 29 November 2000 concerning international trade in goods, technologies and services of strategic significance for state security and maintenance of international peace and security and amending selected laws 80 Section 1 General Provisions Article 1 The law lays down principles of the international trade in goods, technologies and services of strategic significance for state security and maintenance of international peace and security. It also defines principles of control and record keeping of the aforementioned trade and terms of legal responsibility for unlawful trade in these goods, technologies and services. Article 2 Foreign trade mentioned in article 3(8) is prohibited by law, unless the requirements and restrictions laid down in this law, other laws and other international agreements and covenants, have been met. Article 3 Terms referred to in the law shall be construed as follows: 1) Dual use goods: goods and technology that can be used for both civilian and military purpose, listed in the catalogue referred to in article 6(2)(1). 2) Munitions: armament, ammunition, explosives, products and parts thereof, and technologies, listed in the catalogue referred to in article 6(2)(2). 3) Strategic goods: dual use goods and/or munitions. 4) Polish customs the territory of the Republic of Poland. territory: 5) Exports: actions taken in order to place strategically significant goods out of the Polish customs territory, including re-exporting and transmission thereof, in particular by telephone, fax and other electronic media. 6) Import: actions taken in order to place strategically significant goods in the Polish customs territory including transmission thereof, in particular by telephone, fax and other electronic media. 7) Transit: a procedure laid down in article 97(1)(1) and (2) of the Law of 9 January 1997 The Customs Code (Journal of Laws of 1997 No 23 item 117,No 64 item 407, No 121 item 77,No 157 item 1026 and No 160 item 1084,of1998 No 106 item 668 and No 160 item 1063,of1999 No 40 item 402 and No 72 item 802, and of 2000 No 22 item 269). 8) Trade: a) any type of transportation of strategically significant goods across the border of the Republic of Poland, in particular as a result of export, import and transit contract and/or a deed of gift, leasing, loan, cession or contribution in kind to a company, b) agency services, commercial consultancy services, contract negotiation assistance services and participation in any way in actions referred to in subparagraph (a), including actions taken outside the territory of the Republic of Poland. 9) Enterprise: shall be construed in the meaning of the Law of 19 November 1999 The Business Law (Journal of Laws of 1999,No 101 item ) Trade control an authority of the minister responsible for economic affairs. authority: 11) Advisory bodies: bodies of the minister responsible for international affairs, Minister of Defence, minister responsible for internal affairs, Chief of the Office of State Protection, Chairman of the Central Customs Administration, Chairman of the State Nuclear Agency and Chairman of the Customs Chief Inspectorate. Article 4 Import into the Polish customs territory, export from the Polish customs territory and transit through the Polish customs territory of arms and ammunition by individuals for a purpose other than commercial and industrial shall be governed by separate regulations. Article 5 To matters regulated by this law, provisions of the Code of Administration Procedure shall apply, unless otherwise provided for in the law. 80

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