Leonardo, Fincantieri and more, what is wrong with the G2G for Defense
Here is what emerged from the webinar "G2G agreements for defense: challenges and opportunities for Italy" organized by the Iai with the Secretary General of Defense, General Falsaperna, and President Aiad, Crosetto. Potential and challenges for Leonardo, Fincantieri and more. All the details
G2G (Government-to-Government) is an important tool in the international defense market. The vast majority of countries with which Italy competes use them very well.
The legislative change introduced at the end of last year represents an important step, but both the legislation and the related regulation are lacking in some aspects.
This is what emerged from the webinar "G2G Defense Agreements: Challenges and Opportunities for Italy" organized by the Iai with the Secretary General of Defense, General Nicolò Falsaperna, and the Aiad President, Guido Crosetto, starting from the study on the theme edited by Iai.
For Italy it is in fact urgent to define and make its national G2G system operational, to increase the competitiveness of the country-system as a whole in the international market, even more so in this period of economic difficulty.
THE IMPORTANCE OF G2G AGREEMENTS
"The importance of the G2G agreements reverberates under various aspects", underlined General Nicolò Falsaperna, general secretary of defense and national armaments director. “Both at the military political level (as well as at the geopolitical level where it has an important sense of national interests) and at the technological industrial level. In a period like this of Covid-19, everything that can be done to support and relaunch the national industry must be done in an increasingly competitive international context ".
THE NEW REGULATION
“The Italian G2G for defense is based on art. 537-ter, entitled “Cooperation with other States for armament materials produced by national industry”, of the Code of the military system. Modified with law 157 of 2019 and regulated by regulation 104 of 2015. The new formulation of article 537-ter allows the extension of the support of the Ministry of Defense also to contractual activities, in addition to those of technical-administrative support. Without providing for the assumption of financial guarantees ".
WHAT IS MISSING IN THE ITALIAN REGULATION OF G2G AGREEMENTS ACCORDING TO THE IAI
As underlined by Alessandro Marrone, head of the Iai Defense Program and co-author of the study, "from a regulatory point of view, an adequate government approval procedure is not foreseen at the moment, which allows to enhance the signing of the G2G agreement involving the government as a whole, confirming the strategic nature of the agreement itself. This lack of recognition is reflected in the procedural line. In fact, no preferential channels are currently envisaged for export authorization under the G2G agreements. In the study, we propose to make these supplies subject to global authorizations. To facilitate the procedural process ".
Furthermore, "at the regulatory level, the study considers it necessary to update the 2015 regulation with full implementation of the 2019 regulations". Therefore, underlined Marrone, “updating the regulation would also allow us to address some aspects of the Italian G2G which, as formulated, could create management problems”.
A NOT SUFFICIENT STANDARD
General Falsaperna agrees that “the G2G standard, necessary but not sufficient. Indeed, it needs to draw up a regulation. We cannot consider the G2G an isolated norm, they are national norms but the constraints of the EU that it imposes on member countries must also be taken into account. This is a set of behaviors that the whole country system must follow in order for the agreements to be successful. Alongside the norm, there must be behaviors that are consistent with the objectives to be achieved ".
Compared to a standard contract, “G2G is faster and safer”, said Guido Crosetto, president of Aiad, the association that brings together and represents 121 defense, security and aerospace companies.
But to give fullness to the instrument "alongside the updating of the regulation we must also think about a legislative change" Crosetto stressed.
THE FRENCH EXAMPLE
To understand the importance of G2G agreements, just look at what other countries are doing, such as our neighbor across the Alps. To better support its aerospace, security and defense industry, France has recently also introduced the possibility of signing a "government partnership".
Always referring to Paris, General Falsaperna recalls that "in the Iai study a shortage in quantitative terms is mentioned, in the French six-year law a further 400 units are foreseen to ensure the proper functioning of the national export system".
Crosetto is also of the same opinion, remarking that “France has two types of interventions, totally different from ours, more attractive for foreign partners. Demonstrating the importance that the French state attaches to G2G agreements.
HOW ITALY IS LOCATED AND LEONARDO'S ROLE
Among the 25 major arms exporters and their main customers, Italy ranks ninth "thanks to our national champion Leonardo", underlined General Falsaperna. As stated in the Iai study “for all large European companies, including the Italian ones, in the aerospace, security and defense sector, exports constitute a significant and often majority percentage of their turnover. "Our domestic market absorbs 18% of the turnover, the rest is all export".
In 2018, as much as 85% of Leonardo's revenues came from foreign contracts.
G2G therefore has great commercial importance, in the sense of supporting exports in the international defense market.
HOW A G2G IS BUILT
As General Falsaperna explained "G2G was born with a procurement need envisaged by a foreign state, with this foreign state we must already have cooperation agreements, these agreements must be kept alive".
“A G2G does not only involve the signature of a representative of the Ministry of Defense, but it involves a series of activities (training and logistics) that must necessarily involve the entire defense system. These cooperation agreements must exist and be maintained ”.
THE PROBLEMS OF INTERNATIONAL DEFENSE PROGRAMS
As regards defense programs, General Falsaperna recalled how “today programs must be developed as much as possible in international cooperation, we need to understand immediately the role that our country must play. Then there is the problem of the ability to integrate systems and products in other countries, we must always take into consideration which subsystems we are dealing with ”.
For these reasons, “the problem of intellectual property and technology transfers in relation to the countries with which we establish G2G relations is central”. The key point can be summed up in our country's acquisition of technological sovereignty in certain sectors. We cannot help but be the only holders of certain technologies.
MUTUAL DEPENDENCE WITH PARTNERS
“We have to create mutual dependency system with partners, strategic interdependence with which we develop defense systems. They put us safe in G2G cooperation programs and national products with components of other systems ”.
THE EUROPEAN DEFENSE FUND (EDF)
Then there is the EDF question. “Europe will now finance both research and capacity programs” highlighted Falsaperna, emphasizing the fact that “we must be careful and vigilant about the roles and bodies responsible for administering the funds”.
THE NEED FOR AN AD HOC STRUCTURE FOR G2G AGREEMENTS
Finally, Falsaperna underlined that “if we want to prepare a full-fledged G2G, we must prepare ad hoc structures, to ensure that all the components are activated. A science study of the organization will have to be done to ensure that the maximum is achieved. An ad hoc structure is necessary to cope with the largest possible workloads. There is the possibility for Sace to intervene ”.
In fact, Falsaperna believes that “the involvement of the general secretariat of Dna Defense in the preparatory phase is indispensable. But the secretariat cannot participate in the negotiations between industry and the foreign country ”.
“Beyond the regulation there are also some fundamental steps, such as the structure to be carried out”, underlined Guido Crosetto. "The current Segredifesa structure cannot be charged with these tasks, it cannot with this staff or with this organization (nor with the powers attributed to it)".
Without neglecting the financial aspect. Crosetto in fact points out that “both the United States and France have characterized the G2G agreements also with a financial part, which is fundamental”.
Returning to the G2G structure, for Crosetto “it will be a structure detached from Segredifesa, which – even if dependent or integrated with Sgdna – should have a representative of Sace, as well as of Smd and Maeci etc. A structure that has all that is needed for a government-government and not a defense-government relationship. Including the representatives of the companies that should – on specific cases – destined within this structure to build the G2G ”.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/leonardo-fincantieri-e-non-solo-cosa-non-va-nel-g2g-per-la-difesa/ on Tue, 06 Oct 2020 06:10:34 +0000.