Cooperation with GDELS continues to pay off for Czech industry

 09. 12. 2020      category: Events

GDELS started more than ten years ago with the supply of Pandur II 8x8 CZ wheeled armored vehicles for the Army of the Czech Republic. In addition to modern equipment for the armed forces, the Czech Republic has also obtained contracts for domestic industry and know-how, which still brings significant value to the national economy today. As EY's recent study shows, one crown spent by the Ministry of Defence in the current project for the supply of twenty command&control and communication variants of Pandurs II has multiplied to CZK 3.2 in the supply chain.

History of the Pandur II project

Within the more than ten-year long history of the Pandur II project in the Czech Republic, it is possible to distinguish several stages. In the first stage, which lasted from about 2009 to 2013, 107 Pandurs II were delivered, mostly in combat versions, by Pandurs´ original developer GDELS, vehicles were made by Czech company VOP CZ under control of GDELS specialists. At this stage, GDELS brought orders with a cumulative value of CZK 18.5 billion to the Czech economy. Of these, 4.5 billion were so-called direct offsets, i.e. contracts for Czech industry, which directly related to the fulfilment of the Pandur II project. 

pandur_01Picture: Within the more than ten-year long history of the Pandur II  (on the picture) project in the Czech Republic, it is possible to distinguish several stages. | army.cz

In the second stage, which began in 2015, a licensing agreement was concluded between GDELS and the Czechoslovak Group (CSG) on the production of Pandur II 8x8 vehicles in the Czech Republic and on the know-how transfer. As part of the license agreement, CSG companies acquired the right to service, manufacture and develop new versions of Pandur II armors. And not only that: An important part of the agreement was the right to export Pandurs II produced in the Czech Republic to important regional markets, e.g. the Central Europe and East Asia.

It is thanks to the conclusion of a license agreement with the Czech manufacturer that the Pandur II project is also bearing fruit for the Czech economy several years after the end of the original contract. This year, the Czech licensed manufacturer Tatra Defence Vehicle from the CSG Group fulfilled additional three-year contract for the supply of twenty command-staff and connecting versions of the Pandur II for the Czech Army. In addition, CSG has won an export contract to export 23 Pandurs II to Indonesia's armed forces and almost 20 Pandur II for the Philippines. It turns out that the Pandur II project brings unexpected benefits to the Czech economy. 

The multiplier of the current Pandur II project is 3.2

The contract for twenty command&control and communication Pandur II vehicles for the Czech Army has been more than tripled in the Czech economy. This was found by an analysis by the renowned consultancy EY currently prepared for the industrial-technology holding CSG. This is confirmation of the fact that the transfer of modern defense technology to the Czech Republic pays off not only to private companies, but also to the whole state.

The total cost of the contract amounted to less than CZK 1.6 billion. According to EY, the economic benefits of the contract amounted to a total value of over CZK 5 billion. This number can also be expressed in the form of a multiplier, which takes the value of 3,2. This means that single CZK spent on order in the Czech economy generated CZK 3.2 in downstream sectors. The contract was fulfilled from 2017 to 2020. During that time, TDV, a supplier of Pandurs II, has paid CZK 402 million into the state budget in taxes or levies.

The EY analysis also found that the contract brought in a total of work that could be converted into employment for 800 people for a year. Most of this is accounted for by a number of suppliers from the Czech industry, among them Colorlak, Interlink CS, Optokon, Ray Service and Retia.

EY's analysis highlights a number of other positive effects of the contract: The production of a strategically important type of military equipment of the Czech Republic takes place on Czech territory. In the development and testing of vehicles, close cooperation with military technical institutes took place. In the process of the contract, the know-how and educational level of the employees who worked on the contract increased substantially. Finally, thanks to a reference contract for the domestic army, the domestic company can successfully pursue export projects, which has been confirmed in the form of a contract for the supply of Pandur II vehicles to Indonesia's armed forces and the Philippines.

GDELS wants to repeat Pandur's success with ASCOD

After ten years, GDELS is aiming for another major armament project in the Czech Republic. They participate in a competition for the supply of 210 tracked combat vehicles for the Army of the Czech Republic with a proven ASCOD 2 platform used by the British or Spanish army. The estimated value of the contract is close to CZK 50 billion. This must correspond to the economic benefits for the Czech Republic, which, as with the Pandur II project, should be multiplied compared to the expenditure from the state budget.

It can be said that GDELS is ideally placed to cooperate with the domestic defence industry thanks to the Pandur II project, because it knows the whole chain of possible Czech subcontractors, with many of them already cooperating on the ASCOD 2 project or having concluded memoranda. Thanks to the involvement of the state-owned company VOP CZ and dozens of other Czech companies, it is possible to talk, as with the Pandur II project, about the possibility of transferring production to Czech industry.

In the event of GDELS winning the new tracked combat vehicles competition, the maximum contribution to Czech industry and the high multiplier of value spent by the state on the tracked combat vehicles project in the Czech economy are guaranteed. Other competitors in the competition do not have a unique reference from a running project in the field of land defense technology. It means a lot. If the multiplier from the Pandur II project were to apply to the supply of ASCOD 2 vehicles, the Czech economy would earn over CZK 150 billion. And that is a big investment incentive.

 Author: Martin Šiška