Türkiye’s proposed 2027 budget raises the allocation for weapons, ammunition, weapons systems and other defense equipment by 229 percent, a procurement surge that could accelerate domestic production while opening selective opportunities for international technology and manufacturing partners. The increase does not apply to the entire defense budget, and it remains subject to parliamentary approval, but its scale signals that Ankara intends to move major national programs from development into serial production.
A Procurement Increase, Not a Tripling of the Entire Defense Budget
Vice President Cevdet Yılmaz announced the increase on October 16 during the finalization of the 2027 central government budget proposal at the Presidential Complex in Ankara. According to Anadolu Agency, the draft earmarks TRY 2.206 trillion, approximately $44.5 billion at the conversion rate used in the proposal, for defense spending. A separate $25.2 billion is allocated to internal security.
The headline figure requires careful interpretation. Yılmaz said the 229 percent increase applies specifically to purchases of weapons, ammunition, weapons systems and other defense equipment within the Ministry of National Defense budget. It is not a 229 percent increase in Türkiye’s total defense expenditure.
The distinction matters for investors assessing the addressable market. Personnel costs, pensions, operations and other recurring expenditures form substantial parts of military budgets, but a procurement appropriation flows more directly toward manufacturers, systems integrators and specialized suppliers. A sharp rise in this category therefore has potentially greater industrial consequences than an equivalent increase distributed across the whole defense establishment.
The figure is also expressed in nominal Turkish liras. Türkiye’s 2027-2029 Medium-Term Program forecasts inflation of 21 percent in 2027, following an estimated 28.4 percent in 2026, according to the Presidency of Strategy and Budget and comments by Yılmaz reported by Anadolu Agency. Even after accounting for the government’s inflation target, however, a 229 percent nominal increase would represent a substantial expansion in purchasing capacity if the appropriation is executed as proposed.
The budget still has to pass through parliament. Yılmaz said it had been submitted within the constitutional deadline and would be presented to the Planning and Budget Committee. Foreign companies should therefore distinguish between an appropriation, an approved procurement program, a tender and a signed contract. Each represents a different level of commercial certainty.
From Prototypes to Serial Production
The new funding arrives as Türkiye’s defense industry faces a transition from successful product development to production at scale. Anadolu Agency reported in September that additional resources would be directed toward three groups: systems still under development, products entering serial production, and established products that the armed forces want to procure in larger quantities.
That structure points to a broad industrial pipeline. Türkiye is simultaneously developing the KAAN combat aircraft, expanding its Steel Dome integrated air-defense architecture, producing Altay main battle tanks and increasing output in missiles, ammunition, unmanned systems, sensors and naval platforms.
The Secretariat of Defence Industries, known as SSB, describes KAAN as a next-generation fighter being developed with maximum domestic industrial participation and technological localization. Although the program is strategically Turkish, its complexity creates requirements across engines, advanced materials, electronic warfare, sensors, software, test systems and precision manufacturing.
Air defense is another likely beneficiary. Contracts with a combined value of about $6.5 billion were signed in November 2025 between SSB and companies including ASELSAN, ROKETSAN and HAVELSAN to expand Steel Dome, according to Defence Turkey. The publication reported that production investments were intended to support delivery of more than 100 system components annually.
Land systems are also entering a more capital-intensive phase. At the October 2025 opening of BMC’s Ankara tank and armored-vehicle plant, President Recep Tayyip Erdoğan said the facility was designed to produce eight Altay tanks per month. The Presidency’s Directorate of Communications also reported that an initial Steel Dome package containing 47 vehicles had been delivered two months earlier.
These programs require more than final assembly. Serial production increases demand for machine tools, semiconductors, optics, power electronics, propulsion components, composite materials, cybersecurity, testing equipment and supply-chain software. Capacity expansion can consequently reach civilian industries with dual-use capabilities.
For foreign investors, the most realistic entry point may not be the role of prime contractor. It may instead be a locally incorporated operation supplying a Turkish platform manufacturer, an engineering partnership that fills a technology gap, or a production venture able to serve both Turkish orders and third-country exports.
Domestic Preference Is Both the Opportunity and the Barrier
Ankara’s procurement expansion is inseparable from its localization policy. The government says the domestic-content share of the defense industry has risen from about 20 percent in 2002 to more than 85 percent. SSB reports that the value of projects under way or in the tender process has reached approximately $150 billion, compared with $5.5 billion in 2002.
This industrial depth reduces the prospect that the new appropriation will translate into a simple increase in finished-equipment imports. The government has explicitly indicated that the largest portion of additional spending will go to domestically developed platforms, weapons, sensors and ammunition.
Foreign participation is not excluded, but it is commonly expected to contribute to Türkiye’s industrial capacity. SSB’s Industrialization Guideline for Foreign Contractors identifies local production, incorporation, technology transfer, joint production, investment and joint export activity as forms of industrial collaboration. Its definition of domestic net added value emphasizes materials, services, labor, overhead and profits generated in Türkiye.
This means that a foreign manufacturer offering an imported product may be less competitive than one prepared to establish production, qualify Turkish suppliers or share defined technologies. Commercial planning must address intellectual-property protection, control of technical data, export licensing in the investor’s home jurisdiction and the allocation of rights for sales to third countries.
Legal equality alone does not remove these sector-specific considerations. Türkiye’s Foreign Direct Investment Law generally gives international investors the same rights and liabilities as domestic investors, while allowing profit and dividend transfers through banks and financial institutions. Defense procurement, however, operates within a national-security framework where tender conditions, facility clearances, industrial-participation obligations and government approvals can determine whether formal market access becomes a viable contract.
Market-entry analysis must therefore begin with the actual decision-making structure. SSB manages major industrialization and procurement programs, while the Defence Industry Executive Committee sets strategic direction and can decide on foreign-capital and technology participation in production facilities. The Ministry of National Defense, the armed forces, state-controlled companies and private prime contractors may each occupy different roles in a program.
Export Growth Changes the Investment Case
The commercial rationale is no longer confined to Turkish government demand. SSB President Haluk Görgün said defense and aerospace exports reached $10.05 billion in 2025, an increase of 48 percent from $7.1 billion in 2024. By June 2026, twelve-month exports had exceeded $11 billion for the first time. Görgün said the industry was selling to 178 countries and that NATO members accounted for 57.3 percent of exports during the twelve months through May.
Those figures give prospective investors a second possible return channel. A Turkish manufacturing operation can potentially supply domestic programs and participate in exports to Europe, the Middle East, Central Asia, Africa and Southeast Asia. The model is visible in recent international partnerships.
Associated Press reported in April 2025 that Baykar and Italy’s Leonardo had agreed to form a joint venture focused on unmanned aerial vehicles. Baykar had also acquired Italian aircraft manufacturer Piaggio Aerospace. In June 2025, President Erdoğan announced an agreement to export 48 KAAN aircraft to Indonesia, with Indonesian capabilities expected to be integrated into production, according to Associated Press. The financial terms were not disclosed, and KAAN was still in development, but the agreement illustrated Ankara’s effort to connect exports with industrial participation.
Türkiye’s expansion also fits a broader rearmament cycle. At their 2025 Hague summit, NATO members committed to work toward defense and security-related investment equal to 5 percent of GDP by 2035, including 3.5 percent for core defense requirements. NATO said combined allied defense expenditure had risen from 1.4 percent of GDP in 2014 to 2.3 percent in 2025. Türkiye’s production base could therefore serve markets beyond its own procurement cycle, particularly where buyers seek alternatives with competitive delivery schedules.
Geopolitics remains a constraint. Reuters reported in March 2025 that Ankara and Washington were discussing the removal of obstacles to defense cooperation, including U.S. sanctions and Türkiye’s exclusion from the F-35 program after its acquisition of the Russian S-400 system. Companies using controlled U.S. or European technology must examine whether components can be transferred to Türkiye and subsequently incorporated into exported products.
Incentives, Currency Risk and Execution
Industrial policy provides a potential bridge between the procurement increase and foreign capital. Türkiye restructured its investment incentive framework through Presidential Decree No. 9903 in May 2025. The Ministry of Industry and Technology’s HIT-30 program now includes a call for innovative defense technologies and invites both Turkish and international investors to propose high-technology projects.
HIT-30 is administered under the project-based incentive regime. The ministry states that eligible high-technology projects generally require at least TRY 2 billion in fixed investment and may receive tailored support. Depending on the project and applicable rules, the wider incentive framework can include tax reductions, customs-duty exemptions, value-added tax relief, financing support, land allocation and assistance with energy or employment costs. Eligibility cannot be assumed merely because a product has defense applications.
Foreign investors must also separate lira-denominated budget growth from hard-currency returns. Imported inputs, royalties and foreign debt may be denominated in euros or dollars, while local contracts and expenses can be exposed to inflation and exchange-rate movements. Price-adjustment formulas, milestone payments, advance-payment security and foreign-exchange clauses are therefore central to contract economics.
The underlying investment environment is broader than defense. Türkiye attracted $13.1 billion in FDI in 2025, up 12.2 percent from the previous year, according to the Investment and Finance Office using central-bank balance-of-payments data. Manufacturing accounted for 31 percent of inflows, suggesting that international capital is already responding to industrial opportunities, although defense investments face a more demanding regulatory and political review.
What This Means for Foreign Investors
The 229 percent increase should be treated as a strong demand signal, not as an immediately accessible pool of orders. The largest gains are likely to accrue to companies that can demonstrate local value creation, secure supply, technology contribution and compatibility with Turkish export ambitions.
A credible market-entry strategy should identify the relevant program, contracting authority, Turkish prime contractor and procurement timetable before capital is committed. Company incorporation and corporate structuring then need to accommodate foreign ownership, intellectual-property licensing, shareholder controls and possible joint-venture arrangements.
Investment-incentive work should proceed alongside site selection and financial modeling, particularly where a project may qualify for HIT-30 or project-based support. Legal and tax compliance must cover customs treatment, transfer pricing, controlled technology, data security, employment and sector-specific licensing. Import-export planning is equally important because a Turkish facility may depend on licensed foreign components while serving multiple overseas customers.
Government relations and regulatory liaison matter because defense projects involve institutions whose approvals extend beyond ordinary commercial registration. Expo representation at events such as the International Defence Industry Fair can support partner identification and customer validation, but it is not a substitute for procurement mapping and due diligence.
Finally, project management on the ground becomes decisive once a commitment is made. Incentive certificates, factory construction, supplier qualification, security procedures and delivery milestones must be coordinated against the procurement schedule. For an FDI advisory firm such as fdiconsultancy.com, these market-entry, incorporation, incentives, compliance, government-relations, import-export and execution functions form a single investment process. Türkiye’s budget creates scale, but successful participation will depend on converting that scale into a compliant, localized and export-capable operating model.