Private investments needed in the defense sector in Poland. Time for a stock index of weapons?

Poland allocates some of the highest funds in the world to defense, but a significant part of the expenditure consists of purchases of foreign equipment. Without greater involvement of the private sector and better-tailored support instruments, it will be difficult to use the potential of record spending – according to a report by the consulting company CRIDO.

In 2024, Poland allocated 4.2% to defense. GDP, and in 2025 it plans to spend 4.7%. GDP. This is the second highest result among the nine countries analyzed by CRIDO: Finland, France, India, Israel, South Korea, Germany, Turkey, the United States and the United Kingdom.

Large outlays, and most of the equipment is imported

According to the study prepared by CRIDO experts entitled: “Mechanisms for supporting the arms sector in the world”, despite high expenditure, the majority of military equipment is imported. The domination of state entities is also characteristic of Poland – the State Treasury controls approximately 70-80 percent. industry. For comparison, in Germany or France the state's share in the defense sector is only 10-20 percent, and in the USA it is negligible.

“Today, Poland has a unique opportunity to develop its own defense industry, but the ownership structure and limited involvement of the private sector mean that part of the potential remains untapped. High budget expenditure is necessary, but without mechanisms stimulating private investment and technology transfer, it will be difficult to build lasting production and research and development competences in the country. The state must become an animator of public-private cooperation, while ensuring a stable investment framework and regulatory predictability,” said Krzysztof, quoted in the press release. Kluza, partner at CRIDO, leader of the arms and aviation sectors.

The CRIDO analysis covered nine countries where the defense sector plays a key role. As indicated, each of them has developed a set of tools supporting the development of the industry – from financial instruments, through regulatory solutions, to organizational activities.

Poland needs tools to support the development of the defense industry

According to CRIDO, one of the most interesting examples are Indian defense industrial corridors. These are specially designated areas, infrastructurally prepared for armament investments, with simplified administrative procedures, tax reliefs, customs duty refunds and grants for employee training.

According to the authors of the report, similar solutions – properly adapted to Polish realities – could increase the attractiveness of investments in the defense sector.

“In Poland, some of these mechanisms already operate within the Polish Investment Zone, especially after the repeal of the exclusion of projects related to the production of weapons and ammunition in 2025. However, experts indicate that it is worth considering the creation of a more comprehensive instrument combining tax breaks, R&D grants and simplified administrative procedures. At the same time, excessive geographical concentration of production plants, which could pose a risk from the security point of view, should be avoided,” it was written.

List of strategic defense technologies

Another solution proposed by the authors of the report is to create a list of strategic defense technologies.

“Recognizing selected technologies as strategic increases the willingness of companies to invest in their development and modern production processes. A large number of such projects have a chance to obtain funding from public funds. Importantly, the national list of strategic technologies is not identical with the solutions under the EU Strategic Technologies Platform for Europe (STEP),” it was written.

“In the European context, ongoing work on the revision of state aid rules and the development of the STEP platform, which is a mechanism for coordinating the financing of projects related to technologies of strategic importance for EU security and competitiveness, including defense and dual-use technologies, may be of significant importance. Enterprises will be able to count on preferential access to EU funds and higher limits on public aid for investments. Also at the European level, framework programs for defense are being created, while dual-use and exclusively military were excluded from support,” said Magdalena Zawadzka, partner at CRIDO, quoted in the release.

Better use of customs instruments

According to experts, the next step that would allow the development of the defense sector would be better use of customs instruments.

“The example of India shows that zero customs duties on the import of components not available locally, while increasing customs duties on finished products, can effectively support domestic production. In the EU, the procedure of autonomous suspension of customs duties plays a similar role, but it remains little known among entrepreneurs,” it was written.

In their opinion, the implementation of the EU SAFE program in Poland, which aims to strengthen the production capabilities of the European defense industry, requires modification.

“The SAFE program should move in a more investment direction, i.e. focused on purchases understood as providing long-term contracts for promising technologies, including those at the TRL 7-9 stage. Such a model would allow, based on predictable and long-term demand, to build sustainable production capacity in the domestic defense industry,” said Krzysztof Kluza.

Experts emphasize that the development of the domestic defense industry requires the use of a wide range of instruments – from incentives and tax reliefs to grants and investment programs covering projects and companies at various stages of development.

“We need a mix of enabling solutions incubation of innovative ideas, acceleration and support of technology startups, as well as financing the scaling of SME activities and support for large, capital-intensive projects, such as the development of new combat vehicles, missile systems or reconnaissance systems. Only such a system will allow for permanent strengthening of the defense and technological ecosystem in Poland,” said Magdalena Zawadzka.

Among additional activities, the authors of the study also mention the need to strengthen export aid for the defense sector, modeled, for example, on solutions from South Korea, and to create a stock exchange index bringing together companies from the defense and dual-use industries. Such an index – similar to the Indian Nifty India Defense – could increase investor interest and facilitate capital raising. (PAP Business)

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