Estonia to receive €300M defence industry investment
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Despite becoming an internationally acclaimed hub for drone technologies, Estonia is not forgetting to build up other capacities. A major new chapter in Estonia’s defence industrialisation opened this week as Turkish defence group ARCA confirmed it will build a €300M artillery ammunition factory at the Põhja-Kiviõli defence industry park in north-eastern Estonia — entirely at its own expense, reports ERR.
The facility, operated through its Estonian-registered subsidiary ARCA Baltics Operations OÜ, will manufacture 155-millimetre artillery shells (the NATO standard round used in systems such as the Caesar and K9 howitzers), mortar rounds of various calibres, and 122-millimetre rockets. Production is expected to begin in 2028, with up to 1,000 jobs created in a region that has long sought economic renewal following the switch from oil shale industry.
Under the terms of the agreement, the Estonian state will provide the company with a 141-hectare plot of land at the park and contribute up to €10M towards access roads, fencing, and utility connections. ARCA, whose parent group operates nine factories in Turkey and posted export revenues exceeding €3B last year, brings considerable scale to a country that until recently had no domestic large-calibre ammunition production of its own. The agreement also gives the Estonian state an option to procure ammunition directly from the facility.
The formal signing ceremony is scheduled for early May at SAHA Expo 2026, a major defence industry exhibition held in Turkey.
What lures the investors in
Põhja-Kiviõli is one of several dedicated defence industry parks that Estonia is developing as part of a broader rearmament drive. Estonia’s defence spending will reach €2.4B in 2026 — equivalent to 5.43% of GDP, and nearly four times the level recorded in 2021. Prime Minister Kristen Michal described the country’s supplementary defence investment programme, known as Kilp (“Shield”), as “the largest increase in defence spending in recent history.
That spending is increasingly translating into domestic industrial capacity. A designated spatial plan has been approved for both the Põhja-Kiviõli and Ermistu sites, with planning underway at two further locations. At the Ermistu park in Pärnu County, four companies have already been confirmed as tenants, including Nitrotol, Frankenburg Technologies, Infinitum Strike, and UK firm Thor Industries via its Estonian subsidiary Odin Defence.
Foreign interest has been broad: Lockheed Martin signed a contract with the Estonian Centre for Defence Investments in April 2026 for the procurement of three additional HIMARS rocket launchers, adding to the six already delivered last year.
Defence Minister Hanno Pevkur framed the ARCA deal in straightforward terms: “By establishing large-calibre ammunition production, Estonia is taking an important step in developing its defence capability and ammunition industry,” said Defence Minister Hanno Pevkur about the ARCA deal.