Potential Shifts in Pakistan’s Defence Industry Plus

In July 2020, the Pakistan Ministry of Defence Production (MoDP) published its “Two Years Performance Report” to outline the activities of the country’s various state-owned defence industry organizations.[1]

One of the MoDP’s notable disclosures in the report was the creation of a draft offset policy document, which, according to the MoDP, “is being circulated to all concerned for input.”[2] The offset document may be an effort to revive or utilize the Directorate General Defence Purchase’s (DGDP) current offset policy.[3]

In addition, the MoDP said it was working on a number of reforms that would encourage greater oversight of its activities, deepen engagement with Pakistan’s private sector businesses and academic institutions, and drive more transfer-of-technology (ToT) arrangements in big-ticket contracts.[4]

The MoDP likely set these goals in response to longer-standing calls for more defence exports and, at least within the Pakistan Navy (PN) and Pakistan Air Force (PAF), support for indigenization efforts. Controlling the cost of defence procurement is a significant contributor to both the offset and indigenization efforts.

However, Pakistan is also at the crossroad of deciding whether it wants to continue investing in its defence industry, at least in regards to specific state-owned organizations.

These organizations – such as (among others) Pakistan Ordnance Factories (POF), Heavy Industries Taxila (HIT), Pakistan Aeronautical Complex (PAC), and Karachi Shipyards & Engineering Works KSEW) – form the bulk of the country’s defence industry. In effect, the state is Pakistan’s main domestic defence vendor.

Pakistan formed these organizations to locally support the armed forces’ equipment through overhauling, repair, and other major maintenance tasks. Since 2000, these organizations started manufacturing some major equipment, but with support from original equipment manufacturers (OEM) in China and Europe.