JF-17 Export Efforts: Negotiating Expectations Plus

In the sidelines of Defence Services Asia (DSA) 2018, a marquee defence exhibition that took place in Kuala Lumpur in Malaysia in April 16-19, Pakistan Aeronautical Complex (PAC) officials told IHS Jane’s that it had “primary level talks” with Malaysian officials about selling JF-17 Thunder multi-role fighters to meet the Royal Malaysian Air Force’s (RMAF) requirement for a single-engine fighter.[1] Of course, the caveat sitting in this news is that the RMAF has yet to formally include the JF-17 as part of its actual evaluation process, much less beginning contractual negotiations (confirmed to Jane’s by PAF itself).[2]

In effect, the RMAF is likely a prospective customer rather than a substantive lead approaching PAC, but a look at the RMAF’s fighter bid does raise several questions about Pakistan’s capacity to properly pursue certain fighter programs – i.e. those requiring commercial offsets, transfer-of-technology (ToT) and/or a partnership involving commercial activity (related to the JF-17 and/or PAC). The issue is not PAC’s (and by extension, the Aviation Industry Corporation of China: AVIC’s) ability to practically undertake such steps, but its ability to negotiate customer expectations while maintaining its own interests.

According to PAC (via Jane’s), the provision of ToT to enable for local maintenance, repair and overhaul (MRO) and parts manufacturing is a component of the RMAF fighter bid.[3] Besides entertaining those, one should also expect Lockheed Martin, Saab and Korea Aerospace Industries (KAI) to have credible loan/line-of-credit mechanisms available to Kuala Lumpur as well. However, as Malaysia has multiple modernization priorities – each involving big-ticket items (e.g. twin-engine fighters, maritime patrol aircraft, etc) – there could be a need to control fiscal spending on defence.

It is on this basis that PAC likely senses an opportunity to sell the JF-17, but its traction will be contingent on how well it packages the idea of low acquisition and life-cycle costs with an attractive support package with industry inputs. AVIC, by virtue of being an equity partner in the JF-17 program, is also a factor – i.e. it can potentially offer credit to Malaysia should it procure the JF-17 (and/or other Chinese equipment).

For PAC, the question is whether it can move beyond the loss of potential long-term support work (e.g. undertaking MRO of RMAF planes in Pakistan) and convert an industry package into a revenue source.