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The Defense Industry: Turning Liability into Opportunity

When one thinks of Pakistan’s defence industry, they think of state-owned enterprises (SOEs) that operate under thick veils of secrecy and produce systems of a strategic nature.

In addition to strategic systems, like ballistic and cruise missiles, during the last two decades this industry has also manufactured JF-17 jets at Paksitan Aeronautical Complex (PAC) Kamra for the Pakistan Air Force (PAF) and several UAV and UCAV models at various SOEs.

However, calling what we have in Pakistan an industry is disingenuous due to the way that these organizations operate. Large sums of taxpayer money are put into these organizations and in return some, not all, of the demand of Pakistan’s armed forces are met. 

Yes, there are some success stories of import substitution, notably small arms, the JF-17, and Al-Khalid tanks

But there are also many more failures of the local industry, and these failures manifest in off-the-shelf purchases, such as VT-4 tanks, J-10 fighter jets, all types of drones, surface-to-air missile (SAM) systems, satellites, and all types of naval vessels

It is not news that foreign exchange is an extremely rare commodity in Pakistan. Not only that, but Pakistan is losing more and more of its ability to fulfil its defence needs from foreign purchases

It is rather shocking how many people are employed by its strategic SOEs, and, in turn, how much money must be spent on their salaries and pensions. Yet despite this colossal overhead, these so-called industries meet so little of Pakistan’s defence needs. 

Some discussion of these failures is warranted.

Failures of Pakistan’s Defence Industries

We will present several examples that demonstrate the failure of Pakistan’s defence industry and attempt to understand the reasons for it. 

In 2021, the Pakistan Army (PA) officially inducted the VT-4 tank. This alone serves as a glaring example of the failure of the promise of the Al-Khalid 1 and 2. 

Clearly, the PA was unwilling to wait any longer for Heavy Industries Taxila (HIT) to deliver and decided to buy from abroad instead. 

A business that had lost such an important contract for its prime customer would have been extremely worried. However, by all accounts, life goes on as normal at HIT.

A similar story unfolds in the domain of UAVs. 

Pakistan produces several models of UAVs and UCAVs, including Shahpar, Burraq, and Shahpar-II. A MALE UCAV was also under development at PAC Kamra. 

Despite these initiatives, we have seen all three branches of Pakistan’s armed forces buy drones from China and Turkey (e.g., TB-2, Akinci, WL-1, WL-2, CH-4) in very large numbers. 

This, again, is a rather shocking dismissal of the local products in favor of the apparently superior foreign products. 

Of particular note is the purchase of TB-2 by the PAF when an almost similarly sized UCAV is available locally in the form the Shahpar-II. All else equal, Pakistan’s armed forces would prefer a local solution, which points to deficiencies in the local product. 

We can speculate these to be software robustness and maturity, electronic systems, optical payloads, weapons payloads, and general flight performance.

Other failures are not so obvious to see as their replacements cannot be purchased from abroad. In particular, Pakistan’s ballistic and cruise missile program has been advancing at a snail’s pace when compared to that of other nations. 

Where any well-established defence company would be constantly evolving designs to make them smaller, cheaper, and more effective, Pakistan’s strategic SOEs have been churning out the same Shaheen series missiles and the same Babur and Ra’ad cruise missiles with incremental changes over decades. 

Although official numbers are hard to come by, the Babur series of cruise missiles seems to have maxed out its range at around 800 km. In contrast, the Tomahawk cruise missile, which the Babur is allegedly based off of and has similar dimensions, has a range of up to 2500 km. 

If this was a matter of intentionally lowering the range due to targeting reasons, then why would the Babur have the same dimensions as the 2.500 km-range Tomahawk?

Another example is the AGM-158 JASSM air-launched cruise missile (ALCM), which entered service in 2009 with a range of 370 km. This evolved into the JASSM-ER with a range of 925 km, and entered service in 2014. 

In contrast, Pakistan’s Ra’ad ALCM, which was similar in size and specifications to the JASSM, was first tested in 2007 with a range of 350 km, and even today, the Ra’ad II can only reach out to 600 km. 

Of course, comparing Pakistan to the United States is not fair, but the point of this comparison is to show how slow Pakistanis SOEs are at evolving its products, even though it had achieved base competencies in the 2000s. 

Newer versions take decades and have marginal improvements. 

This has meant that Pakistan’s strategic systems have become increasingly outdated. Perhaps this is a function of the adage, “if it works why change it?” mentality coupled with tightening economic conditions.

Another example is the (lack of) evolution of the Shaheen series of ballistic missiles. 

Even though these missiles have been produced for decades, we have not seen advances in propulsion technology such as advanced propellants and casings that would allow smaller and lighter missiles to achieve the same range. 

Instead, we have seen the Shaheen-III, which is simply an enlarged Shaheen-II. 

Another example of the lack of evolution is the continued use of the crude staging mechanisms on both the Shaheen-II and Shaheen-III. 

Furthermore, the reentry vehicles are still using the original designs. 

We have seen incremental improvements in these missiles, but the basic designs have been stuck in their original forms. 

One only needs to look at India’s ballistic missile program to see what actual R&D in ballistic missiles looks like, given how at one point their rocket program was behind that of Pakistan’s.

The Price of Failures

As stated previously, the price paid for these failures is two-fold. 

Firstly, Pakistan’s armed forces are deprived of key capabilities that they require to maintain a balance of power vis-a-vis India. 

Secondly, precious foreign currency reserves end up being spent on procurement of foreign replacements of local failures. 

This is especially appalling, given how much taxpayer money is spent running Pakistan’s strategic SOEs. Given the trajectory of Pakistan’s economy, this has become increasingly unsustainable. Moreover, in some cases, such as for strategic systems, no foreign alternatives are present. 

The Reason for Failures

The natural question to ask is the reason for this failure. 

The reasons for these failures have been detailed in a previous series of Quwa articles

In short, the core issue is that the incentive structure under which these organizations operate is all wrong. 

They are overstaffed and given all of the funding they would need and are asked to develop systems with bare-minimum performance specifications. 

There is no profit-driven motivation to innovate. 

The objective is to develop the minimum viable product with no points for going beyond that. There is no reason to evolve or innovate since there is no actual competition.

Even if the armed forces choose to buy foreign UCAVs instead of local ones, there will be no economic feedback in the shape of loss in profits for the organization making the Shahpar-II because it does not operate as a business but as a government-subsidized service.

And so, they will continue to make the Shahpar-II without evolving it into the TB-2-competitor that it has the promise to be.


The most fascinating thing about the state of Pakistan’s defence industry is that most of the ingredients are already present. 

There are vast factories and R&D centers staffed with thousands of talented researchers. The missing ingredient is the right policy direction. 

The impact that this change can have is massive. 

For an idea of the possible impact, Pakistan’s defence exports in 2021 were a paltry US $3.8 million, while in comparison, Turkiye exported over US $3 billion the same year. 

Comparisons to Turkiye are useful since they have essentially climbed the technological ladder to achieve their status in the world market. This is something that Pakistan can replicate.

A particularly disheartening example is of the Fauji Foundation. 

In the 1970s Turkiye established the armed forces foundation that established businesses such as ASELSAN and HAVELSAN, which are internationally competitive companies today. 

On the other hand, Pakistan established Fauji Foundation, which instead went into the business of fertilizers, banks, cereals, and cement among other things – none of which produce exportable products in any meaningful way. 

It is a shame that the armed forces of Pakistan chose to go into business to earn profits from the local market while on the other hand running the defence organizations under protections that have essentially atrophied their capacity to innovate.

A Path Forward

There exists a massive potential in Pakistan for turning the burden of imports into an export opportunity. What is needed is to view Pakistan’s strategic SOEs as companies that need to be internationally competitive.

Pakistan can no longer afford to dish out taxpayer money to sustain organizations that are barely productive.

There needs to be a gradual shift to profit-making as an incentive. 

Pakistan needs to make all the strategic SOEs responsible for raising an increasing amount of their own capital. In parallel, gradually increasing profit targets need to be set. 

This will be much more gradual and thus more palatable than privatization, which in this case may do more harm than good. 

However, the end goal of opening our SOEs to the open market remains. This will gradually transition them into organizations that care about the bottom line and thus innovate in their products. 

Another path to achieve the same thing is to set up a new private venture from scratch and simply see what it can achieve relative to the established SOEs. 

This carries the very real risk of duplication of effort but eventually, this private company may eventually absorb the unproductive SOEs. 

There is some indication that such a private venture is in the process of being set up with the collaboration of Turkish Aerospace Industries (TAI) for the design, development, and manufacture of UAVs.

Regardless of the path taken, a revamping of Pakistan’s defence industry will have several benefits for Pakistan:

  • Pakistan’s armed forces will have world-class products available locally that they can have tailored to their exact requirements.
  • More control on sensitive technologies can be maintained by Pakistan’s armed forces. This is especially important with regards to radar and electronic warfare/intelligence systems.

  • Precious foreign exchange can be saved by preventing expensive foreign buys.

  • Precious foreign exchange can be earned by exporting the products that are developed.

  • Instead of being a burden on the national exchequer these companies will be a source of revenue for the government.


Even though decades of protectionism and nonexistent incentive structure have gradually stifled the capacity to innovate in Pakistan’s strategic SOEs, there is still hope for change for the better. 

Large R&D centers with thousands of trained engineers lie mostly idle. All that is needed is to manage these organizations like businesses with actual incentives to innovate. This has the very real potential of turning these burdens on our economy to assets.

Author Profile: Syed Aseem Ul Islam is a Research Scholar at the University of Michigan, Ann Arbor, USA, specializing in adaptive and model-predictive flight control systems. He received his bachelor’s degree in aerospace engineering from the Institute of Space Technology, Islamabad, and his master’s and Ph.D. degrees in flight dynamics and control from the University of Michigan.

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