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Understanding Pakistan’s Defence Industry Woes

In July 2019, the Pakistan Army’s (PA) Chief of Army Staff (COAS) General Qamar Javed Bajwa called for Pakistani defence industry entities to “amplify indigenization through fully integrated public and private organizations in defence production for meaningful progression in the defence of the country.”[1]

As noted on numerous occasions, the call for improving Pakistan’s defence industry – especially in terms of private sector contributions – is not new.[2] However, despite repeated statements to this effect, there has been limited progress in structuring the country’s defence industry towards achieving those goals.

The oft-cited causes for this are many. As an example, the managing director of Bow Systems Ltd., Shahzad Ahmed Mir, told Defense News that Pakistan’s civilian bureaucracy is a major obstacle to change.[3] Be it a lack of efficiency or unwillingness, the private sector lacks an avenue in supporting the military’s needs.

On the other end, Integrated Dynamics’ head, Raja S. Khan, noted that Pakistan deflated its drone industry when it moved development work to its state-owned enterprises. Likewise, Khan said that Pakistan does not “allow private sector entities to develop and test their designs.”[4]

Though bureaucratic hurdles and inefficiencies are barriers, Raja S. Khan’s perspective (which comes from the vantage point of a once growing defence firm) sheds light on the root problem. Basically, the Pakistani armed forces do not approach the local industry as a market of solutions, but as glorified armories.

Be it the mature industries in the US or new, thriving ones in Turkey, it is common to see domestic (along with foreign) players pitch different solutions for the armed forces’ requirements. So, the military releases a set of specifications, and the industry responds with proposals.

These proposals can involve original, domestically designed products or foreign ones through partnerships between local and outside companies. In any case, the responding business has a degree of autonomy in how it designs/secures the product. The business is also responsible for adjusting its processes to control costs, offer unique features, and other competitive advantages.

Ultimately, as far as the military is concerned, it simply sees the final offering. Yes, it can stipulate a series of requirements regarding local-sourcing, security controls, etc., but it does not micromanage processes or necessarily interfere with the business’ internal processes (e.g., for design, testing, etc).

However, in Pakistan, the defence industry does not operate with that level of freedom. And this reality is a result of the fact that the vast majority of defence production is conducted under state-owned entities (SOE). But the SOEs do not operate behind a gap, they are production entities owned directly by the armed forces. In a way, they are like armories that roll-out new weapons whenever the armed forces need them.

As a result, the armed forces dictate how Heavy Industries Taxila (HIT), Pakistan Ordnance Factories (POF), Pakistan Aeronautical Complex (PAC), Karachi Shipyards & Engineering Works (KSEW), etc., should work in terms of processes, product development, etc, at all times.

For the most part, these entities are devoid of the freedom and, in most cases, the capacity to undertake original design or product development work. In fact, they only produce solutions that the armed forces select, usually under transfer-of-technology (ToT) or co-production arrangements.

They basically follow a script, and very rarely, can they deviate from that script because the training and facilities are all geared towards producing a pre-determined product. So, for example, POF’s product line for assault rifles is tied to the Heckler & Koch G-3, or HIT’s armoured personnel carrier (APC) line is tied to the M113 and its evolutions, such as the Talha, Saad, and Hamza.

In fact, if you recall the original design attempts by both POF and HIT via the PK08 assault rifle and Viper infantry fighting vehicle (IFV), both are direct developments of the G-3 and M113, respectively. Moreover, neither can move away from those platforms without the Army vertically changing their infrastructure and processes by opting for a next-generation system from abroad and, in turn, acquiring ToT.

Thus, there is no scope for these entities to propose original solutions. It is not because they are SOEs, but that they are essentially departments of the armed forces – i.e., armories that produce new weapons on demand. However, this reality was not borne out of malice.

HIT, POF, PAC, KSEW, etc., were created to enable the armed forces to operate amid sanctions, especially during war time. A gap between armed forces decision-makers and these entities would constitute a risk in terms of misalignment, miscommunication, or compromise. The closer these entities are to the armed forces the more efficiently can the armed forces operate in wartime.

However, that tight control prevents these entities from original design work, or even changing their own product lines. For example, though the PA was not ready to procure a new mainstay assault rifle, why did that issue prevent POF from phasing-out the G-3? The cost of transitioning POF to a new rifle is less than the cost of infrastructure change and issuing across the Army.

From the Army’s standpoint, there was no need to upgrade POF because the Army has no current need for a new assault rifle. However, because of that decision, POF can only compete in the market through a legacy product. There could have been an opportunity to invest in POF by switching it over to a new rifle, and then try to recoup those costs through export orders (if not get a profitable return).

However, for that line of thinking to occur, the leadership of POF et. al should be commercially focused, not departmental where the armed forces see them as armories. Interestingly, it appears that the Pakistan Air Force (PAF) recognized this at one point, and in turn, opted to start the Kamra Aviation City project.

Basically, the PAF decided to keep PAC on its current track, but then deferred product design work to new entities, such as the Aviation Design Institute (AvDI), Mission Electronics Design Institute (MEDI), the Aero-Structures Design Institute (ASDI), and Advanced Technologies Centre (ATC).

Though the general goal for each of these entities is to contribute towards Project Azm, the PAF seems to have set objectives for each across many subsystems, components, and applications. Now, each one must fulfill the goal, ostensibly with the expertise, processes, and capacity they deem fit. Granted, there will be limits due to funding, but that constraint is not unique to Pakistan.

An interesting aspect of Project Azm is that the PAF set-up multiple entities, each specializing in a general domain. However, the categories are still broad enough to allow these entities to sub-contract their work to other firms. For example, AvDI manages “aerodynamics, antennas, fly-by-wire, payloads, sensor fusion, stealth, structures, etc.” In theory, one can have a company dedicated to each of the above areas.

Thus, AvDI could sub-contract one or several of these areas to the private sector. Yes, the PAF can opt to expand AvDI (or other entities) if necessary, but if the lack of in-house engineers or capacity becomes an issue, AvDI et. al can defer the work to private sector businesses.

In turn, the sub-contracting work could spur modest private sector investments in the aviation sector. It may not result in large-scale private manufacturing, but it could result in an assortment of new companies specializing in engineering, development, and other high-tech fields. With time, the market could compel these smaller entities to merge or acquire one another, and later result in larger enterprises.

The key will be to convince the private sector to invest in building-up the necessary capacity and develop the talent. Thus, sub-contracting/outsourcing the private sector is a must to build confidence.

However, an interesting aspect of Project Azm is that its outcomes, such as flight control electronics design work, could extend to third-party users as well. Thus, these same private sector organizations can export their services to foreign businesses as well. So, the incentive to invest is not just limited to PAF needs.

But to create that incentive, Pakistan must create favourable regulations that will allow the private sector to undertake defence related design, development, and testing. In his statements to Defence News, Raja S. Khan, the head of Integrated Dynamics, stated that allowing “private sector entities to develop and test their designs” is essential for reviving the unmanned aerial vehicle (UAV) space.[5]

The same holds true for other defence applications. Through Project Azm, Pakistan has an opportunity to build an eco-system of publicly and privately-owned firms that can support domestic needs and export a wide range of services and solutions. The PAF is hoping for this outcome, but it will require a substantial amount of confidence on the part of investors and, on the PAF’s part, trust in the industry.

Currently, it is unclear how much trust the PAF – and the Army and Navy for that matter – actually have.

[1] “COAS stresses need for public-private partnership in Pakistan’s defence industry.” Geo News. 19 July 2019. URL: https://www.geo.tv/latest/243361-coas-stresses-need-for-public-private-partnership-in-pakistans-defence-industry

[2] Usman Ansari. “Pakistan wants to create a self-reliant, self-sustained defense industry.” Defense News. 25 July 2019. URL: https://www.defensenews.com/global/asia-pacific/2019/07/25/pakistan-wants-to-create-a-self-reliant-self-sustained-defense-industry/

[3] Ansari. Defense News.

[4] Ibid.

[5] Ibid.

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