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This Week in Review: Budgets, Growth and Relations

Every Sunday, Quwa will close the week’s news with a review and analysis with the aim to tie together several topics into broader themes. It is an opportunity to reflect upon and discuss issues in a way where key trends are identified and individual news topics are connected into a “bigger picture.”

Rising Defence Expenditure

Bangladesh and Pakistan have boosted their defence budgets to $2.8 billion and $8.2 billion, respectively. Big-ticket procurements are on the radar for both countries, though it seems the two will depend on credit or loans as a means to finance their purchases.

China will figure centrally, though Dhaka and Islamabad may try to open doors in Moscow. Bangladesh had succeeded in securing a Russian line-of-credit for its purchase of 16 Yak-130 lead-in fighter trainers (LIFT), but fresh support will depend on Russia’s abilities to offer such support. Unfortunately, Moscow is beset with a precarious economic situation. But China could (and likely will) make in-roads.

Pakistan, although interested in acquiring Russian arms, will have more trouble on that front. Although the U.S. is proactively vying to pull India into its sphere of influence (by recently declaring it a “Major Defence Partner”), India is looking to balance its ties with Moscow, Washington and Beijing. For Pakistan to access Russian arms, it will need to speak in terms of its own abilities, namely its fiscal power, proactive foreign relations policy, and tangibly demonstrating that it is serious about its vital national interests.

That said, Pakistan did allocate a little over $2 billion for defence expenditures. To what extent Russian arms are involved (or at all) is not known, but irrespective of Pakistan’s economic situation and political position at this time, its defence needs are borne out of a genuinely tough geo-political neighbourhood.

Growth for Countries and Companies

It has been an eventful week in the defence industry sphere. In South Korea, Daewoo Shipbuilding & Marine Engineering (DSME) recently launched the first Daegu-class (FFX-II) multi-mission frigate for the Republic of Korea (RoK) Navy. Turkey and Sikorsky succeeded in signing a landmark agreement that will enable Turkish Aerospace Industries (TAI) to produce much of the S-70 Black Hawk helicopter (along with its engine) under license. Qatar placed an order for 24 Boeing AH-64E Apache Guardian attack helicopters.

There are several key trends at play. Turkey, Qatar and South Korea are heavily engaged in elevating their respective capabilities. In relative terms, the enhancement is more profound in Qatar, which is on-track to expanding and enhancing its air combat fleet.

Although neither is a stranger to domestically sourcing their defence needs, Turkey and South Korea continue to make strides in producing capable weapon systems. However, South Korea and Turkey are also hoping to generate lucrative leads in the global defence market. For example, Turkey is in talks with Pakistan over a number of potential big-ticket acquisitions.

Nurturing Valuable Relationships

Technology and expertise are immensely valuable for countries seeking to build their indigenous defence industries. It is for this reason that India is looking to loop Saab into the Tejas program, though Saab may be more eager to push its Gripen platform to the Indian Air Force (IAF). Although a different goal, Saab is still eager to enhance India’s defence industry, particularly its private sector. For Saab, a sizable Gripen order from the IAF and India’s participation in the Gripen’s global supply chain could position the Gripen as a less costly and more widely supported platform. Given the importance of such a breakthrough, one should expect Saab to offer substantial technology transfer and commercial offset concessions to India.

Meanwhile, Pakistan seems to be making tangible steps towards modernizing its principal small arms and ammunitions supplier, Pakistan Ordnance Factories (POF). The first step lies in a recent memorandum of understanding between POF and what appears to be an Italian industrial vendor. POF’s production line needs to be modernized in order to cope with the demands of not only the global small arms market, but of Pakistan’s small arms needs. Improvements in quality, efficiency and capacity are critical.