Staff member
Nov 17, 2017
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Nov 27, 2017
by Bilal Khan

Pakistan’s Defence Export Promotion Organization (DEPO) is jointly hosting a two-day seminar with the Sustainable Development Policy Institute (SDPI).
Titled, “Pakistan’s Defence Industry: Export Potential, Challenges and Prospects,” the seminar aims to pose and address central questions regarding Pakistan’s efforts to expand its defence industry.

The seminar, beginning today on November 28, will involve current and former government officials, top bureaucrats and domestic industry leaders as keynote speakers and discussion chairs.

In particular, DEPO hopes to focus on Pakistan’s efforts to secure a greater share of the global arms trade market, which has managed $1.69 trillion U.S. in worldwide expenditure in 2016.

In its statement, DEPO outlines the purpose of the seminar:
To provide a platform for entrepreneurs, financial experts, engineers, policy makers and academia to review Pakistan’s defence industry and its potential to meet domestic needs and make recommendations for developing draft strategy framework to secure desired share of defence industry products in global arms export market.​
Last week, DEPO’s Coordination Director Brig. Gen. Waheed Mumtaz told local journalists (Business Recorder) that “Pakistan has no policy to export defence products,” adding that current efforts fail in terms of clear messaging to prospective customers, neglect potential markets and do not emulate the industry best practices of competitors.

According to Brig. Gen. Mumtaz, Pakistan realized defence exports of $270 million in 2016-2017, with the Pakistan Aeronautical Complex (PAC) Super Mushshak being a key product for growth. However, it should be noted that Pakistan Ordnance Factories (POF) is the constant in Pakistan’s defence exports, generating $67.73 million in sales in 2016-2017.

Notes & Comments:
The general doctrine of Pakistan’s state-owned defence industry vendors, such as Heavy Industries Taxila (HIT), POF, PAC, Karachi Shipyard & Engineering Works (KSEW) and others, is to primarily fulfill domestic requirements foremost, with exports being made of surplus capacity and production.

For the latter, the Middle East has been a receptive market, especially for POF and PAC with ammunition and trainer aircraft, respectively. These vendors have played a role in channelling defence expenditure to the domestic industry, especially in terms of maintenance and long-term support. However, some within the Pakistani government and armed forces leadership have called for these inputs to serve a greater role in the economy, especially in terms of generating high-value exports and pulling foreign currency to the country. This was pronounced during the inauguration of the Kamra Aviation City complex.

There are many potential – and complementary – avenues for defence export growth, but for DEPO, the central issue is the absence of a clear and overarching defence export policy. Besides general aspirations, the Pakistani government has not provided an articulate roadmap for growing defence exports. Thus, the country’s vendors, such as POF and HIT, remain in a condition where their respective products are lagging in current market expectations, but require the armed forces to define requirements and facilitate funding for product development (since the primary purpose of these entities is to serve domestic needs). Meeting domestic requirements does not necessarily mean meeting foreign market expectations.

Thus, one of the potential consequences of DEPO raising this question (of requiring an export policy) could be to review the purpose of Pakistan’s defence industry vendors. The current focus of POF et. al is to serve domestic armed forces requirements. For example, if the Army procures a new assault rifle, that assault rifle will be built under license at POF for meeting Army requirements.

Could this paradigm shift by having POF become an independent (but state-owned) vendor offering a solution to the Army? In this respect, POF would source an assault rifle (be it through original design or partnership with a foreign company) and propose it to the Army. In effect, POF et. al would become less of production depots and instead a domestic marketplace for the armed forces. This model would enable POF et. al to develop their respective product catalogues in alignment to overseas market expectations.

The above is simply an analysis of what Pakistan’s defence and economic planners will consider, alongside faithfully pursuing commercial offsets, engaging the private sector and co-production partnerships.