Non-Subscriber Extract
JWDI briefing: Pakistan's defence industry
07 January 2008
Although there is no civilian involvement in its state-run defence production process at all - which has led to an extremely secretive, unorthodox and unobjective structure - it is clear that Pakistan's defence industries have benefited from a high level of government investment over a number of years. In 2007, the country's official defence budget increased by 9.13 per cent to USD4.54 billion, indicating a return to the large spending increases during 2001 to 2005. In addition to these finances, Pakistan receives substantial US aid as a key ally of the US in its 'war on terror'.
As the government has sought to maximise national self-reliance over the past decade, considerable amounts of money have been received by the defence industries, which has led to the manufacturing of products that are generally of a high standard (some of which have ISO-9002 certification, which is not granted lightly and is regionally unknown). Many products are cheaper than similar items produced by Western countries, and of comparable reliability, which has had a positive effect on exports, which now stand at about USD200 million a year.
The Pakistan government needs to do more, though, to encourage private industries to enter into defence. At present the system to enter into the defence production system is bureaucratic and excessively concerned with security, and this has dissuaded many companies from becoming involved.
Unlike most countries, there is no structured approach to capital acquisition and programme management and budgeting - as is recognised on most other countries - is not practised. Moreover, defence spending transparency is virtually non-existent apart from the overall annual budget: the government provides no specifics. Widely accepted analysis indicates that the budget does not include military pensions, which account for about PKR30-40 billion, foreign military aid, procurement using foreign credit and procurement using funds generated by the Pakistani armed forces' diverse business interests.
In 2007 the official defence budget increased by 9.13 per cent to USD4.54 billion. This rise represented a return to large spending increases between 2001 to 2005 when spending increases averaged about USD420 million or 13.54 per cent each year. The large increases were interrupted in 2006 when, despite an increase of 20 per cent in total government spending in the 2006/07 state budget and real economic growth of 6 per cent, defence spending as measured by the official budget increased by just under 3.8 per cent. Jane's Defence Budgets predicts that defence spending in Pakistan will rise to USD6.14 billion in 2010, with, on average, 10 per cent annual increases from 2007.
Image: Pakistan Aeronautical Complex's MFI-17 Super Mushshak (Jane's/Patrick Allen)