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Pakistan’s
efforts to boost arms
exports bogged down in bureaucratic red tape
The highly competitive milieu in which arms exporting countries
like Pakistan have to operate, requires a deep understanding of the
changing nature of the international arms market and
the de-linking of sales efforts from time-consuming bureaucratic
procedures
By Kaleem Omar
In December 2000 the government created the
Defence Exports Promotion Organisation (DEPO) with the aim of boosting
export sales of the increasingly sophisticated range of domestically
manufactured weapons systems and other defence-related products to
friendly countries. In the eight years since then Pakistan has held four
international defence exhibitions at the Expo Centre in Karachi to
showcase the products being produced by its state-owned defence
industries. Numerous foreign delegations, including high-level military
officials from Middle Eastern and other developing countries, visited
these defence exhibitions and expressed keen interest in the products on
display.
These delegations were all impressed by the quality of
the products being manufactured by Pakistan and by their highly
competitive prices. In 2002 DEPO also set up a permanent display centre in
Rawalpindi to showcase Pakistani arms and other defence-related products,
and has held numerous detailed sales negotiations with potential foreign
buyers over the years.
Despite all these efforts, however, Pakistan’s arms
exports are still stagnating at an average of less than $ 100 million a
year. Pakistan’s defence industries have the potential to achieve export
sales of up to $ 2 billion to $ 3 billion a year. The problem, however, is
that efforts to boost exports continue to be bogged down in bureaucratic
red tape. This has stifled marketing initiatives and has made it difficult
for DEPO to respond quickly to sales enquiries.
Another problem has to do with the fact that there
seems to be a lack of understanding among DEPO officials and Defence
Ministry bureaucrats of the changing nature of the international arms
market. This state of affairs needs to be urgently remedied if Pakistan is
to make any significant headway in its efforts to boost arms exports. A
restructuring of DEPO along commercial lines and the involvement of the
private sector in marketing efforts is therefore a must, given the highly
competitive milieu in which arms exporting countries like Pakistan have to
operate.
The collapse of the Soviet Union and the end of the
Cold War has produced a sea change in the way countries go about
developing and acquiring weapons. Smaller defence budgets have reduced the
influence of traditional military powers in the market place while at the
same time inducing ever-greater attention to the cost implications of
acquisition decisions, cost-effectiveness tradeoffs, and even to the
acquisition process itself.
As Andrew W. Hull and David R. Markov of the
Washington-based Institute for Defence Analyses (IDA) have noted in a
paper, the drastic reduction in military orders from Russian and Western
European governments, coupled with the failure of most defence conversion
efforts, has forced defence firms to look externally for business and
survival. Firms are also entering strategic transnational business
alliances for technical, financial and competitive reasons.
This globalisation of the arms industry springs from a
variety of complex and often interrelated reasons. These include: (1)
sharing costs and reducing risks of developing and producing new systems;
(2) gaining access to innovative foreign technologies and one-of-a-kind
systems or unique R&D facilities; (3) achieving economies of scale;
(4) developing and penetrating foreign markets that might otherwise be
closed to the partners acting individually; (5) keeping production lines
“hot” through exports and (in the process) keeping those lines
available for future domestic orders should the need arise; (6) enhancing
military interoperability and increasing combat effectiveness among
military allies; and (7) exploiting unprecedented opportunities that
resulted from the collapse of the Soviet bloc and the eroding of barriers
that once foreclosed collaboration between Western and Eastern firms.
Hull and Markov note that a number of important trends
have emerged in the international arms market over the last decade as a
result of the growing importance of exports and declining rules over what
may be exported and to whom. Indeed, today’s arms market is almost
totally unlike that of the Cold War period.
For one thing, an external focus has replaced the
traditional domestic orientation of most arms producers. GICAT (an
association of French ground force equipment producers) claims that 44 per
cent of the sales of its members have come from exports since 1999. A
discussion of this issue on the GICAT Internet website goes so far as to
assert that exports “govern the survival of this industry.” While that
claim may seem a bit exaggerated at first blush, it is probably true
especially for some Russian military equipment producers. Foreign
customers, for example, have almost entirely filled Sukhoi’s
aircraft’s order book over the last few years.
Second, arms are now just another commodity. Once,
arms transfers were seen mainly as tools of foreign policy whose primary
value was political. As such, arms transfers during the Cold War were
judged primarily from a national security perspective. This has changed
radically since the end of the Cold War. Generally, arms are now seen as
just another commodity in international trade, except when proposed sales
would go to United Nations embargoed states, involve long-range ballistic
missiles and/or the transfer of weapons of mass destruction.
Third, the defence business is more highly competitive
than ever before. Consequently, it has become a buyer’s market. Because
many customers are now offering hard cash to acquire foreign weapons (as
opposed to accepting foreign military credits, foreign aid or low-interest
loans from the seller as in the past), they can now demand the very best,
even if its is not proffered by the seller. The day of the “stripped
down” export model is a thing of the past.
Cash can even overcome policy considerations. The
United Arab Emirates, for example, demanded that the US reverse
long-standing policies by offering ‘Amraam’ air-to-air missiles on the
80 F-16s acquired by the UAE for its $ 8 billion fighter programme. UAE
officials insisted they would not even consider the F-16s without AMRAAM.
Eventually, the US government agreed to this condition, despite strenuous
objections from Israel. The UAE again used the leverage offered by this
same large aircraft purchase to persuade France to make the Apache/Scalp
EG land attack cruise missiles available.
Fourth, a wide array of ever more sophisticated
defence and dual-use products are being offered in the international
market place. International arms shows are now displaying (and in most
cases offering to sell) a potpourri of sophisticated technologies that
would have been unthinkable 10 years ago. Selected examples of such
“blockbuster” technologies include: (1) explosive reactive armours and
active tank defence systems; (2) laser “dazzlers”; (3) low-observable
technologies; (4) counter-stealth systems for detecting low-observable
aircraft; (5) countermeasures to ballistic missile defence systems; (6)
guided warheads for tactical ballistic missiles; (7) GPS (global
positioning system) jammers; (8) commercial satellite photography; (9)
military surveillance satellites; and (1) cryptological equipment. This
virtual free-flow of military systems is, in part, the by-product of the
demise of most export control restrictions.
Fifth, there is a growing trend towards the
hybridising of weapons. The Chinese, for example, are now the systems
integrator for the FC-1 fighter whose airframe and engine are drawn from
Russian designs; avionics will come from Britain or France, and is being
built primarily for an export client. Similarly, French night vision
devices were added to Russian infantry fighting vehicles in order to
secure a sale of BMP-3s to the UAE. South Africa is also offering to fit
its T-6 155mm self-propelled artillery turret (a variant similar in
capability to the world-renowned G-6 system) onto the Indian Arjun tank
chasis.
Sixth, instead of buying new equipment, many fiscally
constrained nations are looking to modernise their existing inventories
through upgrade packages.
Savings from going with upgrades can be significant.
For example, the price tag on an upgraded fighter can be as little as 20
per cent of the cost of a new aircraft. At the same time, upgrades can
increase an older platform’s performance dramatically. The Russians
claim that their upgrade programme for Indian MiG-21s will result in an
“eightfold increase in air-to-air performance” and a “fourfold
improvement in air-to-ground performance.”
Offers to upgrade existing equipment are not just
confined to the original manufactures. Israel, for example, has a MiG-21
upgrade package that competes with the Russian upgrade (such an upgrade
was performed for Romania by Israel). Similarly, there are Thai companies
offering replacement tracks for Chinese armoured vehicles and South
African companies marketing road wheels and track to upgrade non-South
African tanks and armoured personnel vehicles.
Seventh, commercial off-the-shelf technologies are
being increasingly used to satisfy military requirements. According to
French acquisition reform literature, three-quarters of the military
research undertaken in European programmes now involves dual-use
technology. Similarly, Japanese acquisition reform efforts emphasise
greater reliance on commercially available products. Even the Russians
have equipped the Mig-29SMT and MiG-29UBT with commercial flat panel
displays originally developed for the American Boeing 777 commercial
airliners.
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