Pakistan is a major non-NATO ally of the US and a significant collaborator with China in the area of defense development. The annual increases in the Pakistani defense budget are largely due to the country’s long-standing territorial dispute with neighboring India and the internal instability caused by radical terrorist groups. Furthermore, the country receives substantial military aid from the US for its participation in the ‘war on terror’, which is used to procure advanced fighter jets and missile systems. Over the forecast period Pakistan is expected to make procurements in areas such as submarines and submarine technology, drones for attack-grade unmanned aerial vehicles (UAVs), surveillance equipment and satellites for ground monitoring, fighter jets and associated support systems, air-to-air missile systems, attack helicopters and engines for the development of aerial refueling aircraft.
Pakistan has been subjected to more than 5,000 terrorist attacks in the past five years, which have not only resulted in the death of many civilians, but have also adversely affected the country’s economy as several foreign companies have ceased operations and new ones are reluctant to establish new business.
As a result of the lack of a structured defense budgeting policy until 2008, the Pakistani defense industry has experienced widespread corruption in the use of allocated funds. Indeed, although defense procurements are supposed to be made through competitive bidding, this rule is not strictly enforced, which leads to a lack of transparency in the awarding of defense deals.
Pakistan does not disclose the amount allocated for capital expenditure or the portion of US military aid assigned for expenses. Historically, domestic military industrial complexes have been subjected to the severe mismanagement of budgeted funds, which has impeded the growth of the domestic defense industry.
The US has established a Pakistani counter-insurgency fund annually to take effect from 2011 onwards, to provide the Pakistani Armed Forces with counter-insurgency training and related defense systems. Historically, US defense firms have entered the Pakistani defense industry through government initiated foreign military sales. Furthermore, Pakistan promotes the joint development of defense systems, which has resulted in a number of joint ventures with Chinese and German companies in areas such as submarines, trainer aircraft, fighter jets and UAVs
Pakistan is currently in development of an indigenous attack grade UAV, known as Burraq, which will significantly increase the procurement of drones, surveillance equipment and satellites for ground monitoring. The country is also expected to procure technology to develop drones that have attack capabilities.
Comment related to image / graph: Without a structured defense procurement program until 2008, capital expenditure accounted for an average of 28% of Pakistan’s total defense expenditure during the review period, which included the acquisition of defense systems, the expansion of domestic defense firms and the R&D of indigenous defense systems.
Source: ASDReports - Market Research
Date: Jan 17, 2012