Pakistan Defence and Security Report Q1 2009

The Mumbai terrorist attacks of November 2008 rocked South Asia and have sparked fears of regional instability and a flare up of tensions between India and Pakistan. The only terrorist captured alive, Mohammad Ajmal Amir, disclosed that the group of attackers belonged to Lashkar-e-Toiba, a Pakistani militant organisation. Pakistan has responded to a number of India’s requests in the aftermath of the attacks, and has arrested some twenty members of the terrorist group residing within the country.

Islamabad faces a myriad of challenges as we enter 2009 but two stand out as particularly acute: bringing the presently dysfunctional economy back on an even keel; and quelling the militancy emanating from the country’s restive north-western border region. President Asif Ali Zardari, under formidable external pressure to deal with the latter, will have to work hard to convince Pakistanis that he is his own man, and not at the beck and call of Washington, while also making sure that desperately needed financial assistance materialises.

On the international front, Pakistan and China have held high level talks involving President Zardari and his Chinese counterpart Hu Jintao, as well as other dignitaries. The meetings, held in China in October 2008, were characterised by warmth, friendship and a feeling of mutual understanding, and fashioned a broad agreement on strengthening Pakistan-China strategic relations, first established some 57 years ago.

The meeting reiterated the importance of the 2005 Treaty of Friendship, Co-operation and Goodneighbourly Relations between the two countries and stressed the importance of intensifying co-operation with respect to areas of the economy, defence, science and technology.

Pakistan’s defence industry contains over 20 major public sector units (PSUs) and over 100 private-sector firms. The majority of major weapons systems production and assembly is undertaken by the state-owned PSUs, while the private-sector supplies parts, components, bladed weapons and field equipment. Major PSUs include the Pakistan Ordnance Factory (POF), Heavy Industries Taxila (HIT), Karachi Shipyard and Engineering Works (KSEW) and the Pakistan Machine Tool Factory. Multinational presence in Pakistan is limited, although joint production or engineering support in the development of certain armaments has recently occurred with companies such as DCN International and the Chengdu Aircraft Industry Group.

In November 2008, Ministry of Defence Production Secretary Shahid Siddiq Tirmizi announced that as many as eight countries have expressed interest in acquiring the newly launched JF-17 Thunder fighter, a China-Pakistan joint venture. Tirmizi expects that 800 or more could be produced once sale agreements have been reached. The Pakistan Air Force has been putting the new jet through its paces with a series of trials and technical evaluations. Other defence products of Pakistani extraction garnering interest in international circles include unmanned aerial vehicles (UAVs), air defence systems, tank simulators, and anti-tank guided missiles. Tirmizi noted that between 2006 and 2008, Pakistan had exported US$400mn worth of defence products.

Meanwhile, the Pakistani economy is likely to experience continued turbulence over the remainder of FY09, in view of lingering inflationary pressures, serious security woes and unfavourable external dynamics, and this will in all likelihood manifest itself in slower growth. However, beyond the short-tomedium term, we expect to see a gradual stabilisation of the economy and remain reasonably sanguine about Pakistan’s longer-term growth prospects.