Pakistan Defence and Security Report Q2 2009

Recent comments by British Foreign Secretary David Milliband that Pakistani state institutions were not involved in the Mumbai carnage has been gratefully seized on by the government as tacit backing for its commitment to the on-going global war against terrorism. The Mumbai terrorist attacks of November 2008 rocked South Asia and 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 since arrested 20 members of the terrorist group residing within the country. The government has also been quick to downplay some of the more bellicose statements made in the run-up to the elections in India in May as nothing but grandstanding for local consumption.

In February, the government announced it would accept a system of Islamic law in the Swat valley and agreed to a truce, effectively conceding the area as a Taliban sanctuary and suspending a faltering effort by the army to crush the insurgents. Since then, the government has been working hard to dispel what it calls the misperceived impression by certain circles about the Swat Peace Agreement. The Federal Minister for Defence, Ch. Ahmad Mukhtar said that the agreement would provide speedy justice (an indirect reference to the introduction of Shariah law and its use of corporal punishment in preference to imprisonment) and would go a long way in bringing peace, stability and prosperity to the violence-hit Valley of Swat.

Talking to the visiting Shadow UK Secretary of State for Defence, Dr. Liam Fox, the Federal Minister for Defence highlighted the counter-insurgency and anti-terror efforts made by Pakistan. He went on to say that Pakistan was facing a lot of challenges and the war against terrorism was one of the biggest challenges which required active international support to overcome it.

In March 2009, the Federal Minister for Defence strongly condemned the attack on the Sri Lankan cricket Team in Lahore. Denouncing the attack, he said that “the terrorist anti Pakistani elements wanted to destabilize the country and tarnish its image among the comity of the nations, but they would not be allowed to succeed in their nefarious designs.” The current president, Asif Ali Zardari, lost a lot of his political capital in the protracted dispute with Pakistan's judiciary. Pakistan’s sacked Supreme Court Chief Justice, Iftikhar Chaudhry, resumed his post in March after being ousted by former president Pervez Musharraf in November, 2007, one of the events that affected the outcome of the 2008 elections. This failure to reinstate the judge as promised in the election campaign has significantly weakened the President's power base.

Pakistan’s defence industry contains over 20 major public sector units (PSUs) and over 100 private-sector firms. Major weapons systems production and assembly is dominated 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.

While multinational presence in Pakistan is limited, joint production or engineering support in the development of certain armaments has recently occurred between companies such as DCN International and the Chengdu Aircraft Industry Group. Additionally, in November 2008, Ministry of Defence Production Secretary Shahid Siddiq Tirmizi announced that as many as eight countries had 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.

While macroeconomic stability has improved in the wake of the IMF bailout and as a result of softening commodity prices, restrictive fiscal and monetary policies, the dire energy shortage, weak external demand and continued security problems are likely to drag growth lower in FY2008/09 (July-June) and we now tentatively forecast sub-trend expansion at 2.5%.