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Pakistan Defence and Security Report Q3 2010
Business Monitor International, July 2010, Pages: 98
Business Monitor International's Pakistan Defence and Security Report provides industry professionals and strategists, corporate analysts, defence and security associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Pakistan's defence and security industry.
In June 2010, Pakistan reported an increase in its defence budget of 17% around 5% in real terms, taking into account inflation at around 12%. Budget constraints in previous years have reduced Pakistan’s normally robust training effort and this is a concern for the operational readiness of the military. In February 2010, the US proposed increasing military aid to Pakistan by US$500mn to US$1.2bn, more than in 2009. The country’s well trained and disciplined armed forces are the world’s eighth largest military.
Pakistan is rather at the mercy of political developments in neighbouring countries. Violence along Pakistan’s border regions could become a consistent feature in this politically fragile country. US drone strikes on militants continue through 2010 and those in North and South Waziristan have resulted in the deaths of dozens of militants. There was a number of suicide bombings in February 2010, including two blasts in Karachi that killed 25 people. This increase in the defence budget of around PKR64bn was considered essential in light of the intensifying battle against the Taliban insurgents.
The country’s defence industry is particularly self-sufficient and is able to produce almost all of the domestic military’s ordnance needs and indigenously-designed main battle tanks (MBTs). The biggest sectors in the Pakistan defence industry are shipbuilding, with submarine assemblage capability and ordnance. The military-industrial complex is capable of producing MBTs, trainer aircraft, surface-to-air and anti-tank missile systems, surface and sub-surface naval craft, air-delivered munitions, small arms and a wide range of ammunition and explosives.
Politically, the country’s situation will be largely affected by the efforts of the government to control the situation in Waziristan and in Afghanistan. A long-term strategy is necessary to prevent the Taliban, in Afghanistan, from consolidating power in regions bordering Pakistan and therefore creating a permanent safe haven for the Pakistani Taliban. The Pakistani military could therefore temporarily drive out militants from Pakistan only for them to return once Pakistani army operations have wound down.
The country’s economic situation is not in any better shape. In 2008, a balance of payments crisis that required an IMF bailout together with severe political turmoil, caused real economic growth to plummet to just 2.0% in FY2008/09. Ongoing violence within the country, alongside relatively tight fiscal and monetary conditions (as required by the IMF stand-by arrangement), will unfortunately ensure that the country's economic recovery will struggle to pick up any speed. We forecast Pakistan's real economic growth at just 2.4% and 2.8% in FY2009/10 and FY2010/11 respectively. Prior to the country's descent towards political instability the domestic economy had been ticking along nicely, with growth averaging 6.8% per annum in the five years between FY2002/03 (July-June) and FY2006/07.
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