BMI View: We expect an escalation in domestic security threats though 2015 in response to the NATO withdrawal from Afghanistan, the ongoing military offensive in the Federally Administered Tribal Area (FATA), and rising tensions with Indian forces along the Jammu Kashmir border. The Pakistan Government has increased military spending, and is investing in indigenous defence companies. They in turn are looking to increase capacity through international partnership, creating opportunities for foreign players.
The security situation in Pakistan has steadily deteriorated through 2014. Last year witnessed regular terrorist attacks against military and civilian assets, including Karachi International Airport. This illustrates that domestic and international terror cells are well resourced and well trained, making them a credible threat to domestic and international organisations. Moreover, the NATO withdrawal from Afghanistan will offer more freedom for militants to operate across the porous border region with Afghanistan, where the Pakistan defence forces have launched a military offensive against the Taliban.
We also observe increased scope for interstate conflict with neighbouring India though 2014. Small arms fire and mortar exchanges occurred along the Jammu Kashmir border with increasing frequency, raising bilateral tensions to their highest point in a decade. Given its commitment in the west of the country, Pakistan will be unwilling to militarily engage India on a higher level. Over the last decade, the Indian army has grown in size and sophistication, and is now more powerful than the Pakistan armed forces, which are reliant on weapons of mass destruction as their ultimate deterrent.
In light of the increased scope for terrorism, interstate conflict, and criminality, the government of Pakistan is raising military expenditure. National defence spending grew by 11% in 2014, and remains a public expenditure priority, commanding 18% of the budget. Defence spending is highly skewed in favour of the Pakistan Army, and defence chiefs have highlighted weakness in air and naval hardware in Pakistan, which is losing ground to India with regards to overall military capability. As a result, aircraft, ship, and submarine purchases dominate the current procurement plan.
Pakistan has a well established indigenous defence industry, which is the primary supplier of small arms and ammunition, as well as bombs and munitions to the Pakistani military. It exports to a small degree, but overall revenues are slim. Local defence firms have also developed sophisticated missile systems with a range as long as 2,500km and capable of carrying nuclear warheads. However, budget limitations and poor access to international markets have served to limit technological capabilities of local manufacturers. Local firms have thus licensed international designs to develop sophisticated weapons systems. Key projects include the JF-17 Thunder combat aircraft, al-Khalid Main Battle Tanks, and unmanned aerial vehicles (UAVs).
These weapons are still in the development phase, and defence imports are sustaining military capabilities in the meantime. Major procurements include upgraded F16 combat aircraft from the Royal Jordanian Air Force. Meanwhile, Turkish and US firms have upgraded Pakistan's exiting fleet. Also in 2014, Russia ended its arms embargo on Pakistan and agreed to supply an unspecified number of Mi-35 'Hind E' attack helicopters to the Pakistan Army. Future procurements funded by Chinese loans are also expected to include submarines and missile boats. Most recently, the US State Department cleared the sale of 160 Mine Resistant Ambush Protected (MRAP) vehicles and parts to the Pakistani military in September 2014. These systems will raise Pakistani defence capabilities, but further investment is needed to match India's modernisation programme.
The Pakistan Defence & Security Report features BMI Research's independent forecasts for national and international security, the defence industry, military expenditure, employment in arms production, and arms imports and exports, as well as examining industry trends and prospects, national and multinational arms producers and the regulatory environment.
BMI's Pakistan Defence & Security Report provides professionals, consultancies, government departments, regulatory bodies and researchers with independent forecasts and regional competitive intelligence on the Pakistani defence and security industry.
- Benchmark BMI's independent defence and security industry forecasts on Pakistan to test other views - a key input for successful budgetary and strategic business planning in the Pakistani defence and security market.
- Target business opportunities and risks in the Asia defence and security sector through reviews of latest industry trends, regulatory changes and major deals, projects and investments in Asia.
- Assess the activities, strategy and market position of your competitors, partners and clients via our Company Profiles (inc. KPIs and latest activity).
Global and Regional Political Outlooks
A strategic overview of the world’s major political risks, identifying countries facing leadership successions and nations at risk of upheaval, inter-state conflict, or separatism and insurgencies, plus a summary of the world’s ‘wild card’ low-probability high-impact risks.
Snapshot evaluation of the major issues affecting the defence and security sectors, economy and politics, with issues subdivided into strengths, weaknesses, opportunities and threats.
BMI Industry Forecast Scenario
Historic data series and forecasts to end-2019 for key industry indicators supported by explicit assumptions, plus analysis of key downside risks to the main forecast.
- Defence Expenditure: Defence expenditure (local currency and USDbn); defence expenditure (% of total budget); defence expenditure per capita (USD); defence budget (local currency and USDbn).
- Armed Forces (to 2012): Manpower available for military service, manpower fit for militaryservice, army personnel, navy personnel,air force personnel, total armed forces, (‘000) (% population).
- Arms Trade: Arms and ammunition exports and imports (USDmn); bombs, grenades and missiles exports and imports (USDmn); revolver and pistol exports and imports (USDmn); weapons excluding guns and swords exports and imports (USDmn).
Political Risk Assessment
Drawing on BMI’s heritage of more than 25 years of Country Risk analysis, this comprehensively evaluates the key risks to domestic politics and foreign relations, focusing on issues most likely to affect either domestic security or the defence sector.
Security Risk Analysis
BMI’s proprietary Security Risk Indices provide investors with a reliable and country-comparable guide to conflict, terrorism and criminal risk, backed up by our analyst’s latest assessment of each component. Furthermore, drawing on our Country Risk expertise, we assess the state’s vulnerability to a serious, or prolonged, terrorist campaign.
Armed Forces Spending/ Expenditure
The reports contain a detailed breakdown of areas of expenditure by the armed forces, these include spending on international deployments, WMDs and missile defence systems as well as individual breakdowns of the cost-per-soldier.
The domestic security overview lists the various potential internal security threats facing a country, ranging from internal security issues such as terrorism, cyber terrorism, crime and drugs, to external security issues including general defence procedures and potential threats from specific countries. The reports also provide a regional overview which details specific issues and flashpoints affecting the Americas, along with potential risks in the coming year.
Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.
The Defence & Security Market reports draw on an extensive network of primary sources, such as multilateral organisations, government departments, industry associations, chambers and company reports.
*Company profiles are not available for every country. Those reports instead contain information on the current activities of prominent companies operating in the market.