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.