Military Business and Pakistan's Industrialization

There has been a great deal of criticism of Pakistani military's role in the industry and the economy of Pakistan since the release of Dr. Ayesha Siddiqa Agha's book "The Military Inc: Inside Pakistan's Military Economy" last year. The book describes in some detail the size and the activities of what Dr. Agha calls "MILBUS", the military business in Pakistan. MILBUS, according to the author, includes banks, insurance, cereals, fertilizer, cement, hospitals and clinics, radio and TV, schools, universities and institutes, etc.

In her strongest criticism of Pakistan's military, the author argues that Pakistani military is a giant which has strong political control, economic control, and a very dominant social presence; a military that has over 7% share of the GDP, which controls one-third of heavy manufacturing in the country, which controls 6-7% private sector assets. It has a huge economic presence. It is a constant story of uneven development, between different organizations and institutions.

While some commentators have challenged Dr. Agha's data and her allegations about the dominance of Pakistan's military in the country's business and economy, this post is designed to question why is it bad for Pakistan's military to play an important role in the nation's business.

To explore the possibility of the Pakistani military playing a much bigger positive role in rapid industrialization and globalization of Pakistani economy, let us take a look the role the Chinese People's Liberation Army (PLA) has played in China's phenomenal economic progress and its emergence as a new superpower in the last few decades.

China's PLA began its manufacturing role for the defense sector that picked up steam after the Sino-Soviet tensions during Mao's time. Manufacturing purely military products, such as arms, ammunition, as well as electronics, plastics and metals for military applications, these so-called "third-line" factories were built in remote mountain regions, far away from transportation routes and power sources. The factories bought supplies at subsidized costs from other factories, manufactured the weaponry and related products -- generally low-tech and low-quality -- and then sold them to the military at subsidized prices.

With the change of leadership after Mao's death in 1976, the new government encouraged the military plants to begin exploring civilian uses for their products and to engage in the broader liberalization of the economy. The most nimble managers were free to exploit new markets for their goods. During the early 1980s, the PLA's share of the national budget declined, spurring it to look to other sources for cash, especially hard currency. The higher organizational levels of the PLA created trading companies like China Xinxing, China Poly and China Songhai to take advantage of the opening of China's economy to the international market, according to British analyst Gary Busch.

They formed banks, holding companies and international trading companies like Everbright to market these goods worldwide. Now the PLA runs farms, factories, mines, hotels, paging and telephone companies and airlines, as well as major trading companies.

Busch says the number of military-run businesses exploded during the boom of the late 1980s. The "third line" factories opened branches in the coastal areas, earning increasingly higher profits from the manufacture and export of civilian goods. Even the lowest levels of the PLA set up production units. In fact the PLA had a largely captive audience of Chinese who had never really had the chance to acquire personal goods produced in China before. In addition to their international arms sales, their production of consumer goods for the domestic market soared.

Since the 1980s, many of the PLA companies have now become part of the global economy. According research done by David Welker for Multinational Monitor, in pursuit of hard currency, many of the companies have listed themselves on capital markets in Hong Kong and elsewhere, opened representative offices in overseas markets, solicited foreign companies for joint ventures and partnerships in China and emphasized exports. The so-called red chips, companies listed on the Hong Kong exchange but which are in fact mainland Chinese firms, are the hottest stocks on the market. Hong Kong is the PLA's favored stock exchange because of its loose disclosure guidelines. China Poly Group has two listed companies: Continental Mariner Company Ltd. and Poly Investments Holdings Ltd. Both Continental Mariner and Poly Investments have a large number of subsidiary companies in mainland China, Hong Kong and tax havens like Liberia, the British Virgin Islands and Panama. China Carrie's listed company in Hong Kong is Hongkong Macau Holdings Ltd. China Carrie also owns HMH China Investments Ltd. on the Toronto Stock Exchange and HMH Gold Mining on the Australian Stock Exchange. 999 Enterprise Group, another company controlled by the PLA General Logistics Department, operates Sanjiu Pharmaceuticals Group, the largest pharmaceuticals manufacturer in China. 999 recently listed on the Hong Kong exchange.

Smaller military enterprises, like the Songliao Automobile Company owned by the PLA Shenyang Military Region, have also listed in the domestic Chinese markets.

China Poly Group is a commercial arm of the Chinese People's Liberation Army (PLA) General Staff Department. The PLA General Logistics Department operates China Xinxing. The PLA General Political Department owns and operates China Carrie. The Northern Army Group runs NORINCO and the PLA Navy runs China Songhai.

Some of these international Chinese companies with PLA connections are very rich and powerful. Some have entered into very controversial projects. A good example is the Hutchison-Whampoa, Hutchison Port Holding (HPH), according to Busch. HPH is a huge, multibillion-dollar company which has set up operations in ports all around the world. From Panama to the Philippines, an arm of Hutchison-Whampoa, Hutchison Port Holding (HPH), has become the world's largest seaport operator, embedding itself in strategic seaports all across the globe. In fact now Hutchison holds the exclusive contract to operate the Panama Canal.

Hutchison-Whampoa has spread everywhere. It has a base in Tanzania where it runs Tanzania International Terminal Services Ltd. In the Western Hemisphere it has seaport services in Buenos Aires, Argentina; Freeport, the Bahamas; Veracruz, Mexico; and at both ends of the Panama Canal. HPH's latest acquisition involved taking over eight Philippine ports. New ports in Mexico, Argentina, Saudi Arabia, Pakistan, Tanzania and Thailand make Hutchision-Whampoa the world's largest private port operator with 23 cargo berths, bringing its worldwide total of ports to a staggering 136.

Other ports include Jakarta, Indonesia; Karachi, Pakistan; India (where the company runs the cellular phone services); Burma; China; and Malaysia. There are port operations in Britain at Harwich, Felixstowe (Britain's largest port), and Thames port, and in the Netherlands at Rotterdam. The company is bidding to set up in South Korea's largest port, Pusan, and is already in Kwangyang, another South Korean port.

Retired PLA officers also continue to support China's transformation to a powerful first world economy by founding such companies as Huawei, the Chinese router giant challenging Cisco's dominance.

Since the early 1990s, there has been an ongoing effort to spin off the PLA's commercial enterprises into private companies managed by former PLA officers, and to reform military procurement from a system in which the PLA directly controls its sources of supply to a contracting system more akin to those of Western countries. The separation of the PLA from its commercial interests is now believed to be largely complete. But the stamp of the PLA influence continues on most large enterprises in the form of retired PLA personnel managing these businesses.

The Chinese have pursued liberalizing their economy without political liberalization, in the same way other East Asians did. Such a strategy has allowed them to pursue rapid economic growth while forcefully controlling chaos on the streets, as the PLA did at Tienanmen square in 1989. At the same time, the Chinese PLA businesses have sparked a great industrial revolution that has transformed the nation's economy, accelerated its human development, greatly enriched China and lifted hundreds of millions of people out of poverty. Just as it has in other East Asian nations, it can be expected that political liberalization and democracy will follow the rapid wave of industrialization and human development in China.

Even in the richest democracy like the United States, the military has played a significant role in funding research, development and manufacturing industries to support America's military-industrial complex and its space program. In spite of some of the well-deserved criticisms of the the world's biggest military-industrial and space complex in America, no one can deny that a lot of innovation and job creation and economic expansion has flowed from it for the American society at large.

India, another member of the emerging powers now called "BRIC", has failed to use a period of high economic growth to lift tens of millions of people out of poverty, falling far short of China’s record in protecting its population from the ravages of chronic hunger, United Nations officials said recently. Last year, British Development Minister Alexander contrasted the rapid growth in China with India's economic success - highlighting government figures that showed the number of poor people had dropped in the one-party communist state by 70% since 1990 but had risen in the world's biggest democracy by 5%.

Pakistan's record in alleviating poverty and increasing human development is not much better than India's. But Pakistani military has shown that it is capable of building and operating a wide variety of businesses profitably, ranging from heavy weapons manufacturing to industrial and consumer goods, construction and finance. The country now boasts a powerful industrial, technological and research base developing and manufacturing for its armed forces and exporting a wide variety of small and large weapons ranging from modern fighter jets, battle tanks, armored vehicles, frigates and submarines to unmanned aerial vehicles and high tech firearms and personal grenade launchers for urban combat. Comparing with the Chinese PLA, it is also clear that Pakistan's military currently has a very small footprint in industrial and economic development and globalization of the nation's economy. It is now recognized that without PLA's crucial role, it would have been very difficult for the Chinese to build the modern industrial base and attract massive foreign direct investments to become the factory of the world. It is also clear that, as a powerful and stable institution, Pakistani military can and should take inspiration from the PLA to play a much bigger role in Pakistan's economic development and rapid industrialization to help increase the nation's prosperity and lift millions out of poverty, as China's PLA has done.

Pakistan's military should take a leaf from the Chinese PLA playbook. It should do what is necessary to strengthen the nation's industry, economy and national security, regardless of any critics, including Ayesha Siddiqa Agha and her myriad fans. This is the best way forward to a well-educated, industrialized, prosperous and democratic Pakistan in the future.

Here's a video report about Pakistan's weapons development:

Related Links:

Chinese Military-Industrial Complex Goes Global

Chinese Military-Commercial Complex

Pakistan Industrialization Strategy 2007

Pakistan's Defense Production Goes High Tech

Dr. Ayesha Siddiqa Agha on Pakistan Military Inc.

Military Inc: A Deflective and Derogatory Book

Chuck Yeager on Pakistan Air Force


Farzana Gulzar said…
Hi Author
You have great work in you blog.
Keep it up
Riaz Haq said…
Here's an excerpt from an interesting post by an Indian blogger Vijainder Thakur at

August 22, 2008 - While Indian defense industry has had little success with indigenous design and development of weapons system (Arjun, LCA) its record with license production has been equally dismal (Hawk trainers, Su-30MKI fighters and T-90S tanks).

It is amazing how after years of 'license production' of weapon systems like Gnats, MiG variants, Jaguars, Vijayanta tanks our defense industry has failed to come up with a product of its own that our defense forces are ready to buy.

Russian newspaper Kommersant, reporting on a deal between India and Rosoboronexport for the license production of Smerch multiple launch rocket system mocks Indian capabilities saying:

"India has had little success with military equipment production, and has had problems producing Russian Su-30MKI fighter jets and T-90S tanks, English Hawk training jets and French Scorpene submarines."

Rosoboronexport, is facilitating the manufacture of the Smerch multiple rocket system both in India and China and the news report hints at the radically different approaches adopted by the two countries towards assisted production.

China first developed an unlicensed analog to Smerch called the A-100 in the 90s. However, they were unable to indigenously develop solid-fuel rocket motor matching those of the Smerch system. So their current deal with Rosoboronexport for Smerch focuses only on the transfer of solid propellant rocket motor technology through Perm Powder Mill.

The Indian deal on the other hand simply entails license production in India. My hunch is it entails no transfer of critical technology.

The Russians will come here set up the plant for us and supply the critical manufacturing machinery. Indian labor and technical management will run the plant which will simply assemble the system. Critical components and the solid propellant rocket motor fuel will still come from Perm Powder Mill. However, bureaucrats in New Delhi and the nation as a whole will be happy. The Smerch system will be proudly paraded on Rajpath every republic day as an indigenous weapon system.

A decade or so down the line, Smerch will get outdated and India will negotiate a new deal with Russia for the license production of a new multiple rocket system for the Indian Army.
Riaz Haq said…
Here are some excerpts of Pak Navy Chief's recent interview with DefenseNews:

Q. One of the most high-profile acquisition programs of your predecessor’s tenure was the next-generation submarine. Can you expand on reports of a Chinese submarine design being selected, and comment on whether the HDW Type-214 may still see service with Pakistan as a replacement for the Agosta-70s?

A. Submarines all along have been our main strength and at the heart of our naval strategy of offensive sea denial. Over the years, the strength of our submarines has dwindled due to aging. Our primary consideration is to acquire modern and potent submarines. All options, including submarines of the West, as well as China, are under deliberation, though no decision has been taken as yet.

Q. Long-standing plans include the expansion of the shipbuilding industry but also to diversify construction locations away from Karachi to places like Gwadar and Ormara. Where do these plans stand?

A. Our long-term plan is to have two major shipbuilding and repair yards at Port Bin Qasim in the east and Gwadar in the west. In addition, we have a strategic plan to develop this rich but hitherto untapped segment of our maritime sector. To realize the same, we have a high-level shipbuilding task force formed under the aegis of [the Ministry of Defence Production].

Q. How do you plan to replace the P-3C Orions destroyed by terrorists last year? And what else can we expect from the Navy’s maritime patrol aircraft procurement efforts? Have you examined any Chinese options, such as the H-6K or Y-8Q? And is any thought being given to replacing your elderly Westland Sea King helicopters yet?

A. Despite the loss of two P-3Cs during the unfortunate attack on [Pakistan Naval Station] Mehran last year, our maritime surveillance capability remains intact and we can well manage our operational requirements. Nevertheless, we have initiated the process for the replacement of the destroyed aircraft from the U.S. and remain hopeful of a positive outcome. You must appreciate that the P-3C is designed for long-range surveillance. Deploying this aircraft continuously for routine surveillance in peacetime is not only uneconomical, it actually amounts to its underutilization. We are thus maintaining smaller and cheaper maritime patrol aircraft — i.e., FK-27S —which fulfills our day-to-day operational needs. Apart from that, we are considering a range of other surveillance aircraft, including Chinese options.

With regard to our Sea King helos, we have signed the Mid Life Upgrade Program, under which a new and modern avionics suite and sensors will be fitted onboard, making them a more potent and capable aerial platform.

Q. The effectiveness of the small number of Exocet-equipped anti-ship strike Mirage-5 aircraft is now surely questionable. What do you intend to replace them with? And is there a case for having these Pakistan Air Force aircraft under naval control?

A. PAF Mirage aircraft equipped with missiles are effective [anti-shipping strike] platforms. The PN and PAF have put in place an efficient mechanism for their optimum deployment, which is why we don’t feel the need to place them under PN control. There are plans to replace the systems which become obsolete or are no longer operationally effective.

Q. Later this decade, you will face an Indian nuclear-powered, nuclear-armed ballistic submarine that threatens the current strategic balance in South Asia. How do you intend to respond?

A. The strategic dimension of India’s naval buildup is a cause of concern not only for us but for the entire Indian Ocean region. I feel nuclearization of the Indian Ocean does not augur well for peace and stability in the region. We are mindful of this development and taking necessary measures to restore the strategic balance.
Riaz Haq said…
Pakistan is among nations working on military robots, says expert Peter Singer in an NPR interview. Here's an excerpt:

FLATOW: You're listening to SCIENCE FRIDAY. I'm Ira Flatow. We're talking about technology in the world of drones with my guests Peter Singer, Missy Cummings and Chris Anderson. Our number, 1-800-989-8255. Dr. Cummings, are drones more or less flying robots, you give them a mission, you push in the coordinates, the waypoints, things like that, and they take off and do their thing?

Or do they still - are they still controlled remotely with a joystick on the ground?

CUMMINGS: Well, there's a mix of those technologies in the military today and also in some of the other applications like for border patrol. But the capabilities are coming, and they're already here in some fashion where you don't even have to enter - click on the map to enter GPS coordinates. You can just click on a general area or tell a group of vehicles to set up some kind of search pattern.

So - and in fact that's what we're striving for, to really give more context, aware control to humans so that they don't have to be experts, and in fact that's one of the big things that we're stressing for my program at the Office of Naval Research. We want to put the capability of a ground soldier or a medic in the field who has no piloting experience at all to grab a tablet, something the size of an iPad, and just request help.

And a helicopter comes and give the help to the person who needs it without a pilot in the loop.

FLATOW: Peter Singer, can we assume that we're not the only country developing drones?

SINGER: Oh, we definitely can assume that. Right now, there's at least 45 other nations out there that are building, buying and using military robotics, and they are nations that range from Great Britain in France to Israel, Iran, Pakistan, Russia, China, you name it.

I think one of the things that's playing out right now is just like what's happened in other fields of technology. There's a catching-up effect going on. The U.S. military spends the most in the world on this, but there's a lot else going on there.

For example, at a recent Chinese arms trade show, there were 25 different of their drone-made systems on display, from, you know, one that looked like a knock-off of our Predator drone, they call it the Pterodactyl, to a stealthy jet-powered kind, so a lot of activity going on there, a lot of concern about what that might mean in the long term.
Riaz Haq said…
Pakistan among countries working on military robots

LONG BEACH: Pakistan is among the countries working on the development of military robots as robots will be armies of the future in a case of science fact catching up to fiction, a researcher told an elite TED gathering on Wednesday. “The United States is ahead in military robots, but in technology there is no such thing as a permanent advantage,” Peter Singer, who has authored books on the military said. “You have Russia, China, Pakistan and Iran working on military robots.” Singer warned that while using robots for battle saves lives of military personnel, the move has the potential to exacerbate warfare by having heartless machines do the dirty work. “We are at a point of revolution in war,” Singer said. Singer predicted US military units will be half machine, half human by 2015. afp\02\06\story_6-2-2009_pg1_4
Riaz Haq said…
Here's a News report on Pak defense industry growth:

KARACHI: With a value of $6.3 billion in 2009, the Pakistani defence industry is expected to reach $10.4 billion by 2015. This is due to large scale investments to cope with increased international instability and its active participation in the war on terror.

Pakistan has been making efforts to boost itself in this regard and it’a evident that much attention has been given towards the Unmanned Aerial Vehicle (UAV) sector. Pakistan can now boast of its capacity to develop, design and manufacture UAVs indigenously and can proudly showcase a long list of public and private companies actively in the sector, producing many such products that are gaining increasing popularity internationally.

Pakistan Ordinance Factories (POF) produces seventy major products, including automatic rifles, light/medium and heavy machine guns, a wide range of mortar and artillery ammunition, aircraft and anti ammunition, tank and anti tank ammunition, bomb grenades, land, pyrotechnics and signals stores.

Owing to these rising trends and developments in the Pakistani defence industry, the country’s defence exports have tripled to around $300 million.

In this backdrop, IDEAS-2012 proved very fruitful for the national defence industry as a number of major joint initiatives took place during this prestigious exhibition, including China’s Poly Technologies will be providing mine resistant ambush vehicles to the Pakistan Army for the first time. The type CS/VP3 vehicle is designed to provide secure transportation for combat personnel and materials, especially under the threat of anti-tank mines. Besides, it will also be beneficial for performing anti-terrorism and anti-riot missions. The combat product will also feature modern day telecommunication and navigation technologies, including GPS.

Interestingly, Poly Technologies has actively cooperated with Pakistan for the provision of advanced defence equipments and technologies.

China Shipbuilding Trading Corporation (CSTC) will be providing four new ships to the Pakistan Navy this year. CSTC has been working with the Karachi Shipyard since long. Pakistan has been importing the F-22P multi-purpose frigate from China for the past three years, as this product is exclusively manufactured for Pakistan. The new frigate will be well-equipped with air surveillance, navigation, missile launch and a gun weapon system.

During IDEAS-2012, Heavy Industries Taxila (HIT) Pakistan and Narinco Corporation of China signed a memorandum of understanding (MoU), through which both the companies will be working towards joint marketing of Al-Khalid tank and various other products. The MoU is based on Transfer and Technology (ToT) and is a result of public-private partnership (PPP) between the two nations for the first time.

Al–Khalid tank, which was developed jointly by Pakistan and China in the 90’s, has been marketed internationally by China but the new contract will allow Pakistan to pursue its marketing initiatives as well. In addition, both the companies will also be working on various other products, including security equipments and security vehicles.

Similarly, a MoU and exclusive teaming agreement between Havelsan – a global software and systems integration company, serving in IT and defence markets worldwide – and the Pakistan Air force is due to be signed very soon, regarding collaboration on research and development projects and simulation and training systems of JF-17, F-16, C-130 Super Mushak, and MI-17, respectively.

Havelsan has already delivered three systems to Pakistan’s armed forces, namely Artillery Forward Observer Simulator, Electronic Warfare Test and Training Range, and Military Enterprise Information System.....$104-billion-by-2015
Riaz Haq said…
Here's PakistanToday on primary energy consumption in Pakistan:

KARACHI - Pakistan’s gas requirements are growing hastily, while the domestic gas production is not growing at the same pace. Primary energy consumption in Pakistan has grown by almost 80pc over the past 15 years, from 34 million tons oil equivalent (TOEs) in 1994/95 to 60 million TOEs in 2010/11 and has supported an average GDP growth rate in the country of about 4.5pc per annum.

Consumer Rights Commission of Pakistan (CRCP) in collaboration with Citizens’ Voice Project hold policy dialogues on “Role of Government and Regulators in the Gas Sector of Pakistan” with parliamentarians, policy makers, regulators and civil society organisations here on Wednesday.

CRCP recommended Effective Governance & Regulation for development of Gas Policy in dialogue.

The present natural Gas crisis clearly indicates that overall governance of the gas sector needs improvement. The growing energy shortages have made life difficult for Pakistanis across the board. The quality of life of citizens has deteriorated.

Dialogue reported that economic growth rates have been stunted, and industry and agriculture have suffered. The Government of Pakistan has not yet recognising magnitude of crisis and its effect on the people and the economy. Government has to take emergency measures to address, manage and reduce the impact of crisis. The reasons for present crisis in gas sector have both technical and governance aspects.

The dialogues have given comprehensive insight into the current situation of transparency, public participation and accountability processes in gas sector of Pakistan. The intervention is likely to result in enhanced understanding of the sect oral issues for the stakeholders.

Most important of all, it is expected to inform the policy makers and especially the public representatives about the governance situation of the sector and shall persuade them to take positive actions for sectoral improvement. In Pakistan, industrial and fertilizer sectors are getting gas on subsidised rates, while the CNG stations were being subjected to an exorbitantly high tariff regime, neglecting the general public’s interest. The gas consumers’ woes could not be resolved unless Pakistan had an autonomous regulator free of political interference. Besides, the problems could not be resolved without improving people’s access to information, putting in place a system of strict penalties on consumers involved in gas pilferage and non-payment of gas bills
Riaz Haq said…
Here's a PakistanToday report on railway carriage restoration in Islamabad coach factory:

Islamabad Carriage Factory has rehabilitated 690 old coaches during the last three years, making them durable for another 20 years, an official said on Tuesday.

The factory which was established with the cooperation of the German government is capable of manufacturing 150 German-designed coaches each year.

"The Carriage Factory rehabilitated 20 coaches of meter gauge for Senegal Railway and manufactured new six slipper coaches for the Pakistan Army," an official told APP.

He said out of 400 dysfunctional coaches, 275 had been rehabilitated whereas work on the rest was already in progress. He added that the restoration of these coaches would help Pakistan Railways achieve progress.

The official said that Pakistan Railways would receive also 202 new coaches against a cost of around Rs 16 billion to improve its operations and to facilitate its passengers.

Out of the 202 coaches of various types, Pakistan Railways received 65 coaches in Completely Built Unit condition which are being utilised with different trains plying across the country.

He said the new coaches had the capacity to run at the speed of 160 km per hour but due to the dilapidated rail track it would run at 120 km.
Riaz Haq said…
Here's DefenseNews on Pak plans for new heavy armored vehicles:

Faced with mounting casualties among security forces from roadside bomb attacks in its Tribal Areas, Pakistan is set to reveal an indigenous mine-resistant vehicle.

A spokesperson for Pakistan’s state-owned vehicle manufacturer, Heavy Industries Taxila (HIT), has confirmed that its Burraq mine-resistant, ambush-protected (MRAP) vehicle is nearing the end of its prototype phase and will be unveiled in “three to four months.” The announcement comes after years of development and failed efforts to acquire such a vehicle from other sources.

The need for an MRAP is great, and the military has acknowledged the considerable menace improvised explosive devices (IEDs) pose to security forces, particularly in the Tribal Areas along the Afghan-Pakistan border in fighting with the Taliban.

In what was perhaps the largest loss of life from an IED attack to date, 14 soldiers were killed and 25 wounded during a Jan. 13 attack on a Pakistani Army convoy in Waziristan.

Pakistan has reportedly sought better protected vehicles from as far away as Germany, Turkey and the U.S. However, a lack of financial resources seems to have hampered those efforts.

Failure to acquire an off-the-shelf solution ultimately led to the development of an indigenous answer.

However, as of November, with no news of the Burraq entering production and its non-appearance at Pakistan’s biannual exhibition, IDEAS2012, many analysts began to believe it had been quietly shelved. An order for an undetermined number of Poly Group Corporation Type CS/VP3 MRAP vehicles from China at IDEAS2012 reinforced that notion.

Hitherto, HIT has produced mostly tracked armored fighting vehicles, with some lightly armored four-wheel-drive and Toyota Corolla sedans its sole wheeled products.

According to HIT, the wheeled Burraq will carry 12 passengers and a crew of two. It has standard protection features similar to other MRAPs and will be open for export.

The 8-to-10-ton vehicle can withstand IED blasts of up to 10 kilograms, can be armed with a .50-caliber heavy machine gun (protected against fire from a similar weapon), as well as being fitted with bulletproof windows and run-flat tires. The occupants sit on blast-mitigating seats.

A former Australian defense attaché to Islamabad, Brian Cloughley, was given a briefing on the Burraq during a visit to HIT last year. He said he was impressed with what he saw.

“It appears that the Burraq is a mid-tech and affordable protective vehicle that should serve the defense forces well,” he said.

He said he was also “impressed with the proposed manufacturing process and with what I was told about its technical parameters, which, while not as advanced as U.S. or European equivalents, which are vastly expensive, seem to be adequate to counter the current IED threat.”

Having garnered a considerable amount of data from IED blasts, it appears Pakistan is able to adapt its designs to meet requirements, which Cloughley said is reflected in the Burraq’s design.

“The high profile is caused by the ‘V’-shaped underside, which is so necessary to minimize the effects of mines and IEDs, and although details of the degree of protection afforded are understandably kept confidential, I was told that analysis of the effects of IED incidents showed that Burraq’s armor configuration could cope well,” he said....
Riaz Haq said…
Here's a TOI report on China arms sales and co-production with Pakistan:

WASHINGTON: Asserting that China has signed agreements for arms exports worth USD 11 billion from 2007 to 2011, the Pentagon has said that Pakistan remains Beijing's primary customer for conventional weapons.

"From 2007 to 2011, China signed approximately USD 11 billion in agreements for conventional weapons systems worldwide, ranging from general purpose materiel to major weapons systems," the Pentagon told the Congress in its annual report on China.

In 2012 and the coming years, China's arms exports will likely increase modestly as China's domestic defence industry improves, it said, adding that Chinese defence firms are marketing and selling arms throughout the world with the bulk of their sales to Asia and the Middle East/North Africa.

In 2012, China unveiled the Yi Long tactical unmanned aerial vehicle, which will probably be marketed to developing countries, it said.

Pakistan, it said, remains its primary customer for conventional weapons. "China engages in both arms sales and defence industrial cooperation with Islamabad, including co-production of the JF-17 fighter aircraft, F-22P frigates with helicopters, K-8 jet trainers, F-7 fighter aircraft, early warning and control aircraft, tanks, air-to-air missiles, anti-ship cruise missiles, and cooperation on main battle tank production," the Pentagon report said.

"We describe in this report China's bilateral military interactions with other countries, including Pakistan. China has a very longstanding historical relationship with Pakistan, and it's one that we watch and we report on in this report," deputy assistant secretary of defence for East Asia David Helvey told reporters during a Pentagon news conference.

Helvey said the US is monitoring very carefully China's military modernisation, the implications of that modernisation both for opportunities to cooperate with China in a multinational or bilateral context, but also for potential implications for regional stability.

According to the report, Sub-Saharan African countries view China as a provider of low-cost weapons with fewer political strings attached compared to other international arms suppliers.

"China uses arms sales as part of a multifaceted approach to promote trade, secure access to natural resources, and extend its influence in the region," it said.
Riaz Haq said…
Mary Kay Magistad of NPR's The World reported that China has reacted strongly to the Pentagon report on China's military growth and modernization with its first aircraft carrier, several nuclear submarines and stealth aircraft.

Magistead reported that Xinhua has for the first time talked about China as a global economic power with global interests and it needs a blue water navy to protect a tremendous number of sea-lanes.

Riaz Haq said…
Why #Turkey’s Buying Chinese Missile Systems?

Lower cost, technology transfer, diversification. #Turkey's rationale similar to #Pakistan's.#defensedeals
Riaz Haq said…
Here's a report describing diverse holdings of Pakistani Fauji Foundation ranging from finance and food to energy, transport and and fertilizer:

KARACHI: The Fauji Group on Monday announced that it will acquire Al-Hamd Foods – a venture of Al-Hamd Group which has interests in textile, confectionery and foods – in a bid to diversify its business already weighty of fertiliser, cement, food, power generation, gas exploration, LPG marketing and distribution, financial services, employment services and security services.

The acquisition price has not been disclosed yet.

In a notice sent to the Karachi Stock Exchange, the Fauji Group said that on June 15, the company’s board of directors approved acquisition of 100% stake in Al-Hamd Foods, of which 75% will be held by Fauji Fertilizer Company (FFCL) and the rest (25%) by Fauji Foundation, as part of FFCL diversification drive to ensure sustained and multiple revenue streams.

In May, the Fauji consortium took over the charge of Askari Bank from the Army Welfare Trust, the previous owner, at a sale-purchase price of Rs24.32 per share.

The Fauji Group has been diversifying for the past few years, expanding its interests in all of the potential good buys they can find. Looking at the acquisitions and expansion it was making, it seems that the company wants to become a household name just like Engro.

Published in The Express Tribune, June 18th, 2013.

Riaz Haq said…
Here's an Op Ed piece in The News by columnist Farrukh Saleem:

Myth 1: The allocation for defence is the single largest component in our budget. Not true. The single largest allocation in Budget 2013-14 went to the Public Sector Development Programme (PSDP). The second largest allocation in Budget 2013-14 went to servicing the national debt. The third largest government expenditure, including off the budget allocations, are the losses at public-sector enterprises (PSEs). Yes, the fourth largest government expenditure goes into defence.

Myth 2: The defence budget eats up a large percentage of the total outlay. Not true. In Budget 2013-14, a total of 15.74 percent of the total outlay was allocated for defence. PSDP and debt servicing were 30 percent each. What that means is that more than 84 percent of all government expenditures are non-defence related.

Myth 3: The defence budget has been increasing at an increasing rate. Not true. In 2001-02, we spent 4.6 percent of our GDP on defence. In 2013-14, twelve years later, our defence spending has gone down to 2.7 percent of GDP.

Myth 4: We end up spending a very high percentage of our GDP on defence. Not true. There are at least four dozen countries that spend a higher percentage of their GDP on defence.

They include: India, Egypt, Sri Lanka, the United States, the United Kingdom, South Korea, France, Eritrea, Oman, Saudi Arabia, Israel, Jordan, Liberia, Brunei, Syria, Kuwait, Yemen, Angola, Singapore, Greece, Iran, Bahrain, Djibouti, Morocco, Chile, Lebanon, Russia, Colombia, Zimbabwe, Turkey, Georgia, Guinea-Bissau, Ethiopia, Namibia, Guinea, Turkmenistan, Kyrgyzstan, Algeria, Serbia and Montenegro, Armenia, Botswana, Ukraine, Uganda, Ecuador, Bulgaria, Lesotho and Sudan.

Myth 5: The Pakistan Army consumes the bulk of the defence budget. Not true. In the 1970s, the Pakistan Army’s share in the defence budget had shot up to 80 percent. In 2012-13, the Pakistan Army’s share in the defence budget stood at 48 percent.

Now some facts:

Fact 1: The Pakistan Army’s budget as a percentage of our national budget now hovers around eight percent.

Fact 2: Losses incurred at public-sector enterprises can pay for 100 percent of our defence budget.

Fact 3: Pakistan’s armed forces are the sixth largest but our expenses per soldier are the lowest. America spends nearly $400,000 per soldier, India $25,000 and Pakistan $10,000.

Fact 4: Of all the armies in the world, Pak Army has received the highest number of UN medals. Of all the armies in the world, Pak Army is the largest contributor of troops to the UN peacekeeping missions.

Mark Twain once remarked, “Get your facts first, and then you can distort them as much as you please.”
Riaz Haq said…
FWO: National pride of Pakistan

Construction of an international standard highway was both challenging as well as enormous. Pakistan Army's Corps of Engineers, therefore, raised a special organisation named Frontier Works Organization (FWO) to undertake this virtually impossible task on 31st October 1966 to construct the Karakoram Highway (KKH). Resultantly, the founding of FWO owes its birth to one of the most significant and challenging project undertaken by Pakistan. The breathtaking task of chiseling across the mighty mountain ranges of Karakoram was accepted as a challenge with zeal and determination by the engineers of FWO. The project was unprecedented in the history of Pakistan and required tremendous technical skill in various fields like geology survey, concrete/masonry works and their designing, use of explosives, development of drilling and blasting techniques, besides administrative and logistic problems of a large work force of 15000 personnel spread over an inhospitable and harsh terrain for over 800km. The KKH being the highest road on earth has been acknowledged as 8th wonder of the World. Government of Pakistan, realizing the potential of FWO prior to the completion of KKH project, decided to retain FWO as a permanent organisation and expanded its sphere of activities throughout Pakistan.

FWO succeeded in its challenge and completed the exceptional task of KKH construction in 1978 after tremendous sacrifices. More than 1000 workers including 200 from our sincere friend China laid down their lives with over 1000 sustaining disabling injuries in their quest to achieve this national objective.

During the last half century, FWO has earned the reputation of Country's most prestigious, multidimensional and professional construction organisation which is committed to meeting the strategic needs of the Pakistan in versatile construction fields. FWO plays a pivotal role in socio-economic development and nation building through its unmatched contribution to infrastructure development. Over the years, FWO has been able to ensure performance par excellence despite time, budget and space constraints. The organisation is state of the art construction leader in civil as well as military spheres. Judicious utilisation of resources and adherence to modern construction practices is the hall mark of FWO. Taking a leap from its core competency of roads construction, FWO has excelled into large number of multifaceted infrastructure development projects.

This new paradigm shift has enabled FWO to serve the nation with utmost versatility and commitment. Today the domain of FWO projects range from blazing plateaus of Balochistan to lush green dales of Swat and Chitral; from the deserts of Sindh to snowcapped summits of Siachin.

FWO has a knack for accepting challenges and converting ideas into reality no matter how meagre are the resources. FWO has on its credit several initiatives which have contributed significantly in strengthening national communication infrastructure. FWO is also the pioneers and leader in Built-Operate-Transfer (BOT) regime in Pakistan. Lahore-Faisalabad road (LAFCO) is one such example. FWO has also been given the responsibility of constructing motorway between Karachi and Hyderabad (M-9) on similar BOT methodology.

Keeping up with its traditions of developing the far frontiers, FWO is active in building massive road network in Balochistan (around 900kms) which will bring prosperity in the region. Linkage of Gwadar further up North will provide Pakistan with tremendous potential for commercial activities through development of CPEC. ...
Riaz Haq said…
FWO: National pride of Pakistan

Keeping up with its traditions of developing the far frontiers, FWO is active in building massive road network in Balochistan (around 900kms) which will bring prosperity in the region. Linkage of Gwadar further up North will provide Pakistan with tremendous potential for commercial activities through development of CPEC. The Quick Impact Projects (QIPs) in Fata, Swat and other militancy hit areas by FWO have contributed significantly in changing landscape of militancy hit area. People of Fata have never been provided with such a sustained development which will facilitate durable peace and socio-economic development in the area. Fast development of energy and power generation projects such as Gomal Zam Dam and Dhana irrigation system, development of Central Trade Corridor (CTC) and nearly 700km roads network in Fata, are testimony of FWO’s contribution in eradicating militancy and terrorism from Fata. QIPs undertaken by FWO have changed the landscape of the area besides restoration of normalcy to the lives of affected population. With road infrastructure development, access of agriculture products and mining yields to bigger markets has unleashed a new era of prosperity in Fata.

Recently, National Highway Authority (NHA) has tasked FWO with conversion of existing 4 Lane Super Highway into a 6 Lane Karachi-Hyderabad Motorway (M9) on Build Operate and Transfer (BOT) basis. A consortium of banks headed by UBL provided the finances for the project.

FWO will maintain and operate the Motorway in line with international practices over the next twenty five years. This mega project was inaugurated by prime minister on 11th March 2015. All initiatives planned for M-2 shall also be extended to M-9.

On 25th Feb 2016, Governor Sindh Dr Ishrat-Ul-Ebad Khan while presiding a meeting to review the progress of ongoing mega development projects including the M-9 motorway overwhelmingly appreciated efforts of FWO in nation building. According to FWO, the work has already begun on the proposed M-9 project and negotiations are in progress to shift service stations to alternate locations. M-9 will be a state of the art project with modern CCTV cameras installed after every two kilometers, computerised signboards and automated toll tax collection system. Moreover, a total of 14 overhead bridges and underpasses will be constructed on the proposed route of M-9 for facilitating movement of population living on either side of the road.

Today, FWO with an envious track record, looks forward to greater challenges and stands better equipped to meet them. Our nation will remain highly indebted to the sacrifices of over 1000 lives of FWO workers while working in harsh climates and difficult terrain since its inception.

With growing list of national contributions each year, FWO will continue serving Pakistan with utmost humility. FWO is conscious of the responsibility given to it by the Pakistani nation and will maintain high standards of professionalism, sincerity and national commitment in times to come.
Riaz Haq said…
Modernising #Pakistan through #China. #CPEC by Farhan Bokhari

Reality check long overdue

While Pakistan’s civil institutions responsible for public work increasingly show a dismal performance, the Pakistan army continues to remain responsible for a variety of construction-related mega projects in otherwise inaccessible areas.

This follows more than five decades of experience by the army in undertaking challenging assignments including the Karakorum Highway or KKH, the road built with Chinese assistance, which links China’s Xinjiang province with Pakistan’s northern Gilgit-Baltistan province and onwards to the country’s plains. At the outset with the CPEC too, the army’s promise to provide a full security cover for Chinese workers in Pakistan, marked the critical element that buttoned up this project.

In the long term, Pakistan’s ruling politicians may have a valid point in seeking to lead the CPEC initiative. And yet, that ambition needs to be built with a long overdue reality check. The country’s civilian authorities need to embark on an internal reform plan first rather than seek to block the army from assuming a lead role in the execution of the CPEC.

Such a plan must be built upon three equally vital aspects. First, there needs to be a complete political consensus over the geographic layout of the CPEC and its associated projects. Signs of infighting between different political groups have in fact harmed the view of Pakistani politicians, reinforcing their image as a short-sighted warring bunch rather than a mature and politically responsible community.

Second, it’s vital to put safeguards in place for a radical improvement in the performance of key civil institutions, enabling them to take greater responsibility for the execution and eventual management of CPEC related projects. The total work cut out under this initiative will likely continue till the end of the next decade if not beyond. This creates a sufficient time frame for the army to first take charge of this valuable initiative and hand over responsibilities for its eventual management to Pakistan’s civilian infrastructure following a set of robust reforms.

Finally, it’s important for Pakistan’s ruling politicians to consider different types of fallouts from antagonising the armed forces, all in the name of promoting democracy. In the case of the CPEC, some politicians have eagerly pushed for exclusive civilian control on this project as a step towards strengthening Pakistan’s democratic evolution. Yet their initiative will only be an exercise in futility until such time that they reconcile themselves with Pakistan’s fundamental realities.

For now, General Raheel Sharif and the Pakistan army exclusively remain the main guarantors for the success of what is set to transform Pakistan as never before.
Riaz Haq said…
#India’s most profitable retail chain run by #Indian Army. 3900 stores $35 million profit in 2014-15 via @qzindia

The Indian defence services could teach the country’s top private retailers a thing or two about making money.
A chain of 3,900 stores of the Indian defence ministry’s canteen stores department (CSD) earned Rs236 crore ($35 million) in profit in financial year 2014-15, according to a report in the Economic Times on Aug.17, based on a reply to a right to information query.
For the same period, the Kishore Biyani-owned Future Retail, which runs supermarket chains such as Big Bazaar and eZone, reported a profit of Rs153 crore; the corresponding figure for Reliance Retail was Rs159 crore.
The CSD stores typically work on operating margins as low as 1%—this figure can vary anywhere between 8% and 18% for a private retailer. These canteens function on a not-for-profit basis, but their volumes are huge. In 2014-15, their turnover stood at Rs13,709 crore, according to the report, trailing that of Reliance Retail at Rs17,640 crore but ahead of Future Retail’s Rs11,149.87 crore.
A big reason to the CSD stores’ better profitability is lower overhead costs.
“CSD does not have to bear two expenses that are major operational costs for retailers—real estate and advertising,” explains Devangshu Dutta, CEO of Third Eyesight, a New-Delhi based consulting firm. That’s because they are located within easy reach of defence staff, typically inside cantonments and not in commercial locations such as markets or malls.
“Staffing and training costs are lower than private retailers since the management workforce is partially shared with the standing armed forces. CSD also has a focused, sometimes captive, audience which it doesn’t really have to fight for,” Dutta said.
Riaz Haq said…
From The Economist Magazine:

The Egyptian army has more on its hands than running armoured cars over people in Tahrir Square. It also runs about 10% of the economy. Military-backed companies produce cement, olive oil and household appliances as well as arms. They also provide pest control, catering and even child care. The army owns large chunks of Egypt's most precious commodity, land, particularly on the Red Sea coast. It also leans on private companies to provide powerful retirees with jobs.

The Egyptians have plenty of brothers-in-arms-and-boardrooms. Pakistan's top brass are even more enterprising. Ayesha Siddiqa, the author of “Military Inc: Inside Pakistan's Military Economy”, calculates that the army controls a $15 billion empire, with hundreds of companies making everything from fertiliser to breakfast cereals. In China the People's Liberation Army took Deng Xiaoping's aphorism that “to get rich is glorious” as a direct order. At one point in the late 1980s it was running nearly 20,000 firms. Military men in Thailand and Indonesia have a long tradition of padding their pay with profitable enterprises. Zimbabwe's army has recently formed joint ventures with Chinese partners in farming and mining. Even in democratic India the army runs about a hundred commercial golf courses.

But the most enthusiastic practitioners of khaki capitalism are the Iranians. The Revolutionary Guard runs more than 300 companies in agriculture, industry, transport, foodstuffs and even tourism. (The slogans practically write themselves: “Visit Iran and we won't storm your embassy!”) The Guard has been snapping up companies “privatised” by the government, and exploits its control of border crossings to dominate Iran's black market.


There are also sound military reasons for getting armies out of business. They should get better value for money if they buy supplies on the open market instead of making them themselves. More important, as the Chinese recognise, they are more likely to become modern and professional defenders of the nation if they are not distracted by moneymaking.

That said, the armed forces can provide superb training for future business leaders: some 10% of the bosses of America's 500 biggest companies are former military officers. They are also a great incubator of entrepreneurs—and not just shady ones like Milo Minderbinder. A striking proportion of Israel's high-tech entrepreneurs went into business with friends they made in the Israeli Defence Forces. The founders of China's Huawei, one of the world's most successful makers of telecoms equipment, also met in the army. Many soldiers in Egypt and elsewhere clearly enjoy the challenge of running businesses. But they would do a better job of it if they took off their uniforms first.
Riaz Haq said…
In July 2016, British newspaper Financial Times report headlined "China urges Pakistan to give army lead role in Silk Road project (CPEC): Squabbles in Islamabad highlight obstacles to Beijing’s plans for transport and energy corridor" said as follows:

"Frustrated with the slow progress on a sprawling, $46bn infrastructure project stretching from China to south Asia, Beijing is seeking to give Pakistan’s army a lead role.... progress has stalled as the two sides work out how to turn the proposals into concrete projects, said Victor Gao, a former Chinese foreign ministry official, with some blaming Pakistan’s competing ministries"..... “Pakistani politicians have squabbled over the route for the CPEC and this may have made people nervous in Beijing,” said a Pakistan government official. “Pakistan is a noisy place politically while the Chinese are not used to harsh disagreements, especially over such a vital project.”

The Pakistan military has thousands of civil, mechanical and electrical engineers with decades of experience in building large infrastructure projects and analysts say the army is well placed to supervise the corridor, according to the Financial Times.

In fact, Pakistan Army's Frontier Works Organization (FWO) is building significant parts of the China-Pakistan Economic Corridor (CPEC). A July 2015 announcement is an illustration of what Frontier Works Organization is doing to advance CPEC:

“The Frontier Works Organization (FWO) has built roads with 502 kilometers length on the western alignment of China Pakistan Economic Corridor (CPEC) to link Gwadar with other parts of the country. The FWO took up the challenge to extend the benefits of Gwadar port to rest of the country by building roads in rugged mountainous terrain and highly inaccessible areas. The gigantic task was undertaken on the directives of Chief of Army Staff General Raheel Sharif."
Riaz Haq said…
#Pakistan outlines 5th gen fighter #aircraft industrial aims. "Such large-scale (Project Azm) requires synergetic efforts from a number of #industrial (public and private) and #academic organizations to fulfill the enormous task." #jf17thunder |Jane's 360

The Pakistan Aeronautical Complex (PAC) has outlined ambitious plans to support its development of a fifth-generation fighter aircraft (FGFA) - otherwise known in Pakistan as Project AZM.

The PAC enterprise, which is owned and run by the Pakistan Air Force (PAF), has established a new office - the Aviation Research, Indigenization & Development (AvRID) unit - to lead the FGFA programme, it confirmed.

The development programme is supported through Pakistan's development of a new aerospace complex - named 'Aviation City' - that was launched in 2017 to support Project AZM and other national military aerospace requirements.

"The office of DG [Director General] AvRID has been established to transform into reality the [PAF's] air staff vision… with the long-term goal of developing our own fifth generation fighter aircraft (FGFA)," PAC said on its website.

"[The] development of [the] FGFA would be a major national programme that would entail a massive amount of work, not all of which may possibly be carried out within PAC or even within Pakistan.

"Such large-scale development requires synergetic efforts from a number of industrial (public and private) and academic organisations to fulfill the enormous task," it added.

In order to "manage an engineering development programme of this magnitude", effective technical, engineering, and project management processes need to be established, PAC said.

PAC also outlined several specialist project teams that it will establish in collaboration with other national agencies as part of the Aviation City initiative.

These include an engineering management and support office, an Aviation Design Institute, a Mission Electronics Design Institute, an Aero Structures Design Institute, an Advanced Technologies Centre, and a Flight Test Centre.

PAC states that AvRID will collaborate with and leverage the capabilities of these various Aviation City agencies in undertaking Project AZM. "This [will] put together components of industry and academia to build a high-end research centre to enhance indigenisation capability.
Riaz Haq said…
#Pakistan to corporatize State #Defense Enterprise Heavy Industries #Taxila. The move to corporatize HIT will enable the enterprise to more easily enter joint ventures (JVs) with national and foreign firms.| Jane's 360

Pakistan's Senate passed legislation in late August to support the transformation of state defence enterprise Heavy Industries Taxila (HIT) into a corporate entity. The move is in line with Pakistan's efforts to spur capability developments in its national defence industry.

The legislation - the Heavy Industries Taxila Board (Amendment) Bill 2019 - will result in HIT, a specialist in military land systems, becoming a limited company. The bill was approved earlier this year by Pakistan's National Assembly and was referred to the Senate for consideration in May.

In approving the bill, the Senate's Standing Committee on Defence Production said in a report that the move to corporatise HIT will enable the enterprise to more easily enter joint ventures (JVs) with national and foreign firms.

The committee said these JVs would be in commercial sectors - including the production of automobiles, trucks, and wagons - and that resulting revenues, investments, and technologies would benefit HIT's defence production activities. However, the committee also warned that such commercial activities should not be to the detriment of defence production.

According to the committee, other objectives of the move to corporatise HIT include enabling the enterprise to earn revenues to subsidise Pakistan's defence budget; support national efforts to "move incrementally towards self-sustenance" in the defence sector; support private-sector defence industrial expansion in Pakistan; and "help bring in the latest technologies" into the country to benefit defence.

HIT is one of Pakistan's most important defence enterprises. The organisation specialises in upgrades and manufacturing a range of military vehicles including main battle tanks (MBTs), armoured personnel carriers, and artillery, as well as military vehicle engines and related components and associated equipment.

Its most important programmes include the production of Al-Khalid-I MBTs and the development of Al-Khalid-II MBTs, both for the Pakistan Army.
Riaz Haq said…
UNDP: Elite privilege consumes $17.4bn of #Pakistan’s #economy. Top beneficiaries are corporate sector (tax breaks, cheap input prices, higher output prices, access to capital, land) – 2nd & 3rd biggest recipients of privilege are richest feudal landlords

The UNDP’s Wignaraja noted that this creates a paradox where those responsible for doling out the privileges were also those who were receiving them.

The biggest beneficiary of the privileges – which may take the form of tax breaks, cheap input prices, higher output prices or preferential access to capital, land and services – was found to be the country’s corporate sector, which accrued an estimated $4.7bn in privileges, the report says.

The second and third-highest recipients of privileges were found to be the country’s richest 1 percent, who collectively own 9 percent of the country’s overall income, and the feudal land-owning class, which constitutes 1.1 percent of the population but owns 22 percent of all arable farmland.

Both classes have strong representation in the Pakistani Parliament, with most major political parties’ candidates’ drawn from either the feudal landowning class or the country’s business-owning elite.

Economic privileges accorded to Pakistan’s elite groups, including the corporate sector, feudal landlords, the political class and the country’s powerful military, add up to an estimated $17.4bn, or roughly 6 percent of the country’s economy, a new United Nations report has found.

Released last week, the UN Development Programme’s (UNDP) National Human Development Report (NHDR) for Pakistan focuses on issues of inequality in the South Asian country of 220 million people.

The report uses the prism of “Power, People and Policy” to examine the stark income and economic opportunity disparities in the developing country.

“Powerful groups use their privilege to capture more than their fair share, people perpetuate structural discrimination through prejudice against others based on social characteristics, and policies are often unsuccessful at addressing the resulting inequity, or may even contribute to it,” says the report.

Kanni Wignaraja, assistant secretary-general and regional chief of the UNDP has been on a two-week “virtual tour” of Pakistan to discuss the report’s findings, holding talks with Prime Minister Imran Khan and other top members of his cabinet, including the ministers of foreign affairs and planning.

She says Pakistani leaders have taken the findings of the report “right on” and pledged to focus on prescriptive action.

“[In our remarks in meetings] we focused right in on where […] the shadows are, and what is it that actually diverts from a reform agenda in a country,” she told Al Jazeera in an exclusive interview.

“My hope is that there is strong intent to review things like the current tax and subsidy policies, to look at land and capital access.”


The country’s powerful military, which has directly ruled Pakistan for roughly half of its 74-year history, was found to receive $1.7bn in privileges, mainly in the form of preferential access to land, capital and infrastructure, as well as tax exemptions.
The report noted, however, that Pakistan’s military is also “the largest conglomerate of business entities in Pakistan, besides being the country’s biggest urban real estate developer and manager, with wide-ranging involvement in the construction of public projects”.

“These things are not neatly separate entities,” said Wignaraja. “You do see some of… these are overlapping so you almost get a double privilege by the military. The minute in a country the military is a part of big business, it obviously doubles the issue and the problem.”

In a country like Pakistan, where the military continues to hold power over many aspects of governance, she warned that it would take “almost a social movement” to displace structures of power that were so entrenched.
Riaz Haq said…
US defense contractors see longer term benefits from war in Ukraine

New York (AFP) – US arms manufacturers are not cashing in directly from the thousands of missiles, drones and other weapons being sent to Ukraine, but they do stand to profit big-time over the long run by supplying countries eager to boost their defenses against Russia.

Like other Western countries, the United States has turned to its own stocks to furnish Ukraine with shoulder-fired Stinger and Javelin missiles, for instance. These weapons from Lockheed-Martin and Raytheon Technologies were paid for some time ago.

So these companies' first quarter results, due to be released in coming weeks, should not be especially fatter because of the rush to arm Ukraine as it fights off the Russian invasion.

But those US military weapons stockpiles being tapped for Kyiv will need to be replenished.

The Pentagon plans to use $3.5 billion earmarked for this purpose in a spending bill approved in mid-March, a Defense Department spokesman told AFP.

The Javelin anti-tank missile is made by a joint venture between Lockheed and Raytheon. The latter's Stinger anti-aircraft missile had ceased to be produced until the Pentagon ordered $340 million of them last summer.

"We are exploring options to more quickly replenish US inventories and backfill depleted stocks of allies and partners," the spokesman said.

"It will take time to revive the industrial base -- at the prime and at sub-tier suppliers -- to enable production to resume," he added.

The profits that the companies make from these missiles, known for being simple to use, will not exactly be staggering, defense industry experts told AFP.

"If 1,000 Stingers and 1,000 Javelins get shipped to Eastern Europe each month for the next year, which is not unlikely given the current pace, in our view, we think it would equate to $1 billion to $2 billion in revenue for both program manufacturers, which is material," said Colin Scarola of CFRA, an investment research firm.

Raytheon's and Lockheed's revenue figures last year dwarf that amount, however: $64 billion and $67 billion, respectively.

"Raytheon probably made more money off selling a Patriot missile system to Saudi Arabia than they will from making Stinger missiles," said Jordan Cohen, an arms sales specialist at the Cato Institute.

"They're only going to put so much effort into producing those weapons that are not that valuable," Cohen told AFP.

Lockheed, Raytheon and another arms manufacturer, Northrop Grumman, did not respond to AFP requests for comment.

General Dynamics said it has not raised its financial outlook since January, while Boeing just said it is up to governments to decide how to spend money earmarked for defense.
Riaz Haq said…
Pakistan's military-run enterprises need upgrade to revive economy
Corporate empire has potential to be globally competitive

By Uzair Younus

It is time to accept that rather than trying to cut this empire down to size, it may be more fruitful to develop Military Inc. 2.0: a corporate empire that is globally competitive.

Pakistan's military began playing a role in the economy soon after independence. The construction of the 805-km cross-border Karakoram Highway in the Himalayas was a major inflection point. The Frontier Works Organization was formed then with the mission to construct the highway on the Pakistani side.

Today, military-run organizations have their tentacles spread across the entire economy, with the military-owned Fauji Foundation being one of the largest conglomerates in the country. The government has exempted both the Army Welfare Trust and the Fauji Foundation from income taxes, giving them an edge over privately owned companies.

The military also operates housing developments across the country, with the Defence Housing Authority (DHA) a dominant force in the country's real estate sector. While the initial aim was to develop homes for serving and retired military personnel, DHA has since evolved into a multibillion-dollar entity with a presence in all major cities.

The military's economic footprint, however, is indicative of broader economic issues plaguing Pakistan. For decades, Pakistan's civilian and military elites have extracted wealth by engaging in highly protected, low-productivity sectors. As a result, Pakistani businesses are both globally uncompetitive and provide shoddy services to domestic consumers.

An example is the DHA project in Karachi, built on land reclaimed from the Arabian Sea. The predominant role enjoyed by the military meant that development of the DHA site occurred without proper access to proper stormwater drainage, resulting in multimillion-dollar homes, paid for in cash, routinely being flooded during monsoon rains.

Political volatility and instability have further compounded the problems, leading to an anemic rate of foreign direct investment, particularly in export-oriented sectors. The result: recurring balance of payments crises that require bailouts.

To emerge from this crisis, Pakistan's military must learn from its strategic ally China. While the Chinese regime also began with military-run organizations developing public infrastructure, over the decades, it has developed companies that have a more global outlook.

In addition, China focused on improving quality by leveraging technology while also investing in global best practices. This ensured that the country built globally competitive businesses that enhanced China's technological reach, such as telecommunications group Huawei Technologies.

Pakistan's military would do well to mimic China's strategy to become globally connected, competitive and innovative.

Such a reconfiguration may solve Pakistan's macroeconomic challenges and recurring external crises, as the military is finding it difficult to muster resources required to compete with an India that is growing at a faster pace and rapidly modernizing its military. This is tilting the balance of power in the region toward India, creating national security risks for Pakistan.

Critics will argue that reorienting the military's corporate empire will only worsen the challenges facing Pakistan's floundering democracy. This concern is valid, but Pakistan's growing economic challenges mean that it is time to prioritize sustainable growth and socioeconomic development.

Changing the military's corporate approach is likely to create the space for broader economic reforms that are urgently needed to end Pakistan's protracted economic decline.

Riaz Haq said…
Pakistan's military-run enterprises need upgrade to revive economy
Corporate empire has potential to be globally competitive

By Uzair Younus

Pakistan's military would do well to mimic China's strategy to become globally connected, competitive and innovative.

Such a reconfiguration may solve Pakistan's macroeconomic challenges and recurring external crises, as the military is finding it difficult to muster resources required to compete with an India that is growing at a faster pace and rapidly modernizing its military. This is tilting the balance of power in the region toward India, creating national security risks for Pakistan.

Critics will argue that reorienting the military's corporate empire will only worsen the challenges facing Pakistan's floundering democracy. This concern is valid, but Pakistan's growing economic challenges mean that it is time to prioritize sustainable growth and socioeconomic development.

Changing the military's corporate approach is likely to create the space for broader economic reforms that are urgently needed to end Pakistan's protracted economic decline.

The experience of the last few years shows that there is, at least in the near term, no political party capable of challenging and dislodging the military from its dominant role.

The next best alternative is to leverage the military's economic empire to transform the country's economy. But the question is: Do Pakistan's generals have it in them to reform in a way that generates wealth for their country?

With millions of younger Pakistanis joining the workforce and failing to find jobs, the time for a different approach is now.
Riaz Haq said…
Muneeb Sikander
1/2 Pak Flood hit rural economy

Work produces things of value and transforms physical world in ways to make life better and survival possible.

But without organised and purposeful productive action, i.e., work, not possible for most people asis at the base of economic order


2/2 Flood hit rural areas

Agrarian to agriculture/livestock based or limited workshop industry. Limited Agri TFP + 15.4 million at poverty risk

1. Need for agri TFP improvement
2., Need to diversify economic base by Proto-industrialization,
Riaz Haq said…
Riaz Haq has left a new comment on your post "Growth of Pak-China Special Economic Zones ":

How to Jump-Start Industrialization in Sub-Saharan Africa
May 27, 2021
By Yi Wen , Iris Arbogast

Most sub-Saharan nations have such low per capita incomes that it would take decades of double-digit growth to attain U.S. living standards.
Nations that industrialize successfully often begin with small-scale efforts and progress to mass-producing heavy industrial goods.
African countries could follow this development pattern with government-provided infrastructure and other support.

When considering income disparities across nations, the differences often can be striking, particularly for nations in the sub-Saharan region of Africa. Per capita income in many poor countries like these is 30 to 50 times smaller than in the U.S. In sub-Saharan Africa, 38 of 48 countries had gross national income (GNI) per capita levels below $2,300 in 2019, while GNI per capita was $65,850 in the U.S., according to data from the World Bank’s World Development Indicators database.

Generations of economists have studied economic development and given policy suggestions to officials in poor countries in Africa and elsewhere, but the disparities remain. To catch up to U.S. living standards, they would need to grow at about 11% per year for 40 to 50 years—an almost impossible standard that only China has come close to achieving in recent history.

The New Stage Theory of Development
The commonality between successful Asian countries’ industrialization (such as China’s rapid rise in the past 40 years) and successful European nations’ industrialization (such as the British Industrial Revolution in the 18th* and 19th centuries) is that these economies all went through three key stages during their industrialization, according to the New Stage Theory of Development (NST):1

Proto-industrialization, which features massive numbers of workshops in rural areas with small-scale production of basic consumer goods for long-distance trade
A first industrial revolution, which features mass production of labor-intensive, light consumer goods for domestic and international markets
A second industrial revolution, which features mass production of capital-intensive, heavy industrial goods
The first stage is very important but has been largely ignored by development economists. During this initial stage, rural farmers or poor households in urban areas use their free time to manufacture simple products and engage in long-distance trade. This raises their income and nurtures the formation of an increasingly unified market and primitive production networks, while developing entrepreneurship and labor skills. 2

During the second stage, large-scale factory systems become prevalent for light industries such as textiles, processed food, toys and furniture. This mass-production stage is labor-intensive, export oriented and benefits from poor countries’ comparative advantage in cheap labor. Mass production in the second stage is profitable only because proto-industrialization has created a large enough market and distribution networks for consumer goods.

Finally, the expansion of light industry in the second stage facilitates the formation of a large enough market for heavy industrial goods—such as means of transportation, energy, steel and heavy equipment. This is not only because the income of workers needs to be high enough to purchase big-ticket items such as automobiles, but because mass production of heavy industrial goods is profitable only after the second stage creates a mass-production chain to support their demand. 3

Riaz Haq said…
How to Jump-Start Industrialization in Sub-Saharan Africa
May 27, 2021
By Yi Wen , Iris Arbogast

In some newly emerging Asian economies, such as Vietnam and Bangladesh, about 30% of rural households were participating in nonfarm wage employment in the early- to mid-2000s (29% in 2002 in Vietnam and 35% in 2005 in Bangladesh). Rates of nonfarm wage employment in poor African countries, such as Ethiopia, Ghana, Malawi and Nigeria, remain between 5% and 18%.

In 2019, the GNI per capita in Bangladesh and Vietnam was $1,940 and $2,590, respectively. GNI per capita was $850 in Ethiopia, $2,220 in Ghana, $380 in Malawi and $2,030 in Nigeria. Although GNI per capita in Nigeria and Ghana is relatively high for the region, these economies are more dependent on income from oil and other natural resources than Bangladesh and Vietnam, according to data from the World Bank’s Development Indicators.

On the other hand, when China engaged in full-fledged proto-industrialization in the 1980s and kick-started its first industrial revolution around the early 1990s, the number of village workers as a fraction of the total rural labor force increased greatly. These workers went from 9% of the labor force in 1978 to 23% by 1988, and then increased to 30% by 2000.5
The Chinese experience in recent decades and the British industrial revolution in the 17th and 18th centuries imply that proto-industries must reach 40% to 50% of total agricultural value added—or about 25% to 30% of total rural labor force in their employment share—to spark a full-fledged first industrial revolution, or to render mass production of light consumer goods profitable and internationally competitive. 6
Based on this criterion, Vietnam and Bangladesh should possess the market conditions for supporting mass-production technologies in light industries like textiles. Indeed, these two countries are currently the largest clothing exporters after China, according to data from the World Trade Organization. But countries such as Ethiopia, Ghana, Malawi and Nigeria do not appear ready to support mass-production technologies in light industries, since their textile and clothing exports are very low.

Policy Implications for Africa
Based on the New Stage Theory of Development, we have a few policy suggestions for countries where rural manufacturing is not yet prevalent. Policymakers should provide every means possible to enhance proto-industrialization, which will help their countries embark on a healthy path of economic development.

The goal is to absorb as many rural households as possible into small-scale manufacturing workshops to increase their income and create a primitive supply chain and a disciplined labor force. This is one of the critical steps for nurturing a mass market to support full-fledged mass-production in light industries.

Governments should provide the necessary infrastructure and social capital to allow farmers to organize themselves into firms and send their goods to distant markets. Part of the income earned could be used to support government initiatives such as building local roads and canals, which reduce transportation costs and are a better use of resources than large projects like high-speed trains—which are better suited to the second industrial revolution stage.

Successfully creating proto-industrial supply chains, commercial distribution networks and competition between proto-industrial firms would eventually help give rise to large firms that mass produce light industrial goods such as textiles. A nation can also be more likely to attract large foreign firms that outsource their labor-intensive manufacturing industries by using subsidization policies such as providing ports, roads and free land as incentives.

* This article has been updated to correct the start of British industrialization.

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