Defence Budget 2013

Pakistan’s security objective places a heavy requirement on maintaining a consistent level of defense spending. The newly elected government will have a lot on its plate when dealing with the budgetary and the financial condition of the economy of the country.

Presently the economy is on life-support even if all the indicators are turned around at a fast pace and move towards a recovery and the growth engine kick starts, it will take about two years before one can see any sustainable positive revenues being generated, which I doubt would happen. The to be Prime Minister Mr. Nawaz Sharif keeps maintaining that his government will build roads, airports, dams, etc, but the issue here is who will pick up the bill. The international investors are not even visiting Pakistan but because of security reasons, always ask Pakistani officials and businessmen to meet them either in Dubai or Doha. Furthermore, Mr. Sharif’s past record is not something many can look at with satisfaction; when he was removed from office last time (1999) the foreign exchange reserves were at $300 million. After the sanctions were imposed in 1998 post nuclear weapon testing, he arbitrarily froze all the foreign exchange accounts of Pakistani and others which were worth a little over $11 billion. The people have not forgotten that these actions led foreign investors to be very apprehensive of his motives.

Pakistan will continue to focus the largest percentages of its defense budget on procurement of new military equipment, as well as the personnel and operational expenditure required to address the security concerns that threaten the nation’s stability. Defense spending transparency has improved in Pakistan in recent years but there remains no structured approach to capital acquisition. Program management and budgeting, as understood in most defense forces, is not practiced. Usually the defense spending is one line and it is approved without any debate in the Parliament. The Defense Select Committee (DSC) of the Pakistani Senate usually holds some formal hearings but they are held behind closed doors. Normally the items which are discussed in DSC are related to Pakistan Defense Division which is responsible for implementing policy and the Defense Production Division which covers AWC, HIT, KSEW PAC, and POF.

In the fiscal year 2011-12 budget, there was an increase in Navy’s budget by 11%. This increase was directed at modernizing shipbuilding facilities such as the installation of a ship lift and transfer system and equipment to provide improved docking and repair facilities for surface ships and submarines. It is notable that these funds were allocated three months after Pakistan announced that it had commenced negotiations with China to procure six submarines from state-run Chinese shipbuilders. Two of these submarines are likely to be constructed in China with the remaining platforms built in Pakistan by Karachi Shipyard and Engineering Works (KSEW).

Pakistan’s defense budget excludes military pensions (thought to be about PKRP55 billion to PKRP55 billion), military aid, defense procurement using credit and income generated by the military’s diverse business interests.

Procurement
Ambitious modernization plans will mean that procurement will continue to account for a significant proportion of the defense budget, about 30 percent on average. Pakistan will continue to seek modern equipment from a variety of sources – most significantly China – driven by a suspicion that the US could again resort to sanctions if so inclined. President Musharraf initiated Armed Forces Develop Plan (AFDP) 2015 in 2004. The total project cost for plan was estimated at $15 billion with 7% GDP growth.

The government does not declare procurement expenditure but it is likely to be sourced from the ‘physical assets’ allocation. Pakistan receives $750 million under the US Coalition Support funds, which will start to dry up after the US/NATO will pull out of Afghanistan by the end of 2014.

Impact of Suspension of Armed Forces Develop Plan (AFPD) 2025
The AFDP 2015 program was launched in 2003/04 by former president Pervez Musharraf aimed at making the three branches of Armed forces upgraded to modern forces of the world. In March 2009 Prime Minister Gilani initiated AFDP 2025 at the cost of $30 billion but since 2008 the GDP is stagnated at an average of 2.5% which is hardly maintaining an economy which is suffering from recession. In all likelihood, it is clear that major arms procurements will not be attained at this rate of GDP. Recently during a hearing of the Senate’s standing committee on defense, the Chief of Pakistan Air Force disclosed that their organization Development Plan 2025 was suspended in 2007 because of lack of funding. It would be safe to assume that the Navy’s development Plan 2025 has met a similar fate.

Army
For the last seven years the Army has been taking on the fight against militants on a perpetual basis. According to reliable sources it has lost more than 5,000 servicemen in this fight. Aside from the loss of personnel it also sustained material attrition and needs a significant replenishment for the material. One of the unfulfilled requirements is the induction of attack helicopter gunships. Pakistan Army was in negotiations with Turkey’s TAI/AgustaWestland T129 for 15 helicopters but due to budgetary reasons the deal fell apart. On the other hand, the US had offered 20 latest Cobra attack helicopter AH-1Z but for some unknown reasons the talks were suspended. Further, the requirement list includes a medium—heavy lift helicopters (stored German CH-53 and stored Dutch Army’s CH-47 plus new Chinese Z-8 are some of the options) plus more of medium and light utility helicopters. The Pakistan Army is already in the process of receiving new armed/scout Eurocopter AS.550C3 Fennec.

On the ground, there have been some impressive milestones achieved in training of the servicemen in counterinsurgency (COIN) operations. New types of assault rifles (US M4 Colts & Chinese Type-69) have been inducted along with heavy and medium caliber sniper rifles, grenade launchers, US made Dillon M134D Gatling Gun helicopter mounted Gatling guns, plus POF’s upgraded RPG-7 along with radio, night visions, and body armor.

To support and transport troops in the fight against the militants the Army has not made any progress. The normal transportation method deployed in the NW Pakistan in the rugged area is 4×4 Toyota pick-up trucks, which are devoid of any armor protection. In some of the areas the army has deployed HIT M-113/Talha APC but again because of the militants’ usage of RPG additional iron sheets were attached to give more protection to the troops. What is required are some types of Light Combat Tactical All-Terrain Vehicles (LCTA-T), MRAP All-Terrain Vehicles (M-ATV), medium and heavy duty MRAP vehicles, wheeled Infantry Fighting Vehicles (IFV)

Navy
In the last days of former President Musharraf Pakistan (August 2008) after lengthy negotiations, was about to sign a multi-billion dollar deal with HDW in Kiel, Germany, for 3 U-214 submarines. However, immediately after President Musharraf left office the new government went straight for the IMF program therefore forfeiting the submarine deal with Germany. If the contract was signed in November of 2008, the first U-214 Advance AIP powered submarine built in Pakistan would have been delivered in 2015. Because of the dire need to fulfill the requirement for a 12 Submarine fleet Pak Navy approached China for a submarine deal. A tentative agreement was reached for six-diesel electric submarines of unknown class worth close to $6 billion. Again, even though China was willing to provide long term soft loans the Government of Pakistan was far away from providing any collateral assurances. Similarly, acquisition for an additional four F-22P Frigates along with three or four F-25P heavy frigates with China are at a standstill because of the funding issues. Pakistan Navy Aviation has added two used ATR-72-500C but no avionics package has so far being disclosed. These two aircrafts are acquired as a replacement for aging Breguet Br.1150 Atlantic. Air arm of the navy is still recovering from the devastating loss of two multi-million dollar US-made Lockheed MartinP-3C Orion aircrafts in May of 2011. The US has implicitly indicated to replace these two losses but the destroyed P-3C Orions are very expensive aircrafts. One of the replacement options is to procure Chinese Xian H-6K long range aircraft and equip them with Saab’s Swordfish maritime patrol aircraft.

Air Force
The local production of the jointly built lightweight fighter aircraft CAC/PAC JF-17 is moving smoothly at Kamra. According to PAF sources the air force has received first 40 Block I JF-17 and the production for Block II is about to commence. If all production goes as planned PAF aims to induct close to 175 JF-17 (although some sources say 250) of these modern lightweight fighter aircrafts.

PAF desperately wishes to induct Chinese FC-20/J-10B multi-role 4^th generation aircraft. Initially there were some engine issues related to the sale but the recent visit by the Lieutenant General of the Russian Federation, Viktor Bondar, it seems that the Russian might be willing to release the engines for sale to Pakistan under the similar guidelines as RD-93 engines for JF-17. Plus the Chinese want some type of assurance that if they give Pakistan some soft loans they [Pakistanis] can provide some type of collateral for these loans. The first batch of 36 FC-20/J-10B costs was estimated at $1.9 billion plus.

PAF should have exercised the option to buy 18 F-16 C/D from the USA few years ago. One of the most critical items that PAF should have asked for are a couple of AC-130 from the US to fight militants. The US would have given these aircrafts without any hassle because they fit the requirement for fighting terrorism.

The air force is also in need to replace the advance Saab Erieye AWC&E which was damaged beyond repair in the militant’s attack at PAF Base Minhas. Recently, Sweden’s Saab signed a contract worth $170 million with an unnamed country for Saab 2000 Erieye, it is safe to assume the unnamed country is Pakistan since it is the sole operator of Erieye based on Saab 2000 airframe.

There is a need to add a lot to the transportation and logistic sphere of PAF. PAF needs to invest in procuring more IL-76/IL-478 from Russia, used/stored C-130, and add more CN-235 along with CN-295.

Army Budget by Category (2013 and beyond are estimates in USD)

Research, Development, Training and Evaluation (RDT&E)
Pakistan’s indigenous military production capabilities are fairly limited. However, the government is trying to develop domestic production through technology transfer in equipment purchases. Therefore, investment in R&D spending is likely to increase gradually over time, although unlikely to rise above six per cent of the defense budget while the country’s armed forces are engaged on multiple fronts. The Ministry of Defense needs to encourage the local investor and industry to be partners in defense projects.

Personnel
Scrutiny of official budgetary documentation indicates that military personnel have received a significant increase in pay from 2008, when operating costs stood at $1.07 billion. They have subsequently increased to $1.15 billion (2009) and $1.41 billion (2010), and are projected to reach $1.61 billion by 2013.

Operations and Maintenance (O&M)
As security threats are focused on insurgents and border stability, the majority of O&M funding is spent on the army. However, as the Air Force has played a greater role in support of full-scale ground operations, its O&M costs have increased accordingly.

Offset Policy
Pakistan considers the cooperation with foreign companies, especially those in China, an important part of the country’s procurement policy. In recent years, the government has encouraged its industries to work more closely with overseas partners to take advantage of offset opportunities – particularly in the arena of technology transfer.

The proposed Type 214 deal in November 2008 with Germany’s Howaldtswerke-Deutsche Werft (HDW) was reported to have involved all three Type 214’s is being built under license by state-owned Karachi Shipyard and Engineering Works (KSEW) following extensive technology transfer. Such a move to build the submarines in Pakistan is in line with the objective to improve indigenous capabilities but is a departure from previous strategies where foreign manufacturers would start production before transferring it in country.

Defense procurement policy is based on its military doctrine and economic ability to purchase equipment needed by the services. In the past the procurement process was largely autonomous from the political. Even in the years of democracy, it was rare for governments to attempt to interfere with procurement decisions made by the armed forces.

Navy Budget By Category (2013 and beyond are estimates in USD)

Air Force Budget By Category (2013 and beyond are estimates in USD)

Defence-Wide Budget (2013 and beyond are estimates in USD)

The multiple groups that form the paramilitary forces of Pakistan provide a wide range of services. These forces are comprised of: the Coast Guard, the Frontier Corps, the Maritime Security Agency, the National Guard, the Northern Light Infantry, and the Pakistan Rangers.

** PLEASE NOTE: All figures quoted are in Constant 2013 USD billions unless otherwise stated.