Quwa
Research Partner
This is just my perception, but I get a sense that a lot of our budget ends up sustaining overhead like facilities, wages, and pensions, and a lot of that is under-utilized. For ex., I don't think HIT and PAC are running around the clock with all slots being used. As a result, the public exchequer ends up subsidizing unused capacity.
In big part, that capacity also gets underused because the armed forces requirements have moved on from the older things those previously built capacities were designed for. So, we either have to spend in upgrading them (adding to sunk costs) or, basically, move on entirely (e.g., remember AK?)
IMO, this problem stems from the fact that the armed forces don't want to offload serial production work to the private sector. Okay, I get it, the private sector isn't at the point to take on that work at the moment, but how can they when there was hardly incentive nor free pathway (much less support) to build that capacity in the first place.
The private sector can take on the costs of building and upgrading production lines for each new requirement. Sure, they'll pass on those costs by baking it into the price of the stuff they sell, but that's where we'd want to bank on our local currency, labour costs, or material costs to ensure those prices stay lower than equivalent imports.
The benefit, however, is that we lift arguably some of the biggest cost centres off the hands of the SOEs like NESCOM/SPD, freeing them to invest more on the R&D side of the equation. They can spend on the labs, instrumentation, projects, and, most importantly, the scientists and engineers rather than managing production.
So, this necessitates a policy where armed forces munitions orders, for example, must -- by design -- involve the private sector. SPD can design the munitions and their inputs, and the private sector handles the work of manufacturing it at scale. Obviously, things can be pushed even further with the private sector getting incentivized into developing their own tooling and other infrastructure, enabling them to both localize and compete across other markets.
If that aspect succeeds, then we generate high-value exports on one end, and save on imports of machining and factory equipment on the other. With a local machining and tooling base, Pakistanis may invest in manufacturing more broadly and push us into things like auto/EVs, appliances, etc.
However, for this to be worthwhile for the private sector, they need to know that they'll get orders from both the armed forces and foreign markets. Thus, security regulations and controls also need to be streamlined, heavily, so "scorty" doesn't derail momentum and create unnecessary friction.
And, of course, we need our fiscal exchequer to get healthy as well. We've beaten the main tax sources today -- middle class wage earners and manufacturing -- to death with taxes, harming our exports on one end and driving skilled workers out to the Gulf and the West on the other. The rent-seekers, like big agriculture and big retail (esp the ones who import goods) need to get taxed as well. This helps us increase our defence spending alongside other areas (esp. education) to fuel the stuff talked about above.
But this is all a tall ask for leaders who are basically thumbs for butts.
