Maj (Retd) AGHA HUMAYUN AMIN from WASHINGTON DC writes about the weapons manufacturing field in Pakistan.

As per one respectable estimate, financial turnover wise, the armaments industry is the world’s largest industry. The world weapon trade is larger than the world oil industry which is third in the order, drug trafficking occupying the second position. Since the end of WW II the focus of warfare conventional and unconventional has shifted from Europe to Asia and Africa. Thus the four Middle East Wars, the two Indo-Pak Wars, Iran-Iraq War and the Gulf War etc have provided the principal testing ground as well as market for all types of defence equipment producers.

This brief essay attempts to analyse the Pakistani Arms Market  and the likely problems that a potential defence equipment seller may face in Pakistan. It is based on this scribe’s fifteen years experience as an army officer and as a private businessman in Pakistan, Russia and in USA.

The defence equipment selling business has become far more difficult than twenty years ago. This is basically because of major political changes in the political and mass media spheres. The Bofors Scandal rocked India and its tremors continue to rock Indian politics even today. The Contras Scandal rocked USA and the Tank and Submarine Scandals are hot words in Pakistani politics.

These scandals were not inevitable if the buyers and sellers  had followed more coherent and logical methods. We will discuss some of the salient aspects of the whole business.

‘Sound Intelligence’ backed by ‘Technical Competence’ backed by  a good logistic/financial base and an imaginative on ground strategy  executed by a well integrated team can clinch a good deal in face of  outwardly impossible odds. The defence equipment seller or marketing man must have no pre-conceived notions. He should first acquire as much first hand knowledge of local conditions as he can and then confirm or reject his conclusions by a personal visit to the country.

Memories of an Equipment Trial

I remember trials of  ‘Terrain Navigation Systems’ that my unit  conducted back in 1985. I was part of the team and saw from very close  quarters not only the three competing company’s equipment on tank but also the blunders that foreigners commit once they try to sell equipment. There were three companies who wanted to sell terrain navigation systems, which could be mounted on tanks, armoured personal carriers as well as soft-wheeled vehicles. One  Canadian company was offering a magnetic system with typically complicated British controls. The second a US Company was offering a satellite based GPS terrain navigation system. The third was a German Company offering a Gyrobased system. One fine intensely cold December morning we started the trials. This was in the Cholistan desert. The Canadian system which was magnetic based went berserk on the tank and gave errors of up to one and half to three miles once we moved to bearings about seven or eight kilometres away from the start point. The US satellite based system was relatively better but highly complicated but politically unreliable since it was satellite based. The German system beat both the US and Canadian by a huge margin. It was simple to operate and highly accurate both on tank and on other vehicle types.

The most thought-provoking part of the affair was the behaviour of the three company’s staff. An overbearing retired colonel who was very fond of name-dropping and interfering in everything he could represented the Canadian Company. His conduct only weakened his company’s cause which thanks to their magnetic error failures was already half hopeless! The American team was better but did not understand the Pakistani society and indulged in too much marketing of their equipment. The German Company had the smallest staff, one solitary German and one Pakistani administrative assistant. The German came to the mess in the evening sometimes, sat for an hour or less, had his dinner and departed. We did not hear him discussing his equipment even once!

We realised that the Canadian and US Companies had not even done a thorough initial study of the client requirements. The Germans on the other hand had done their homework. I think that the German Company was recommended in the trial report. It was another thing that they finally did not clinch the deal in the end since the Government of Pakistan bought no equipment.

It was a most thought-provoking experience. The performance of equipment is the best certificate and recommendation of a company. In this case the Germans had a marked technical advantage. However, in most cases the differences in various companies are not really glaring. It is in these circumstances that the other factors like: behaviour of the company’s marketing team, their trial staff, and their initial planning, which decide the issue.

Some observations on doing business

Foreign companies doing business make some imperial blunders  again and again. The most common is putting all their eggs in one basket! By this is meant reliance on one particular individual or political party to push through a deal. Selecting a local agent may not be the soundest policy in the present Pakistani or even Asian scenario. The power politics of the region are full of uncertainties and it is common to find yesterday’s pinnacles of power toadies most persecuted political prisoners. A local representative operating on his own may have been good in older times when a general or a prime minister could hold office with certainty for a decade or even half a decade. Today the best bet for a company trying to do business is to have its own local office headed by its own national or a local on salary. Such a set-up would ensure that the company’s business does not suffer with change of government. This scribe witnessed this pitfall while serving as clearing agent of a UK based aviation company. The company was relying totally on a Pakistani businessman who was extremely effective but controversial and was a very close friend of a powerful political figure.

Once this political figure lost his seat the UK Company’s business went for a six due to reasons other than technical failures. Had they operated through their own office nothing would have affected their business. In this regard some foreign companies may find it better to deal through semi-official organisations of the Armed Forces like the Shaheen Foundation, Bahria Foundation or Army Welfare Trust.  These Organisations are non-political and carry weight inside their parent services. Any such institutional arrangement may depend on a foreign company’s case to case requirements. Another good bet for a foreign company may be operating through a clean non-political private organisation. This again is better than operating through an independent agent or a political figure.Ironically the same UK businessman who had earlier sold an aircraft with dubious characteristics and specifications later sold an aircraft through lease to a semi-government airline with success! The politician who he involved in the first deal is behind the bars while his second clients are enjoying life, since they were from a semi-government organisation! This can happen only in an Islamic Republic!

Another important factor for a foreign company is sound intelligence. This requires the on ground presence of a local partner or employee who understands the procedures, the military or organisational requirements and the on ground operational tactical and strategic requirements. Knowledge of terrain in which the equipment will be used, the character, level of intellect and habits of the potential users are also important aspects of this intelligence. Thus any company desirous of doing business must have intelligent people who understand the local conditions and can help them in arriving at pragmatic and feasible assessments. Ideally a company doing business, like Admiral Horthy of Hungary or Talleyrand of France should have many irons in the fire at the same time. This again involves meticulous planning based on a long-term strategy. Factors like the various old boy networks through which decision making can be influenced are important here. Change in government or change in office holders whether institutional or political must not be allowed to interfere with companies business. This requires careful planning and selection of correct type of on ground representation.

Potential Business areas Pakistan is no longer a frontline state and no longer possesses the financial muscle to make huge equipment purchases. However, it has a fast emerging private sector dealing in security services. In addition the cyber sector offers vast possibilities. There are no fixed parameters that regulate the procurement in the intelligence agencies and in much sensitive defence organisations. Even the military purchases are free of bureaucratic interference since the parliament or ministry of defence are little more than rubber stamps in the defence procurement decision making process. There is huge market in spares but this is open only to those western companies who have the guts and the intellect to defy their government’s policies. In the last decade some Western businessmen have made huge fortunes by supplying spares to various Asian states on which some Western countries have placed a strict embargo. I had the honour of meeting one such businessman at the Metropol Hotel in Moscow in October 1995.

There is huge potential in demands arising out of the High Altitude Conflict in Siachen Glacier or in the Low Intensity War in Kashmir. Both the conflicts can escalate into a larger conflict and both offer a lucrative market for the defence equipment man with a sharp eye. The Intelligence agencies are also not regulated by a concrete procurement policy and do a lot of buying through defence attaches and through their operatives posted abroad and through a technical section in the capital territory area.

A good bet for any foreign company aspiring to do business in Pakistan may be getting involved in the national economy. There is no better example of this than the Wah Nobel Bofors and the Chinese who established the HMC and HRF. A foreign company that has some kind of roots in the country would enjoy a position of unfair but morally and strategically very strong advantage. On the other hand companies who operate on the ‘Fire and Forget’ i.e ‘Sell and disappear’ motto will naturally be perceived from day one as Blackguards.                                                                            

CONCLUSION

Pakistan and surrounding countries offer significant markets in the defence related industry. The region at present is the most dangerous potential flashpoint in the world for the last two years. A low intensity war has been going on in Pakistan’s proximity for the last twenty years, be it Afghanistan, Siachen, Kashmir or parts of India. The region has skilled manpower, which due to massive unemployment and economic depression is ready to work at wages far lower than in many parts of the modern world. Both India and Pakistan are likely to remain highly militarised states for the next decade or so. All these factors make the region a potentially challenging market for the defence equipment businessman, provided he proceeds intelligently and deliberately and has done his homework well!