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Pakistan Defence and Security Report Q1 2011


Pakistan Defence and Security Report Q1 2011

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Price $530.00
Meta Description No
Publisher Business Monitor International
Date of Report Aug 1, 2011
Quick Overview
In late November 2010, a number of US diplomatic cables made public on the WikiLeaks website demonstrated significant US concerns about Pakistan’s nuclear programme. Pakistan is said to be producing nuclear weapons at a faster rate than any other country in the world. Further, the north-west of Pakistan is said to be the headquarters for al-Qaeda worldwide.
The US ambassador to Pakistan, Anne Patterson, worried that someone could smuggle enough nuclear material out of a nuclear site to eventually make a weapon. She added that it would be possible for terrorists to build several ‘dirty bombs’ from the existing large and poorly-guarded stockpile of highly enriched uranium at a research facility. She added that, because of India’s military superiority, Pakistan would rely increasingly on nuclear weapons for defence.
Pakistan’s political leadership is portrayed as inept, weak and corrupt. President Zardari is regarded as spending more time in political manoeuvring than governing, countering the growing insurgency and improving the weak economy. In July-August 2010, the worst flooding in Pakistan’s history devastated the country. Our preliminary damage assessment suggests that Pakistan will struggle to muster any meaningful economic growth in FY10/11. We have slashed our real GDP growth projection from 2.8% to 0.7% for FY10/11, with risks probably tilted to the downside.
Even after the clean-up operations are complete, we are unlikely to witness a return to the days of plus-5% economic growth (last seen between 2002 and 2007), as the government’s poor fiscal state and a protracted internal struggle against extremist elements weigh heavily on private sector demand.
Pakistan's continuing failure to tackle the structural flaws of its public finances saw the government miss its IMF-prescribed nominal deficit target by a wide margin. With the floods dashing any hopes of the government meeting its FY10/11 deficit target, it looks like the country will remain on IMF life support for at least the next 12 months. We believe that the IMF will ease some of the conditions, given the sheer scale of damage incurred by the floods and the key role Pakistan is playing in the West’s fight against Islamist extremists operating in its borders with Afghanistan.
We note that defence-related spending soared to an all-time high of PKR100bn (US$1.16bn) in Q4 FY09/10 (Q210) – roughly seven times what is spent on education and healthcare combined – and with Pakistan's internal struggles unlikely to improve significantly, spending here will remain high.
According to the UN Food and Agriculture Organization (FAO), food prices in Pakistan have risen 10% since the floods. Rising inflation and unemployment following the disaster will add to the woes of a poor security environment and popular distrust in the government. Meanwhile, tense relations with India remain a potential flashpoint.
Politically-motivated violence in Karachi continues. On November 11, Taliban gunmen killed at least 18 while attacking the police anti-terrorism unit CID in Karachi. On November 5, at least 72 were killed in a suicide attack on a Sunni mosque in Khyber Pakhtunkhwa. The Taliban claimed responsibility. The Human Rights Commission of Pakistan estimated in November that hundreds of targeted political killings had taken place so far in 2010. Also in November, the US military has increased drone bombings of suspected insurgents in Waziristan.
Pakistan is at risk of experiencing years of instability and militant activity, but an outright collapse of the state is unlikely unless the core province of Punjab becomes ungovernable. Although not our core scenario, such a volatile backdrop means that we cannot rule out a serious challenge to the executive – either constitutional or unconstitutional – in 2011. Under such circumstances, we would not preclude a military coup. Meanwhile, due to its strategic importance, Pakistan's foreign allies will do everything they can to ensure its stability.
Table of Contents
Executive Summary ........................................................................................................................................ 7
SWOT Analysis ................................................................................................................................................ 9
Pakistan Security SWOT ....................................................................................................................................................................................... 9
Pakistan Defence Industry SWOT ....................................................................................................................................................................... 10
Pakistan Political SWOT .................................................................................................................................................................................... 11
Pakistan Economic SWOT .................................................................................................................................................................................. 12
Pakistan Business Environment SWOT ............................................................................................................................................................... 12
Global Political Outlook ................................................................................................................................ 13
Global Hotspots .................................................................................................................................................................................................. 14
Latin America: More Of The Same ..................................................................................................................................................................... 21
Western Europe .................................................................................................................................................................................................. 22
Central Europe ................................................................................................................................................................................................... 23
South Eastern Europe ......................................................................................................................................................................................... 24
Russia And The Former Soviet Union ................................................................................................................................................................. 25
Middle East: Mostly The Same Old Challenges .................................................................................................................................................. 26
Sub-Saharan Africa: Definitive Elections Pending ............................................................................................................................................. 28
Asia: Accommodating A More Powerful China .................................................................................................................................................. 29
Wild Cards .......................................................................................................................................................................................................... 31
Global Security Outlook ............................................................................................................................... 33
The Future Of NATO ...................................................................................................................................... 39
South Asia Security Overview ...................................................................................................................... 44
The Strategic Outlook For The 2010s ................................................................................................................................................................. 44
South Asia In A Global Context .......................................................................................................................................................................... 44
The Outlook For South Asia................................................................................................................................................................................ 55
Political Overview .......................................................................................................................................... 57
Domestic Politics ................................................................................................................................................................................................ 57
Long-Term Political Outlook ......................................................................................................................... 60
Security Risk Ratings ................................................................................................................................... 63
BMI’s Security Ratings ....................................................................................................................................................................................... 63
Table: Asia Pacific Regional Security Ratings .................................................................................................................................................... 63
Table: Asia Pacific State Vulnerability To Terrorism Index ............................................................................................................................... 64
City Terrorism Rating ......................................................................................................................................................................................... 64
Table: BMI’s Asia City Terrorism Index ............................................................................................................................................................. 65
Security Overview ......................................................................................................................................... 67
Internal Security Situation .................................................................................................................................................................................. 67
Insurgency .......................................................................................................................................................................................................... 67
Need For Police Reform ..................................................................................................................................................................................... 68
Tribal Cooperation ............................................................................................................................................................................................. 69
External Security Situation ................................................................................................................................................................................. 69
Border Disputes .................................................................................................................................................................................................. 70
Afghanistan ......................................................................................................................................................................................................... 70
Kashmir .............................................................................................................................................................................................................. 71
Armed Forces And Government Spending ................................................................................................. 72
Armed Forces ..................................................................................................................................................................................................... 72
Table: Regional Armed Forces, 2010 Forecast (including conscripted, ‘000 personnel) .................................................................................... 72
Deployments And Exercises ................................................................................................................................................................................ 73
Table: Pakistan’s Deployments........................................................................................................................................................................... 73
Weapons of Mass Destruction ............................................................................................................................................................................. 75
Table: Pakistan’s Nuclear-Capable Ballistic Missile Arsenal ............................................................................................................................. 76
Nuclear Developments ........................................................................................................................................................................................ 77
Table: Exports From Pakistan ............................................................................................................................................................................ 78
Market Overview ............................................................................................................................................ 79
Arms Trade Overview ......................................................................................................................................................................................... 80
Industry Trends And Developments .................................................................................................................................................................... 81
Procurement Trends and Developments ............................................................................................................................................................. 83
Industry Forecast Scenario ........................................................................................................................... 85
Table: Pakistan’s Defence Personnel 2000-2008 ............................................................................................................................................... 85
Table: Pakistan’s Defence Personnel 2008-2015 ............................................................................................................................................... 85
Table: Pakistan’s Defence Expenditure; 2008-2015 ........................................................................................................................................... 86
Table: Pakistan’s Defence Expenditure - Of GDP; 2008-2015........................................................................................................................... 87
Table: Pakistan’s Defence Exports; 2008-2015 .................................................................................................................................................. 88
Table: Pakistan’s Defence Imports; 2008-2015 .................................................................................................................................................. 89
Table: Pakistan’s Defence Trade Balance, 2008-2015 (US$ mn) ........................................................................................................................ 89
Key Risks To BMI’s Forecast Scenario ............................................................................................................................................................... 90
Macroeconomic Outlook ..................................................................................................................................................................................... 90
Table: Pakistan - Economic Activity, 2006-2015 ................................................................................................................................................ 92
Company Profiles .......................................................................................................................................... 93
Air Weapons Complex ........................................................................................................................................................................................ 93
Dr AQ Khan Laboratories .................................................................................................................................................................................. 94
Heavy Industries Taxila ...................................................................................................................................................................................... 95
Pakistan Aeronautical Complex .......................................................................................................................................................................... 97
Pakistan Ordnance Factories ............................................................................................................................................................................. 98
Country Snapshot: Pakistan Demographic Data ........................................................................................ 99
Section 1: Population .......................................................................................................................................................................................... 99
Table: Demographic Indicators, 2005-2030 ....................................................................................................................................................... 99
Table: Rural/Urban Breakdown, 2005-2030 .....................................................................................................................................................100
Section 2: Education And Healthcare ................................................................................................................................................................100
Table: Education, 2002-2005 ............................................................................................................................................................................100
Table: Vital Statistics, 2005-2030 ......................................................................................................................................................................100
Table: Employment Indicators, 2001-2006 ........................................................................................................................................................101
Section 3: Labour Market And Spending Power ................................................................................................................................................102
Table: Consumer Expenditure, 2000-2012 (US$) ..............................................................................................................................................102
Table: Average Annual Manufacturing Wages, 2000-2012 ...............................................................................................................................102
BMI Methodology ........................................................................................................................................ 103
How We Generate Our Industry Forecasts ........................................................................................................................................................103
Defence Industry ................................................................................................................................................................................................103
City Terrorism Rating ........................................................................................................................................................................................104
Table: Methodology ...........................................................................................................................................................................................106
Sources ..............................................................................................................................................................................................................107




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