THE MILITARY government held in Karachi two high profile defence equipment exhibition known as the International Defence Exhibition and Seminars, IDEAS 2001 and 2002 in a bid to display expertise in the manufacture of hardware and enhance export in this field.

Weapons and military equipment is one of the most lucrative industries for many leading industrialized countries, particularly the big powers. The United States leads in selling of armaments, (about $26.billion), followed by Britain ($10 billion), France ($6.6 billion) and Russia, in that order. (Dawn, 4 June, 2000). The actual figures are even more indicative of how the capitalist world thrives on arms sales and how war, threat of war and tensions between countries in the Third World translate into dollars for them. Hence, for those countries in the Third orld, which have to maintain fairly large military machines relative to their GNP — and Pakistan is one such country—having an arms manufacturing capability is certainly a plus point.

It is a kind of ‘import substitution’ which will have secondary benefits of feeding upstream and downstream industries and vendors with work. Currently, the contribution and involvement of the private sector in defence-related production is yet very scanty, unlike in the advanced capitalist nations, specially in the USA, where the bulk of the defence manufacturing is done by private companies while the research and development is supported by both private sector and the government.

Nevertheless, its intangible benefits include a reduction in dependence on other countries for arms and equipment, employment and training of national personnel in sophisticated technical skills in defence related industries and so on. However, when it comes to export, one has also to consider their production cost and profitability. Whether such exercises in costing and evaluating profitability have been conducted is rather doubtful because most of the facilities are located in the sensitive defence sector where the normal cost and account controls often do not apply, or are not applied rigorously. So far, operations of the armed forces and departments, laboratories and research organizations under their control have enjoyed a kind of immunity from routine controls. They work in a closed system outside the pale of the rest of the audit and accounts regulatory mechanisms.

You can quote impressive figures of sales and even juggle with figures in percentages, saying exports have doubled,— in the early stages, when sales are low, doubling and trebling is easier to attain. What is not known, however, is how much net income was actually earned through such export. Simply winning export contracts, if the enterprise is making a loss instead of profit, would amount to multiplying the losses. At present, the volume of exports, according to Maj-Gen Syed Ali Hamid, DG, Defence Export Promotion Organization, is $80 million. Costing exercises should be carried out before the export grow further.

It is also doubtful if the cost-benefit ratio analysis (in terms of real economic productivity) of holding high profile, extremely expensive exhibitions at public place, like IDEAS 2002, that have great direct and indirect costs, not to speak of the inconvenience to the general public and losses due to cessation of commercial activity in the affected areas, was done. High profile exhibitions also tend to put the country’s ‘defence industry’ into limelight, drawing unnecessary attention to, and xposure of, both its capabilities and deficiencies. The organisers and policy makers need to consider whether it is desirable from the political or military standpoint to do so, particularly in view of the precarious and tense situation in South Asia, and this country’s vulnerability, that was seriously exposed during the recent crisis, post September 11, that forced the architects of the ‘strategic depth theory’ to effect a U-turn in their Afghan policy.

This is not to argue against defence manufacture. Essentially, the idea of earning hard currency through exports of arms and other defence-related equipment and hardware can work. Many countries are already doing it to their advantage. Furthermore, under the prevailing conditions, it is necessary to enhance the country’s capability in manufacturing military quipment and hardware in the interest of self- eliance and thus maintain a high state of alert, but it is a moot point whether intense publicity under high profile events of this kind would go to enhance our security,or even facilitate business substantially. After all, the clients, or potential purchasers of arms are governments and not the ordinary public. Hence no doubt the criticism from cynics that carrying out media events like IDEAS:2002 do not appear to serve any purpose other than trying to project defence production as an achievement of the sitting government.

Such development is the result of cumulative effort going on for the last several decades, and is expected in normal course in a highly militarized nation 55 years after its independence. Were the defence industry a private sector enterprise, would they have spent such massive amounts in organizing and display of such equipment at a public venue for publicity? And would the government have ordered a shutdown of all commercial activity in the surrounding areas for about a week so such an exhibition could be held? The holding of IDEAS 2000, and later the establishment of DEPO, are admissions of the fact that it is no longer an activity that could be supported conomically by the armed forces acting as the lone patroniser of the industry and that buyers must be found for the industry to improve its competitiveness. But the success of this again depends on how economical the defence industry’s operations can be made to be.

So the main question is how exports could become profitable for the industry and thereby help support the armed forces’ need?

The answer to this may of course lie partly in economy of scale generated by higher volumes of exports. The market for such products could be the countries of the developing world, particularly in the Middle East and Central and South Asia. But the key to this lies in subletting comparatively simpler tasks and operations to private sector industries and cooperation with more advanced foreign manufacturers where sophisticated technologies or skills are involved. Perhaps the plight of most industry in the country is not hidden from the ruling circles. The involvement of the private sector thus can benefit the industry.

Such collaboration can come in the form of manufacturing auxiliary equipment and components that are more economical to produce in the private sector that in the high overheads public sector, and even more costly defence organizations, besides provision of services ranging from transport to engineering consultency, business, insurance and financial services.

Collaboration with foreign manufacturers could result in import of technology that could reduce production costs, improve quality of products and help transfer technology through training of personnel.

However, this approach would require the defence establishment to adopt more open and transparent ways than hitherto. Besides, once they determine to enter the forbidden field, they must also have the courage to face the music from those ruling the roost in this area if and when they become a viable threat to their market share.

The field of arms manufacture is one dominated by the big sharks, with all the risks and responsibilities that it entails. Establishing organizations like the Defence Export Promotion Organization (established in June 2001) is the easy part. Manufacturing at low production cost, procuring contracts and ensuring profitability is the difficult part. Without transparency and subjecting the defence industry to the usual controls, that would not be possible.