With its capital procurement increasing regularly, the Army’s economic position remains strong
Islamabad has finally decided to impose taxes worth $170 billion on its people as per IMF guidelines for its austerity measures. Other measures which the Shehbaz Sharif Government has agreed to include reduction in untargeted subsidies, increasing financial commitment for social protection to help the most vulnerable and those affected by the floods, letting the market determine the exchange rate, prevention of further accumulation of circular debt, and ensuring the viability of the energy sector.
Although these measures might sound impressive and give a breather to the people of Pakistan, Islamabad hesitates to accept a steep decline of 10-20 per cent in its military budget. On the face of it, Islamabad and other Pakistani supporters in Europe and America might argue that its defence budget has been scaled down. From 2019 onwards, each year, there has been a substantial decline in the defence expenditure component of its GDP. For instance, from 4.11 per cent in 2019, the figure came down to 2.8 per cent in 2022. These figures are supplemented by the share of military expenditure in its government budgetary outlay which has come down from 18.7 per cent in 2019 to 16.1 per cent in 2022.
Yet, it’s worth examining if the Pakistan Army's financial influence is on the decline. Rawalpindi's economic position is much more than what meets the eye. First, its capital procurement, including arms procurement for modernisation, has constantly increased. Second, the Pakistan Army controls a substantial share of its civilian financial projects almost in all domains, from its theatre and cinema to infrastructure projects and housing. Third, Pakistan's recent attempt to emerge as an exporter of weapons earned it a substantial amount.
The capital procurement of the army in 2019 stood at $669 million, which increased to $760 million and $884 million in 2020 and 2021, respectively. The statistics for 2022 are unavailable. Additionally, if one co-relates these statistics with the SIPRI data, specific facts emerge that can help one assess Pakistan's combat potential for the next five to seven years.
Concerning conventional warfare capabilities, Rawalpindi is broadening, as well as sharpening its armoured warfare and naval capabilities, with the sole purpose of improving coordination and integration among the various branches of its forces. In 2021, Pakistan purchased armoured vehicles of $263 million compared to $92 million in the previous year.
Further, the value of the purchase of ships more than doubled, with figures of $145 million in 2020 and $358 million in 2021, respectively. There have been no significant procurements for its Air Force. In 2021, the procurements witnessed a steep decline to $139 million from $397 million in 2020, indicating that it continues to rely on the American F-16 and Chinese JF-17.
However, there have been indications that Pakistan has been exploring the domain of disruptive new technologies with the help of China to offset India's conventional and emerging technologies. These technologies are more disruptive, cheaper in cost and can evade detection. In 2021, it imported sensors worth $25 million in 2021, which is a sharp increase of $15 million from the previous year.
A detailed description of the types of sensors is missing, but they have probably been purchased for Pakistan navy's underwater surveillance and anti-submarine warfare.
Rawalpindi is rapidly developing capabilities to fight in cyber and electromagnetic spectrum (EMS). It has already developed a cyber-division with the help of China under a major-general rank officer and its National Cyber Security Policy unveiled in 2021 outlined that a cyber-attack on Pakistan will be considered as category I and category II aggression against its national sovereignty thereby giving it the right for appropriate response measures.
Additionally, its Air Force and the Navy will have cyber capabilities. Further, Pakistan Air Force seems to have procured a Drone Jx gun from China. These guns disrupt the signals between the ground station and the UAV, thereby expanding the domain of unmanned warfare.Second, the official development assistance (ODA) receipts of Pakistan indicate that in 2019-20 it received $334 million and $325.9 million from the US and the UK respectively. According to the Development Assistance Committee (DAC) statistics, 31 per cent and 25.10 per cent of Pakistan's ODA is allocated for economic and other social infrastructure. Given these figures, a pertinent question is whether the bilateral aid agencies have been closely monitoring the final utilisation of the aid, and if the answer is in the affirmative, why is it that poverty and inflation have increased in Pakistan? The answer to this question lies in Pakistan's military economy, also called the 'culture of entitlement'.
Rawalpindi's business activities run through two entities, the Fauji Foundation (FF) and the Army Welfare Trust (AWF). Military commercial projects run by Pakistan Army Generals are approximately $26.5 billion. For instance, the military owns more than 50 different housing projects and more than two dozen import, distribution, and processing petroleum products. It is also the biggest fertilizer and cement manufacturer, apart from having the lion's share of investments in film production, television series, and land holdings which have been forcefully taken from the small and marginal farmers.
Further, its military enjoyed Rs 257 billion in privileges in 2017-18. Annually, it generates around $10 billion, which is used wholly by the army itself for purposes, the statistics of which are not in the public domain. So, how will the IMF and other bilateral and multilateral aid agencies ensure a rapid decline of this 'culture of entitlement'? After all, there are strong possibilities that the military might not be financially affected as only the civilian projects and companies undergo the austerity measures as chalked out by the IMF. It remains unclear whether the IMF possesses a detailed list of the companies associated with the military economy and, if yes, what level of transparency they must adhere to.
Finally, Rawalpindi in 2021, tried its hands at exporting fighter aircraft to Nigeria. SIPRI's Arms Exports register of Pakistan mentions a total amount of $53 million as earnings from Nigeria. Further, the supplier's trade register for Nigeria indicates some interesting geopolitical facts which the defence and strategic experts cannot miss.
In 2016, Pakistan concluded a $184 million deal for three JF-17 thunder aircraft. This is hardly a surprise given China and Pakistan's joint research and development agreement. Russia in 2021 decided to supply Nigeria with three RD-93 turbo fans for JF-17 aircraft sourced from Pakistan. Does this sale indicate that China and Pakistan have been able to convince Russia for arms exports that financially benefit Pakistan strategically? It is unlikely that this is an independent decision of Russia.Does it not indicate the building blocks of Russia, China and Pakistan's strategic proximity? If yes, then Rawalpindi might not be short of finances as the case may look superficial, for there can be many takers for JF-17. Russia has to be convinced by the MEA to alternate source sales and should avoid such cooperation with Pakistan as it might hurt India's security interests sooner or later.
Thus, in light of the above facts, it becomes mandatory for international bodies to demand full transparency of Rawalpindi's revenues and expenditures to help the poor and the vulnerable truly.
(The author is Associate Professor in Central University of Punjab, Bathinda)
