How Pakistan's Defence Acquisition Practices Are Quietly Stifling Private Industry Growth and Innovation

Summary

Pakistan's military engages private defence companies on a "no cost, no obligation" basis, meaning the government neither financially supports the development of indigenous solutions nor guarantees procurement of the resulting products, leaving all financial risk with the private firms. This arrangement is commercially unviable in a market where the military is essentially the only significant buyer, which explains why Pakistan's defence industrial base is dominated by state-owned enterprises (SOEs) while genuinely capable private firms remain scarce. Industry insiders, such as Bow Systems Ltd. Managing Director Shehzad Ahmed Mir, have openly identified this policy as a critical barrier to private sector growth, as companies must independently bear costs for engineering, prototyping, testing, and tooling with no assurance of a return on investment. While the policy may superficially appear fiscally responsible by avoiding government spending on unproven products, it fundamentally misunderstands the unique economics of defence development, where public co-investment and demand guarantees are internationally recognized as essential catalysts. The article argues that a more rational risk-sharing framework — incorporating milestone-based co-financing, conditional procurement commitments, multi-year demand signals, and IP protections — similar to models successfully employed by India and Türkiye, could unlock Pakistan's private defence potential without abandoning fiscal discipline.