Private sector must have role in production of defence goods

It will lead to competition, better quality goods and higher exports

IKRAM HOTI December 13, 2015
Highly capable marketing professionals are in abundance and the private sector has access to potential buyers and markets of defence products. PHOTO: AFP


Competition Commission of Pakistan (CCP) Chairperson Vadiyya Khalil spoke at a seminar organised by the Khyber-Pakhtunkhwa Chamber of Commerce and Industry last week and said competition law enhances economic efficiency and creates a level playing field.

Her argument was that the law was meant to create the best possible conditions for consumers, investors and innovative entrepreneurs while the main objective is to enhance economic efficiency and create a level playing field.

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Enforcement of competition law is a must for economic growth, she said, adding “the Competition Act 2010 is pro-competition, pro-consumer protection, pro-growth and therefore is pro-business. The law protects you, the businesses, from any anti-competitive or deceptive behaviour of other entities or competitors.”

Situation on the ground, however, is altogether different for the private sector. There are many areas where private investors complain of monopolies in businesses. Defence hardware and software production is one such area.

The Defence Export Promotion Organisation (DEPO) held a seminar on public-private partnership last week to discuss the opening of the area of defence production and exports for the private sector.

But no terms of references (ToRs) were offered to the participants, which were not associated with DEPO, for engagement in production and export. No private sector businessman of the country engaged in the same business was invited to the event.

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Though a couple of Turkish businessmen were present, they too sought the ToRs. The only participant from Pakistan was Almas Hyder, Senior Vice Chairman of the Lahore Chamber of Commerce and Industry.

Poor beginning

Speaking to The Express Tribune about the seminar, Hyder said, “Efforts to invite the private sector to this field were only rudimentary. Unpreparedness on the part of organisers was evident; it was the beginning and it should not have been that poor. Now it is up to the private actors to determine how much space they (the monopolist state actors) allow them in business.”

The CEO of a company, which deals with the Ministry of Defence Production and is the largest supplier of equipment, accessories, kits and material, said “the monopoly of the state organisation leaves this sector in critical need of capacity for acquiring advanced technology and increasing exports.”

He added the private sector had a bitter experience of dealing with the ministry’s branches as they withheld payments while over-pricing of products was made possible in connivance with the private actors. “This is a monopoly that acts against the state exchequer,” he remarked.

The monopoly of the state in defence production and exports has restricted the development of the sector, which has never been exposed to competition. The defunct monopoly control authority had no history of challenging this monopoly.

An expert in the engineering sector, who gatecrashed into the seminar, had something to say: “A key feature of the seminar was low quality of products.”

According to the expert, marketing results are best achieved by private actors who are in a position to hire best professionals and are better aware of market forces. But they are kept out of business. Highly capable marketing professionals are in abundance and the private sector has access to potential buyers and markets of defence products.

He pointed out that the manufacturer and end-user/buyer in this case were actually one organisation with no competitor. “It is impossible to achieve economical and quality production in such an environment.” The absence of significant export orders is a proof of the lack of competition.

Who needs whom?

A Turkish delegate at the seminar remarked, “it is important to know who needs whom – the Ministry of Defence Production needs the private sector or the private sector needs the ministry.”

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Elaborating how the model of engaging the private sector in defence production worked in Turkey, he said the sector operated in coordination with various chambers of commerce and industry and there existed clusters for receiving input for initiating a project.

The writer has worked with major newspapers and specialises in analysis of public finance and geo-economics of terrorism

Published in The Express Tribune, December 14th,  2015.

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Abdul Majid Ghori | 7 years ago | Reply In line with the article by Mr Ikram Hoti I would like to reproduce the following for viewers; Published as ‘The Ten Top Chinese Economic Issues of 1998” By Wang Anwen in Xinwen Bao Nov. 28, 1998 reprinted in Zhongguo Jianbao December 11, 1998 [summary translation *The Military and the Police are Forbidden to Run Businesses* The Chinese government ordered that the military and the police shall not engage in business activities. Three months later, on July 13, the government called a big conference against smuggling. Ten days after this conference, the four commands of the military called a conference on fighting smuggling. At this conference the government not only repeated the prohibition about the military and the police engaging in business but also extended the order to the courts, the prosecutorial organizations, public security and the judicial departments.
zahid | 7 years ago | Reply Strongly agreed with FAZ
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