Strategic Context: The Evolution of an Industrial Base Under Siege The historical trajectory of Pakistan’s defense industrial base (DIB) is a study in the law of unintended consequences. Unlike the military-industrial complexes of the West, which evolved through the confluence of private capital and state projection of power, Pakistan’s defense industry was forged in the crucible of existential anxiety and international isolation. The boom witnessed in the mid-2020s, characterized by export orders exceeding $13 billion and a fundamental shift from import dependence to strategic autonomy, is not a sudden phenomenon but the maturation of a survival strategy instituted decades prior. To understand the current "boom," one must analyze the foundational epochs of the industry. Following the wars of 1965 and 1971, and particularly after the imposition of the Pressler Amendment sanctions in the 1990s, the Pakistani state concluded that reliance on external suppliers—specifically th...
The Arsenal of the Global South: A Comprehensive Strategic Assessment of Pakistan’s Defense Export Boom, Industrial Trajectory, and Geopolitical Realignments (2024–2035)
Strategic Context: The Evolution of an Industrial Base Under Siege
The historical trajectory of Pakistan’s defense industrial base (DIB) is a study in the law of unintended consequences. Unlike the military-industrial complexes of the West, which evolved through the confluence of private capital and state projection of power, Pakistan’s defense industry was forged in the crucible of existential anxiety and international isolation. The boom witnessed in the mid-2020s, characterized by export orders exceeding $13 billion and a fundamental shift from import dependence to strategic autonomy, is not a sudden phenomenon but the maturation of a survival strategy instituted decades prior.
To understand the current "boom," one must analyze the foundational epochs of the industry. Following the wars of 1965 and 1971, and particularly after the imposition of the Pressler Amendment sanctions in the 1990s, the Pakistani state concluded that reliance on external suppliers—specifically the United States—was a strategic vulnerability that compromised national sovereignty. The denial of F-16 fighter jets and the cessation of military aid forced Islamabad to adopt a policy of "indigenization at all costs." This necessitated the creation of vertically integrated Public Sector Enterprises (PSEs) such as the Pakistan Aeronautical Complex (PAC), Heavy Industries Taxila (HIT), and the Pakistan Ordnance Factories (POF). These entities were engineered not for commercial efficiency or profit maximization, but to ensure the continuity of supply chains during protracted conflicts.
For nearly half a century, this industrial architecture remained introverted, servicing the large standing army and air force of Pakistan while absorbing significant state subsidies. However, by the fiscal years 2023-2024, a convergence of macroeconomic crises and geopolitical opportunities forced a paradigm shift. The severe balance of payments crisis, exacerbated by dwindling foreign exchange reserves, compelled the state to monetize its strategic assets. Defense production, previously viewed solely through the lens of national security, was re-evaluated as a potent engine for economic recovery. The establishment of the Special Investment Facilitation Council (SIFC) and the "Uraan Pakistan" economic framework institutionalized this pivot, explicitly targeting defense exports as a primary source of hard currency inflows.
This report posits that Pakistan is currently executing a "Third Way" strategy in the global arms market. By offering platforms that combine Chinese technological DNA with Western-standard avionics and indigenous integration—free from the political conditionality of US ITAR (International Traffic in Arms Regulations) or the CAATSA (Countering America's Adversaries Through Sanctions Act) risks associated with Russian hardware—Pakistan has identified a lucrative niche. It positions itself as the "Arsenal of the Global South," providing cost-effective, battle-proven, and sovereign defense solutions to mid-tier powers in Africa, the Middle East, and Southeast Asia who seek to modernize their forces without becoming vassal states to Great Power suppliers.
The Macroeconomic Imperative: Monetizing Security
The driving force behind the aggressive export push is arguably more economic than military. By 2024, Pakistan’s economic architecture required urgent diversification away from its traditional reliance on low-value-added textiles and agriculture. The defense sector, with its potential for high-value manufacturing and dollar-denominated revenue, emerged as a stabilizing pillar for the national economy.
The Balance of Payments and Defense Revenue
The disparity between official trade statistics and the actual value of signed defense contracts highlights the unique nature of the military market, where deliveries and payments are spread over years. While customs data from sources like the Pakistan Bureau of Statistics (PBS) might reflect realized exports in the low tens of millions for specific categories in 2024, the Ministry of Defence Production (MoDP) reported a total economic contribution of over Rs 260 billion in a single year, with export contracts signed in the 2024-2025 period exceeding $10 billion.
This massive order book serves a critical macroeconomic function: it provides a future stream of guaranteed foreign exchange. Unlike textile exports, which fluctuate with global consumer demand and cotton prices, defense contracts are sovereign guarantees, often backed by state-to-state financing protocols. The projection that defense exports could contribute up to 3.7% of GDP and boost foreign exchange reserves by 82% over the 2026-2030 period underscores the sector’s growing centrality to fiscal planning.
Projected Economic Impact of Defense Export Pipeline (2026-2030)
| Economic Indicator | Projected Impact | Strategic Mechanism |
| Foreign Exchange Reserves | +82% Increase | Direct capitalization through G2G payments and advance deposits. |
| Share of National GDP | ~3.7% | Transition from a non-productive strategic asset to a core industrial contributor. |
| Export Target Contribution | Significant portion of $60B target | Diversification of the export basket beyond textiles/agriculture. |
| Industrial Value Addition | High-Value Expansion | Shift from raw material export to complex systems integration. |
| Debt Management | Loan-to-Asset Conversion | Repayment of foreign loans (e.g., Saudi Arabia) through hardware delivery rather than cash. |
The Debt-for-Defense Model
A particularly innovative, albeit necessitated, financial instrument emerging in Pakistan’s strategy is the "Debt-for-Defense" swap. Negotiations with Saudi Arabia in late 2025 to convert approximately $2 billion in existing loans into a procurement package for JF-17 Thunder jets represent a strategic evolution in sovereign debt management. This mechanism achieves dual objectives: it alleviates the immediate pressure of debt repayment while simultaneously securing a long-term customer for the defense industry. It effectively transforms a financial liability into an industrial stimulus, ensuring that capital remains within the domestic economy to fund production, wages, and R&D, rather than flowing out as debt servicing.
The "Uraan Pakistan" Framework
The "Uraan Pakistan" economic roadmap, unveiled to guide growth through 2035, identifies defense production as a priority sector for Foreign Direct Investment (FDI) and export promotion. This framework aims to dismantle the silos between the military-industrial complex and the civilian economy. By encouraging private sector participation—integrating over 150 private vendors into the supply chains of giants like PAC and HIT—the state aims to create a "trickle-down" technology effect. The rigorous quality standards required for aerospace and military manufacturing are expected to raise the industrial baseline of the country, enabling civilian manufacturers to compete in high-precision global markets.
The Catalyst of Conflict: Operation Bunyan-un-Marsoos (May 2025)
In the global arms trade, marketing brochures and technical specifications are secondary to operational validation. The most significant accelerator of Pakistan’s defense exports in the current era was the military escalation with India in May 2025, widely referred to in Pakistani defense circles as "Operation Bunyan-un-Marsoos" (Operation Solid Structure).
Operational Dynamics and Technology Demonstration
The conflict, sparked by cross-border tensions following the Pahalgam incident, escalated into a multi-domain confrontation involving air, missile, and cyber warfare. For the Pakistani defense industry, this was a high-stakes live-fire demonstration of its indigenous and co-developed platforms against a technologically superior adversary equipped with top-tier Western (Rafale) and Russian (S-400) systems.
According to reports and analyses from the conflict, the Pakistan Air Force (PAF) utilized a networked package of JF-17 Thunder Block III and J-10CE fighters. The JF-17 Block III, equipped with the KLJ-7A Active Electronically Scanned Array (AESA) radar and PL-15 Beyond Visual Range (BVR) missiles, was reportedly deployed to engage high-value Indian air assets. The narrative emerging from the conflict—that a lightweight, cost-effective fighter like the JF-17 could successfully lock onto and engage 4.5-generation heavy fighters—shattered the perception that Western platforms are invincible.
Furthermore, the conflict saw the extensive use of the HQ-9/P long-range air defense system, which successfully intercepted incoming missile threats, establishing a defensive umbrella that denied air superiority to the adversary. The integrated use of electronic warfare (EW) suites, developed by the National Radio & Telecommunication Corporation (NRTC), reportedly disrupted enemy communications and radar locks, showcasing Pakistan's capabilities in the electromagnetic spectrum.
The "Battle-Proven" Marketing Dividend
The aftermath of Operation Bunyan-un-Marsoos was an immediate surge in international interest. In the defense market, the label "Combat Proven" validates claims of reliability and lethality that no amount of testing can replicate.
Iraq:
Following the conflict, Iraqi military leadership explicitly cited the PAF’s performance as a key factor in their renewed interest in the JF-17, viewing it as a viable replacement for their F-16 fleet, which has suffered from logistical support issues.
Indonesia:
The Indonesian Air Force, seeking to balance its high-end Rafale purchases with a cost-effective mass of fighters, advanced its negotiations for the JF-17 Block III, impressed by its maritime strike potential demonstrated during the crisis.
Confidence Multiplier:
For existing customers like Nigeria and Azerbaijan, the conflict reassured them that their investments were operationally sound. It provided the political cover for governments to justify purchasing non-Western hardware to their domestic audiences, citing the platform's success against a peer competitor.
Cyber Warfare and Asymmetric Responses
A less visible but equally critical component of the 2025 escalation was the cyber domain. Reports of cyber-attacks disrupting power grids and railway networks in India highlighted Pakistan’s developing offensive cyber capabilities. This has opened a new export vertical for entities like NRTC, which now market "defensive and offensive information dominance" suites to allied nations facing asymmetric threats. The ability to offer integrated kinetic and non-kinetic solutions distinguishes Pakistan from suppliers who only sell hardware.
The Aerospace Sector: The Vanguard of Exports
The aerospace industry, anchored by the Pakistan Aeronautical Complex (PAC) Kamra, represents the most mature and commercially successful segment of Pakistan’s defense exports. It accounts for the lion's share of the $13 billion pipeline and serves as the primary diplomatic door-opener for broader defense relations.
JF-17 Thunder: The Democratization of Air Power
The JF-17 Thunder (jointly developed with China’s Chengdu Aircraft Corporation) has evolved from a simple MiG-21 replacement into a sophisticated multirole combat aircraft that rivals the capabilities of the F-16 Block 70/72, but at a fraction of the cost.
Technical Evolution and Specifications:
The export success is driven largely by the Block III variant, which represents a generational leap over previous models.
Radar:
It features the KLJ-7A AESA radar, capable of tracking 15 targets simultaneously and engaging 4, with range and resolution comparable to the AN/APG-83 SABR.
Armament:
The integration of the PL-15E air-to-air missile is a decisive factor. With a dual-pulse motor and a range exceeding 145km (export version), it outranges the AIM-120C AMRAAM, giving the JF-17 a "first look, first shot" advantage in BVR combat. It also carries the C-802AK anti-ship missile and the CM-400AKG supersonic cruise missile for carrier-killer roles.
Avionics:
The cockpit features a wide-angle holographic Head-Up Display (HUD) and Helmet Mounted Display (HMD) derived from China’s 5th-generation J-20 program, drastically improving pilot situational awareness.
Market Analysis and Key Deals:
Azerbaijan:
The sale of JF-17 Block IIIs to Azerbaijan is the single largest aerospace export in Pakistan's history. Valued at $1.6 billion initially and expanding to a $4.6 billion framework, this deal includes aircraft, training, and munitions. Deliveries reportedly commenced in October 2025. For Baku, the JF-17 offers a potent counter to regional threats and creates interoperability with its Turkish-trained air force.
Libya (LNA):
In late 2025, reports emerged of a massive deal worth over $4 billion with the Libyan National Army. This package includes 16 JF-17s and 12 Super Mushshak trainers. While politically sensitive due to the divided nature of Libyan governance, this deal underscores Pakistan’s pragmatic approach to securing revenue from non-traditional actors.
Iraq:
Negotiations with Baghdad reflect Iraq’s desire to diversify away from US dependency. The deal, potential worth billions, would see the JF-17 form the backbone of the Iraqi Air Force’s interception capability.
Indonesia:
Talks for approximately 40 aircraft would position the JF-17 as the workhorse of the Indonesian Air Force, complementing their high-end Rafales. Indonesia values the platform’s anti-ship capabilities for patrolling its vast archipelago.
Comparative Economics:
The unit cost of a JF-17 Block III is estimated between $25 million and $30 million.24 In contrast, the Dassault Rafale costs over $90 million, and even the Korean FA-50, which lacks BVR capabilities in its base configuration, costs significantly more. For developing nations, the JF-17 offers 80% of the capability of a top-tier Western fighter for 30% of the price, with far lower lifecycle costs due to the RD-93 engine and simplified maintenance protocols.
Super Mushshak: The Global Trainer
While the JF-17 captures headlines, the MFI-17 Super Mushshak remains the "bread and butter" of PAC’s exports. This piston-engine primary trainer is renowned for its ruggedness, simplicity, and ease of maintenance.
Global Footprint:
It is currently in service with the air forces of Saudi Arabia, Turkey, Qatar, Nigeria, Oman, and Zimbabwe.
Strategy:
The Super Mushshak often serves as an entry point. By selling trainers, Pakistan establishes long-term relationships with foreign air forces, embedding its training doctrines and maintenance standards, which paves the way for future high-value sales like the JF-17. The inclusion of 12 Super Mushshaks in the Libya deal illustrates this bundling strategy.
Fifth-Generation Ambitions: Project Azm and the Turkish Partnership
Recognizing that 4th-generation platforms will eventually become obsolete, Pakistan is aggressively pursuing 5th-generation capabilities through two parallel tracks.
Project Azm:
Launched in 2017, this indigenous program aims to develop a stealth fighter, medium-altitude long-endurance (MALE) UAVs, and advanced munitions. While ambitious, the technological hurdles—particularly in engine development and stealth coatings—are immense for a country with Pakistan’s industrial constraints.
The KAAN Partnership:
To mitigate the risks of Project Azm, Pakistan has formally joined Turkey’s KAAN(formerly TF-X) fighter program. In 2025, agreements were reached to establish joint factories for the production of KAAN subsystems.
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Unmanned Systems: The Future of Asymmetric Warfare
The conflicts in Nagorno-Karabakh and Ukraine demonstrated the democratization of air power through Unmanned Aerial Vehicles (UAVs). Pakistan, observing these trends, has heavily invested in drone technology through Global Industrial & Defence Solutions (GIDS) and the National Engineering and Scientific Commission (NESCOM).
Shahpar-II: The Armed MALE UAV
The Shahpar-II is the flagship of Pakistan’s unmanned fleet, designed to compete directly with the Turkish Bayraktar TB2 and Chinese Wing Loong II.
Specifications:
It boasts an endurance of 20 hours in surveillance mode and 12 hours in armed configuration. It features a service ceiling of 23,000 feet and a data link range of 300km (Line of Sight) or over 1500km with SATCOM.
Armament:
The platform carries the "Barq" laser-guided air-to-ground missile, capable of precision strikes against armor and fortifications.
Export Potential:
Indonesia has expressed specific interest in the Shahpar-II, valuing its maritime surveillance capabilities and its independence from Western export controls. The system is marketed as "ITAR-free," with GIDS claiming near-total indigenization of the airframe, avionics, and software, reducing the risk of sanctions grounding the fleet.
Loitering Munitions and Swarm Technology
The future of warfare lies in loitering munitions (kamikaze drones). Pakistan has developed and exported systems like the "Burraq" and smaller, man-portable loitering munitions. The deal with Sudan, reportedly worth $1.5 billion, includes over 200 loitering munitions, providing the Sudanese military with a persistent strike capability that is difficult to counter with traditional air defenses.
Technology Spillover:
Technologies developed for military drones are being adapted for civilian use. GIDS and NRTC have launched agricultural variants of their drones for precision spraying and crop monitoring, demonstrating the dual-use potential of the sector.
The Munitions Boom and the Ukraine Connection
While high-tech platforms like jets and drones garner attention, a significant portion of the recent export revenue has come from the most basic of military commodities: artillery shells. The war in Ukraine created a global shortage of 155mm ammunition, creating a market opportunity that Pakistan exploited with ruthless efficiency.
The Ukraine Supply Chain
Despite maintaining an official stance of neutrality, Pakistan emerged as a critical supplier of ammunition to Ukraine’s defense efforts.
The Mechanism:
Reports confirm that Pakistan utilized an air bridge via Nur Khan Airbase to transfer 155mm artillery shells, M4A2 propellant charges, and 122mm BM-21 Grad rockets to third countries such as Poland and Germany, from where they were shipped to Ukraine.
Volume and Value:
Contracts worth approximately $364 million were executed with US contractors (e.g., Global Military Products) for the supply of 155mm shells. The total value of ammunition transfers is likely much higher when EU contracts are included.
Strategic Trade-off: This trade provided a desperate infusion of foreign exchange that helped stabilize Pakistan’s economy during the IMF negotiations of 2023-2024. However, it came at a strategic cost. Intelligence reports indicate that the aggressive export of stockpiles led to a critical shortage of ammunition for the Pakistan Army itself. During the May 2025 escalation with India, internal assessments reportedly suggested that the army had only enough artillery reserves for four days of intense combat. This highlights the precarious balance between economic gain and national defense readiness.
Pakistan Ordnance Factories (POF) Capacity
The Pakistan Ordnance Factories (POF) in Wah Cantt is one of the few industrial complexes outside the US and Russia capable of mass-producing standard NATO caliber munitions. As Western nations struggle to ramp up production to meet the target of 100,000 rounds per month by 2025 , POF has positioned itself as a "back-office" manufacturer for the West. Its ability to produce high volumes at low cost makes it an indispensable partner in the global ammunition supply chain, ensuring steady revenue streams even in the absence of major platform sales.
Land Systems: The Heavy Armor Equation
While aerospace leads the way, Pakistan’s land systems sector, led by Heavy Industries Taxila (HIT), remains a cornerstone of its defense posture and export potential.
Al-Khalid and Al-Zarrar Tanks
The Al-Khalid Main Battle Tank (MBT), developed jointly with China, is a robust 3rd-generation tank tailored for the harsh environments of South Asia and the Middle East.
Market Position: While tank exports have been slower than aerospace, the Al-Khalid is marketed to nations in the Middle East and Africa looking for a cost-effective alternative to the M1 Abrams or T-90. The 90% indigenization rate of the Al-Khalid ensures that Pakistan can support the fleet without external dependencies, a key selling point for buyers worried about supply chain weaponization.
Future Upgrades: Continuous upgrades, including integration of active protection systems and improved thermal imaging, aim to keep the platform relevant on the modern battlefield.
Small Arms and Light Weapons
POF exports a wide range of small arms, including the G3 rifle and MP5 submachine gun (produced under license). These weapons are ubiquitous in the security forces of the Gulf states and African nations. The reliability and low cost of POF small arms make them a staple export, ensuring a baseline of revenue that supports the wider industry.
Electronics and Cyber: The Invisible Export
The modern battlefield is digital, and Pakistan’s National Radio & Telecommunication Corporation (NRTC) has evolved to meet this demand.
Secure Communications and EW
NRTC exports military-grade software-defined radios (SDRs), encrypted communication sets, and electronic warfare (EW) jammers. These systems are critical for command and control (C2) and were reportedly effective in disrupting Indian communications during the 2025 conflict.
Export Success:
NRTC’s products are exported to friendly nations for border security and internal security operations. The "Anti-Drone Systems" developed by NRTC are in high demand due to the proliferation of commercial drones in asymmetric conflicts.
Civilian Spillover: Smart Cities
Interestingly, NRTC has successfully pivoted its military tech to the civilian sector. It is implementing "Safe City" projects (surveillance, facial recognition, command centers) in Pakistan and offering these turnkey solutions to countries like Iraq and Nigeria. This dual-use strategy allows the defense industry to capture value in the growing civilian security market.
Geopolitical Market Analysis: Mapping the Buyers
Pakistan’s export strategy is geographically targeted, focusing on regions where its value proposition of "sovereignty at a discount" resonates most.
The Middle East: From Client to Partner
Saudi Arabia:
The relationship is undergoing a structural transformation. No longer just a donor, Riyadh is becoming a strategic investor. The potential $2-$4 billion JF-17 deal and the Mutual Defense Pact signal a shift towards joint industrialization, where Saudi capital meets Pakistani manufacturing.
Iraq:
A pivotal new market. Iraq’s disillusionment with Western post-sales support has opened the door for Pakistan. The focus is on replacing F-16 capabilities with JF-17s and leveraging Pakistani training academies.
Africa: The Growth Engine
Nigeria:
The anchor customer in Africa. The successful deployment of JF-17s against insurgents has solidified trust. Nigeria continues to purchase small arms, tanks, and training services.
Libya:
The LNA deal represents a high-risk, high-reward bet. By supplying Haftar, Pakistan secures massive funding but risks diplomatic fallout. However, the sheer scale ($4B+) makes it a risk Islamabad is willing to take.
Sudan:
The $1.5B deal places Pakistan as a key supplier in the Sudanese civil war, providing drones and aircraft to the SAF against the RSF.
Southeast Asia: The Maritime Frontier
Indonesia:
The potential sale of 40 JF-17s is a strategic entry into the Pacific. It positions Pakistan as a player in the maritime security of the region, offering a counter-narrative to the US-China duopoly.
21 Myanmar:
Despite sanctions, Myanmar remains a user of the JF-17, proving Pakistan’s willingness to support customers regardless of international pressure.
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Institutional Framework: The Architecture of Growth
The boom is supported by a revamped institutional architecture designed to streamline exports.
MoDP and DEPO:
The Ministry of Defence Production and the Defence Export Promotion Organization (DEPO) act as the marketing arm, organizing exhibitions like IDEAS and facilitating G2G negotiations.
SIFC:
The Special Investment Facilitation Council has reduced the red tape for joint ventures, allowing deals like the Azerbaijan framework to be signed in record time.
Private Sector Integration:
The integration of private firms for component manufacturing is reducing the burden on PSEs and fostering a competitive vendor base.
Challenges and Risks
Despite the optimism, the path to $20 billion is fraught with risks.
Brain Drain:
The economic crisis in Pakistan is driving engineers and scientists to emigrate. The loss of institutional memory at PAC and NESCOM is a critical threat to R&D continuity.
Supply Chain Vulnerability:
The reliance on imported engines (Russian RD-93, Chinese WS-13/10) remains a choke point. While Chinese engines are a reliable alternative to Russian ones, true independence requires indigenous propulsion, which remains elusive.
Geopolitical Blowback:
Selling to Ukraine, Libya, and Azerbaijan involves navigating complex diplomatic minefields. Alienating Russia or Iran could have strategic consequences for Pakistan’s energy security and border stability.
Economic Volatility:
Inflation and currency devaluation increase the cost of imported raw materials (titanium, composites), squeezing margins on fixed-price contracts.
Future Outlook (2025-2035)
The trajectory of Pakistan’s defense exports is undeniably upward. The "hockey stick" growth curve predicted by the $13 billion pipeline suggests that defense will become a major export sector, rivaling traditional industries.
Strategic Roadmap:
2025-2028:
Delivery of major contracts (Azerbaijan, Libya, Iraq). Focus on scaling production of JF-17 Block III and Shahpar-II. Realized exports to cross $2 billion annually.
2028-2032:
Induction of 5th-generation technologies (KAAN/Azm). Expansion of the submarine export portfolio (Hangor class).
2035:
Achievement of the $5 billion - $20 billion annual export target. Emergence as a top-tier supplier of drones and 4.5/5th-gen fighters to the Global South.
Conclusion
Pakistan’s defense export boom is not a fleeting anomaly but a structural transformation of the state’s political economy. By monetizing its military-industrial complex, Islamabad is attempting to engineer a way out of its chronic economic dependency. The success of platforms like the JF-17 and Shahpar-II, validated by combat operations and supported by strategic alliances with China and Turkey, has proven that there is a vast market for "sovereign, affordable, and effective" weaponry. As the global security architecture fragments, Pakistan is well-positioned to arm the non-aligned world, turning the "Arsenal of Pakistan" into a cornerstone of its national survival and global influence.
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