Boston, MA -- (ReleaseWire) -- 04/16/2014 -- Despite Nawaz Sharif's best laid plans to initiate peace talks with the Taliban and to address major security issues, we expect Pakistan's domestic security situation to remain highly fragile. In September 2013, Nawaz called an All Parties Conference which gave him the green light to begin negotiating with the Taliban. However, talks have already stalled and Nawaz's plans are in tatters. Regarding the defence industry, we expect Pakistan to continue to pursue defence relationships with a range of powers including Saudi Arabia, Turkey and South Korea. This will be essential in avoiding overreliance on the USA and China for military equipment.
We remain sceptical on the outlook for successful peace talks between the government and Pakistan's militant groups. While Prime Minister Nawaz Sharif has taken the positive step of declaring that he favours a dialogue with the Taliban rather than pressing ahead with a military strategy that shows little sign of working, we emphasise that peace talks are likely to end in impasse over coming years. A positive development in the security sphere has been the appointment of Raheel Sharif as the new Pakistan army commander after the departure of General Kayani in Q413. So far, the army has cooperated well with the government with the prospect of military coup remaining low.
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The military now appears to be gearing up for what will be the biggest procurement programme in its history - the long-delayed acquisition of six new submarines worth up to U$4bn. China is in pole position to secure the contract, but Pakistan has recently signed defence industry collaboration agreements with South Korea and Turkey, and they both have a realistic chance of securing the order.
Another important milestone for the Pakistani defence industry will soon arrive with a first export order for the JF-17 fighter aircraft, a mainly Chinese design now being manufactured in Pakistan. The most likely primary purchaser will be Saudi Arabia, with whom Pakistan signed an agreement for defence cooperation in Q114. It is possible that Kuwait, Qatar and Sri Lanka will also place orders over coming quarters.
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