The Need for Reform in Pakistan’s Defence Sector

In the evolving landscape of global defense markets, Pakistan finds itself at a crossroads. The call for private-sector participation in the defense industry is becoming increasingly critical, particularly as defense exports are projected to surge from $10 billion in 2025 to an ambitious $15 billion by 2026. However, without significant reforms—covering licensing, regulatory frameworks, and long-term capital—the aim of these targets will likely remain aspirational.

Private Sector Participation: A Necessary Inclusion

In January 2026, the Senate Standing Committee on Defence Production emphasized the importance of enhancing private-sector involvement in Pakistan’s defense sector. Currently, the private sector holds a marginal share of defense exports, a stark contrast to countries like India, which showcased 25 companies at the World Defence Show in Riyadh—compared to only 17 from Pakistan. This gap highlights the urgent need for reforms to provide a more inviting environment for private enterprises.

Learning from Global Practices

To foster such growth, Pakistan could look towards successful models found in the U.S., where a fusion of private contractors and research institutions sustains military technological advancements. Collaborations, like those between Caltech and NASA’s Jet Propulsion Laboratory, showcase how academic research can significantly contribute to defense capabilities. Similarly, historical efforts during World War II underscore the role of universities in catalyzing innovation.

Despite a few success stories like SATUMA Pvt Limited, which has engaged in UAV development and applied research, the broader ecosystem in Pakistan lacks the robustness witnessed in India’s defense sector.

Enhancing Offset Policies for SMEs

One practical avenue for boosting local industry lies in revamping the existing offset policy. Currently, Pakistan’s approach lacks a dedicated framework for small and medium enterprises (SMEs), which are crucial for industrial development. By establishing a more structured offset management system, similar to India’s dedicated Offset Management Wing, Pakistan could amplify the benefits of defense procurements and encourage necessary investments.

Streamlining Licensing and Regulatory Frameworks

Navigating the licensing landscape in Pakistan can be a daunting challenge for private firms. The current process, fragmented across various agencies, can stretch approval timelines into years, stifling innovation and investment. Implementing a single-window clearance mechanism, akin to India’s Defence Industrial Corridors, could significantly streamline operations and attract private-sector players eager to participate in defense production.

Access to Long-term Capital

Beyond regulatory reforms, access to long-term capital is a pressing concern. The cyclical nature of defense technology development often conflicts with the short-term financing strategies employed by commercial banks. Establishing a Defence Innovation Fund, possibly supported by the National Development Finance Corporation, could pave the way for more sustained financing options targeting promising startups and SMEs. The experiences of Turkey’s TUSAS and ROKETSAN can serve as models, showcasing how state-backed financing can help local firms evolve into global competitors.

Demand Signals from Armed Forces

Crucially, these reforms hinge on a coherent demand signal from Pakistan’s armed forces. Multi-year acquisition roadmaps are vital for providing visibility to private firms, enabling them to strategically plan for investments in research, tooling, and talent. By fostering a transparent pipeline of domestic orders, private sector firms will be more inclined to invest in indigenous development rather than relying on imported components.

The Path Forward

Achieving the $15 billion defense export target is feasible, but only if the private sector is integrated more thoroughly into this narrative. The recommendations voiced by the Senate Standing Committee highlight a crucial challenge within Pakistan’s defense ecosystem. However, realizing a thriving defense export environment necessitates substantial policy reforms and a collective commitment to transforming current practices.