Pakistan Defence and Security Report Q3 2008

The lead-up to the February elections, dominated by the assassination of Benazir Bhutto, led to considerable uncertainty about the path the country might take. In the end, though, the huge parliamentary majority secured by the Pakistan People's Party (PPP) saw the election of Yousaf Raza Gilani as Pakistan's new prime minister and he has demonstrated a firm intention to enact constitutional reform.

While we still expect the coalition to eventually encounter internal division, the commitment to restoring the authority of the legislature and judiciary should consolidate democratic institutions.

In the wake of this positive turn, Pakistan was re-admitted to the British Commonwealth and India's Prime Minister Manmohan Singh said that he expected that bilateral ties between the two countries would improve. Peace talks, which had been suspended for six months previously, resumed on May 20 and made some progress.

The ongoing transition to democracy should allay fears by business investors that severe instability might return in the immediate term.

Meanwhile, the Pakistani army is engaged in ongoing combat operations against pro-Taliban militants in the tribal areas adjacent to Afghanistan. The surging production of opium has contributed to the scale of Pakistan's problems in this area, and it is assumed that if the situation in Afghanistan continues to deteriorate then there will be further security problems along the border.

The Pakistan Army is at the same time fighting local extremists who were angered and alienated by the army's storming of the Lal Masjid (Red Mosque) in July 2007.

Pakistan's defence industry contains over 20 major public sector units (PSUs) and over 100 private-sector firms. The majority of major weapons systems production and assembly is undertaken by the state-owned PSUs, while the private-sector supplies parts, components, bladed weapons and field equipment. Major PSUs include the Pakistan Ordnance Factory (POF), Heavy Industries Taxila (HIT), Karachi Shipyard and Engineering Works (KSEW) and the Pakistan Machine Tool Factory. Multinational presence in Pakistan is limited, although joint production or engineering support in the development of certain armaments has recently occurred with companies such as DCN International and the Chengdu Aircraft Industry Group.