Lockheed Martin is in the midst of a lucrative deal to move production of America’s venerable F-16 fighter jet to India. While there are no more U.S. military contracts for the aging fighter, it is still very popular abroad, and the deal aims to benefit India’s domestic defense industry and Lockheed Martin’s bottom line.
This is one example of how transnational defense partnerships have become more common, and how more countries want to acquire the skills and know-how to design, develop, and build the most advanced weapons platforms and systems with their own defense industries.
A domestic defense industry has several benefits. Many countries view a robust defense industry as a source of national pride. Countries such as Israel, Taiwan, or South Korea face existential security threats, and building weapons domestically hedges against isolation from the world arms market in the event of a conflict. Prospering (or at least aspirational) free market economies such as India see a defense industry as a way to boost employment of skilled labor and high-value exports, and the acquisition of technologies and skills can trickle into civilian industries. More authoritarian governments such as Saudi Arabia or Turkey can use their bureaucratic influence over domestic defense industries to enrich personal or special interests by handing out contracts to specific companies. They can also stipulate high percentages of domestic manufacture in all finished platforms, a move that benefits well established state-owned firms by decreasing competition and therefore crowding out smaller private industry.
U.S., Russian, British, and Western European companies have historically been at the cutting edge of defense technology and therefore still capture the lion’s share of weapons sales revenues. In the next tier, countries such as South Korea, Israel, Japan, and Brazil have invested heavily into expanding their defense industries for decades and continue to push for more advanced capabilities. For example, South Korea aims to develop its own fifth-generation jet fighter. These countries are now poised to capture an increasing share of global defense sales. (China also has a rapidly expanding industry, there is insufficient public data to accurately measure the industry). Further down the chain are countries like India or Turkey that have successful partnerships with foreign defense companies to do assembly work or build subsystems, but hope to manufacture platforms such as planes, tanks, or ships from start to finish.
South Korea stands out as an example of a country with a second-tier defense industry because of strong government support for the industry, export ambitions, and a wide variety of advancing capabilities. After years of successful partnerships with U.S. firms and the resultant technology transfers, South Korea can domestically produce advanced ships, tanks, planes, and missiles. On the horizon, South Korea is developing the KF-X, a 4.5 generation fighter that it hopes will be a successful export. While South Korea has the technology to compete globally, its export success is not guaranteed. Dan Yoon, a senior market analyst at Avascent Analytics told The Cipher Brief that “Real, long-term progress for the Republic of Korea's defense industry rests on the country's broader ability to spawn, incubate, and sustain a large defense science and technology base that contributes regular innovations to the industry.” Fostering innovation is no easy feat, and would benefit from government influence that is engaged without being heavy-handed.
India’s growing wealth and domestic defense needs—it borders two capable adversaries, Pakistan and China—makes advancing its defense industry an important priority. While its domestic technological capabilities are not as advanced as South Korea’s, its ambitions are set just as high—it is pursuing a deal with Russia to jointly develop a fifth-generation fighter known as the PAK FA T-50.
The barriers to the Indian defense industry’s growth and advancement are mainly bureaucratic at the moment. Private defense companies are relatively new and are hindered by a complicated acquisitions process that still favors state-owned arms manufacturers and foreign firms with state-of-the-art offerings. No amount of technology transfers or research and development spending can offset the need to reform the inefficiencies of state-owned enterprises. The government has made progress in this regard, but it has been slow and occasionally well-intentioned but counterproductive.
The growing number of countries with advanced defense industries will increase global competition for sales and secure economic and security benefits for the most successful among them. Like any industry, innovation is key to success, however the close relationship between defense industries and government—needed for national security reasons—can at times be counterproductive to an innovative environment. The most successful countries are likely to be those that can balance the needs of the government with the freedom necessary for innovative private industry.
Will Edwards is an international producer at The Cipher Brief. Follow him on Twitter @_wedwards.
