Joint Defense Production: Some Points To Note

Proposal floated in a seminar Ushers change in defense in particular.

Last week Indian High Commission organized a seminar and proposed joint production of defense equipment and sharing of technology. It is indeed a good proposal came from a neighbouring country that allowed private sector in defense article manufacturing. The country has a good track record of allowing the press to report on corruption on defense sector. This proposal if comes into fruition will boost the governance situation in our defense sector.

India has long ago offered a $500 million line of credit to import defense equipment from India. Bangladesh spent some of the credit to import bus, truck ,floating bridge and other nonlethal equipment. India continues to offer the line of credit. Recently, India offered to sell 105 mm light cannon to Bangladesh. In addition, maintenance ,repair and overhauling plant for the MI-17 helicopter fleet that Bangladesh set up with the assistance from the Ukraine will likely to get benefit from the Indian proposal. India has the license to manufacture some parts of this kind of helicopter and in future it is going to decommission large part of its MI-17 fleet, opting for the Western options as well as the domestic ones. Bangladesh on the other hand is going to induct more units of MI-17 helicopter as it is equipping both the BGB and the Police with this kind of helicopter. Sanctions on the Russian Federation mean Bangladesh will likely to hinge on India to procure future MI-17 units and its parts or produce the parts with Indian consent.

Indian private sector has long been operating in Bangladesh. In fact, it is the Indian private sector that opened up manufacturing and assembling facilities in the automobile sector in Bangladesh. Hero Honda first set up its motorbike assembly plant in Bangladesh. Later, other Indian and Japanese companies followed its step. Mahindra has a mini truck assembling plant in Comilla. Bajaj last year set up an assembling plant for three-wheeler after a Bangladeshi company demonstrated its ability to manufacture three-wheeler locally. Similarly, many Indian companies that researched and built prototype of Indian defense article for Indian Army but did not manage to get world attention may open facility for such equipment for the Bangladesh Armed Forces as well as for the world as Bangladesh has a very liberal and competitive export policy.

There are some hurdles in this endeavor. First, Bangladesh does not have proper policies and guidelines for engaging local / foreign private sector in defense article manufacturing. So we need proper guidelines and laws to ensure smooth participation of private sector, constitutional protection for the press for reporting on corruption in the defense sector and to make strong parliamentary committee on defense to administer regular hearing on defense related issues. India has Defense Acquisition Procedure(DAP) 2020 and the USA has Defense Production Act (DAP) 1950 and other laws and regulations to address the issues. In my piece“Need Policies For Domestic Defense Production” on November 30,2023,I highlighted the matter. Apart from that we also need laws to compensate individuals and groups who may fall victims of wrong policies / misconduct of any member of defense community.

Second, in our country public spending /resources often fall into wrong hand as proper check and balance mechanism is not in place. I have recently come across a documentary that reveals how agency people in a powerful country operate shadow company/front line company/think tank to misappropriate local resources and spy on others(Watch the docu).In Bangladesh, we witness how grand scale misappropriation of local resources/public spending often goes off the radar or seldom talk about at the highest level of defense community. Working with such front line companies at the end of the day will not bring any benefits.

Third, companies registered in the stock exchange have greater transparency than those who are not registered. Stakeholders and shareholders ask about their decisions and seek explanation. As they want answers,the press often provide them information through regular reporting. Unfortunately, most of the Army run subsidiaries are not in the stock exchange. Many of them are overusing public resources. If subsidiaries like BOF,BMTF, Radisson ,Army Golf Club sell some shares to the public and the private sector ,then stakeholders will question about their spending and decision making and government will not have to spend much on these subsidiaries. Any Indo-Bangla joint venture has to make sure these subsidiaries sell shares to the private sector. It will be boon for our capital market.

It is indeed a good news that India has shown keen interest to joint defense article manufacturing. It will transfer technology and pave the path for other future foreign investment. Thriving motorbike industry is the example. Moreover,Bangladesh will be able to get greater market access to Indian consumer market and will augment its export volume in the country. The crucial aspect of this proposal is it will bring the necessary transparency and accountability that our defense sector currently lacks.