Interesting that we are entering key design and manufacturing stage with out a viable special steel industry or any metalurgical research institution ( unless I am unaware). We have previously announced TOT deals which have not translated into much primarily because there was not much to transfer on to. So I hope we dont go down the same route with this one.
On a purely strategic and long term viability issue we need dual use technology as in any industry barring industrial giants like the US, China and the Russians, there is not enough production of material to keep things going. Initial production rates may be kept low for that reason along with adequate manpower development/retention However in the long run we will need "bread and butter" stuff to keep the industry moving during the times of defence related contract dearth. The next question is whether we are looking at reinvesting the money gained from export of defence items in revamping our industrial hubs as well as build viable feeding industry? Whehterh the private sector could be invited into such a complex for basic metallurgical input remains a mute but thought provoking point.
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With the MILGEM-J and LRMPA, the PN is trying to build-up the country's design/engineering and integration expertise. It knows full well that Pakistan doesn't have anywhere near all of the inputs to make a warship on a turnkey basis. However, it can escape from OEM-specified configurations by designing its own solutions and, in turn, sourcing the inputs from whatever sources it wants. So, with a French corvette, you'd probably have to pay for French steel and electronics, which can cost a lot. Likewise for German and British. However, with the Jinnah-class (esp. ship #4), you can pick whatever steel, propulsion, superstructure materials, etc you want, and at least control the pricing a bit more.
That said, I do think we have enough inherent economies-of-scale to justify some critical inputs, namely steel and superstructure materials. The latter can include composites for ships, land-based vehicles, and -- of course -- rotary and fixed-wing aircraft.
Or we do not have the relevant industrial base to claim those offsets? Even today we are importing basic building material for JFT as well as marine projects. It maybe because the production base is not large enough for the necessary investment.
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Reason for frigates being built in China was lack of capacity at the KSEW.
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You don't necessarily have to implement offsets on the defence industry directly, at least not in the beginning.
One thing the Germans did, especially in the 1950s/1960s, is that they asked the Americans and British to issue offsets through R&D partnerships with local German companies. Some of it was in defence, others was in auto, medicine, etc. The basic point is that you want some of the hard currency you're spending on an import to come back to your economy (lower the BoP gap) and, with the right policies and oversight, in targeted sectors that you want to develop further. These offsets is what helped create those mega-consortiums (e.g., MBDA) -- because you had sellers reinvest some of the expenditure back in the buyers' countries.
So, for Pakistan, you could have very well tied these big purchases to targeted offsets. You could have told TAI, for example, 'we'd like to start developing critical inputs for aerospace,' and force their hand to invest in R&D (either as a whole TAI subsidiary or a co-owned subsidiary with a private Pakistani company) in Pakistan. This is exactly what the Turks did as well with the Europeans and Americans, which helped create TUSAS/TEI and, with time, spawned into wholly Turkish-owned companies (i.e., from people and businesses that were originally borne from offsets). This is what India is doing today.
You could also take an alternative approach. E.g., in Canada, the offsets were pushed to non-defence industries. So, Pakistan could've asked the OEMs to figure out a way to invest in Pakistan's auto-manufacturing, medicines, pharma, surgical equipment, electronics, etc. In this situation, the OEM would work out a deal with some private investors and let them take lead in FDI in those non-defence sectors. In turn, those sectors grow and generate exports -- i.e., pull hard-currency -- and you can keep importing weapons. In this situation, you're not focused on building a defence industry, but rather, the wider economy so that you can support defence spending.
Ultimately, the key is crafting forward-thinking, comprehensive policies and enforcing oversight into ensuring that the selling side meets its contractual obligations. We know, for a fact, that Pakistan doesn't do either. Yes, money is a constraint, but at the end of the day, whether it's in cash or through a loan, it's your USD/GBP/Euro that are flying out. It's either upfront today or gradually, but it's your money. So, you have to exert leverage. This would result in some OEMs backing away (esp. in US/Europe), but others -- like in Turkey, Ukraine, Brazil, etc -- who do need your business (for scale, prestige, etc) will talk.
I agree to your post but we need to accept our industrial limitations as well which you have duly noted as quoted above and because of this our level of absorption of technology is limited, for example even in JF-17 as per Shahid Latif in some areas our engineers accepted limitations of their knowledge and experience therefore we decided to get whole batches of engineers trained and educated in Chinese universities in exclusive technical disciplines.
Another example from the point of view of Electronics/Avionics you know that we use Grifo radars in our F-7 and Mirage jets and have licence to manufacture them but to my surprise I recently come to know that Grifo radar still use Pentium-75 processor which was introduced in early or mid 90s of the last century and now OEM has discontinued it, I don't know we don't want to update it or we don't have the capacity to update it, but the fact is we are still using Grifo with same processor ......
So the point is with China we have a model for the procurement of defence article which give us basic level of capabilities in that domain with flexibility of integration and modification as per our requirement but it is upto increase those capabilities from basic level
The mistake with the Grifo program is that we bought the 'ToT' to manufacture (or likely assemble it). Instead, we should've tacked a 33% offset in the form of investment in our electronics sector, possibly in semiconductors or at least one higher/less intensive layer (e.g., chip manufacturing?). Sure, that investment alone wouldn't have gotten us there, but it's a huge start that wouldn't have come at the cost of trading an urgent defence need.
The fundamental flaw with our 'defence industry' thinking is that we're not working to build an actual defence "industry." This is why the 'ToT' sticker is always a factor, but never offsets. With offsets, you probably can't say something like "and we make this radar in Pakistan," in the near-term. It doesn't sound as good, but from an economic standpoint (and there are risks with this too, but again, with controls it can work) you have money flowing into development. India dropped ToT from the MMRCA and got 36 Rafales off-the-shelf with offsets -- those offsets are going to feed into something that'll bite us down the line later.
That 'development' could be the German/Turkish model of nurturing a defence industry, or the Canadian model of your supporting your wider economy (so that you can comfortably afford defence), or a hybrid model like Australia, UK, India, etc of both. For this you need to bind defence procurement with economic policy-making and a well-defined goal. This is the biggest difference between us and Turkey, India, and I daresay now, even UAE and KSA.
