You have a point there my friend. Although a small arm, but the scale of its roll-out makes the G-3 replacement financially difficult. This effort to equip 800,000 troops (if Army switches, so will PAF/PN) means we are talking about a $1B investment (Pakistan cannot afford outright purchases so will have to go for local production). In these tight fiscal times, a billion could be better spent on artillery, armor etc. and thus I think the army is looking at retrofitting existing small arms thus the continuous churn by POF and the various options being seen from time to time.
G-3 was never phased out. It is serving with units to this day and honestly in some ways this has worked out for Pakistan. To get more SMGs at the section level, Type 56s were initially purchased and then later produced by POF. Chinese ditched Type 56 which is a 7.62x39 caliber for a smaller 5.56mm round aping NATO/West. Pakistani PoV is that while 5.56mm is alright for smaller inductions, the battle rifle caliber needs to have more stopping power. Whether that means staying with 7.62x51 or an altogether new, more potent caliber remains to be seen. The Indian induction of Sig 716 is another indication that 5.56mm has not been found very effective due to its limited range etc.
To this day, a G-3 with a decent scope has the ability to deliver rounds effectively with a respectable grouping and do serious damage. Keep in mind, for those interested in Shikar, this is a .308 round which can easily bring down a Nilgai type animal at a decent range. One can easily deduce its effectiveness against a human target.
IMO the PA has a new rifle in mind. It just hasn't signed onto a full-scale program yet because, as you said, shortage of funds and other priorities. However, I think it'll happen and, as
@Zarvan has wished, will probably involve Turkish OEMs. Of the suppliers available, the Turkish ones are probably able to offer the best bang for the buck.
That said, I don't think POF will manufacture these new rifles.
With our shortage of funds, it's probably untenable to buy licensing and facilities off-the-shelf; this time around, we'll likely see offset-based deals wherein the foreign OEMs set up shop in Pakistan, source Pakistani labor and inputs, and supply to the armed forces directly.
This might be the best course of action for us in the long run. It removes the armed forces from the defence industry business and, potentially, makes it easier for the Pakistani private sector to get involved (by eliminating the red tape and black tape). It's time for the military to become leaner in the sense that it should focus specifically on fighting and, in turn, leave the industry side to the private sector or at least independently-run state-owned enterprises.
TLDR: With an offset policy, the Army wouldn't need to pay for the local production line. Rather, it says it'll buy 1M rifles over 10 years, and sets a sourcing policy, e.g., built with 100% Pakistani inputs. In response, the OEMs invest in Pakistan (to set up their production lines and follow the sourcing policy) and, basically, supply the Army. In the end, the OEM owns the licensing, IP, etc, but through their Pakistani subsidiary. That Pakistani subsidiary might even start re-exporting, thereby giving the OEM additional revenue, supporting Pakistani jobs, and helping us gain foreign currency (via corporate and income taxes).
