The rapidly evolving global politico-strategic environment and the manner in which security challenges are now crystalising before our nation necessitate urgent transformational reforms in our defence industrial edifice. The ‘capital’ budget crisis that the MoD finds itself currently in, due to which superficial tinkering to cut down ‘revenue’ expenditure is being attempted, is perhaps due to wasted decades of reasonable ‘capital’ availability through foreign equipment purchases without leveraging them into building a viable Defence Industrial Base (DIB). As my doctoral research at IIT Delhi has shown, similarly placed nations such as Turkey, Brazil, Israel, Japan, South Korea amongst others, could leverage much lower foreign procurements to much greater effect in their DIB, thereby seeding wider benefits to the civil industry, enhancing their geo-strategic status and also enabling domestic employment. Some of these nations including China could also exploit geo-strategic synergies to enable effective ToT which we could not. It’s not that we did not know what to do. There were numerous empowered committee reports over the years to guide the MoD towards this end. That we remain at over 65% import of modern weapons and are amongst the largest importers decade after decade, implies that the current system is unable or unwilling or both, to allow development of a functional and effective indigenous DIB. Decades of patronage and rent seeking is difficult to get rid of and despite best intentions of the current political leadership, it is unlikely that much will change unless the entire edifice is transformed.
In this article, I develop the concept of the Defence Industrial Ecosystem (DIE) and recommend one such structure that maybe appropriated for atmanirbharta in defence. MoD public policy documents have only of late started referring to the concept of DIE. The first reference was in DPP-2016 followed by the draft Defence Production Policy 2018 which also aimed at creating a tiered defence industrial ecosystem. The chapter on ‘Revitalising Defence Industrial Ecosystem through Strategic Partnerships in DPP 2016 was the first ever official reference of the ‘DIE’ and the MOD laid the onus of building an extensive DIE on ‘Strategic Partners’ in the Private Sector without defining the contours or metrics of the DIE. Similarly, the Innovation for Defence Excellence (iDex) scheme launched by the MoD in April 2018 as well as the attempt to set up defence innovation hubs nationwide are fledgling efforts towards this end.
While we are referring to the concept of the defence ecosystem of late, internationally it has been around for a while. As reported in the Jane’s Defence Weekly February 15, 2006, the Deputy Defence Secretary for Technology and Transformation, Singapore, described its tightly intertwined defence sector as Singapore’s ‘Defence Ecosystem’, due to the multiple players in the defence community and large interdependency, interplay and co-evolution between them. He defined the basic components in Singapore’s Defence Ecosystem as ‘the User’, ‘the Developers’ and ‘the Producers’, together with their operating environment, all closely linked with shared interests and cross-posted personnel. Similarly, in an interview to the Business World in August 2018, the South Korean Defence Minister stated that the Republic of Korea, which could not even make a rifle fifty years back, today produces and exports high technology weapon systems. This was based on the fair commitment amongst government agencies, military, research institutes, project management agencies and the industry to create a conducive Defence Industrial Ecosystem. This included development of appropriate policies ensuring fair competition, guaranteeing cooperation and solidarity amongst all stakeholders, lowering of barriers for entry of firms developing innovative technology transfers and a symbiotic relationship between large and smaller firms based on capability and competence.
The notion of the Defence Industrial Ecosystem was introduced in a RUSI paper published in 2011, while examining the case of the UK defence industry. Three core elements were identified, namely ‘defence policy formulation and implementation’, ‘industries’ (as providers of goods and services), and ‘society’ (which is the source of manpower, other resources and discourses), which combine to generate the DIE. The Ecosystem’s constituents and the transactional processes between them are shaped by a multiplicity of internal and external drivers and relationships, which are dynamic and present significant systemic impetus for innovation and reform. The DIE has at its heart a set of actors, organisations and discourses relating to governmental, commercial, financial, legal, cultural, ethical, science and technological issues. These are reflected in the figure below:–
Defence Industrial Ecosystem
At the global level, the ecosystem is tied to the processes of globalisation and internationalization, as investment decisions and co-operation across industries are not limited to national boundaries. At the regional level, the DIE is driven by changes in regional geopolitics, strategic relationships and security situations which shape policy formulation. The national level is the main area for discourse between government and society on key public issues like spending priorities, national security situation etc. Further, sovereignty and autonomy are critically linked to the structure and conduct of the DIB as part of the wider, national industrial sector. At the local level, the interaction between the society and the defence industry is expressed in terms of provision of the competent workforce by society and the generation of employment by the industry.
The government, besides being an end-user, also has the key roles of a regulator, sponsor, developer and facilitator, while the industry part of the ecosystem comprising the businesses and commercial entities are broken down in a hierarchy of different layers. At the head are the ‘Primes’ or the system integrators that are large public limited companies which operate globally and are responsible for the major platform-based contracts and large support services. Working as sub-contractor to these ‘Primes’ through framework agreements are the Small and Medium Enterprises (SMEs). Further, Universities and Colleges have a key role to play in the ecosystem as providers of the human resource with knowledge, skills and research experience. Working with universities for funding research work are research councils. These are supported financially both by the government and industry. There are also industry organisations and associations that provide consultancy and support to manufacturers.
Another report on the UK Defence Ecosystem is depicted diagrammatically below:–
The Indian Imbroglio. My research tells me that the reason the Indian DIB flounders is the lack of an organisational structure responsible for setting policy goals, bringing various stakeholders (users, R&D and production agencies) on board a common platform, reviewing projects in terms of their viability, monitoring the progress of indigenous projects and fixing accountability, inadequate human resource and its optimisation, the absence of a dedicated defence R&D policy and concomitant manufacturing plan. Other Indian defence specialists have also recommended establishing of a Defence Technology Commission responsible for all aspects of defence innovation and self-reliance with cross ministerial/departmental membership and representatives from industry and other science and technology fields. The need to clearly define and establish a defence ecosystem with a clear holistic strategy, a well-defined road map, clear-cut responsibility and accountability, is thus the need of the hour. Also, in light of the fact that the current structures under the MoD have not been able to deliver, decade after decade, drastic measures are essential. A conceptual model for reorganising the Indian Defence Ecosystem is given below, bringing out the constellation of functions and actors required for building a robust defence industrial base.
There are four key components of the proposed Defence Ecosystem. In ‘green’ is the functional ecosystem which includes the support infrastructure needed such as knowledge transfer, competent HR, Academia, an effective IPR regime, infrastructure support such as SEZs, clusters, supporting financial regime amongst others (shown in dark green).In ‘light green’ are the R&D, Production Agencies, and Industry with multiple aspects influencing them such as QA, Testing and Standardisation faciltities, ToT, introduction of modern production techniques, Strategic Partnerships & JVs which can also include exports and engaging with global supply chains and many others. As can be seen a great amount of synergy is essential. In ‘purple’ is the supervisory and management vertical, headed by the PMO, Defence Technology Commission and the Inter-Ministerial Committee, administratively supported by the MoD. This key vertical will also develop the ‘strategies’ needed and leverage and develop global synergies through different means into the functional ecosystem. Equally important is the ‘Feedback’ vertical in red. With experience, the ecosystem will need regular course correction. Expert, independent and non-partisan feedback, will thus be critical to its success. Finally, of course is the nature of our ‘Society’. On that will dependent the quality of our ethics, governance, etc.
An independent Defence Technology Commission (DTC). There is need for establishing an independent Defence Technology Commission which should report to the Prime Minister’s Office (PMO) and will evolve the National R&D strategy, National Science and Technology Strategy and National Defence Industrial Strategy covering all security sectors including Defence, Nuclear, Space, Cyber and Information and Communication Technology (ICT) so as to ensure that all parts of the security ecosystem are synergised and supported simultaneously. These strategic formulations will spell out and prioritise security related R&D, Technology and Industrial futuristic needs of each of these security sectors including routes to be adopted, the appropriate combination of policy tools for achieving these outcomes and global synergies to be built with supporting nations, to enable timely fulfilment of these needs. The DTC would also clearly define and identify the constituents of the defence ecosystem, the drivers of these constituents, the nature of interaction between the various elements and its systematic audit and competency mapping. This process can only be driven by a knowledgeable and empowered hierarchy, which can innovate and transform existing pyramidal structures into nimble and responsive flat hierarchies. Implementation of these strategies will need an Inter-Ministerial Committee consisting of different Ministries, all of which play an important role in creating of a conducive ecosystem and enable coordination of efforts. Thus, the Finance Ministry will allocate adequate budget, establish a conducive tax regime and foreign exchange regulations while encouraging Venture Capitalists and FDI into different components of the ecosystem. The Ministry of Science & Technology (S & T) alongwith the MoD, Department of Space and Atomic Energy will work together towards meeting the requirements of the Defence R&D and Technology Strategies including efficient knowledge transfer, effective IPR and handholding of incubator hubs, while the Ministry of Commerce and Industry will work with the MoD towards fulfilling the Defence Industrial Strategy like enabling JVs, ease of business, developing of clusters and infrastructure needs of the ecosystem. Similarly, the Ministries of Skill Development and Entrepreneurship, Human Resource Development will work towards providing the empowered Human Resource needed to make the Ecosystem work, in terms of qualified professionals in the numbers needed. The MoD would be the administrative ministry charged with supporting the DTC. Based on the R&D, Technology and Industrial Strategies, policy tools such as the Defence Procurement Policy, the Defence Production Policy, Defence Offset Policy would be involved with empowered administrative procedures and structures, to oversee implementation with complete transparency. To do that, the DTC will ensure effective data mining, performance audits, and periodic reviews and course corrections / reorganisation where needed. It would need to be supported by technology evaluation as well as legal, financial and negotiation specialists. Establishment of standard norms, regulations and effective communication and networks amongst all stakeholders is essential for the synergy and success of the ecosystem. An efficient support structure will be needed to enable unbiased periodic performance audit and evaluation, regular review of policies and administrative structures with specialists in the fields of finance, law, technology evaluation and negotiations to support decision making.
An Inter-Ministerial Committee: In view of the complex inter-ministerial linkages that have to be synergised for nurturing a defence ecosystem, an Inter-Ministerial Committee (IMC) should be established to support the DTC to facilitate coordination in implementation of its relevant policies and programs, once approved by the PMO. The IMC should also be in a position to evaluate and engender leveraging of the acquired technology for broader application in other sectors of the economy so as to bring greater long-term benefits and prosperity to the larger economy and enhance the NIS.
Security Technology and Industrial Strategies
The formulation of these strategies is essential to guide security technology acquisition and development in the country consistent with the national security needs for the longer term, so as to strengthen the DIB so that we build the capability not only to manufacture, but also develop improved and innovative technologies and systems ourselves. Developing and implementing these policies would require well directed investment in indigenous R&D, strategic targeting of defence offsets, reverse engineering, outright purchase of technology, co-development, acquisition of foreign firms or forging strategic collaborations with technology owners, public procurement, entrepreneurship support, and recruitment/training of international human capital or even acquiring critical knowledge through subversive means. Axiomatically relevant portions of the strategies could classify as secret. Geostrategic convergence with USA, Japan, Israel, etc. (such as the US-India Defence Technology and Trade Initiative) could be leveraged along with our large market influence to enhance our defence technology and industrial ecosystem. Thus, the Security Technology and Industrial strategy need to be supported by a suite of policies. To start with, the Defence Procurement Policy (DPP) should be a simple document which only deals with speedy and efficient procurement of defence equipment from India or abroad and should be shaped by the technology and industrial strategy, but this is not necessarily a one-to-one relationship. While the procurement policy may be refined over time, the overall technology and industrial strategy stays constant. Similarly, the offset policy has to be well directed into tangible outcomes.
Supporting Policies and Infrastructure. In order to implement the Security Technology and Industrial strategy, there are a number of requirements including transparent and fair procedures, ease of doing business, availability of capital, strengthening of broader R&D infrastructure,and strengthening and empowering human resource. A single window concept for meeting regulatory provisions would greatly facilitate the ease of business by streamlining the maze of regulatory requirements for defence production. In addition, policy tools such as establishment of industrial clusters and Special Economic Zones (SEZs) along with the others listed above could also be part of the overall policy portfolio. Strengthening elements of the technical higher education enterprise could help both by advancing scientific and technical knowledge that will support the DIB as well as training technically-skilled manpower. But given that this will require inputs, efforts, and resources from many ministries, the DTC will need to coordinate and ensure synergized action across various entities to enable coordinated policies and infrastructure development.
Systematic Collection of Data. The lack of systematic and comprehensive data on the defence industrial base is presently a serious limitation to audit and mid-course correction, and nor is accountability attributable. Detailed data collection from the public and private sector must be ensured to enable assessment and understanding of core competencies and capabilities, outcomes, propriety technology etc. Similarly, data banks on global technology trends, global defence offset deals etc must be maintained. This would assist in contract negotiations as our officials would be aware of the technological strengths of foreign OEMs and will help in identifying the best policy tool to be leveraged. Knowledge of what offsets OEMs have offered to other nations will facilitate our contract negotiations with them. The format adopted by the US Bureau of Industry and Security may be a good model to learn and adapt from.
Evaluation/Audit Structures. The DTC will require robust evaluation and audit structures to enable detailed competency mapping, evaluating structures and procedures for reviewing organisations and policy, and carrying out performance audits. Such evaluation and audit need to be carried out by personnel who have the appropriate expertise in these areas.
Accountability and Transparency. The DTC and its verticals must employ specialists and technocrats, instead of generalists, who are accountable and operate with transparency. Data must be collected systematically and be available in the open domain to enable analysis by researchers and academicians. One of the key reasons why we remain heavily dependent on imports of weapons and systems, is lack of accountability of the stakeholders. The present system of ‘committee decision-making’ diffuses responsibility and must be done away with.
In course of my research, it became evident that if we are to succeed in the Prime Minister’s endeavours towards ‘Atmanirbharta in defence’, the following issues are key – (1) To acknowledge and recognise our shortcomings that have resulted in a weak DIB over many decades, (2) development of a clear vision for the DIB, in the context of our national security needs along-with concomitant focus and clarity in high-level policy towards this end, (3) an independent knowledgeable and committed body that develops, oversees, and monitors the DIB, preferably reporting to the Prime Minister. Old stake holders who have held the system ransom over decades need to be jettisoned and should be replaced by technocrats and specialist with impeccable credentials, (4) reorganization of the relevant structures to support this process, and (5) ensuring that the defence offset process and other policy tools available to the government are linked to, and help nurture, the broader defence industrial ecosystem.