Bangladesh eyes arms exports

Highlights:

• Bangladesh plans a defence economic zone for self-reliant military production
• Tk15,000 crore investment expected via PPPs, FDI, and joint ventures
• Chief Adviser Muhammad Yunus approved policies for technology transfer and partnerships
• Private sector seen as central to industry growth and sustainability
• Experts warn local demand alone insufficient—exports vital for viability
• Two high-level committees formed to guide defence industry development

The government is moving to establish a specialised defence economic zone as part of a broader plan to build a self-reliant military industrial base. The initiative aims to produce drones, cyber-technology systems, arms, and ammunition for the armed forces and security agencies—with export potential in view.

Officials estimate that the sector will require long-term investment of around Tk15,000 crore, mobilised through the revenue budget, public–private partnerships, joint ventures, or direct foreign investment.

According to officials involved, Chief Adviser Muhammad Yunus has already approved a set of policy measures to facilitate technology transfer, joint investment, PPPs, and FDI in the defence industry.

The decision to establish a dedicated zone was taken at a September meeting chaired by Chowdhury Ashik Mahmud Bin Harun, Executive Chairman of the Bangladesh Economic Zones Authority (Beza), and attended by senior civil and military officials.

Meeting minutes obtained by The Business Standard show that several foreign governments and companies have already expressed interest in investing in Bangladesh's nascent defence manufacturing sector.

"Work is under way to establish the zone and attract both domestic and foreign investment," Ashik Chowdhury told TBS on Thursday. "The location and land size have not yet been finalised. We are developing the policy framework and engaging with friendly countries. The goal is to make the defence sector export-oriented."

Ashik Chowdhury, who also serves as Executive Chairman of the Bangladesh Investment Development Authority (Bida), declined to comment on whether China or Türkiye were among the interested parties.

Officials said the Chief Adviser approved policy directions on 30 April, and the Bangladesh Army has since been tasked with drafting a concept paper for a comprehensive national policy at Beza's request.

They estimated Bangladesh's domestic demand for defence products at around Tk8,000 crore, covering the needs of the armed forces as well as the Border Guard Bangladesh, Coast Guard, police, Ansar and VDP, and other paramilitary agencies. A domestic industry, they said, could meet much of this demand and eventually expand into exports.

They added that the armed forces have received proposals from foreign companies to produce military equipment in Bangladesh. Similar proposals have reached Bida, but some policy decisions are still pending.

Infograph: TBS

Private investment seen as key

Finance Secretary Md Khairuzzaman Mozumder, who attended the meeting, cited international models such as McDonnell Douglas and Lockheed Martin, stressing that the private sector must play a central role in developing the industry.

"Tk15,000 crore may not be available from a single year's budget, but it can be allocated over several fiscal years," he said, adding that the Finance Ministry would support land acquisition, possibly using land from unused state factories. He also advised taking up a short-term project to establish the zone quickly.

Defence and security analysts have welcomed the initiative but urged careful planning.

Major General (retd) ANM Muniruzzaman, president of the Bangladesh Institute of Peace and Security Studies (BIPSS), said self-reliance in defence was a strategic necessity.

"Every nation seeks to reduce dependence on foreign suppliers. Establishing a defence economic zone is essential for that goal," he said. "But such an initiative demands significant investment and technical expertise. Tk15,000 crore alone will not suffice."

He added that Bangladesh must ensure the private sector has the capacity for large-scale investment and that technology gaps are addressed through partnerships and training.

Muniruzzaman cautioned that Bangladesh's domestic market alone may be too small to sustain a defence industry.

"To make it viable, we must tap export markets. The global defence industry is fiercely competitive, dominated by established players. Success will require either joint ventures or direct foreign investment with technology partners," he noted.

Bangladesh lags in defence manufacturing

Meeting documents show that Pakistan has invested about $450 million annually in defence production over the past four years, while India's annual investment reached $2.76 billion. In 2023, the US invested $11.3 billion, Germany $3.3 billion, China $2.4 billion, South Korea $621 million, Türkiye $600 million, and the Netherlands $258 million in their respective defence manufacturing sectors.

A senior army officer told TBS that Bangladesh has made limited progress in building a defence production base even after 54 years of independence, while other countries of similar economic strength have advanced significantly.

He estimated it could take 25–30 years for Bangladesh to reach comparable levels and stressed the need to develop an industrial ecosystem that can function independently of imports for extended periods.

Commerce Secretary Mahbubur Rahman said Bangladesh has the potential to match Pakistan's level of investment among regional peers.

"The initiative should start immediately to strengthen both the armed forces and the national defence industry," he said, suggesting that the proposed defence zone should have a designated area like the Bangladesh Ordnance Factory in Gazipur.

Other officials pointed out that in neighbouring countries, defence production has expanded primarily through private-sector initiatives. They said Bangladesh's large industrial conglomerates could also play a similar role.

However, an additional secretary from the Industries Ministry cautioned that foreign investors often seek guarantees, which Bangladesh's current laws and policies do not clearly provide. He urged the government to define investment procedures and protections in the forthcoming policy.

Another official said the Defence Procurement Act and related laws currently restrict private participation in the sector, and recommended new legislation to open the field to investors.

Participants also suggested adopting policy models from Türkiye or Pakistan and forming a permanent coordination body to oversee defence industry development.

Two committees formed to guide the process

The meeting decided to form two high-level committees:

• A Defence Industry Policy Implementation Committee, chaired by the minister or adviser for the defence ministry, to draft and execute the pending National Policy on Defence Industry Development.
   
• A Bangladesh National Defence Industry Development Coordination Council, to supervise overall progress.

Chief Adviser Muhammad Yunus currently heads the defence ministry, a role traditionally held by the prime minister under elected governments.

Speakers at the meeting emphasised the need to transform Bangladesh from a net importer to a potential exporter of arms and ammunition.

A Navy officer noted that local shipyards are already working on building frigates and ocean-going vessels but warned that without clear export provisions, sustaining investment would be difficult.

He called for strategic alliances and long-term partnerships with friendly nations, alongside clear policy guidance and partnership frameworks, to ensure the defence industry's steady growth.