Lessons from the defense industry of India (2)

India is one of ten countries which presently spends most on the acquisition of arms systems in the world. This condition is not a military casuism, but a doubly based decision. One of the bases is given by Indian force project which confronts its national security demands with the complex of threats in its strategic shape; the other basis is given by the project of a robust defense industry anchored on the understanding that expenditure on defense is investment in national industry.

For the construction of these projects – force project and defense industry project –, the government of India had to remove barriers erected over time by the corporative technocrats. There were barriers imposed by working rules and tax structure which, by not taking into account the complexity and security particularities, dealt defense manufacturers with the same market logic as applied to other sectors of the economy. And there were barriers constructed by defense planning which for not understanding how defense manufacturers worked in a market economy – and not considering this condition as part of the security equation – did not adjust the force design to the design of competencies and capacities of the defense industry. 

Under these barriers, the defense justified its inefficiency in the absence of modern arms systems, which the defense industry justified its inefficiency in the non-existence of a force project guiding the corporate strategic planning in the search for levels of self maintenance. This double inefficiency fed itself off the shortsightedness of the government, creating a viscious circle expressed in the equation described below, called “spiral of dependence”: the barriers raised by the economic technocracy in the defense of market principles inhibited development of the national defense industry with the result that arms systems needed to be imported to take care of security demands and there is no way of “braking or blocking” this importation with economic arguments, since they are based on a logic of security, which, being eminently political, overcome the priorities of the logic of the economic technocracy, the defense projects ends up being defined in terms of capacity requirements (arms systems) with no structural link to a national industry project.

The motor of this spiral is the inconsistency born in the disarticulation between logic guiding the project of force and that of the defense industry. Although in isolation, both projects may present arguments for self maintenance which are equally valid, they are asymmetric and competitive only removing economic logic which adjusts the transition rules (including those presented in the form of tariff and non-tariff barriers) to create conditions for the force project and defense industry project to gain internal and external consistency. 

The solution given by the government of India to brake the dependence spiral, assuring internal consistency of the force project with the defense project and, of both, with economic policy of the country, was to integrate  these three logics – defense, industry and economy – in the national policy;  the force project is a political construction for security, defense for productive defense arrangements and the economy for security (security economics, as known in the literature) is a political construction of barriers and incentives for the force project and for the productive defense arrangement.

To give sequence to this idea, they took some courageous measures. In 2001 India opened all (100%, literally) its defense market to private investment, allowing foreign direct investment (FDI) up to 26% in selected areas, creating base conditions – tax and credibility – for the sustained growth of the Indian defense industry. National businessmen understood and occupied the opportunity spaces created; presently about 1,500 companies are supplying about 30% of components and defense sub-systems are injecting US$ 7 billion into the local economy. 

Part of these manufactures and suppliers of services are Mahindra & Mahindra, Tata Group, Kirloskar Brothers, Larsen & Toubro, Ashok Leyland, Jindal, Max Aerospace & Aviation, and Ramoss India. The same names we see in the auto industry, aeronautic, services. The aerospace industry in particular, makes up more than 500 small companies in the Indian defense productive arrangement, contributing 231 patented technologies and transferred to the commercial sector for dual use (spin off). 

Apart from market opening and incentive rules for FDI, the Indian government created new offset rules, demanding that 30% of overseas purchases over US$ 70 million were invested in the manufacture of components and services in the country, with the aim of generating new companies and conditions of market for products demanding long term investment returns.

Apart from this, a list of applicable technologies for non-lethal arms systems with tax benefits was created, including arms systems and management of public security processes (urban policing and disturbance control), sensor equipment, vigilance and frontier management, technological security systems, with emphasis on information protection systems. These systems nurture the inclusion of small companies in the productive defense arrangement while they similarly attend to the need of the armed forces and public security forces (Police) in constable actions (non-war operations) 

More importantly, 75% of the defense budget is annually allocated to the design of defense innovation aiming at investigating the mediation and support that new technologies of information and communication offer to the enterprising capacity of overcoming organizational, intellectual and cultural barriers; to perfect existing products and processes; to develop innovative ones that attend to the efficiency requirements in defense different from existing ones; and to conceive cognitive and strategic environments  not yet integrated into human experience, exploring analytical and theoretical frameworks that explain the frontiers between scientific and intuitive experience and which establish practical bridges between these knowledge dominions for the conception of new technologies to attend to future defense and company demands. 

Unfortunately in Brazil, few know what design of innovation means. There is not yet any course on the subject so that probably the public managers responsible for generating public policies are not qualified in this competency, acting basically intuitively, without the knowledge and training needed to change the present sate of national functional inefficiency on the three pillars of security: design and management of the force project; configuration and maintenance of the technological industrial national defense; and economic security. 

India is one of the countries that most invests in innovation design with research centers dedicated to construction and reconstruction of the principles and knowledge to guide the force project and national defense industry, both under the integrating logic of economic security. 

There is much to learn from India, and much our companies can take advantage of the Indian market opening to partnerships with foreign defense companies – ours in this case, including because both countries are very similar in the large traits of their defense histories. 

For example, the first arms and munitions factory in India is more than 200 years old, established in 1801, in Cossipore. Our arsenals started with the coming of the Royal Family in 1808. Independence in India, like in Brazil, although dephased in time by more than 100 years, made a strong jump in the capacity of self defense, leveraging a national defense industry under governmental management. Both underwent an expansion at the end of the 1960´s and the start of the 1970´s, until the oil crisis put economic regulations which no longer compensated internally the inefficiencies of an anachronist force project and absence of mechanisms for self sustenance of industrial undertakings and private services.  

But the similarities stop there. While the defense industry in Brazil goes bankrupt and we do not manage to produce until today a national force project, India has been promoting its defense industry projecting an increase of 39 to 72  large private integrated companies in its national defense productive arrangement. Lessons learned with India allow listing of seven dimensions of simultaneous actions for Brazil to leverage the development of its productive defense arrangement.

1. Deregulation of specific areas of industry for import substitution and creation of norms and procedures for the incentive and controlled offset, including private companies.

2. Incentives, including with financing and benefits to be written off, technology transfer processes which increase the capacity of installed production and incentives for manufacturing under license state of the art arms systems.  

3. Modernization of the infrastructure of defense and its articulation with industrial development policies by way of letters of intent for the acquisition of projects by licensing and acquisition of national projects developed with technology that may be shown in the scope designed in the diagrams of the future.   

4. Civil capacitating for defense with support and nurturing of development of centers of independent analyses able to generate and push innovation design. 

5. Design of a transparent national force design with reference to and sustenance on centers of investigation and reflection for the defense, with support of development agencies for research. 

6. Studies and projects for understanding laws of formation and management of productive defense arrangements, articulating security economy with projects of national force and its dissemination in national fora specialized and not specialized, including in the dominion of scientific initiation on a level of technological graduation and knowledge in basic training companies.  

7. Analytical modeling exploring and evaluating the force project and construction of formal and informal mechanisms for translation of its results into public political proposals, programmed structures of governments and strategic plans of articulated invest ents. 

We hope that those responsible for making our National Defense Plan are conscious (and competent too) incorporate these requirements into their goals without which this Plan will not fulfill its condition of transparence, not make links to a force project, which needs to be created and will not establish capillarity mechanisms for teaching competencies and research and extension which the force, industry of defense and security of economy projects demand.   

Of all, this last item is fundamental and must be always the top priority in defense projects. Respecting this priority, maybe we can avoid the embarrassment of seeing the CNPQ, the organ responsible for research development in Brazil, turn down in 2008, a project for research on exploratory modeling of the defense industry and force project for being an “irrelevant” theme; or avoid the embarrassment of seeing CAPES turn down also in 2008 a request for the opening of a course in training people in Innovation Design of the Force Project through the absolute incompetence of its assistants in the defense area, with an explanation of motives clearly done by someone who knows nothing of the area.  

Without independent defense research centers, we are fated to follow the sustenance path of the defense industry, different to the one India traced for itself, after all, if they were not independent centers, articles like this would not even exist. 

We urgently need CAPES, CNPQ, FINEP and national research development organs like FAPESP, for example, to operate beyond the corporativism of consolidated disciplines and exert their responsibilities on creating and maintaining these new areas of knowledge: the force project, design innovation applied to national defense businesses and security of the economy. While these areas are not established and consolidated, the National Development Plan – whatever it may be – will not have the intellectual backing for its entrepreneurial self-sustenance, making it just one more effort to end up in the political voids of possibilities. 

When will it be that we will learn that “creating on paper” is easy, gives passing prestige to the “father of the idea”, but these ideas go nowhere if not based on enterprising competencies. There is no self-sufficiency in defense without intellectual backing, and no self sufficient defense industry without enterprising capillarity supported by sustainable public policies in principals of the economy of security.