Category Archives: Self-Reliant Defense Posture

Could self-reliance save AFP modernization under Duterte?

The Aquino administration’s Presidential candidate, Mar Roxas, had campaigned on a promise of continuing with the courses of action of the outgoing administration and represented continuity of an AFP Modernization Program that achieved gains hitherto unseen:

Aquino administration   Arroyo administration    Ramos administration
2015

2014

2013

2012

2007 to 2011

2003 to 2006

 The Plan: 1995

But with the victory of President-elect Rudrigo Duterte, a self-described socialist whose campaign platform centered on an inward-focused good governance campaign, declarations of doom about the AFP Modernization Program swept across the defense-centric social media landscape. The perceived outlook for modernization, particularly for acquisitions that were either still planned or ongoing was bleak.

Further aggravating the concerns of the defense-enthusiast community were his controversial statements with regard to US and Australian relations and his openness to bilateral talks with China regarding the West Philippine Sea and an open aversion to war with the red dragon that had been gobbling up Philippine territory in its western approaches. To many, the nightmare scenario had arrived.

Stigma around implements of war

Given Duterte’s preference to avoid conflict, and announced repertoire of populist programs that benefit the poor, defense planners have reason to worry about the still-unallocated billions of pesos required for ongoing and upcoming programs:

  • Ten of the 12 FA-50PH Surface Attack Aircraft / Lead-In Fighter Trainers remain in the queue for delivery
  • The Long-Range Patrol Aircraft has not yet even reached the bid invitation phase
  • The Close-Air Support project remains in bid-supplement limbo
  • The second Tarlac class Strategic Sealift Vessel (SSV) remains under construction
  • Two multi-purpose Frigates are still in the post qualification phase and are ripe for cancellation
  • Three Multi-Purpose Attack Craft (MPAC) Mk.3 whose design is still being finalized

While the Philippine Navy has been careful to couch the SSV project as a dual-purpose asset that will prove useful in the event of another Yolanda crisis as well as for evacuating Filipino OFWs in crisis zones like the Middle East — in addition to its obvious amphibious assault function — the other projects listed above lack this protection. All are clearly implements of war . . . a war that Duterte appears hell-bent on avoiding.

Highlighting the value of building up a credible defense capability is a given. For a mayor a major city, security as an enabler of progress should be a fairly well understood concept. Especially for one that oversaw a city that had its share of security crisises over the past decades.  Your constituents can’t earn a living if they aren’t safe.

External defense, however, would arguably be an unfamiliar rendition of an old tune. The enemy in this case is different, and enjoys an overmatch that is simply beyond whatever resources the Philippines could ever hope to muster on its own. Our current, and foreseeable, defense posture only makes sense when done in concert with our allies — allies with whom Duterte’s campaign rhetoric raised concerns. How such relationships play out over the next six years are hard to predict.

Defense planners need a ready answer for the question: “Would spending for external defense just be throwing money away?”

Among the plethora of reasonable answers to the questions above, one tack that the DND-AFP would do well to consider would be to highlight the opportunities these assets represent to the domestic economy. Benefits that would be available for both existing commercial offerings as well as potential future endeavors between the original manufacturer of the equipment and Philippine companies.

If the DND-AFP is able to demonstrate a reasonable, direct, return on investment for the Philippine economy, then the billions spent would be even more of an investment for national growth than the argument that defense is an enabler for economic prosperity. If the defense establishment can emphasize how these acquisitions put food on the table of Filipino workers, then these acquisitions will fit well with the President-elect’s campaign focus on business opportunities. The local military industrial complex could very well be what saves the AFP modernization program.

The next two sections of this article will present concrete examples of opportunities that map to the list of projects, presented earlier, that could be at risk in the event of a budget crunch:

  • Economic windfall from aircraft aquisitions
  • Economic windfall from maritime acquisitions

Economic windfall from aircraft acquisitions

As of writing, the Philippines lacks any serious indigenous aeronautical endeavors. The dreams offered by the XL-14 Maya and XL-15 Tagak in the 50s, and even the Cali Pinto of the Marcos years have been relegated to the realm of the “what-if” with no clear-cut path to the here and now.

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 XL-15 Tagak c/o Janes All the Worlds Aircraft 1954  Cali Pinto c/o Francis Neri albums

Near-term economic benefit from additional air assets, therefore, would be found in maintenance contract opportunities. The influx of new aircraft — from supersonic jets to new transport and patrol aircraft — create numerous potential service contracts for qualified companies. Keeping what we buy in the air with as much involvement of local companies — providing licensed or OEM-certified services — as possible ensures operational readiness of these aircraft as well as providing economic benefit to the local aerospace industry.

The increased capabilities of these new aircraft come at a price. Not only in terms of capital outlay, but upkeep. Modern electronics need levels of attention that older, less-sophisticated and less capable, systems could potentially get by without. This is particularly true of cutting-edge modular avionics systems that can’t simply be jury-rigged into operation when they become nonoperational.

Consider the following aeronautical developments and a simplified sampling of their corresponding support burden would be candidates for logistical agreements:

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The Korean Aircraft Industries FA-50 Lead-In Fighter Trainer / Surface Attack Aircraft represents a quantum leap in PAF capabilities. But those capabilities come with a corresponding maintenance overhead for its myriad of systems that the Philippine Air Force is operating for the first time. From its fly-by-wire system to its Mach 1 capable engines. There are currently two of these aircraft in the inventory, and another 10 are due to arrive. Photo c/o Lester Tongco Aircraft such as the FA-50 and S211 Basic Jet Trainer have two ejection seats each. One for each aircrew. These pilot safety systems require their own maintenance regimens that include periodic refurbishment of their components, to include rocket motors.
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Forward Looking Infra-Red (FLIR) systems allow PAF and PN AW-109 helicopters to find targets, or individuals in need of rescue, in all weathers. But these also require scheduled replacement of critical modules to stay operational. Photo c/o the Francis Neri albums All new acquisitions from the AW-109 helicopters to the CN-295 transports, feature multi-function displays (MFD) — also called “glass cockpits”. These reduce pilot workload by replacing the traditional gauges of Vietnam-era aircraft thus improving flight safety. These modular components introduce new maintenance routines. Photo c/o the Francis Neri albums.

Business-as-usual, part-by-part, piecemeal acquisitions — that would have the AFP issue bid invitations for each individual component, with all the attendant bureaucratic overhead and potential for delay-causing re-bids — would hamper operational readiness of these aircraft in ways that wouldn’t on older but less-capable, Vietnam War-era aircraft. An FA-50, for example, could be fully operational in all respects. But if its fly-by-wire computers are rendered non-operational by the lack of appropriate spares it will stay on the ground. A non-operational “hangar queen” or non-mission-capable asset is a poor return on investment for the people’s money.

While the AFP modernization law requires that each acquisition include provision for an Integrated Logistics Package (ILP) from the manufacturer, such packages are finite. The following excerpt from a Supplemental Bid Bulletin from the PAF’s Attack Helicopter project, which eventually acquired the AgustaWestland AW109, presents an example of the extent of spares that are included in acquisitions. This document lays out how much time the AFP typically has to establish a more sustained spares acquisition scheme after a weapon system arrives.

spares_parts_program

For the long-term, in-country capability for supporting these aircraft must be developed. If done with the nation’s interests in mind, this need could be filled by Philippine companies — in partnership with foreign manufacturers of the equipment — that would provide logistical support arrangements to ensure local availability of manufacture-approved parts as well as in-country maintenance and repair capabilities. Companies offering these services would be contracted to provide ready availability of critical components at pre-negotiated prices based on forecasts of the need for such parts (e.g., based on maintenance schedules, Mean-Time-Between-Failure (MTBF) data, statistical trends, etc.) as well as foreign currency fluctuation tolerances.

This would reduce the delays created by having to source replacement components overseas after having exhausted the AFP’s own internal inventory — assuming budgetary provisions permit the build-up of such an inventory as opposed to a Just-In-Time (JIT) parts requisition scheme. The red-tape generated by government procurement processes currently do not facilitate JIT acquisitions.

Note: The complexities of balancing quantities between in-house AFP component stocks with components sourced through these logistical arrangements are beyond the goals of this article and would require direct access to proprietary maintenance data. Attention must also be given to the tariffs that such companies would face for importing and then storing these components. The potential for leveraging the industrial park status of the Government Arsenal compound in Limay Bataan, to address these tariffs, would need to be investigated. See further below for details.

A foreign example of a commercial entity providing logistical support for a military organization would be Quantas Defense Services — previously a wholly owned subsidiary of Quantas Airlines but was sold to Northrop Grumman in 2013. This company provided support for the Royal Australian Air Fore’s A330 multi-role tanker transport fleet, operational logistics services for the Australian government’s VIP aircraft, and engine overhaul services for the Lockheed Martin Orion P-3 and BAE Systems Hawk lead-in fighter trainer. It was recently given a contract to refurbish C-130s of the Indonesian Air Force.

Broadly speaking, this equipment-support capability is referred to as: Maintain, Repair, & Overhaul (MRO). The Philippines is no stranger to aeronautical MRO — particularly the commercial MRO that is at the heart of this article. The Philippine Aerospace Development Corporation, a Government Owned & Controlled Corporation (GOCC), was established in 1973 with the following charter:

. . . the government’s arm for the development of the Philippine Aviation Industry. The driving motives for its establishment are self-reliance, national security and technology transfer.

padc

PADC currently provides MRO services for the following:

Services Description
Airframe  Inspection, repair and alteration of:

  • Britten Norman ISLANDER Model 2A and 2B Aircrafts
  • CESSNA Model 150, 172, 206, T206 Series 421, 421A and 421B Series
  • Piper Seneca Aircraft
Engines Lycoming and Continental piston engines up to four hundred (400) HP rating

As the Allison Authorized Maintenance and Overhaul Center (AMOC)in the Philippines, PADC undertook theForeign Military Sales (FMS) program on the overhaul of the Allison 250-C30 engines of the Sikorsky helicopters and the Allison 250-B17 engines of the Nomads

Propellers  Repair and overhaul facilities for:

  • Hartzell
  • MC Cauley
  • Sensenich
  • Hamilton Standard
Landing gear  Functional Test, Repair and Overhaul of landings gears for:

  • Britten-Norman Islander
  • Cessna

As shown by the list above — which was taken from the PADC Website — these capabilities remain limited to the types of aircraft that were in service at the time of this GOCC’s inception. Whereas private MRO companies, such as Lufthansa Technik Philippines — a joint venture between MacroAsia Corporation and Lufthansa Technik AG — benefit from foreign capital and know-how and cater to larger and more sophisticated aircraft, the PADC’s service offerings are comparatively stunted.

In its current form, the PADC is ill-suited to provide MRO services for the dozens of aircraft that are coming for the AFP. Closing the gap between current capabilities with what our new warplanes require will require a systemic evaluation of why the PADC atrophied in the first place. Assuming the PADC can be recapitalized and modernized, if not replaced with an equivalent but optimized organization, such an entity would be the perfect platform for Public-Private Partnership ventures that would not only satisfy the needs of the AFP, but also compete in the global MRO market.

For this to work, however, critical mass involving the following considerations must be reached:

  • Funding
  • Opportunity
  • Know-how

The funding is there, care of the various funding instruments that have been developed over the years to justify and enable defense spending. These include procedures for proper access of the AFP Modernization Trust Fund, legal basis for private contributions to that fund (c/o Section 6, sub-paragraph “i” of Republic Act 10349), to the implementing guidelines for Multi-Year Obligating Authority (MYOA) for DND acquisitions that exceed the annual budgetary allocation of the national budget.

“Opportunity” is a function of a multitude of factors but recapitalization of the air arms of the various services already create a baseline upon which to build. The new aircraft being acquired create this opportunity.

On the matter of “Know-How”, a shining example of advancements in locally available skills came to the fore in 2013, when the Philippine Air Force reached a major capability milestone careof the 410th Maintenance Wing when it completed Programmed Depot Maintenance (PDM) for C-130 #3633. A PDM is the aircraft equivalent to a major overhaul for a car, and in the US Air Force is done every 48 to 64 months. The 410th MW not only identified sources for the necessary parts — albeit piecemeal because of the lack of logistics arrangements — it also mustered the necessary technical expertise to complete the PDM in-house.

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Previously, the PAF had never undertaken its own PDM of its complicated Hercules transports. The event was a testament to the PAF’s efforts to improve the technical proficiency of its personnel. While the need to retain these capabilities within the Philippine Air Force is important, the potential for leveraging these skills and lessons-learned in this effort to compete in the global Maintenance, Repair, Overhaul (MRO) market for military aircraft — as a properly OEM-certified maintenance facility — should not be ignored.

It is worth noting that the Malaysian Air Force unit responsible for similar functions was eventually privatized as a joint-venture with Lockheed Martin and became Airod Malaysia, which continues to provide support for the Malaysian Air Force. In 1997, Airod provided PDM services fo PAF C-130 #4593.

A conscious effort to maintain PAF equipment using a combination of in-house capabilities and domestic MRO companies as part of a self-reliance program would boost the MRO industry to the benefit of the Philippine labor force. Not only would this strengthen the local aerospace industry, it would also reduce the outflow of foreign currency. The experience, and resulting capital build up generated by a maintain-locally policy could very well give impetus to more ambitious aerospace manufacturing ventures. Provided, of course, that the Philippines were properly organized for such a transition. (See further down for how to organize for this shift).

Keeping aircraft in the air will mean profit for someone. Why not make sure that that “someone” is the Filipino people?

Economic windfall from maritime acquisitions

The Philippine Navy is in the midst of the largest post-Martial Law build up in its history. Plans to recapitalize the service have been in existence since the 1995 modernization program. The Navy reminded the public of this effort when it published it’s “desired force mix” in 2012 providing specific force-strength requirements for various types of vessels. The service refreshed this notice again three years later when it published he following infographic on the Philippine Navy website.

pn_horizons

The individual components of the PN’s modernization plan are the most expensive members of the AFP modernization effort. Consider the following projects on the list at the start of this article:

Project Authorized Budget for Contract Quantity
 Strategic Sealift Vessel Acquisition Project  P4,000,000,000.00  2
 Frigate Acquisition Project  P18,000,000,000.00  2

With an annual modernization budget of only P5B per year, many of the navy’s projects would not even be possible without the Multi-Year Obligating Authority drafted in 2010. The SSV project budget alone is larger than the appropriations for either the Department of Science and Technology or Department of Trade and Industry. The sheer amount of monetary resources that these projects require make them prime candidates for the budget slasher’s axe.

From a purely defense-centric perspective, the need for these acquisitions is undeniable. These vessels resolve long-standing capability gaps that prevent the Philippine Navy from operating in a modern maritime threat environment. It is the only navy in Southeast Asia without missile capable boats, and until its frigates arrive is the only maritime force with no response to a submarine threat.

But aside from emphasizing that these assets are par-for-the-course for 21st century maritime security, defense planners could also emphasize the economic benefits of continuing the maritime build-up — regardless if the vessels are actually built locally or imported.

The obvious direct benefit to the economy would be to build ships on the modernization list locally. With the navy fresh on the heels of two relatively recent self-reliant shipbuilding programs, there is ample evidence to prove that Philippine shipyards are ready to answer the call to build military vessels. These two projects are the Multi-Purpose Assault Craft (MPAC) manufactured by Propmech in Subic Bay, and the largest domestically built military vessel in AFP history: the BRP Tagbanua Landing Craft Utility (LCU) which was manufactured in Philippine Iron Construction & Marine Works (PICMW) in Jasaan, Misamis Oriental. Both appear below.

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 BRP Tagbanua (PN photo)  Multi-Purpose Assault Craft (DND photo)

It’s worth noting that the following components of the Sail Plan are comparable to the MPAC and LCU projects, in terms of vessel size, as well as technical and construction complexity, and would therefore be low-hanging-fruit for an indigenous shipbuilding program:

  • Fast Attack Craft (42 units)
  • Landing Craft Utility

Beyond these types of vessels, however, the Philippine Navy has thus far sought foreign assistance. The first SSV, the BRP Tarlac (LD-601) was built in PT PAL in Indonesia and the second SSV is being constructed at the same yard. For the Frigate project, a South Korean shipyard is currently undergoing Post Qualification evaluation for this two-ship acquisition.

There is good reason for this. While there are indeed shipyards in the Philippines with significant slipways and are capable of constructing as many as five massive container ships simultaneously, these large yards are actually foreign-owned and are focused primarily on building ships for their foreign owner’s order books. The lack of participation of local shipyards in the bid invitations for the SSV and Frigate projects strongly implies that the local industry acknowledges this limitation.

Filipino controlled local shipyards face a number of challenges that need resolution. These range from the cost of electricity, supply chain issues (e.g., lack of domestic steel sources, etc.), to skills-deficits. On top of these industry challenges, there is also the matter of restricted access to key sub-systems that make up a modern warship. Foreign-manufactured sensors, advanced weapon systems, and similarly sensitive equipment are not available for export (e.g., ITAR) to non-state buyers. So local shipbuilders would not be able acquire these sub-systems themselves.

Therefore, for the near-term, we will need to resort to foreign sourcing for vessels that exceed our manufacturing capability or access to technology. This gives the AFP the best opportunity to achieve its modernization goals within a reasonable timeframe. The operative word being “near-term”.

Philippine Navy Sail Plan 2020 requires multiple instances of each ship. Therefore even if the initial orders for ships go to foreign shipyards, subsequent order need not be. A prime example of this mode of acquisition is Indonesia, and actually involves the Strategic Support Vessel (SSV).

The recently delivered Tarlac class SSV is based on the based on the Indonesian Navy’s “improved Makassar” class Landing Ship Dock (LPD). This ship, in turn, was derived from a design by Daesun Shipbuilding & Engineering of South Korea which built the first two ships of the class for Indonesia in South Korean shipyards. PT PAL, the Indonesian shipyard which built the BRP Tarlac and is currently building its sister ship, acquired design rights to the Makassar class LPD from South Korea, and is now offering the vessels for export. Whether or not South Korea continues to receive compensation for future sales of their design is unclear.

The potential benefits for the Philippine economy are too great to ignore. With careful planning, industrial incentives, licensing agreements with foreign partners — comparable to what Indonesia negotiated with South Korea — and synergy with the local shipbuilding industry, the remaining items in the Sail Plan could function as a catalyst for the shipbuilding industry.

Basis in law

Incremental efforts, from the Ramos to the Arroyo administration have created a legal framework that actually reduces the legislative ground work that the Duterte administration needs to perform to implement the proposals listed above. The unprecedented volume of purchases completed or initiated during the Aquino administration is — in truth — a net effect of the efforts that have come before. There is, therefore, no legal or procedural impediment to continuation of the current trend.

The AFP modernization law explicitly favors locally-manufactured defense articles:

Sec. 10. Self-Reliant Defense Posture Program. — (a) In implementing the modernization program, the AFP shall, as far as practicable, give preference to Filipino contractors and suppliers or to foreign contractors or suppliers willing and able to locate a substantial portion of, if not the entire, production process of the term(s) involved, within the Philippines.

(b) In order to reduce foreign exchange outflow, generate local employment opportunities and enhance technology transfer to the Philippines, the Secretary of National Defense shall, as far as feasible, incorporate in each contract/agreement special foreign exchange reduction schemes such as countertrade, in country manufacture, co-production , or other innovative arrangements or combinations thereof.

(c) The AFP likewise ensure that in negotiating all applicable contracts or agreements, provisions are incorporated respecting the transfer to the AFP of the principal technology involved as well as the training of AFP personnel to operate and maintain such equipment or technology.

The “spirit of the law” favors a Filipino-First procurement scheme.

As things currently stand, all pending acquisitions are required to have a local Philippine partner. A requirement enshrined in the Carlos Garcia-era Republic Act 5183 prohibits the Philippine government from sourcing items from companies that aren’t majority Filipino owned. This means that any foreign vendor seeking to sell its wares to the AFP needs to establish arrangements with Philippine business entities, which will then be responsible for representing the vendor in public biddings and similar engagements.

The legal framework for domestic windfall from the billions of pesos slated for defense expenditure for already-ongoing projects is already in-place. All that a prospective Secretary of National Defense, Chief of Staff AFP, or defense adviser would need do is to highlight this prospectively unaware policy makers within a Duterte cabinet.

Putting the plan in action

The law calls for technology transfers as part of as many acquisitions as possible. But creating the entities that would actually absorb that technology are simply non-existent. The Philippines’ failure to implement a far-reaching industrialization program has been a persistent stumbling block to the local defense industry. There are few, if any, companies that could oversee a turn-key transfer of defense technology.

While RA 5183 has been in existence for over half a decade, thus far it’s principal achievement as been the institutionalization of the “middle-man” industry: companies that simply peddle access to the corridors of power rather than actually promote the local defense industry.

Three key enablers must exist for this self-reliance based modernization program to take root:

  • coordinating body that can marshall government and industry resources for the identification and evaluation of technologies that would be candidates for technology transfer
  • A manufacturing entity that would either serve as a catalyst for its sector or as proof of concept for local manufacture of defense articles
  • A skills development agency that would ensure that existing, and prospective defense companies would have a pool of properly trained and educated workers from which it can draw its manpower requirements

Without these three pillars of self-reliance, any indigenous development program would be doomed to failure. From the 1950s to the today, the history of the indigenous defense industry is littered with failed ventures and prototypes that went nowhere mainly because of the lack of this three-legged framework.

All three enablers can, theoretically, be either based on existing agencies or be entities that would have to be created.  The following sections presents one way such enablers could be setup.

Coordinating body: A PH DARPA

The Philippines needs an equivalent to South Korea’s Defense Acquisition Program Administration (DAPA), Singapore’s Defense Science and Technology Agency (DSTA), and the US’ Defense Advanced Research Projects Agency (DARPA). These organizations are drivers for defense technology innovation in their respective countries. For additional details about how a prospective Philippine DARPA would emulate the roles of these agencies in the Philippine setting, see the following article, which was endorsed for consideration within the DND-AFP decision structure in 2014: A Self-Reliant Posture (SRDP) Roadmap and a DARPA equivalent.

DARPA Vector Logo.eps dapa150 download

This coordinating body’s principal function would be to ensure that the DND-AFP is a “wise buyer”. One that knows what it needs to buy, clearly articulate its needs to prospective bidders, and is able to distinguish between a lemon and a diamond-in-the-rough, when selecting items to be acquired. It would also determine whether or not the country’s needs are best served by acquisition of specific technologies and licenses for local manufacture, or if an outright purchase of equipment from foreign vendors is more appropriate. For an older discussion about considerations for local manufacture, see here.

Once the prospective PH DARPA determines that technology or license acquisition is a practical option, selection of a method for ingesting that technology or license becomes the next SRDP imperative.

When the items to be acquired are either technology, or licenses to produce equipment locally, then it would be the prospective PH DARPA’s role to facilitate absorption of that acquisition either by:

  • Using a government manufacturing entity such as the Government Arsenal
  • An existing commercial enterprise that would have to be selected through a competitive evaluation process to ensure the best qualified recipient, and to avoid allegations of impropriety
  • A completely new entity, either in the form of a Government Owned and Controlled Corporation, or a Public-Private Partnership

Integral to that function would be evaluation of existing manufacturing relationships, assessing their benefits to the government — both for economics and security of access to materiel — and implementing a plan to move forward.

Manufacturing entity: Government Arsenal

Earlier in this article, the Philippine Aerospace Development Corporation was presented as an imperfect potential government interface to Public-Private Partnerships that would satisfy the needs identified in this article. There is, however, another government entity — under the Department of National Defense — that is currently operational and setting production records for items under its charter — a testament to the quality of its management, as well as the maturity of the organization: The Government Arsenal.

Although currently focused on munitions and small arms production, the Government Arsenal remains a logical starting point for any search for a model for domestic defense manufacture. It is a manufacturing entity that the government itself owns, and has a proven track record for marshaling engineering and manufacturing prowess in support of national defense. It has reached out to civilian agencies such as the Metals Industry Research and Development Center of the Department of Science & Technology, as well as private manufacturing concerns as part of its Research & Development efforts, making it a hub for defense technology knowledge.

By regulation, it is the primary source of war materiel for the AFP, PNP, and other uniformed services which can’t source ammunition externally unless the arsenal is not able to satisfy the need. As per Executive Order 303, Series of 2004:

SECTION 1. Sourcing the Government Munitions Requirements. The AFP, PNP, and other government agencies are hereby directed to source their small arms ammunition and such other munitions requirements as may be available from the Government Arsenal;

This is a significant, albeit controversial, advantage that ensures any government investment in the institution will be put to use for its benefit.

In addition breaking ammunition production records that were set in the 70s, the revitalized Government Arsenal has also embarked on a modernization program designed to assure the quality of its products, enhance accountability, and improve production efficiency. The following photos summarizing recent modernization gains were obtained from the Arsenal’s FB page.

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Government Arsenal new Laser Marking and packaging machine from WaterBury Farrel of Canada now undergoing commisioning in Bataan. A capacity of serializing cartridges at 200 pieces per minute and automatically packaging 5.56 ammo in 30 round carton boxes. Intended to enhance the traceability of ammunition issued to the AFP & PNP. The creation and establishment of the Small Arms Repair and Upgrade Unit (SARUU) on January 24, 2012 paved the way for the realization of another mandated function, wherein the GA had developed its home-grown capability for the repair, refurbishment, upgrade and enhancement of unserviceable small arms firearms being turned-over to its facility from various AFP units. Starting in CY 2012 up to 2015, some 2,813 units were already repaired and / or upgraded, providing our soldiers with lesser cost but reliable weapons in the field. The Electronic Pressure Velocity Action Time firing range is equipped with complete line of accessories to include Transducer Calibration and Automated Testing of ammunition. This is the most modern ammo testing facility in the Philippines. The EPVAT Firing Range was rehabilitated in the last quarter of 2014.

The Philippine Economic Zone Authority recently approved its application to designate its sprawling complex in Lamao, Limay, Bataan as an industrial park. Once formally approved by the Office of the President, this status would put the arsenal in an interesting position to function as an “incubator” for defense-related enterprises.

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Working under the oversight of the prospective PH DARPA, and in cooperation with business development agencies such

  • National Development Corporation
  • Philippine Investment & Trade Corporation
  • Public-Private Partnership Center of the Philippines
  • Board of Investments

Government Arsenal facilities and management expertise could be brought to bear to either establish new ventures, or form partnerships with existing enterprises, to fulfill the logistical and/or manufacturing needs created by the influx of new equipment or the new equipment requirements laid out by the AFP modernization program.

Circling back to the proposals put forth earlier in the article, one candidate use for the GA’s industrial estate would be as host for affordable (if not outright free) manufacturing and office spaces embryonic defense companies, as well as secure storage facilities for goods that will eventually be sold to the AFP as part of logistical agreements. With the GA facility being a military base in its own right — know officially as Camp Heneral Antonio Luna — it provides unparalleled security for defense-industry investment.

Exploration of the potential tariff and immigration status incentives that could be offered for operating within the Industrial Estate must also be explored, but are currently beyond the scope of this article.

Whether these new ventures will eventually partner with the GA or a re-capitalized PADC, or if they will be entirely new separate ventures that could simply benefit from the GA’s infrastructure, will ultimately depend upon the judgement of the prospective PH DARPA and its partner agencies.

Skills development agency: TESDA and the National Defense College of the Philippines

Defense industries require specific skills not normally found in the private sector. A chemist knowledgeable in the explosive yield of specific proportions of highly combustible chemical compounds, for example, won’t be readily found among the roster of graduates of conventional schools. Neither will skilled rifled gun barrel makers.

Integral to the Government Arsenal’s modernization efforts is skills development of its staff. For this reason, the Arsenal has established education linkages with various foreign governments and institutions to establish education linkages with with their centers for defense education. Arsenal personnel have been sent for advanced Turkey for ammunition quality control courses, to Czechoslovakia for barrel manufacturing training, and to Nevada in the United States for various armorer’s courses.

A revitalized Philippine defense industry will need similar access to skills development opportunities as its range of services improve. A defense industrial complex will need its own schools to produce manpower with the right know-how.

tesda  200px-Ndcplogo

The Technical Education and Skills Development Authority (TESDA), would be a logical starting point for the creation of the manufacturing base for defense companies. Apprenticeship programs could, theoretically, be arranged with the various manufacturing offices of the Government Arsenal, Philippine Aerospace Development Corporation (PADC) and similar institutions.

For more sophisticated projects (e.g., avionics design and maintenance, guidance software design), the Philippines could presumably follow the lead of Singapore’s Temasek Defense Systems Institute, which offers post graduate degrees for a variety of fields (e.g., Master of Science (Defence Technology and Systems) and maintains linkages with similar institutions such as the Naval Post Graduate School in Monterey CA.

The AFP’s own institutions of learning would be obvious foundations upon which such a post graduate program could be built. Particularly the National Defense College of the Philippines (NDCP) which is already recognized as an institution of higher learning, and is adept at maintaining linkages with the civilian academia.

Summary

To fulfill its constitutional mandate to protect the integrity of Philippine territory, the Armed Forces of the Philippines must be equipped to fight 21st century conflicts. From 1995 — when the first modernization law was enacted — to the present day, progress of this modernization effort has been snail-paced. Only in the past six years have significant strides been made, in no small part due to the existential threat posed by the People’s Republic of China.

To sustain the gains of the defense buildup, particularly in a fiscal environment that favors domestic concerns and populist programs, the Department of National Defense must demonstrate that the billions of pesos spent on its acquisitions have a direct benefit to the Philippine economy. By implementing the provisions of the AFP Modernization Law that require technology transfers and domestic production, the AFP modernization program could be packaged as a investment in new income-generating industries rather than superfluous expenditure.

Support for the domestic arms industry, and the employment they generate, could very well be what ensures continuity of the modernization program in the Duterte administration.

SRDP opportunity to develop jammers for China’s GPS?

Most modern smart munitions use a combination of GPS and Inertial Navigation Systems (INS) to achieve their phenomenal accuracy. Loss of one option, therefore, doesn’t completely negate the “smartness” of the weapon. Both, however, are needed to work as advertised.

Of the two options, the GPS component is most vulnerable to outside interference because it is susceptible to jamming, as the Russians have advertised in the past, and for which Saddam-era Iraq spent a fair amount.

From: http://www.scientificamerican.com/article/safeguarding-gps/

Indeed, it was the potential vulnerability of GPS to jamming that prompted Iraq to purchase a number of GPS jammers fromAviaconversiya Ltd., a Russian company that has been hawking GPS jammers at military hardware shows since 1999. The high-priced and high-powered GPS jammers offered by Aviaconversiya were said to be able to jam GPS signals for a radius of several miles. The Iraqi military used at least six of these high-powered GPS jammers, which cost $40,000 or more each, during the war. All six were quickly eliminated by U.S. forces over the course of two nights. Officials won¿t provide details, but considering the speed with which they tackled the problem, the Iraqi GPS jammers may initially have been somewhat effective.

 The US AGM-154 Joint Standoff Weapon uses this INS-GPS combination. (See ). It would be reasonable to assume that China is doing something similar with its own equivalent weapon (see below) but that they are not going to rely on the US GPS network.

 

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Photo from China Defence Blog

China actually has its own GPS-equivalent known as Beidou, which was composed of nine satellites as of 2011, flying over China, the Korean peninsula, the WPS, and Australia.

Photo below from: http://www.astronautix.com/craft/beidou.htm

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Isn’t it time for the AFP to acquire its own Beidou jammers?

Or better yet . . .

. . . develop its own as a medium-term SRDP initiative.

Concerned about North Korean use of the Chinese navigation system for its own smart munitions, South Korea is reportedly already looking into measures to jam the system. See the following paper written by researchers at Konkuk University, Seoul, South Korea.

At least some frequencies at which Beidou operates are known. The following text is from: http://gpsworld.com/signal-quality-of-galileo-beidou/

BeiDou M6. BeiDou satellites transmit navigation signals in three different frequency bands, all are located adjacent to or even inside currently employed GPS or Galileo frequency bands. The center frequencies are for the B1 band 1561.1 MHz, B3 band 1268.52 MHz, and B2 band 1207.14 MHz.

In 2012, China launched six satellites: two inclined geostationary space vehicles and four medium-Earth orbit ones, concluding in September (M5 and M6) and October 2012 (IGSO6). There have been further BeiDou launches in 2013, but these satellites’ signals are not analyzed here.

This would present an interesting opportunity to the proposed PH DARPA. This would just be the kind of competitive crowdsourcing effort that this organization could undertake, and leverage the following factors in its favor:

1. Compared to other projects (e.g., basics of air defense, ASW, etc.) this is NOT a critical, time-sensitive need. Therefore it is low-risk

2. There is a relative abundance of local engineering talent for such projects

Interested in exploring this opportunity further? Visit the following discussion at Timawa.net: http://www.timawa.net/forum/index.php?topic=38904.0

Licensed manufacture: The key to survival for SRDP companies?

In the wake of efforts by the Senate Committee on National Defense to amend Section 53 of the Government Procurement Reform Act to give the President the power to negotiate modernization-related acquisitions (see here), supporters of local defense industry players sought to campaign the Office of the President to use that power to instruct the DND to buy from local defense manufacturers.

But with only two years remaining in the Aquino administration, such a move would be the kiss-of-death for the object of such a blatant act of patronage. Any such selection would, in essence, be a political decision thus firmly associating that company with the outgoing administration. This in turn gives the succeeding administration a very strong incentive to overturn the decision — if only to show the country that Malacanang was under new management.

Given the state of the local defense industry, virtually all players are vulnerable to the following two excuses for reversing the “anointment” of a preferred supplier:

  • Qualification for suppliers. Normal bid invitations include a protection against fly-by-night suppliers that stipulate that “bidders should have completed, within five (5) years from the date of submission of bids, a contract similar to the project. With all Philippine defense companies still in an embryonic state, this virtually disqualifies all local players
  • Commoditized products. Unless the preferred company were manufacturing the world’s only light saber — it really wouldn’t take much for spin doctors to question the selection. Regardless of the technical merits of company’s design, there are virtually no locally produced defense articles that are sufficiently unique to merit being singled out for a negotiated purchase, in lieu of other potentially cheaper imported alternatives

Even if a new administration upholds the previous President’s decision, these violations would still give SIGNIFICANT fodder for any political operator who wants to stir controversy. The company that benefited from presidential selection could then be in the unenviable position of becoming a tool for political leverage, or worse . . . impeachment.

Dealing with SRDP barriers

To deal with these omnipresent barriers to SRDP, defense companies could lobby for a change in the rules-of-the-game. The industry could ask Congress to amend procurement rules and make them more favorable to local production. This, however, is a time consuming approach with an uncertain outcome. Furthermore, such amendments have the potential for unintentionally weakening the protections that the current law was meant to implement in other procurement areas (e.g., routine purchases for schools, hospitals, etc.)

This is NOT the only option for the defense industry.

Despite the challenges presented in both the previous (RA 7898) and current (RA 10349) AFP modernization law cited earlier in this article, both actually contain substantial pro-SRDP provisions namely the following:

Sec. 10. Self-Reliant Defense Posture Program. — (a) In implementing the modernization program, the AFP shall, as far as practicable, give preference to Filipino contractors and suppliers or to foreign contractors or suppliers willing and able to locate a substantial portion of, if not the entire, production process of the term(s) involved, within the Philippines.

(b) In order to reduce foreign exchange outflow, generate local employment opportunities and enhance technology transfer to the Philippines, the Secretary of National Defense shall, as far as feasible, incorporate in each contract/agreement special foreign exchange reduction schemes such as countertrade, in country manufacture, co-production , or other innovative arrangements or combinations thereof.

(c) The AFP likewise ensure that in negotiating all applicable contracts or agreements, provisions are incorporated respecting the transfer to the AFP of the principal technology involved as well as the training of AFP personnel to operate and maintain such equipment or technology.

The spirit of the law is clearly in favor of SRDP. But the AFP modernization law does not actually direct the AFP to buy locally. It merely encourages it to do so, and with a very ambiguous caveat: “as far as practicable”.  Given the state of the manufacturing industry, there is a significant disconnect between the intent of that section and practical implementation. The law does not lay out a plan for how to develop local defense industries to the point where it would be practical to source equipment from them. Prototypes should not be mistakenly equated with a production-ready design, or production capacity.

These two mandates: “buy local” and “buy only mature products” appear totally contradictory. After all, how can the AFP buy mature products from an immature local defense industry? A potential answer: license-production of existing weapon systems in the Philippines.

What is licensed manufacture?

The following is an excerpt of a document prepared by an organization that monitors the growth of the international arms industry.

Licensed production is where a company’s product is manufactured under contract by a company in another country. At its simplest, parts purchased from the vendor are assembled in the buyer country; at its most advanced, a weapon’s design, along with the expertise of engineers, is purchased and the equipment built in its entirety in the buyer country.

The document above cites India as an example of a country that insists on licensed production of weapons as a pre-condition for acquiring them from foreign vendors. Russia, Israel, France, and the United Kingdom have all complied with India’s demands to secure that regional power’s business. It is worth noting that India’s procurement policy is the same model espoused by Section 10 of the AFP modernization law. Other countries have adopted a similar approach.

Tim Huxley described in his book Defending the Lion City how Singapore uses a point-system for selecting weapon systems, with contracts awarded to options garnering the highest score. Special additional points are awarded to prospective suppliers that include locally-produced content thus ensuring success for companies that enter into partnerships with Singaporean companies. This strategy has resulted in in-country production of components for Singaporean F-16 multi-role fighters and CH-47 Chinook heavy lift helicopters.

The South Korean aerospace industry benefited greatly from licensed production of 120 KF-16 multi-role fighters. The US Department of Defense notified Congress of the South Korean request for local production in 1991, and a mere ten years later, the first South Korean supersonic aircraft, the T-50 Golden Eagle, took to the air. It was arguably no accident that the Golden Eagle was developed in partnership with Lockheed Martin, the manufacturer of the F-16 from which South Korea obtained the production license.

Incentive to license

The existing legislative framework offers local defense companies a host of under-utilized tools. In addition to Section 10 of the AFP Modernization Law shared above, prospective SRDP entrants also have Republic Act 5183 working in their favor. This law prohibits the Philippine government from sourcing items from companies that aren’t majority Filipino owned. This means that any foreign vendor seeking to sell its wares to the AFP needs to establish arrangements with Philippine business entities, which will then be responsible for representing the vendor in public biddings and similar engagements.

The following partnerships have been outcomes of this representation requirement

Philippine company   Foreign companies represented   Acquisition project
Aeromart Commercial & Industrial Corp Marsh Aviation (USA) Service Life Extension Program (SLEP) for OV-10 Bronco aircraft
Aerotech Industries Philippines Alenia (Italy) Supply SF-260 training aircraft for the Philippine Air Force
Firepower Defense Contractors Rheinmetal Denel Munition Pty Ltd (Germany)
Denell Pty Ltd (South Africa)
Companhia Brasilera de Cartuchos (Brazil)
Supply of various small arms munitions for the Philippine Army and general purpose bombs for the Philippine Air Force
Urban Industrial Corporation Arcus Co. (Bulgaria)
Kompanija Sloboda A.D. (Serbia)
Supply of 40mm grenade launcher ammunition and artillery rounds for the Philippine Army

This law virtually ensures that a Filipino company will be involved in any acquisition — with the exception of government-to-government deals. While the companies that have thus far emerged have been mere middle-men that lacked manufacturing capacity, Philippine defense companies could potentially use this law as a catalyst for licensing talks, thus forging an enduring production partnership instead of just a representation relationship.

Arguably, this law was meant to entice manufacturing  investments to the Philippines. Having defense industry players leveraging the law for licensed production would use the law the way it was intended.

This approach has the following advantages:

1. Existing laws can be used without any changes. This means that this course of action is available today

2. There would be no need to curry political patronage since this simply requires the law to work as written and intended. Although ensuring DND buy-in of the concept would still be necessary, as would an SRDP roadmap.

3. The two-countries rule AND the minimum requirement for deal sizes are both satisfied since the Philippine company would leverage those characteristics of their foreign partner

Once this joint venture is established, and wins bids for AFP contracts, the Philippine company would then be completely justified in claiming to have had experience with sizeable government contracts, thus satisfying the minimum deal-size requirement. A status that it could not have achieved on its own. Furthermore, the company could leverage its status as a licensed manufacturer of an established company to sell its own products both domestically and overseas.

Plan of action

How could this all play out? Ultimately that would depend on the nature of the equipment that will be manufactured, the capacity of the Philippine company (which would determine the capital expenditure required), the requirements of the foreign entity, and the export controls of the foreign company’s country of origin.

Philippine companies may also have to come to grips with the fact that they can’t advance on their own and may need to form a consortium of companies with complementary capabilities. This would potentially cut down on capital expenditures, since the consortium would take advantage of the investments already made in equipment and production space, and enhance the resulting entity’s competitiveness as well as credibility as manufacturing partner.

The following simplistic plan of action should, at a high-level, should cover the process in broad strokes:

1. Select a foreign manufacturer whose products are already in use by at least two foreign countries — or at least the country of origin. This would satisfy the requirements of the AFP Modernization Law

2. Enter into a representation agreement with this manufacturer in accordance with RA 5183

3. Enter into a licensing agreement with this manufacturer to have THEIR products manufactured at the Philippine company / consortium’s manufacturing facilities

4. Take part in a bid invitation, and submit a bid that reflects the savings made possible by local manufacture

Conclusion

Instead of leveraging their design portfolios, local defense companies should consider to looking to their manufacturing prowess instead, and enter into licensing arrangements with existing players. This approach would not only allow it to tap into the admittedly small Philippine defense market, it could also launch it into the world stage, where the bulk of the defense dollars are to be sourced anyway.

———-

Author’s note: This article is based on the opening message of what eventually became a productive, well-received, email conversation with the founder of a prominent player in the Philippine defense industry. Details of that discussion are being kept private as per request. But the substance of the proposal is shared here.

This post was also posted on the Timawa.net forum here.

ERRATA: The following bullet point was removed from the main article because the IRR of the AFP Modernization law actually exempts local companies from this rule: Section 1 of the revised AFP Modernization Law re-affirmed Section 4 sub-paragraph b of the original modernization law, RA 7898, that explicitly stipulated that “no major equipment and weapon system shall be purchased if the same are not being used by the armed forces in the country of origin or used by the armed forces of at least two countries”. This is pretty much a deal breaker for patronage-based SRDP. Any administration looking to establish its anti-corruption credentials could very easily resort to reversing the “hand-out” for a quick win.

A Self-Reliant Defense Posture (SRDP) roadmap and a DARPA-equivalent

In 2013, the Self-Reliant Defense Posture (SRDP) program — an ongoing albeit lackadaisical effort to create an indigenous defense industry — saw the most tangible display of high-level support in recent decades, when the Department of National Defense committed significant resources to the modernization of the Government Arsenal (GA), and facilitated the organization of the Defense Industries Association of the Philippines (DIAP). Both actions came on the heels of the successful entry into Philippine Navy service of a series of indigenously constructed marine vessels: The BRP Tagbanua (AT-296), the largest locally manufactured warship in history, and three Multi-Purpose Assault Craft (MPAC) Mk.II, arguably the fastest ships in the fleet. Both joined the fleet a year earlier.

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The year also saw the operational use C-130 #3633, the first Philippine Air Force Hercules transport aircraft to undergo Programmed Depot Management careof the 410th Maintenance Wing. It was an achievement many hoped would herald a new era in improved Hercules availability — all by Filipino hands.

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Prospects for SRDP looked more promising in 2013 than it had ever been in recent years. But would it really last?

SRDP history shows that the Philippines neither lacks the imagination nor the talent to initiate domestic weapons production. However that same account also shows a long track record of failure to sustain such efforts. While the aforementioned recent SRDP developments showed a promising change in institutional outlook towards self-sufficiency, a change in the status quo will require more than a mere high-level peek into the current state of local-manufacture. This bump in interest must be institutionalized if it is ever to achieve any lasting effects.

Towards this end, the Philippines needs to establish an SRDP roadmap that clearly defines the following:

  • The key defense articles that the Philippines needs to produce on it own to achieve its security goals
  • Among the above-mentioned articles, which does the government intend to produce by itself and which ones will it farm out to Philippine industry

Before local industry commits the capital and resources necessary to research, develop, and eventually manufacture goods for the Armed Forces of the Philippines (AFP), it needs to understand the nature of the demand. Without this, the pool of willing entrepreneurs will be slim at best . . . if not non-existent.

What we need to produce ourselves

SRDP sought to protect the country from geopolitically motivated disruptions in the supply of defense material, as well as to allow local industry and labor to benefit from defense expenditure. The AFP spends billions of pesos to both acquire new equipment and maintain existing ones. Unless local industry learns to satisfy these needs itself, all these funds would be destined for foreign vendors.  SRDP was supposed to control this foreign-currency hemorrhage and help keep funds in-country.

The ability to pursue this program has been hampered by a multitude of factors: funding, lack of an industrial base, etc.. However, even if these prevailing limitations were addressed, the program’s objective shouldn’t be to completely eliminate importation of all defense equipment from foreign sources.

Very few countries actually design and/or manufacture every single defense article entirely on their own. Even the United States, for all its wealth and manufacturing capacity, still has its soldiers’ uniforms manufactured in eastern Europe and Asia. The official sidearm of the US Army is Italian: the M9 Barreta. Its standard Squad Automatic Weapon (SAW) and Medium Machine Gun (GPMG) are Belgian in origin: the M249 and M240 respectively, both built by Fabrique Nationale Manufacturing, Inc. (The latter replaced the iconic M60 machine gun) The UH-72 Lakota Light Utility Helicopter that recently entered service with the Army as a replacement for the UH-1 Huey and the OH-58 Kiowa is manufactured by Eurocopter. The most powerful military force in the world accepts the practicality and cost effectiveness of foreign solutions for their troops. A defense-spending fact that shouldn’t be lost upon SRDP advocates.

There are two main reasons for continuing to import items, both of which allow the AFP to acquire equipment in the most efficient and cost-effective manner:

  • Time to deploy
  • Economies of scale

Time-to-deploy

Decades of under-investment in national defense means that the AFP is in such a dire state that many of the items on the AFP modernization list are critical pieces of equipment that cannot be delayed by protracted development times. The military’s principal concerns are time-do-deploy and reliability. Acquiring off-the-shelf and proven equipment means that they can field weapon systems to the troops in the shortest possible time and with the confidence that the systems will work as advertised and as proven by other users around the world.

Off-the-shelf products can be deployed significantly faster than something that still needs to make the transition from the drawing board to the field. Take for example the largest military vessel produced by local industry for the Philippine Navy to date: the 51-meter BRP Tagbanua Landing Craft Utility (LCU). From bid initiation, to design definition, to actual delivery, this project took six years to complete. In contrast, Daewoo shipyard can complete an entire 122 meter Makassar class LPD in only four months using pre-existing designs.

Time-to-deploy considerations aren’t unique to the Philippines. Even the People’s Republic of China isn’t immune to such concerns, which is why they are still buying Russian engines for their vaunted new-generation aircraft instead of waiting for their design bureaus to perfect their designs.

How can time-to-deploy considerations be balanced with inevitable delays caused by development? Read on.

Economies of scale

Contrary to a sentiment popular amongst defense-commentators, in-country production will not automatically translate to lower cost of equipment. Setting up of industries is neither cheap nor easy. Acquisition of capital equipment and plant facilities – where none existed before – is a very financially intensive affair. All of those costs will have to be passed on to the buyer and unless the equipment is purchased in quantity, whatever is produced domestically could become the most expensive items of its kind in the world. (See older article about supply-and-demand). When buying equipment from foreign sources that are already ongoing concerns, one not only benefits from pre-existing infrastructure and experience, but also an existing global customer base that allows the vendor to spread out the cost of production resulting in lower per-unit costs.

Ultimately, SRDP program managers must be selective about what is produced locally. A balance between self-reliance and fiscal responsibility must be struck — all without compromising the AFP’s modernization efforts. A proposal for how to do this will be discussed later in this article.

Government-Private sector synergy: Who produces what?

Central to the DND’s ongoing efforts to reviving SRDP is the modernization of the Government Arsenal. The primacy of the Arsenal as an SRDP engine is affirmed in issuances such as Executive Order 303, Series of 2004 which states:

SECTION 1. Sourcing the Government Munitions Requirements. The AFP, PNP, and other government agencies are hereby directed to source their small arms ammunition and such other munitions requirements as may be available from the Government Arsenal;

To this end, the arsenal has increased production to levels that have now surpassed its previous output record of 20 million rounds set in 1978. Production for 2013 exceeded 23 million rounds. It is worth noting that the arsenal achieved this volume with its existing aging equipment. Much of the arsenal’s ongoing modernization efforts revolve around replacement or supplementation of existing equipment with state-of-the-art equivalents. Such as the new production line from Waterbury Farrel which will be dedicated to the production of M193/M855 5.56mm rounds. This and other new machines promise even more strides in production capacity thus allowing the GA to satisfy the routine ammunition needs of both the AFP and Philippine National Police (PNP).

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The GA’s activities, however, do not end with ammunition production. With the creation of the Small Arms Repair and Upgrade Division (SARUD), the Arsenal has begun providing the AFP with small arms refurbishment services — bringing unserviceable rifles back to operational status. The SARUD is a key step towards the re-establishment of a small arms manufacturing capability back to the arsenal complex. A function that was lost when the martial-law era Elisco Tool stopped production of Philippine-made M-16s.

The growth in the arsenal’s capabilities, however, presents potential private sector SRDP players with an interesting quandry: “Will the business I setup eventually run into conflict with the GA’s offerings?” Solution: An SRDP roadmap.

A roadmap for SRDP

An SRDP roadmap would show where government agencies like the Government Arsenal growth are headed, thus allowing defense entrepreneurs to plan their investments accordingly and manage expectations. For example, a for-profit entity that produces ammunition would then understand that its role in SRDP would either be to simply provide surge capacity for national emergencies that call for more output than what the GA can accommodate otherwise it would need to enter into a Joint Venture (JV) with the DND — provided, of course, that the company is already a mature industry fixture. Areas of concern that are not on the plate of any government agency (e.g., GA, Philippine Aerospace Development Corp, Department of Science and Technology, etc.) would then be fair game and would merit more capital.

A side-benefit of maintaining a roadmap would be the definition of development horizons. It would give a timeline for when a particular piece of equipment is required, and therefore layout the AFP’s decision criteria for whether or not to wait for local prototypes to mature or to procure off-the-shelf. This avoids the time-to-deploy conflict between SRDP and the AFP modernization program that is mentioned above and would give private industry time to acquire the expertise and technology required to respond to a future government request for products. It also protects potential SRDP entrepreneurs from a state of limbo where their wares never leave the prototype stage. A situation that currently affects the “Project Trident Strike” Remote Control Weapon System (RCWS) developed by the Naval Sea Systems Command (NSSC) and the Mapua Institute of Technology. This RCWS has reportedly gone through several versions and modifications . . . and is no where near being deployed for operational testing.

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This roadmap would need to encompass the SRDP development activities of all AFP services and government agencies (e.g., GA, PADC, etc.). It would avoid duplication of effort among these organizations, in the same manner that the US National Aeronautics and Space Administration (NASA) rationalized the aerospace and rocketry programs of various entities within the US government, whose fractured efforts reportedly gave the Soviet Union the opportunity to take the opening lead in the space race.

Drafting and implementing a policy instrument of this breadth requires an entity with the expertise to grasp the technological hurdles that must be overcome, the military’s doctrinal considerations that must be satisfied, and possess the required business acumen to see the venture through. It must also have the means to either absorb technology transfers itself, or is able to farm this out qualified private sector entities.

To this end . . . the Philippines needs its equivalent to the American Defense Advanced Research Projects Agency (DARPA).

A Philippine “DARPA”

Before crafting a Philippine DARPA, it would be best to understand what the original DARPA is and map it to the Philippine setting. Like NASA, DARPA was organized in response to the technological challenge that the Soviet Union presented during the space race and continues to play a key role in maintaining American leadership in military technology today. It was established in 1958 to oversee strategic application of United States research and development capacity to benefit of national defense and has since given rise to now-ubiquitous technologies such as the following:

  • ARPANET – this effort to link computers into a national network became the basis for the modern Internet
  • GPS –  early DARPA work on a positioning system called “TRANSIT” laid the groundwork for what eventually became the current Global Positioning System
  • M-16 assault rifle – DARPA initiated the Project Agile study that eventually created the rifle that has been the official US military assault rifle for the past 50 years

In recent years, it has organized technology competitions like the DARPA Robotics Challenge whose participants are currently tasked to develop robots that are capable of “assisting humans in responding to natural and man-made disasters”.

DARPA leverages both government and private sector research organizations for its projects. The agency’s 50th anniversary publication summarizes how it manages its projects as follows:

 The DARPA program manager will seek out and fund researchers within U.S. defense contractors, private companies, and universities to bring the incipient concept into fruition. Thus, the research is outcome-driven to achieve results toward identified goals, not to pursue science per se. The goals may vary from demonstrating that an idea is technically feasible to providing proof-of-concept for an operational capability. 

By design, DARPA leverages the industrial capacity and existing research infrastructure of the United States to achieve its goals. As a consequence — surprisingly, as related by the document linked above — DARPA doesn’t have its own organic research facilities and is entirely dependent on the capabilities of its research partners. DARPA projects are also focused on developing cutting-edge technologies, leaving comparatively less risky development projects to other procurement organizations within the Department of Defense. For this reason, a pure US-DARPA model is at best a source of inspiration for what can be done, but cannot be completely replicated in a country with limited manufacturing capacity like the Philippines.

Other nations who’ve adopted national policies that apply technological solutions to defense, and developed indigenous military industrial complexes have come up with their own variations of the DARPA concept. Consider the following countries: South Korea, India, Pakistan, and Singapore. These countries have very robust domestic defense materiel production capabilities and are even able to export their products, or take part in co-production ventures.

Lessons from South Korea

Thanks to the selection of the Korean Aerospace Industry FA-50 Golden Eagle for the Philippine Air Force’s Lead-In Fighter Trainer / Surface Attack Aircraft requirement, the Defense Acquisition Program Administration (DAPA) has gained prominence in the Philippine defense social media circles for its involvement in negotiations for the purchase of the aircraft. DAPA defense materiel acquired from South Korea and is tasked with the harnessing of manufacturing capacity of South Korean industry in that country’s defense.

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It’s Website describes its function as follows. The DAPA is tasked implementation of the following national policies:

  • Reinforcement of R&D in national defense
  • Reinforcement of global competitiveness of the acquisition program
  • Expansion of export support for the defense industry
  • Prioritization of domestic R&D
  • Strengthening cooperation of nation-wide science and technology

Like the US DARPA, this entity leverages already existing capabilities, but adds a marketing function to the equation because of its involvement in the export of South Korean defense technology.

Lessons from India

The Indian Department of Defense Production (DDP) takes a direct hand in the production of military equipment for the Indian military, from the HAL Tejas Light Combat Aircraft to the Arjun Main Battle Tank. The following organizations fall under this department’s control:

  • Ordnance Factory Board (OFB)
  • Hindustan Aeronautics Limited (HAL)
  • Bharat Electronics Limited (BEL)
  • Garden Reach Shipbuilders & Engineers Limited (GRSE)
  • Goa Shipyard Limited (GSL)
  • Hindustan Shipyard Limited (HSL)
  • Mazagon Dock Limited (MDL)
  • BEML Limited (BEML)
  • Bharat Dynamics Limited (BDL)
  • Mishra Dhatu Nigam Limited (MIDHANI)
  • Directorate General of Quality Assurance (DGQA)
  • Directorate General of Aeronautical Quality Assurance (DGAQA)
  • Directorate of Standardisation (DOS)
  • Directorate of Planning & Coordination (Dte. of P&C)
  • Defence Exhibition Organisation (DEO)
  • National Institute for Research & Development in Defence Shipbuilding (NIRDESH)

DDP efforts put India in a position to absorb foreign technologies as part of co-production ventures. Hindustan Aircraft Limited, for example, is now gearing up for local production of France’s most advanced combat aircraft to-date: Rafale Multi-Role Fighters. It is worth noting that the DDP was created at a time when the defense industry was the reserved for the public sector. In 2001, India opened the industry up to private sector involvement with up to 100% domestic participation and a maximum of 26% foreign direct investment.

Lessons from Pakistan

Like it’s similarly-named Indian counterpart, the Pakistani Ministry of Defense Production (MODP) participates in the manufacture of defense materiel for its armed forces. Among other achievements, it is the driving force behind local production of the Chinese JF-17 Light Combat Aircraft. Its Website describes its role as follows:

  • Laying down policies or guidelines on all matters relating to defence production
  • Procurement of firearms, weapons, ammunition, equipment, stores and explosives for the defence forces
  • Declaration of industries necessary for the purpose of defence or for the prosecution of war
  • Research and development of defence equipment and stores
  • Co-ordination of defence science research with civil scientific research organizations
  • Indigenous production and manufacture of defence equipment and stores
  • Negotiations of agreements or MOUs for foreign assistance or collaboration and loans for purchase of military stores and technical know-how or transfer of technology
  • Export of defence products
  • Marketing and promotion of activities relating to export of defence products
  • Coordinate production activities of all defence production organizations or establishments

Like the Indian model, the Pakistani government is deeply involved in the manufacture of its own defense articles. Like the South Korean DAPA, the MODP also takes steps to promote the export of Pakistani technology.

Lessons from Singapore

The Defense Science and Technology Agency (DSTA) is the latest Singaporean Ministry of Defense (MINDEF) organization dealing with defense-related R&D and procurement. Its official Website describes its role as follows:

  • Acquiring platform and weapon systems for the SAF
  • Advising MINDEF on all defence science and technology matters
  • Designing, developing and maintaining defence systems and infrastructure
  • Providing engineering and related services in defence areas
  • Promoting and facilitating the development of defence science and technology in Singapore

It was established in 2000 and absorbed the functions of the what was then known as the Defense Technology Group (DTG). Tim Huxley, in his book Defending the Lion City, credited DTG with facilitating the creation of the Singaporean defense industry by acting as intermediaries between foreign defense companies who were willing to enter into Industrial Cooperation Programs (ICP) with Singapore and state-owned corporations to include the following:

  • Chartered Industries of Singapore (CIS) – initially established in 1967 to produce small arms ammunition, it eventually branched out into license production of M-16 rifles. By the 70s this company was manufacturing larger weapons like machine guns, mortars, and grenade launchers
  • Singapore Shipbuilding and Engineering – established in 1968 to maintaining and building naval vessels, entered into a technology transfer arrangement with the German firm Lurssen which eventually resulted in the construction of motor gun boats for the Royal Singaporean Navy
  • Singapore Electronic and Engineering Ltd – established in 1969 to provide electronic engineering services for the Singaporean Air Force

These and other companies were brought under a holding company owned by the Singaporean Ministry of Finance but directed by MINDEF. By 1989 this holding company was restructured to accommodate diversification of its activities beyond purely military ventures such as electronics and engineering and renamed Singapore Technologies (ST) Holdings.

The ICP arrangements brokered by DTG, now DSTA, initially allowed Singaporean companies to accomplish self-reliance activities such as in-country manufacturing components for the Singaporean Air Force’s CH-47 Chinook helicopters and F-16 fighters. In 1999 it allowed Singapore to become a major participant in the US-UK Joint Strike Fighter (JSF) program.

Implications for Philippine SRDP

Close scrutiny of the histories of the five self-reliance samples presented above offer a number of take-aways:

Stable self-reliance policies.  The political decision to establish and maintain a domestic defense industry must be measured in decades, not mere years, to give these policies a chance to yield results. The Indian Tejas LCA program, for example, started in 1983 but even as late as 27 years later (as  per Air Forces Monthly, May 2010) HAL was only producing its third Limited Series Production aircraft. Although the Tejas program is sometimes touted as an example of why domestic production is more a political decision than a practical one, it remains an example of the length of the gestation period for such endeavors — which go beyond time-in-grade timetables of individual officers, even beyond normal Presidential terms.

In the Philippines, a fair number of SRDP-related endeavors are conducted by service-level research organizations, often resulting from serendipitous pairings of SRDP-minded officers with industrialists and/or inventors willing to take a chance at dealing with the Philippine government. While efforts these do have their place in the grand scheme of things, the more complicated projects that take this route that have historically churned out one-off products. Often times, when time-in-grade issues force AFP personnel handling projects to leave their positions, development stops. Even when a project reaches completion, the departure of its original proponents often cause a change in the institutional stance towards the endeavor, resulting in either outright cancellation of the project or worse: indefinite postponement.

An SRDP-czar-like body such as Philippine DARPA, that is independent of the various services but is supported by the Department of National Defense, could presumably provide some stability to the these sorts of efforts.

Each to his own competence. The military shouldn’t run these programs alone. Other sectors of the government have a role to play and their respective skill-sets must be brought to bear (e.g., Finance, Trade & Industry, etc.). Singapore, for example, drew about the expertise of the Ministry of Finance to setup financial a holding entity to manage and finance the various self-reliance companies and architect their expansion into alternative profit centers. Ministry of Defense involvement was primarily at the technical and requirements definition level.

Interfacing with private sector entities such as the aforementioned Defense Industry Association, or similar organizations, could draw in additional talent that would otherwise not be available in government service.

Profit. Export of whatever defense articles are produced is a key goal. This not only extends the longevity of the production line, it also facilitates achievement of economies of scale. As mentioned earlier, the South Korean DAPA served as the primary point of contact for the South Korean defense industry.

Mature procurement system. For the non-American samples, their self-reliance programs are closely tied to their procurement procedures. Implementation of an SRDP roadmap cannot outstrip the efficiency of the DND-AFP’s overall acquisition system. Therefore advancement of the DND’s procurement service is essential to progress in SRDP.

In the Singaporean system, both foreign and domestic defense companies take part in open bidding for MinDef contracts. However procurement rules grant participants in Industrial Cooperation Programs with Singaporean companies additional “weight” in the final selection. There are no such protections in the Philippine setting, where the original SRDP Presidential Decree was actually amended in December 2003 through GPPB Resolution 06-2003  which deprived the government of the option to pursue SRDP acquisitions without subjecting potential participants to public bidding. This reflects an institutional attitude towards defense that generally hostile to SRDP.

Arguably, DARPA, DAPA, and DSTA represent the ideal free-market oriented relationship between the defense department and private industry. With indigenous defense-oriented companies actively taking part in developing tailor-made weapon systems in response to government requests and receiving production contracts in open competition with both domestic and foreign companies. At this point in history, the Philippines is nowhere near having this state of affairs. Despite SRDP being a 14-year-old program, the Philippines remains closer to the starting points for DDP, MODP, and DSTA than the present-day state of either DAPA or DARPA.

In crafting its equivalent to DARPA / DAPA / DDP / MODP / DSTA, the Philippines with two choices:

1. Select an existing government entity and expand its role

2. Create a completely new entity with resources drawn from existing entities

The United States faced a similar question when it evaluated its efforts to put a man on the Moon by the 70s. One of the candidates foundations for the expanded effort was the National Advisory Committee for Astronautics (NACA) which had been organized in 1915 and had been guiding American aerospace development since then. However, on the strength of the General Accounting Office which had judged NACA as having become too lethargic to keep pace with technological developments at the time, the US Congress enacted legislation that created an entirely and NASA was born. What route the Philippines ultimately takes will depend on similar evaluations of existing Philippines departments and/or government owned and controlled corporations.

The following organizations, theoretically at least, possess the key elements necessary for the creation of a Philippine DARPA:

Government Arsenal – as already mentioned earlier, this institution has been chosen as the lynchpin for renewed SRDP efforts. Its plant site in Limay, Bataan has been designated as a Defense Industrial Estate and the GA recently issued a bid invitation for consultancy services for the creation of a Master Development Plan for its continued development. For this reason, this is the logical base upon which a Philippine DARPA and SRDP-roadmap-custodian can be based. However, to approach the capabilities of the above-mentioned self-reliance organizations it will require significant expansion beyond its current areas of expertise which are primarily in manufacturing and research & development and currently focused ordnance and small arms technology.

Defense Industry Association – this is an group of Philippine companies that are have chosen to involve themselves in the domestic security market place. Its members include companies that were part of the original SRDP effort in the 70s and have varying levels of expertise in their respective fields. Arguably DIA members would be involved primarily in production and certain aspects of R&D, leaving responsibility for SRDP policy direction to the DND itself. How this relatively new entity develops remains to be seen

Philippine Aerospace Development Corp – this aerospace SRDP pioneer has assembled a total of 67 Britten Normal Islands and 44 BO-105 helicopters for the Philippine market and has established overhaul and maintenance facilities for various relatively low-technology aircraft  and engine components. The company is currently in such a dismal state that the Commission on Audit recommended considering closure of the company in 2012. Despite being certified for BN Islander overhaul, that still didn’t make it the preferred vendor for the Philippine Navy’s Britten Normal Islander refurbishment programs which when to Hawker Pacific Ltd instead.

padc

Philippine Investment & Trading Corporation – the PITC brings the necessary expertise to sell Philippine products to the world and would be a key player in the export of whatever defense articles the Philippine defense industry produces. This organization brings complex financial transaction experience to the table and was the AFP’s agent for past counter-trade deals that eventually acquired the SIAI-Marchetti S211 aircraft, and various communications equipment. What the organization lacks however, as reported for the Commission on Audit, is the technical expertise to adequately comprehend military requirements.

pitc_1

While the Government Arsenal’s central role in SRDP, at least in the near term to mid-term, is both logical and inevitable, where SRDP goes in the long term will depend on a NACA-NASA-like evaluation of the GA’s performance, as well as those of the other entities listed above. Only time will tell if the SRDP roadmap and responsibility for a Philippine DARPA will go to an existing SRDP actors or an entirely new entity. All that is certain is that if the goals of SRDP are ever to be achieved the status quo cannot continue.

This article is also available on the Timawa.net forum at the following location: http://www.timawa.net/forum/index.php?topic=36697.0

Where are the defense entrepreneurs?

A fair number of discussions about SRDP, on various social groups, trumpet the abundance of skills in the Philippine labor force. This is how pronouncements typically go:

“We have so many engineers, computer graduates, OFWs with technology exposure overseas, etc. . . . so we should be able to make our own weapons!!!”.

These assertions, however, overlook one very important ingredient in every successful venture: The Entrepreneur

A weapons manufacturing company is a business. It needs start-up capital and it needs a market that it can satisfy and from which derive profits that sustain the business. Without capitalists and businessmen to get these ventures going . . . the much heralded engineers, computer graduates, etc. won’t have a company to work for and no weapon systems will be produced.

Even if a venture were to benefit from government assistance, to succeed there would still be a need for a business savy manager with an eye towards customer satisfaction as well as profitability. One way or another you need to attract business talent to the mix.

So when scratching our heads about why SRDP isn’t taking off, you shouldn’t just ask why aren’t our engineers being employed . . .

. . . you really also ought to ask, where are the defense-oriented entrepreneurs?

Why aren’t there any entrepreneurs lining up to produce weapons for the AFP despite the billions of pesos lined up for such projects?

That will require a discussion into government procurement practices, the problems plaguing the Self-Reliant Defense Posture program that are only now being addressed through the partnership between the Government Arsenal and a newly formed Philippine defense industry association, as well as gaps in national policy with regard to domestic production. You’d also have to go into the barriers to setting up any business in the Philippines in the first place. Topics that deserve an article all to themselves.

At this point let us simply salute the brave few who dared to risk time . . . and capital . . . to satisfy a customer whose rules and policies remain murky, and who decisions appear . . . randomly reversible.

This article was first posted on the Timawa.net forum here.

“To manufacture, or not to manufacture ?” . . . that is the question

Various defense commentators on social media have championed Philippine manufacture of all manner of weapons. From 20mm cannons to sophisticated aircraft and missiles. All too often, however, these Self-Reliant Defense Posture (SRDP) advocates side-step the need to be selective about what we push to make by ourselves. All forms of manufacture, to include weapons manufacture, is subject to laws of supply and demand. If the demand for an item — for example a 20mm cannon — cannot justify the cost of production, then it SHOULD NOT be produced.

The calculus is quite simple:

Per unit cost = Cost of production / Number of items produced

Cost of production includes capital expenditure for production equipment, cost of raw materials, salaries and consultancy fees, and other business start up costs.

The AFP cannot buy a weapon maker’s wares for forever, resulting in a limited production run.  The Philippines could end up with the most expensive examples of a specific type of equipment.

To sustain the business, therefore, the weapon maker must be able to sell his wares overseas. Given the number of established players for various arms segments, a new company with no track record will be at a significant disadvantage. Whatever employment opportunities such a venture would open could very well be short-lived, as production lines shutdown for lack of demand. A fact of business life that established companies like Lockheed Martin and Saab face with their F-16 and Gripen production lines respectively.

The local defense industry’s focus on small arms manufacture reflects pragmatic recognition of the prevailing state of affairs. The market for that class of weapon remains relatively open. While the necessary equipment for quality manufacture still requires significant investment, the potential rewards still justify the risks.

Those risks increase in direct proportion to the complexity and capability of the weapon. This is already apparent even while still focusing on the small arms category, but simply going up to the high-end of the caliber scale — 12.7mm/0.50. There’s a reason why the Browning M-2 and the DShK are still kings of the hill in those caliber categories despite their age. Although there are indeed pretenders to those two thrones, these arguably will remain ankle-biters for the foreseeable future. The specialized nature of these weapons translates to limited market growth which is already served by existing solutions and suppliers — Military channel documentaries not withstanding.

There is prestige in make systems yourself. But such vanity pursuits have to be tempered by practicality. You would be hard-pressed to find a successful businessman, with an eye for profit, who would risk capital in saturated weapons markets. The Government Arsenal (GA) could theoretically get involved in such ventures since profit is not their goal. But that would still be a poor use of the people’s hard earned taxes. Those funds could be applied to more sustainable SRDP endeavors that give the people more bang for the buck. The GA’s push into small arms manufacture, and even the upcoming production of small bombs for the Philippine Air Force, as well as the Navy’s focus on relatively unsophisticated boats (e.g. MPACs, etc.) — all of which focus on already-present, and unsatisfied, local demand — reflect the conservative approach that effective stewardship of the people’s money requires.

Does this mean that the Philippines should abandon all hope of manufacturing systems beyond the simple ones that it can now? Not at all. It simply means that it needs to pick its battles and choose sunrise technologies that still offer hope for, at the very least, profitable market penetration or at best market leadership. Production of me-too products will yield limited benefit.

Patriotic considerations aside, some items are simply best bought from existing vendors overseas. For examples of companies that have successfully found niches in the local defense industry, see Sustainable defense manufacture in the Philippines.

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This article is also on Timawa.net here: http://www.timawa.net/forum/index.php?topic=35948.0

Government Arsenal expands product line

The Government Arsenal announced via its Facebook account, and through Timawa.net, its plans to expand its product with the following rounds for 2012. The following photographs show the new cartridges.

The match-grade rounds for 7.62mm and 5.56mm are of particular interest. These are to be manufactured for the Philippine Army ASEAN Armies Rifle Meet shooting team and Philippine Marine Scout Snipers respectively and would minimize, if not eliminate, future need for bid invitations like the following.

Indigenous LCU (BU-296) arrives in Manila

The largest locally-built navy vessel has arrived in Metro Manila. The BU-346, provisionally named “BRP Tagbanua” arrived from the Philippine Iron Construction & Marine Works (PICMW) shipyard on a voyage that also served as its sea trial. According to AFP sources, the results were deemed satisfactory. This vessel commissioned later this month, long with BRP Gregorio del Pilar (PF-15).

For a timeline on the LCU project, see:  http://adroth.ph/afpmodern/?p=845

For additional information about the ship see the following Timawa.net discussion: http://www.timawa.net/forum/index.php?topic=15958.0

PN LCU to sail on maiden voyage

According to the following Notice to Mariners (NOTAM), the Philippine Navy’s latest Landing Craft Utility (LCU) — a breakthrough for SRDP — will conducting its maiden voyag/sea trials on November 10 to 11 by sailing from the PICMW shipyard in Jasaan, Misamis Oriental to Navotas from November 10 to 11, 2011.

For details about the project, refer to the following:

Project discussions on Timawa.net: http://www.timawa.net/forum/index.php?topic=15958.0

LCU project timeline: http://adroth.ph/afpmodern/?p=845

Government Arsenal publishes second edition of Bullet-In

Related discussion on Timawa.nethttp://www.timawa.net/forum/index.php?topic=29205.0

The Government Arsenal published the second edition of its new journal: The Government Arsenal Bullet-In. This edition features the following developments:

  • The arsenal’s return to assault rifle manufacture
  • In-house production of ballistics gel
  • An update on the arsenal’s modernization plans
Download the bulletin, click here: