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The Fourth Industrial Revolution and Military–Civil Fusion

Advanced commercial technologies offer new opportunities for defense applications that could greatly affect military power and metrics of military advantage. This is relevant when it comes to civilian-based technological innovations found in the emerging “fourth industrial revolution,” such as artificial intelligence, autonomous systems, “big data,” and quantum computing. Militaries and governments around the world are increasingly focused on how and where advanced commercial technologies, innovations, and breakthroughs could potentially create new capacities for military power, advantage, and leverage. This process of exploiting civilian-based advanced technologies is referred to as “military–civil fusion” (MCF). This book addresses MCF not only from a conceptual and practical sense but also comparatively as it explores how four different countries – the United States, China, India, and Israel – are attempting to use MCF to support national militarytechnological innovation. It will interest scholars, researchers, and advanced students of military, security, and technology studies, as well as analysts and policymakers in military and defense organizations. Yoram Evron is Associate Professor of Political Science and Chinese studies at the University of Haifa, Israel. His articles have appeared in the Journal of Strategic Studies, Pacific Review, and China Quarterly. He is the author of China’s Military Procurement in the Reform Era (2016). Richard A. Bitzinger is a senior fellow at the S. Rajaratnam School of International Studies. His articles have appeared in International Security, Orbis, and Survival. He is the author of Arming Asia: Technonationalism and Its Impact on Local Defence Industries (2016) and the editor of Defence Industries in the 21st Century (2021).

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Published online by Cambridge University Press

The Fourth Industrial Revolution and Military–Civil Fusion A New Paradigm for Military Innovation? Yoram Evron University of Haifa

Richard A. Bitzinger Nanyang Technological University

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Shaftesbury Road, Cambridge CB2 8EA, United Kingdom One Liberty Plaza, 20th Floor, New York, NY 10006, USA 477 Williamstown Road, Port Melbourne, VIC 3207, Australia 314–321, 3rd Floor, Plot 3, Splendor Forum, Jasola District Centre, New Delhi – 110025, India 103 Penang Road, #05–06/07, Visioncrest Commercial, Singapore 238467 Cambridge University Press is part of Cambridge University Press & Assessment, a department of the University of Cambridge. We share the University’s mission to contribute to society through the pursuit of education, learning and research at the highest international levels of excellence. www.cambridge.org Information on this title: www.cambridge.org/9781009333283 DOI: 10.1017/9781009333290 © Yoram Evron and Richard A. Bitzinger 2023 This publication is in copyright. Subject to statutory exception and to the provisions of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press & Assessment. First published 2023 A catalogue record for this publication is available from the British Library. Library of Congress Cataloging-in-Publication Data Names: Evron, Yoram, author. | Bitzinger, Richard, author. Title: The fourth industrial revolution and military-civil fusion : a new paradigm for military innovation? / Yoram Evron, Richard A. Bitzinger. Description: Cambridge ; New York, NY : Cambridge University Press, 2023. | Includes bibliographical references and index. | Summary: “Advanced commercial technologies offer new opportunities for defense applications that could greatly affect military power and metrics of military advantage. This is relevant when it comes to civilian-based technological innovations found in the emerging “fourth industrial revolution,” such as artificial intelligence, autonomous systems, “big data,” and quantum computing. Militaries and governments around the world are increasingly focused on how and where advanced commercial technologies, innovations, and breakthroughs could potentially create new capacities for military power, advantage, and leverage. This process of exploiting civilian-based advanced technologies is referred to as “military-civil fusion” (MCF). This book addresses MCF not only from a conceptual and practical sense but also comparatively as it explores how four different countries - the United States, China, India, and Israel - are attempting to use MCF to support national military-technological innovation. It will interest scholars, researchers, and advanced students of military, security, and technology studies, as well as analysts and policymakers in military and defense organizations” – Provided by publisher. Identifiers: LCCN 2023005193 (print) | LCCN 2023005194 (ebook) | ISBN 9781009333283 (hardback) | ISBN 9781009333320 (paperback) | ISBN 9781009333290 (epub) Subjects: LCSH: Defense industries–Technological innovations–Case studies. | Military research–Case studies. | Research and development contracts, Government–Case studies. | Civil-military relations–Case studies. | Industry 4.0–Case studies. Classification: LCC HD9743.A2 E976 2023 (print) | LCC HD9743.A2 (ebook) | DDC 338.4/7355–dc23/eng/20230313 LC record available at https://lccn.loc.gov/2023005193 LC ebook record available at https://lccn.loc.gov/2023005194 ISBN 978-1-009-33328-3 Hardback Cambridge University Press & Assessment has no responsibility for the persistence or accuracy of URLs for external or third-party internet websites referred to in this publication and does not guarantee that any content on such websites is, or will remain, accurate or appropriate.

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To my children, Yoav, Nimrod, and Yael – Y.E. For my parents – R.A.B.

Published online by Cambridge University Press

Published online by Cambridge University Press

Contents

List of Figures List of Tables Acknowledgments List of Abbreviations 1 Introduction 2 Military–Civil Fusion: A Conceptual Framework What Is Military–Civil Fusion? MCF and the Fourth Industrial Revolution The Rise of the Military-Industrial Complex Challenges Facing the Military-Industrial Complex and the Growing Appeal of MCF Forms of Military–Civil Fusion Moving Forward

3 MCF in the United States of America The Rise of the American Military-Industrial Complex The Postwar Military-Industrial Complex: From Spin-On to Spin-Off to Spin-Apart The 1990s: The Growing Appeal of Civil–Military Integration in the US Defense-Industrial Base The 2010s: The Third Offset Strategy, the Fourth Industrial Revolution, and the Emergence of Military–Civil Fusion Conclusions

4 MCF in China China’s Military-Industrial Complex The Long Way from Civil–Military Economic Integration to MCF Shifting Back to Military Modernization: CMI and Exploitation of Dual-Use Technologies Military–Civil Fusion under Xi: Turning a New Page? MCF’s Strategic and Political Implications Conclusions

5 MCF in India India’s Military-Industrial Complex The Evolution of CMI in India

page ix x xi xii 1 17 18 21 25 32 37 48

49 51 58 68 76 85

88 89 98 104 110 123 126

129 130 140

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Contents The Road to MCF Conclusions

156 168

MCF in Israel

170

Israel’s Military-Industrial Complex Setting the Stage for MCF: The IDF’s Quest for Emerging Technologies From CMI to MCF MCF Implementation Strategic Implications of Israel’s MCF: Initial Thoughts Conclusions

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Conclusions MCF as a Competitive Strategy

Bibliography Index

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171 180 186 195 204 207

208 218

224 250

Figures

2.1 Defense R&D expenditure as a share of total government’s R&D expenditure, 1981–2019: Select countries page 33 2.2 Business sector’s share of national R&D, 1981–2015: Select countries 34 3.1 US spending on military RDT&E 56 3.2 US expenditures on R&D by source of funds, 2018 56 3.3 US spending on military procurement 61 4.1 China’s military expenditures, 1989–2019 92 4.2 Breakdown of Chinese military expenditures, 2010–17 93 4.3 Chinese arms imports, 1999–2020 93 5.1 India’s and China’s military expenditures, 2001–19 135 5.2 R&D expenditures as a percentage of GDP (2018): A comparative perspective 138 5.3 India’s arms imports (comparative view) and exports: Select years 143 6.1 IAI, Rafael, and Elbit’s revenues by market, 2017–19 177 6.2 Israel defense industry’s R&D expenses as a share of national commercial R&D, 2016–18 181

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Tables

3.1 4.1 4.2 5.1 6.1

US defense spending as a percentage of GDP page 62 Defense industry reorganization during the reform period 97 Major areas of focus and mega projects of the 2006–20 MLP 106 India’s defense public sector undertakings 133 Israel’s top defense industries’ R&D expenditure as a share of revenues in Israel (SRI), 2008–17 178

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Acknowledgments

This book could not have been possible without the considerable support and inputs of many people. In the first place, we are grateful to the organizers and participants of two workshops held in 2019 and 2020 at the S. Rajaratnam School of International Studies (RSIS) – one on artificial intelligence, robots, and the future of defense, and the other on the future of military–civil fusion – which inspired us to initiate this book project. We would like to single out Michael Raska, Ian Bowers, Katarzyna Zysk, and Yang Zi, as well as other experts and scholars who read older versions of the manuscript and provided important comments and insights: Eitan Shamir, Shaul Chorev, Guy Paglin, Deba Mohanty, Ajai Shukla, and Shannon Brown. We would also like to thank the University of Haifa’s Research Authority and RSIS’s Military Transformations Program, who gave this book project their full and enthusiastic backing. At Cambridge University Press, we are thankful to our editor, John Haslam, for his support of this book, to Laura Blake, who managed the project, and to Siddharthan Indra Priyadarshini and Pete Gentry, who carried out the manuscript preparation and production process. Personally, we thank our respective spouses, Dana Evron and Eve Bitzinger, for their patience and support. Finally, each author would like to acknowledge the other for the mutual respect and good humor shown during the often arduous process of collaborating on a book.

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Abbreviations

3IR 4IR A2/AD AI ASB ASCM ATC ATP BEML C4ISR C-RAM CAD/CAM CII CMC CMI COSTIND COTS CRADA DARPA DDR&D DIB DII DIU DoD DPP DPSU DRDO DTIB FFRDC

third industrial revolution fourth industrial revolution anti-access/area denial artificial intelligence AirSea Battle antiship cruise missile Advanced Technology Center Advanced Technology Program Bharat Earth Movers Limited command, control, communications, computing, intelligence, surveillance, and reconnaissance counter–rocket, artillery, and mortar computer-aided design/computer-aided manufacturing Confederation of Indian Industry Central Military Commission civil–military integration Commission for Science, Technology, and Industry for National Defense commercial off-the-shelf Cooperative Research and Development Agreement Defense Advanced Research Projects Agency Directorate of Defense Research and Development (MAF’AT) defense-industrial base Defense Innovation Initiative Defense Innovation Unit Department of Defense Defense Procurement Procedure Defense Public Sector Undertaking Defense Research and Development Organization defense technology and industrial base federally funded research and development center

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List of Abbreviations

FMS FPD FPDI GAD GPS HAL IAF IAI ICT IDDM IDF IGMDP IMI IoT IP IPR IT IT-RMA J/V JAIC JAM-GC KMT L&T LAWS LRRDPP MATIMOP MCF MIIT MLDP MLP MMB MoD MRO MSME NCW NDSTC NSCAI

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foreign military sale flat-panel display Flat-Panel Display Initiative General Armaments Department global positioning system Hindustan Aeronautics Ltd. Israeli Air Force Israel Aerospace Industries information and communication technologies indigenously designed, developed, and manufactured Israel Defense Forces Integrated Guided Missile Development Program Israel Military Industries internet of things intellectual property intellectual property rights information technologies information technologies revolution in military affairs joint venture Joint Artificial Intelligence Center Joint Concept for Access and Maneuver in the Global Commons Guomindang (“Nationalist party”) Larsen & Toubro lethal autonomous weapons system Long-Range Research and Development Program Plan Israeli Industry Center for R&D military–civil fusion Ministry of Industry and Information Technology Medium and Long-Term Defense Science and Technology Development Plan Medium and Long-Term Science and Technology Development Plan Ministry of Machine Building Ministry of Defense maintenance, repair, and overhaul/operations micro-, small-, and medium-sized enterprises network-centric warfare National Defense Science and Technology Commission National Security Commission on Artificial Intelligence

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xiv

List of Abbreviations

NSF OEM OF OTA OTS PLA PRC R&D RDT&E RMA RUR S&T SASTIND SIPRI SME SOE TRP UAV

National Science Foundation original equipment manufacturer Ordnance Factory Office of Technology Assessment off-the-shelf People’s Liberation Army People’s Republic of China research and development research, development, testing, and evaluation revolutions in military affairs Raksha Udyog Ratnas (“Champions of Industry”) science and technology State Administration for Science, Technology, and Industry for National Defense Stockholm International Peace Research Institute small- and medium-sized enterprise state-owned enterprise Technology Reinvestment Program unmanned aerial vehicle

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1

Introduction

The rapid development of advanced conventional weaponry and military technologies since the 1990s has taken place during a period when “militarily relevant technologies” are becoming harder and harder to identify and classify. Many advanced commercial technologies increasingly offer new and potentially significant opportunities for defense applications that, in turn, could greatly affect military power and the metrics of military advantage over potential rivals. Even before the end of the Cold War, it was becoming apparent to many that technologies and technological innovations conceived and developed in commercial hightech sectors were clearly superior to and cheaper than those found in the military-industrial complex.1 In particular, the latter stages of the so-called third industrial revolution (3IR) – which centered around breakthroughs in microelectronics, computing, telecommunications, and other information technologies – was largely dominated by innovations centered in the commercial sphere, for example, in places like Silicon Valley or Israeli technology incubators, or at companies like Google, Amazon, and Alibaba. This commercial technological superiority has become even more evident in recent years given the emerging “fourth industrial revolution” (4IR), which revolves around emerging technologies such as artificial intelligence (AI), autonomous systems, “big data,” and quantum computing. At the same time, these technologies and their related products are making the distinctions between military and civilian technologies – and, by extension, the distinctions

1

A landmark study on this issue has been John A. Alic et al., Beyond Spinoff: Military and Commercial Technologies in a Changing World (Boston: Harvard Business Press, 1992). See also Jacques S. Gansler, “Integrating Civilian and Military Industry,” Issues in Science and Technology 5, no. 1 (1988): 68–73; David C. Mowery and Nathan Rosenberg, “New Developments in US Technology Policy: Implications for Competitiveness and International Trade Policy,” California Management Review 32, no. 1 (1989): 107–24; John Lovering, “Military Expenditure and the Restructuring of Capitalism: The Military Industry in Britain,” Cambridge Journal of Economics 14, no. 4 (1990): 453–67.

1

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between military-based and civilian-based innovation – ever harder to discern. Against this backdrop, this book is grounded in two interconnected arguments. The first is that technologies associated with the emerging 4IR are increasingly understood as constituting the future basic determinants of military effectiveness and advantage. Like the 3IR, the 4IR is largely based on digital technologies, and especially information technologies, such as microelectronics, computing, software, and the like. Nevertheless, the 4IR is more than simply a “3IR mk. 2.” Like the 3IR, the 4IR is about the collection, storage, and processing of data, but at orders of magnitude greater than the 3IR ever envisioned. And like the 3IR, the 4IR is about communications and networking, but on a much grander scale, complexity, and intensity when it comes to connectivity, sharing, and jointness. Above all, the 4IR is about unprecedented processing power, storage capacity, and unlimited access to knowledge, which interconnect people and things while generating a fusion of technologies that blurs the lines between the physical, digital, and biological spheres.2 Whether or not we realize it, the technologies found in the 4IR are becoming increasingly ubiquitous, and whether or not we like it, they are infiltrating and permeating our lives. For instance, China is already using AI and big data to power its so-called social credit system, a combination of surveillance devices, databases, and software that monitors, grades, and rewards or punishes citizens for their positive or negative behavior (as defined by the regime). Britain employs AI, along with facial recognition software, to search for possible terrorists and criminals. Israel uses big data AI analysis tools to trace irregular activities along its borders. Finally, intelligence organizations all over the world use AI tools to analyze large-scale online communication to trace terrorist and other hostile activities against their countries. Creating a new set of innovative capabilities and opportunities, 4IR technologies will create military advantage and, therefore, political leverage in the decades to come. As detailed below, 4IR technologies – and especially AI – will further improve capacities for the collection, analysis, and management of usable intelligence. In addition, the 4IR could make possible the execution of long-range precise attacks, improve forces’ maneuverability at all levels, increase soldiers’ and weapons’ physical protection, shut down the enemy’s information systems and critical

2

Klaus Schwab, The Fourth Industrial Revolution (New York: Crown Business, 2017), Chap. 1.

https://doi.org/10.1017/9781009333290.001 Published online by Cambridge University Press

Introduction

3

infrastructures, damage its command-and-control networks, and thwart its attacks in general while, at the same time, it can strengthen a nation’s strategic and tactical defenses against such onslaughts, and the like.3 Such technological leaps in military proficiency have often been termed a “revolution in military affairs” (RMA). RMAs are generally viewed as processes of disruptive or discontinuous change in how militaries fight – in other words, a “paradigm shift” in the way armed forces carry out warfighting. They entail “innovative operational concepts” and “organizational adaptation,” performed in such a way as to “fundamentally alter the character and conduct of a conflict,” and produce “a dramatic increase … in the combat potential and military effectiveness of armed forces.”4 At the same time, RMAs are more than “mere” technology; they entail fundamental organizational, institutional, and doctrinal changes as well. That said, technology and technological innovation are what we always come back to. Technology is often a crucial determinant of military effectiveness, either directly or by promoting and facilitating those doctrinal and organizational changes; consequently, harnessing the latest technology will be critical to military success and advantage. Subsequently, technological innovation is central to implementing the organizational and operational aspects of the RMA. Without the requisite technology, the RMA cannot be imagined or implemented, and this is what makes the 4IR so particularly relevant. This brings us to the second major argument of this book: that, if militaries want to harness the technological potential of the 4IR, then they must craft a new form of civil–military cooperation in science and technology (S&T). Since the late 2010s, this strategy has come to be known as military–civil fusion (MCF) – a form of military–civil

3

4

On the military utilization of emerging technologies, see Jacques S. Gansler, Democracy’s Arsenal: Creating a Twenty-First-Century Defense Industry (Cambridge, MA: The MIT Press, 2013), 100–4; Wilson Wong, Emerging Military Technologies: A Guide to the Issues (Santa Barbara: ABC-CLIO, 2013); Diego A. Ruiz Palmer, “A Maritime Renaissance: Naval Power in NATO’s Future,” in Routledge Handbook of Naval Strategy and Security, eds. Joachim Krause and Sebastian Bruns (London and New York: Routledge, 2016), 370; Armin Krishnan, Military Neuroscience and the Coming Age of Neurowarfare (London: Routledge, 2016); Nah Liang Tuang, “The Fourth Industrial Revolution’s Impact on Smaller Militaries: Boon or Bane?” RSIS Working Paper 318 (Singapore: S. Rajaratnam School of International Studies, 2018); Katarzyna Zysk, “Defense Innovation and the 4th Industrial Revolution in Russia,” Journal of Strategic Studies 44, no. 4 (2021): 543–71; Michael Raska, “The Sixth RMA Wave: Disruption in Military Affairs?” Journal of Strategic Studies 44, no. 4 (2021): 456–79; Margaret E. Kosal (ed.), Disruptive and Game Changing Technologies in Modern Warfare (Cham: Springer, 2020). Andrew F. Krepinevich, “Cavalry to Computer: The Pattern of Military Revolutions,” The National Interest, Fall, 1994, 30.

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cooperation that has been increasingly recognized as a major mechanism for the military assimilation of 4IR technologies.5 Quite simply, acknowledging that after the Cold War the civilian sector has taken over the military sector’s position as the most critical source of innovative technologies, MCF is about providing the military with technological innovations originally sourced in the commercial sector. Contemporary MCF focuses on cutting-edge commercial technologies – and especially 4IR technologies – that can be then adapted and integrated into military systems, and which subsequently can provide a significant advance in military capabilities. At the same time, MCF is more than just finding and assimilating civilian technologies. It is also about crafting strategies and initiatives to locate adequate civilian technologies and producers and then harness them for military R&D projects, involving the military in R&D collaboration with civilian entities, starting at the earliest stages possible, and adapting advanced civilian technologies and products to military purposes. To put it simply, MCF is about creating a common “technology well” to which both the military and civilian R&D bases contribute and from which both can draw.6 As 4IR technologies become a more critical element of military effectiveness, the ability of states to engage in MCF will likely factor more and more in how their militaries might gain comparative advantages over their rivals and adversaries. MCF has a particular appeal in that it promises to be a faster, more reliable, and cheaper shortcut to innovation. Since MCF entails the exploitation of existing or emerging commercial technologies, it has the potential of avoiding the all-toocommon problem of militaries “reinventing the wheel” from a technological standpoint. These features are increasingly important given emerging twenty-first-century competitions and rivalries, where nations are seeking to gain innovative comparative military advantages over their rivals. In the case of the United States and China, for example, these two countries are increasingly locked in a strategic competition for politicalmilitary dominance, as each side searches for military-technological advances that might provide it with an edge over the other. At the same time, countries that aspire to be regional great powers (such as India) or 5

6

For example, Xie Fengjun and Wang Yunzhu, “The Analysis of System Feedback Structure of Military Civil Industry Fusion Development Model,” International Conference on Measuring Technology and Mechatronics Automation, Zhejiang, China, April 11–12, 2009. See also Audrey Fritz, “China’s Evolving Conception of Civil–Military Collaboration,” Center for Strategic and International Studies, August 2, 2019, www.csis-cips.org/blog/2019/8/2/chinas-evolving-conception. Jordi Molas-Gallart, “Which Way to Go? Defense Technology and Diversity of ‘DualUse’ Technology Transfer,” Research Policy 26, no. 3 (1997): 376.

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Introduction

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those that place a high degree of importance on advanced military technologies for national defense, particularly where they may offset quantitative or geographical disadvantages (for example, Singapore or Israel, both of whom possess little strategic depth), are further likely candidates for tapping into the military potential of the 4IR. A few examples illustrate the relations between states’ quests for 4IRrelated military technologies, military buildup, and MCF. In the case of India, its military leaders assume that the country’s immensely complex military challenges require it to assimilate and deploy advanced technological means. This includes its enduring conflicts with China and Pakistan, of which at least one of them – China – has the world’s second largest military force and has, among other things, acquired advanced ground, maritime, air, space, and cyber capabilities, which are supported by various 4IR technologies. Concurrently, India also faces severe threats of terrorism and insurgency along its borders, as well as across its territory. Responding to these challenges, India has acknowledged the ability of advanced civilian technologies and military–civilian fusion to narrow some of the strategic gaps it faces, and since the early 2000s it has taken measures to promote their implementation. Israel, for its part, has adopted a new doctrine during the first two decades of the twenty-first century that is intended to address the increasingly unconventional and asymmetrical defense challenges it faces. As part of this new doctrine, Israel increasingly relies on the massive use of precise, lethal, and often standoff fires; accurate, real-time intelligence information; and unmanned and partly autonomous vehicles, among other things – all of which make massive use of 4IR technologies. In order to keep the development and acquisition of these capabilities within its budget constraints, since the early twenty-first century Israel has assigned the civilian high-tech sector an ever-increasing role in defense R&D, taking advantage of and further reinforcing the strong connections that exist already between its defense establishment and the civilian hightech industry. Russia also increasingly views emerging 4IR technologies – particularly AI – along with some limited form of MCF, as essential to its country’s future.7 In October 2019, Putin approved a new Russian “National Strategy for the Development of Artificial Intelligence until 2030.”8

7 8

“‘Whoever Leads in AI Will Rule the World’: Putin to Russian Children on Knowledge Day,” RT, September 1, 2017. “Decree of the President of the Russian Federation on the Development of Artificial Intelligence in the Russian Federation”, trans. Center for Security and Emerging Technologies (CSET), October 28, 2019.

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Introduction

This new strategy document is intended to accelerate Russian development of AI capabilities by expanding research, training, and informationsharing in AI. In addition, in December 2019, the Russian government raised the status of AI to a strategic program in its national “Digital Economy” project.9 Together, these initiatives have the goal of raising Russia up to among the global leaders in AI by 2030. Moreover, Russia appears to be increasingly keen on the idea of exploiting AI for military purposes. The Russian armed forces frequently talk about the “intellectualization” and “digitization” of the military, and it is actively exploring the use of AI for intelligence gathering and processing as well as the development of robots and “multi-agent systems” (e.g., swarming).10 In this regard, Putin has repeatedly called upon Russia’s scientific potential to improve the country’s defense capability via the convergence of military and civilian science. In 2012, Putin “clearly spoke out in favor of using Russia’s scientific potential to enhance the country’s defense capability,” arguing that “without a doubt, the normal development of military research is impossible without partnership with civil science.”11 Although how it might be accomplished is still unclear, the stress on “convergence” very clearly points to some kind of strategy utilizing MCF. While MCF stands at the nexus of the 4IR and future military modernization, true civilian-to-military spin-on is rarely a situation where the armed forces can simply find and integrate a piece of commercially available off-the-shelf technology (“plug-and-play”). Any involvement of private sector companies and civilian scientific institutions in military R&D and production involves numerous administrative, legal, political, commercial, and even cultural barriers.12 Naturally, the more intimate the collaboration between the sectors is, the greater the potential for friction between them, and under MCF these connections are likely to be closer than ever. To be sure, the involvement of civilian companies in

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11

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Ministry of Digital Development, Communications and Mass Media of the Russian Federation, Alexey Volin Discussed Collaboration in the Field of Media with ASEAN Countries, November 27, 2015, https://digital.gov.ru/ru/activity/directions/858. Samuel Bendett, “The Development of Artificial Intelligence in Russia,” in Artificial Intelligence, China, Russia, and the Global Order, ed. Nicholas D. Wright (Maxwell AFB, Al: Air University Press, 2019), 168–77. Vadim Kozyulin, Militarization of AI (Moscow: PIR Center, 2019), https://stanleycenter .org/wp-content/uploads/2020/05/MilitarizationofAI-Russia.pdf; “Vladimir Putin: ‘Being Strong: Guarantees of National Security for Russia,’” The International Affairs, February 20, 2012, https://interaffairs.ru/news/show/8286. Gansler, “Integrating Civilian and Military,” 69–70; Linda Brandt, “Defense Conversion and Dual-Use Technology: The Push toward Civil–Military Integration,” Policy Studies Journal 22, no. 2 (1994): 362–4.

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Introduction

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weapons production is not new. Until World War II, the military and commercial industries basically drew their technologies from the same well, and different military products, such as naval ships and even aircraft, were produced by civilian firms. World War II and the Cold War have brought an unprecedented expansion of the arms industry, which has taken the technological lead in different areas, such as microelectronics, communication, composite materials, and nuclear. Nevertheless, in many countries, civilian companies remained involved in arms production, mainly as suppliers and subcontractors of the defense industries but in some countries also as direct suppliers of the defense establishment. The same is true for civilian scientific institutes – mostly universities – which throughout the Cold War took part in military-related projects.13 However, never has this collaboration been as intensive and as comprehensive as it is expected to be in the case of 4IR technologies-based military R&D. During the Cold War, most civil–military technological and industrial collaboration took place under the largely unchallenged assumption that the defense industry would take the lead, while civilian entities played a limited, supporting role, mostly further down the supply chain (i.e., second- and third-tier suppliers) and highly subject to cost– benefit considerations. Under the 4IR, however, hierarchy is not as clear as before; indeed, in many areas – such as drones, AI, the internet of things (IoT), and quantum computing – civilian companies (from multinational corporations to large national firms to small and medium-sized enterprises [SMEs]) seem now to be leading the way when it comes to technological breakthroughs and adoption. In such cases, traditional defense industries and national defense establishments find that they need to collaborate much more closely with these companies throughout the stages of military research, development, production, and even through-life support, to provide the armed forces with effective cuttingedge weapons systems and other military equipment. Consequently, more and more commercial companies, which previously had never been thought of as prospective military suppliers, are being increasingly sought after in the realm of defense contracting. As detailed below, Microsoft and Google are two striking examples. Locating these companies and incorporating them in defense programs – that is, getting them to

13

Dan Kevles, “Cold War and Hot Physics: Science, Security, and the American State, 1945–56,” Historical Studies in the Physical and Biological Sciences 20, no. 2 (1990): 239–64; Audra J. Wolfe, Competing with the Soviets: Science, Technology, and the State in Cold War America (Baltimore: Johns Hopkins University Press, 2013).

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participate in MCF – is one of the most acute challenges facing contemporary efforts at military modernization. Several factors can affect how successful a nation may be at MCF including: the structure and organization of national defense industrial bases; the openness on the part of military institutions to alternative sources of technology and innovation that may exist outside the realm of the traditional defense technology and industrial base; national strategic culture when it comes to risk-taking and innovation; and so forth. Some countries may, therefore, be much more adept at MCF while others, despite their best intentions and avowed policies, may find MCF much more difficult to implement. The success or failure of these efforts will heavily depend on regime type, the national security environment, market structures, and other factors that this book attempts to clarify. The aim of this book, therefore, is to provide for the first time a comprehensive analysis of how states exploit and deploy 4IR technologies for military use through MCF: what challenges they face during this process, what methods they use to tackle these challenges, and ultimately what the basic factors are that underlie a successful MCF implementation. In addition, it will offer preliminary insights on MCF’s implications for states’ national security, balance of power, and even broader issues such as the global economy. More specifically, this volume intends to address the following issues: (1) why and how the traditional post–World War II “military-industrial complex” developed as an isolated technology sphere; (2) how the traditional defenseindustrial complex failed to meet the persistent demands of present-day armed forces for the most advanced militarily relevant technologies available (or conceivable); (3) why militaries increasingly look to MCF as the solution for their future needs for cutting-edge military capabilities and advantage; (4) what strategies and methods states adopt to implement MCF; (5) what the potential benefits and ramifications are of MCF, not just for militaries but for countries seeking to exploit their overall national innovation capacities as a competitive strategy; and (6) how MCF has functioned in practice in specific cases (i.e., national country studies). What we hope to determine is how effective MCF may be as a defense-technology development strategy, what impacts its effectiveness, and how it might affect military capabilities, advantages, and balance-of-power dynamics. To this end, we conduct in-depth analyses of MCF implementation in the United States, China, India, and Israel. Intending to unveil the contour, dilemmas, challenges, underlying forces, and archetypal practices of MCF, rather than tracing its entire range of forms worldwide, we examine a limited number of national case studies in which we find

https://doi.org/10.1017/9781009333290.001 Published online by Cambridge University Press

Introduction

9

favorable conditions for MCF implementation. Starting with the basic components of MCF, that is, technological collaboration between the national military-industry complex and civilian entities engaging in advanced technology development, we see that all four showcase states possess both a large-scale defense industry and a vibrant civil industry that focuses, inter alia, on 4IR technologies. While the importance of this condition seems self-evident, some clarifications are in order. First, the requirement for a vibrant private technology industry does not mean that MCF can take place only in countries with market economies. While the literature on national innovation systems generalizes that the market economy provides suitable conditions for innovation, it also acknowledges that a relatively large degree of state involvement in the market can also promote technological development of countries with a lower level of development, especially when they try to catch up with developed countries.14 That does not mean, however, that the states’ market structure does not impact their MCF implementation. According to Mahmood and Rufin, once companies have passed the catch-up phase, continued intensive state involvement can disrupt market capitalism conditions in the state, which is ultimately the force pushing companies to innovate.15 As MCF is all about innovation, we can assume that free market conditions are better at promoting successful implementation. Second, a collaboration between civilian academic institutions and governmental research bodies on the one hand and a national defense industry on the other can hypothetically meet the minimum requirements of MCF definition. In practice, we argue that the bar for civilian participation should be higher and include the participation of the business technology sector.16 For one thing, as detailed in the following 14

15 16

Ishtiaq P. Mahmood and Carlos Rufin, “Government’s Dilemma: The Role of Government in Imitation and Innovation,” Academy of Management Review 30, no. 2 (2005): 338–60; Jan Fagerberg and Martin Srholec, “National Innovation Systems, Capabilities and Economic Development,” Research Policy 37, no. 9 (2008): 1417–35. Mahmood and Rufin, “Government’s Dilemma.” For this reason, Russia is not included in the research although it is committed to intensive military modernization through, inter alia, AI and other 4IR technologies. Examining Russia’s achievements in the area of advanced military technology, a 2021 Chatham House report maintains that, while the defense ministry has set up a network of R&D organizations including the private sector, to integrate AI into military systems, the results were poor partly because “The private-sector AI ecosystem is relatively small.” The report also quotes a senior Russian expert, claiming, more generally, that “an unfavourable business climate and the poor quality of regulations” are among the main reasons behind Russia’s stagnation of innovation. Samuel Bendett et al., Advanced Military Technology in Russia: Capabilities and Implications (London: Chatham House, 2021), 20, 64. See also Keith Dear, “Will Russia Rule the World Through AI? Assessing Putin’s Rhetoric Against Russia’s Reality,” The RUSI Journal 164, no. 5–6 (2019): 36–60.

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Introduction

chapters, R&D cooperation between defense establishments and academic institutions has taken place regularly in various countries since World War II. Therefore, it cannot be regarded as a distinctive MCF phenomenon. For another, as has been widely acknowledged, the private sector has become an integral part of the national innovation system since the late twentieth century, and private firms occupy a growing space in the development of defense-relevant 4IR technologies.17 In Switzerland, for example, the private sector was responsible in 2017 for 72 percent of the national expenditure in R&D, in Japan for 82 percent, in South Korea for 89 percent, and in Israel for 86 percent.18 Another case study selection criterion is the strategic circumstances that push states into an enduring and intensive military modernization process. Prima facie, such circumstances do not seem crucial for MCF implementation, as technological cooperation between the defense industry and private firms can take place regardless of the state’s strategic circumstances. However, for the purpose of this book, we assume that such circumstances are required since they are almost crucial for a successful MCF implementation. Being a young, almost experimental, military buildup approach facing high barriers, we expect to find the fullest facets of MCF implementation in states that are committed to and engaged intensively in military modernization. Moreover, if intensive military modernization is not taking place, MCF implementation is expected to be partial and small-scale. Put differently, the analysis of MCF implementation’s weaknesses in countries that sense no urgent need for military modernization and innovation is expected to be vague. Similarly, a comparison of MCF implementation between states that assign substantially different importance to military modernization can produce distorted results. Finally, we look at states that undertake an active (though not necessarily declared) MCF policy. The promotion of a close and extended collaboration between the defense and civilian industries – sectors that have been long separated from each other by various high barriers – 17

18

Kathleen A. Walsh, “The Role, Promise, and Challenges of Dual-Use Technologies in National Defense,” in The Modern Defense Industry: Politics, Economic, and Technological Issues, ed. Richard A. Bitzinger (Santa Barbara: Praeger Security International, 2009), 133; Gansler, Democracy’s Arsenal, 135–7; Charles Edquist, “Systems of Innovation: Perspectives and Challenges,” in The Oxford Handbook of Innovation, eds. Jan Fagerberg and David C. Mowery (Oxford: Oxford University Press, 2006), 193–4; Bengt-Åke Lundvall, “National Innovation Systems – Analytical Concept and Development Tool,” Industry and Innovation 14, no. 1 (2007): 95–119. Organisation for Economic Co-operation and Development (OECD), “Gross Domestic Expenditure on R&D by Sector of Performance and Field of R&D,” https://stats.oecd .org/Index.aspx?DataSetCode=GBARD_NABS2007.

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requires, first, a long-term commitment and arduous efforts on different fronts. Such commitment and efforts can be expected to exist most often in countries that are engaged in an enduring military modernization process, motivated by a sense of threat, an arms race, or a similar reason. Second, it can be strongly benefitted by an active guiding hand taking legal, bureaucratic, commercial, and other measures to that end, providing incentives, creating platforms to bring the different players together, and the like. These measures are costly and complex, a barrier that an (official or unofficial) MCF policy can reduce significantly – particularly in countries where the market economy is underperforming. The case studies presented in this book meet all these conditions. All four countries face specific strategic circumstances driving them to constant efforts of military buildup and modernization, relying in one way or another on well-established local defense industries. The United States and China have the first and second largest military expenditures in the world, respectively, largely used to arm them against one another.19 Israel, facing a highly complex security environment since its early years, has long adopted a military strategy requiring it to maintain a militarytechnological advantage over all other actors in its region. India’s previously mentioned complex security challenges push it to make immense military investments (the third largest military expenditure in the world in 2018–20), coupled with a military doctrine that assigns a central role to advanced technologies. A 2017 official doctrinal document stated that “information technology and integrated reconnaissance, surveillance and command, control, communications, computers, information and intelligence systems will win battles.”20 In addition, all four countries have a vibrant civilian high-tech industry. This point requires clarification in the cases of China and India, where the heavy state capitalism structure of the former and the low level of economic development of the latter work to conceal this reality. Ranked by the Global Innovation Index (2021) as the twelfth most innovative country in the world, possessing a national digital economy worth 30 percent of GDP, and boasting the second largest investment in the world on R&D, China has become a world power in several technological realms.21 While China’s rapid rise to this position has certainly 19 20 21

SIPRI, “Military Expenditure Database,” 2022, www.sipri.org/databases/milex. Government of India, Ministry of Defence, Joint Doctrine Indian Armed Forces (New Delhi: Directorate of Doctrine, Headquarters Integrated Defence Staff, April, 2017), 49. Global Innovation Index 2021: Tracking Innovation through the COVID-19 Crisis (Geneva: World International Property Organization, 2021), 4; World Bank, “Research and Development Expenditure,” 2021, https://data.worldbank.org/indicator/GB.XPD .RSDV.GD.ZS.

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Introduction

involved a concentrated governmental effort (including huge investments, a decisive industrial policy, market interference, and concerted efforts to import foreign advanced know-how), it has still allowed and supported the establishment of a tech sector in which many of the companies are privately owned. This includes giants such as Alibaba, Huawei, Tencent, and ZTE, but also flourishing start-ups. As a home to over 300 “unicorns” (start-ups worth over US$1 billion) in 2021, China enjoys one of the largest start-up ecosystems in the world.22 These technology companies attract both domestic and international investments worth billions annually, and focus on a variety of 4IR technologies including AI, 5G, autonomous vehicles, and quantum computing. Clearly, China’s high-tech companies have shifted from imitation to genuine R&D and enjoy a global reputation. For instance, China has the largest number of listed companies in the US stock market of all nonUS countries. It is, therefore, unsurprising that the business sector (both private and state-owned companies) became the main source of R&D expenditure in China: 76 percent in 2020.23 Of course, that does not mean that China’s business tech sector enjoys suitable market economy conditions. Quite the contrary. The state’s involvement in private companies’ conduct is heavy, and the companies are subject to growing political monitoring. According to a 2017 official Chinese report, Communist Party cells operate in 68 percent of the private-owned enterprises in China and in 91 percent of the state-owned ones.24 In addition, the state is increasing its presence in the start-up sector through growing investments made by state-owned companies and financial bodies, and since early 2020 the party has taken measures to increase monitoring and shape the conduct of high-tech firms.25 This and other forms of involvement impact the companies’ decision-making, access to financial resources, and conduct. Yet, it does not change the fact that China’s commercial tech sector, including private-owned companies, is a vibrant financial and technological force. That is also the case for India, which was known for decades as a world-level ICT powerhouse, and has also recently begun developing a

22 23

24 25

“China Ranks 2nd as Home to Over 300 Unicorn Companies: Report,” Xinhua, December 25, 2021. National Bureau of Statistics of China, “Communiqué on National Expenditures on Science and Technology in 2020,” September 22, 2021, www.stats.gov.cn/english/ PressRelease/202109/t20210923_1822410.html. “Members in Numbers: A Profile of the Members of the Communist Party of China,” China Daily, July 5, 2017. “China’s Communist Authorities Are Tightening Their Grip on the Private Sector,” The Economist, November 20, 2021.

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flourishing start-up environment. Consequently, with over 2,000 software product companies, 25,000 high-tech start-ups (including 42 new unicorns), and over US$200 billion revenues in 2021, India’s entire technology sector is enjoying rapid and constant development.26 Rated as the third best start-up economy in the world according to the 2020 Global Innovation Index, India is both a provider of relatively traditional IT outsourcing services and platforms to global companies and a development center of technology R&D in multiple areas. Thanks to growing investments by global venture capital firms from the mid2010s, totaling tens of billions in US$,27 Indian start-ups and other hightech firms are focusing on various 4IR-related technologies, such as AI, advanced IT solutions, IoT, energy, big data, and others. Of course, India’s private technology sector still has a long way to go to exhaust its potential. It is not only struggling with India’s cumbersome bureaucracy on national and local levels but its level of R&D investments is low. Compared with the world’s leading innovative countries, in which the business sector is normally responsible for over 70 percent of the national R&D investment, its share in India is only a little above 40 percent. The government is not only the largest R&D investor but also a dominant player in the shaping of India’s technology development scene. Notable measures include national plans and initiatives to advance innovation and technological development in various fields and specific measures to develop India’s start-up scene. The latter includes, among other things, initiation of and financial support for hundreds of incubators, establishment of labs, tax benefits for start-ups, and efforts to reduce the related bureaucratic burden.28 Yet, the obstacles posed by India’s bureaucracy and large corporations also provide opportunities for private tech companies, mitigating the semi-state capitalism environment that surrounds them. As large companies in India face growing pressure to innovate, they are increasingly reaching out to start-ups rather than undertaking this innovation in-house. Among other things, this choice forms partnerships and other collaborations with start-ups, while supporting them in different ways.29 26 27 28

29

Ayushman Baruah, “Indian Tech Industry Crosses $200 Bn Revenue Mark in FY22,” Mint, February 16, 2022. Global Innovation Index 2020: Who Will Finance Innovation? (Geneva: World International Property Organization, 2021), 161. Sabrina Korreck, The Indian Startup Ecosystem: Drivers, Challenges and Pillars of Support, ORF Occasional Paper no. 211 (New Delhi: ORF, 2019), 6–7; Dharish David et al., The Startup Environment and Funding Activity in India, ADBI Working Paper Series no. 1145 (Tokyo: Asian Development Bank Institute, 2020), 7–8; H. S. Krishna, High-Tech Internet Start-Ups in India (Cambridge: Cambridge University Press, 2019), 16–21. Korreck, The Indian Startup Ecosystem, 7.

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Introduction

Finally, all four showcase states take comprehensive and consistent measures to incorporate the business sector (as well as other civilian organizations) into defense R&D and production. These measures are of different types, not always formally acknowledged as MCF-related. Furthermore, as they are closely associated with the defense domain, these collaborations are often kept secret. Revealing these policies and measures while relating them to a concentrated national MCF effort is the research’s main empirical challenge. To begin with the easiest case, the US defense establishment has been quite accessible when it comes to discussing and debating its guidelines, objectives, and mechanisms for implementing MCF, and subsequently its efforts to conceptualize, standardize, and document its support and implementation of US MCF have been well documented. On the other hand, Israel’s objectives and implementation of MCF must be traced through a careful collection and analysis of sporadic evidence and semi-official announcements rather than official policy documents, which simply do not exist. A major reason for this has to do with Israel’s cultural “orientation toward doing, coupled with the trait of anti-intellectualism …”30 Consequently, the Israeli defense establishment may adopt and implement a particular practice for years without conceptualizing it or giving it a formal label. This is also the case with MCF. So far, Israel’s defense establishment has not issued a formal document that defines the role of MCF in Israel’s military procurement, or which expresses an intention to implement it, sets goals and implementation methods, or even elaborates this concept. Instead, there is a growing awareness of this phenomenon inside the defense establishment, and any implementation of MCF has been gradually consolidated without a systematic conceptualization or adoption of any clear policy. Instead, the availability of multiple public accounts of MCF-related activities – mostly through reports and analysis published by acting and former officers in military and defense journals, as well as interviews with acting and former IDF officers and officials in the Ministry of Defense (MoD) – has permitted us to form a clear picture about the defense establishment’s objectives, means, achievements, and challenges regarding Israeli efforts at MCF. China poses yet another methodological challenge. The country’s MCF objectives are openly declared but data about its implementation is rather scarce. Not surprisingly, therefore, our examination of MCF in China has been hindered by the secrecy that has long shrouded China’s 30

Dima Adamsky, The Culture of Military Innovation: The Impact of Cultural Factors on the Revolution in Military Affairs in Russia, the US, and Israel (Stanford: Stanford University Press, 2010), 111.

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Introduction

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defense establishment, and by the relative recentness of Beijing’s current approach toward MCF, which could arise considerable confusion between aspirations and actual developments when it comes to Chinese efforts at it. Nevertheless, in recent years, Beijing has become much more public about its broad goals and strategies for MCF, and enough information has emerged to allow an interim assessment of the objectives, implementation, and impact of Chinese MCF. In fact, the focus of this policy on the civilian sector has unavoidably forced the regime to openly publish some of the related documents, activities, and online platforms, thus providing us with exceptionally large amounts of primary sources on the decisions, policy means, and practical measures related to China’s MCF. Finally, India falls somewhere in the middle: technically an open and pluralistic society, with an aggressive free press, but also a country where armaments production is dominated by a collection of highly protected, monopolistic, state-owned enterprises. Moreover, India’s military-industrial complex is a particularly closed and uncommunicative system, which has impeded efforts to examine its national approaches to MCF. Consequently, the exploration of India’s MCF policy has entailed the screening of multiple official documents and announcements, analyses by former high-ranked officers, press reports, and the like, which have shed light on almost every aspect of India’s weapons acquisition but one: the ability of the Indian military-industrial complex to shape the basic conditions that ultimately decide the civilian industry’s participation in arms procurement. Nevertheless, an abundance of primary and secondary sources on India’s military procurement has permitted us to bridge this knowledge gap and to address some of the most pressing issues in this respect, particularly India’s actual interest in 4IR technologies, the ability of the local defense industry to address this need, the defense establishment’s approach to MCF, MCF’s practical implementation and its hitherto results, and, finally, the factors that are responsible for success or failure in this area. To be sure, the strategies and methods that these four states implement to deploy 4IR technologies for military use through MCF do not necessarily exhaust the entire range of possible policies in this area. Moreover, they do not cover the entire range of regime types, strategic circumstances, market conditions, and the like. Covering all these possibilities would likely require us to record the entire spectrum of MCF efforts that have taken place since the early 2000s, an effort that exceeds the objective of this book and would be of debatable analytical benefit in any event. However, these four case studies meet the basic preconditions for MCF materialization while differing in many other important aspects, such as global and regional position, total size, regime type, market

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Introduction

structure, level of innovation, and defense industry efficiency. Taken together, they provide both a comprehensive view on the diverse faces and forms of MCF and a solid ground for a comparative analysis of the factors underlying MCF implementation. Tackling these methodological limitations, we still face a major challenge. It must be conceded that MCF as a possible paradigm for militarytechnological innovation is still quite new. The 4IR is relatively new as well, and many 4IR technologies are still at the speculative, experimental, or even conceptual stage. In a sense, this novelty provides MCF adherents with an opportunity to “get in at the ground floor” of the 4IR, by encouraging the pursuit of joint military-commercial R&D from the very beginning. This also means that MCF is still very much a nascent undertaking and success is not guaranteed. Accordingly, the findings presented in this book – for each of the cases that we explore, as well as our discussions of the future of MCF in general – should be taken with certain reservations, as only time will tell how accurate they are. After all, MCF as a concept and as an innovation strategy is still relatively young, and defense establishments and industries are still testing different approaches in applying MCF to military uses. As a result, any successes or failures when it comes to implementing MCF are yet to be determined. Nevertheless, since MCF is already regarded by many as a critical avenue for future military-technological innovation, we cannot allow ourselves to postpone such an examination.

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Military–Civil Fusion A Conceptual Framework

Technology is a crucial determinant when it comes to military innovation, effectiveness, and advantage. To be sure, technology is not the end all and be all of military modernism. As Cheung, Mahnken, and Ross put it: “Technology is the most visible dimension of military innovation, but military innovation is not to be equated with, or reduced to, technological innovation … the organizational and doctrinal components of military innovation are no less significant than its technological component.”1 On the other hand, they also agree that “technology, in the form of weapons and weapon systems, serves as the source of the hardware dimension of military innovation and its concrete products.”2 Consequently, technology is one of the most critical enablers of military innovation. In theory – and, generally, in practice – the possession of cutting-edge, militarily relevant technologies equals more effective weapon systems, which in turn results in greater military power, and which then translates into greater geopolitical power. The effectiveness of advanced military technologies over the past several decades has been well documented. As demonstrated in numerous battles, when it comes to conventional operations, it is the technologically superior side that usually wins. This lesson has not been lost on aspiring world powers, such as China or India, or on regional wannabes, such as Iran or South Korea, or, indeed, on countless other nations seeking to acquire the means to best defend themselves. As a result, since the early 1990s at least, militaries around the world have been acquiring arms at a significant, perhaps even alarming, rate. Moreover, this process of upgrading and recapitalizing armed forces has entailed more than simply trading in older equipment for their newer counterparts. Replacing aging fighter jets with more sophisticated

1

2

Tai Ming Cheung et al., “Analyzing the State of Understanding of Defense and Military Innovation in an Era of Profound Technological Change,” Workshop on Comparing Defense Innovation in Advanced and Catch-Up Countries, Washington, DC, May 3, 2018, 4. Ibid.

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Military–Civil Fusion: A Conceptual Framework

versions, or swapping out old tanks, artillery pieces, warships, and so on, for more up-to-date models, has been more than “mere modernization.” Rather, each new round of acquisitions has translated into a major expansion of these nations’ capacities to wage war. Each new generation of equipment has added capabilities to militaries that they did not possess earlier – such as new capacities for force projection and precision-strike, low-observability (stealth), and greatly improved command, control, communications, computing, intelligence, surveillance, and reconnaissance (C4ISR) networks. For example, by procuring such equipment as medium-range, active-guided air-to-air missiles (such as AMRAAM or the Russian R-77), land-attack cruise missiles, and GPS-guided bombs (such as the Joint Direct Attack Munition, or JDAM), armed forces have acquired unprecedented capacities for stand-off attack with devastating firepower and accuracy. Drones and satellites have considerably expanded capabilities for reconnaissance and information-gathering while the addition of modern platforms – submarines, surface combatants, amphibious assault ships, air-refueled fighter jets, and maritime patrol aircraft – has extended these militaries’ theoretical range of action. Finally, through the application of stealth and active defenses (such as missile defense), militaries around the world are adding substantially to survivability and operational effectiveness.3 The advantage of acquiring advanced military technologies is selfevident, therefore. Complicating this state of affairs, however, we live in an era when – as previously noted in the Introduction – the notion of what constitutes a “militarily relevant technology” is becoming harder to identify and define. The 4IR – particularly AI, autonomous systems, “big data,” and the like – is largely embedded in the commercial high-tech sector; at the same time, the military potential of the 4IR is both vast and mostly self-evident. For all these reasons, therefore, militaries and governments around the world are increasingly focused on how and where advanced commercial technologies, innovations, and breakthroughs might create new capacities for military power, advantage, and leverage. This process of exploiting such civilian-based advanced technologies for military use is increasingly known as “military–civil fusion.” What Is Military–Civil Fusion? Military–civil fusion (MCF) is a relatively new label that takes to its next level a rather old idea. The term “military–civil fusion” was reportedly 3

See, for example, Richard A. Bitzinger, “Come the Revolution: Transforming the AsiaPacific’s Militaries,” Naval War College Review 58, no. 4 (Autumn, 2005): 39–61.

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What Is Military–Civil Fusion?

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first used in China when then General Secretary of the Chinese Communist Party, Hu Jintao, coined the term at the Seventeenth Party Congress in 2007. However, MCF is most closely associated with the current General Secretary Xi Jinping, who in 2015 articulated the MCF – defined as the “aligning of civil and defense technology development” – as a national priority.4 This strategy was subsequently reaffirmed in China’s 2015 White Paper on Military Strategy and then the Nineteenth Party Congress in October 2017.5 MCF is not the only term that attempts to capture the technological interaction between the civil and the military sectors, however. In addressing how civilian and military technologies – and civilian and military technological-industrial sectors – interact with each other, it has been common to use a variety of terms to describe the process: “civil–military integration,” “dual use,” “spin-on,” “spin-off,” and now “military–civil fusion.” While these terms are often used interchangeably, they describe quite dissimilar functions. Before military–civil fusion was coined, it was more common to speak of “civil–military integration,” or CMI. The classic definition of CMI is the process of combining the defense and civilian industrial bases so that common technologies, manufacturing processes and equipment, personnel, and facilities can be used to meet both defense and commercial needs. According to the US Congressional Office of Technology Assessment (OTA), CMI entails “cooperation between government and commercial facilities in research and development (R&D), manufacturing, and/or maintenance operations; combined production of similar military and commercial items, including components and subsystems, side by side on a single production line or within a single firm or facility, and use of commercial off-the-shelf items directly within military systems.”6 While CMI is mainly a process whereby civilian and military bodies cooperate in utilizing technologies and manufacturing capacities that have both civilian and military utilizations, the vague connection between military and civil also pertains to items, which are generally known as “dual use.” “Dual use” generally refers to technologies, whole systems, services, know-how, and so on, which were developed in the civilian sector, and which can 4 5

6

Toby Warden, A Revolutionary Evolution: Civil–Military Integration in China (Sydney: Australian Institute of International Affairs, October 1, 2019). Lucie Béraud-Sudreau and Meia Nouwens, “Weighing Giants: Taking Stock of the Expansion of China’s Defense Industry,” Defense and Peace Economics 32, no. 2 (2021): 162. US Congress, Office of Technology Assessment, Other Approaches to Civil–Military Integration: The Chinese and Japanese Arms Industries, OTA-BP-ISS-143 (Washington, DC: US Government Printing Office, March, 1995), 3.

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subsequently be utilized for both military and civilian purposes. Accordingly, the US government describes “dual-use technologies” as “products, services, standards, processes, or acquisition practices that are capable of meeting requirements for military and non-military” purposes.7 It is noteworthy that both CMI and dual use generally encompass two-way technology transfers between the military and commercial technological-industrial sectors, that is, military-to-civilian “spin-off” and civilian-to-military “spin-on.” MCF is like CMI in that it is also a process that involves civilian technology producers and dual-use technologies. Moreover, like CMI, MCF is essentially about transferring commercial capacity to military use, but in contrast to traditional CMI, which mostly emphasizes the harnessing of commercial manufacturing capacity to military use and the transfer of advanced military-originated technologies to the civilian sector, MCF emphasizes the fusion of cutting-edge technologies into military products through joint, civil–military technological collaboration, starting at the earliest stages of products’ R&D. The outcomes of these efforts occasionally find their way back to the civilian market after being adapted to the civilian market’s needs. In this regard, MCF should be viewed as creating a common “technology well” to which both the military and civilian R&D bases contribute and from which both can draw.8 Consequently, MCF can be seen as a “spin-together” process. Some striking examples of spin-together include semiconductors, computers, wireless communications, datalinks, infrared cameras, and the like – technologies that had been originally developed for military use and then diffused to the civilian sector, which subsequently improved on them and transferred these innovations back to the military in the form of more advanced defense products. Military–civil fusion and civil–military integration are often used interchangeably (as they will throughout this volume), and, in general, they both have the same end result – that is, leveraging commercial technological capacity for military advantage. However, there are important differences between classic concepts of CMI and current models for MCF. MCF is a military procurement process that involves joint civil– military technological efforts (R&D processes and/or integration of civil/ dual use and military items), and which includes the integration of 7 8

Christopher J. Ray, An Analysis of Expanding the Defense Industrial Base through Civil– Military Integration (Monterey, CA: Naval Postgraduate School, June, 1998), 27. Molas-Gallart, “Which Way to Go,” 376; Michael Brzoska, “Trends in Global Military and Civilian Research and Development (R&D) and Their Changing Interface,” International Seminar on Defence Finance and Economics 19, New Delhi, November 13–15, 2006, 22.

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MCF and the Fourth Industrial Revolution

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advanced civilian or dual-use technologies into military means and their development and manufacturing processes. This does not mean that MCF negates the potential contributions of integrated industrial bases. However, MCF is more about harnessing cutting-edge technological innovation in the contemporary commercial high-tech sector in support of military power than it is the other way around (which was often the case when it came to “classical” CMI). Moreover, MCF is not simply a mechanism by which to develop and produce better weapons at a cheaper price (although this is still an important task for MCF). Rather, MCF is a competitive strategy – a means by which a country attempts to gain a military-technological advantage over its competitors and adversaries. Such a definition, therefore, makes a clear distinction between “ordinary” dual-use processes and MCF and distinguishes MCF from earlier, more generic concepts of CMI. These distinctions will be further explored and expanded upon later in this chapter when we address forms and characteristics of MCF. MCF and the Fourth Industrial Revolution MCF as a competitive strategy is even more critical given the fact that the global economy and the global technology base are rapidly entering a new phase in industrialization and innovation. This new stage is generally characterized as the “fourth industrial revolution,” frequently abbreviated as 4IR. It is generally agreed that mankind has so far experienced at least three distinct industrial revolutions. The first industrial revolution began in the late eighteenth century, the age of steam power (mainly fueled by coal) and iron production, and exemplified by the first mechanized industry – that is, textiles – and the birth of the railroads. In the second half of the nineteenth century, this phase was superseded by the second industrial revolution, a period of rapid industrialization and mass production, based on steel, oil, electricity, the internal combustion engine, and heavier-than-air flight. The second industrial revolution lasted until roughly the middle of the twentieth century, and innovations from this era include electric light and power, the telegraph and telephone, wireless radio and television, and the mass use of automobiles. The third industrial revolution (3IR) – that is, the digital revolution in which we exist and operate today – began roughly around 1950 with the invention of the transistor and the first integrated circuitry. This stage is synonymous with the growing ubiquity of computers, digital telecommunications, and the Internet. Moreover, while the first two industrial revolutions were mainly periods of commercial innovation

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Military–Civil Fusion: A Conceptual Framework

consequently spun off to military applications, the 3IR was a hybrid situation, initially driven by military demands for advanced electronics (radar, digital computers and software, micro-miniaturization of electronics, missiles, satellites, etc.) but then subsequently superseded by accelerating advancements in the commercial information technologies sector that were (and are currently) spun on to the military. Now we supposedly stand on the cusp of a fourth industrial revolution, comprising AI, machine-learning, block-chains, man–machine interfaces, automation and robotics, quantum computing, and the “internet of things” (IoT).9 To be sure, both the 3IR and 4IR are based on a common foundation of digital technologies, especially information technologies. However, what distinguishes the 4IR from simply being a “3IR mk.2” is its emphasis on – and its ability to make possible on a grand scale – connectivity. As Klaus Schwab, one of the first to use the term “fourth industrial revolution,” puts it, the 4IR is “a fusion of technologies that is blurring the lines between the physical, digital, and biological spheres,” which interconnects people and things by devices “with unprecedented processing power, storage capacity, and access to [unlimited] knowledge.”10 Therefore, the 4IR is another industrial “revolution” because it “heralds a series of social, political, cultural, and economic upheavals” unseen before, which will change “the way humans create, exchange, and distribute value.” Consequently, as with previous industrial revolutions, the 4IR will “profoundly transform institutions, industries, and individuals.”11 The 4IR promises to affect military capabilities in several ways. Sarah Kirchberger describes the potential military impact of the 4IR as generating technologies that not only further strengthen the interconnections between [various military domains] but will interlink them more strongly with the outer space and cyber domains. Space and cyber are key enablers of … capabilities such as navigation, ISR, communication, and targeting, but immense computing power is necessary to interpret large amounts of sensor and other input data, with secure data links … needed to provide connectivity

9

10

11

Throughout this book, 4IR technologies are occasionally referred to as emerging technologies, and these two terms can be used interchangeably. Concerning the evolution and conceptual components of the 4IR, see Schwab, The Fourth Industrial Revolution (2017). Klaus Schwab, “The Fourth Industrial Revolution: What It Means and How to Respond,” Japan Spotlight, December 12, 2015, www.foreignaffairs.com/articles/201512-12/fourth-industrial-revolution. Klaus Schwab, “The Fourth Industrial Revolution,” Encyclopedia Britannica, March 23, 2021, www.britannica.com/topic/The-Fourth-Industrial-Revolution-2119734.

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between disparate units to allow a shared situational awareness – ideally, in realtime or near-real-time.12

To this we may also add other emerging technologies, such as additive manufacturing (i.e., 3D printing), militarization of the cyber realm, hypersonics, directed-energy weapons, electromagnetic rail guns, and stealth.13 There are several possible scenarios where the 4IR could significantly influence the battlespace of the future. One oft-cited example would involve the extensive use of armed, autonomous drones “equipped with advanced sensors, and linked to wireless command and control networks where artificial intelligence-enabled decision-making only requires human intervention when lethal force needs to be used.” While operating in large swarms, these drones could be remotely controlled “by a single soldier using improved man–machine interfaces.”14 Due to their complexity, some kinds of 4IR technologies, such as highly autonomous armed drones, are unlikely to be widely diffused – at least not in the foreseeable future; instead, the ability to develop and integrate these technologies could solely be the purview of larger, more technologically advanced countries. To be sure, the barriers to the widespread development, diffusion, and exploitation of many 4IR technologies remain high, especially for smaller militaries. Technologies tend to distribute themselves unequally, depending upon a country’s ability to access, absorb, and leverage such know-how. Nevertheless, less technologically advanced militaries are not necessarily doomed to permanent inferiority, and there exist many less-than-cutting-edge technologies that have the potential to cause outsized disruption to the regional balance of power. Consequently, even smaller militaries and nonstate terrorist and paramilitary organizations have discovered already “offsetting” alternatives that may permit them to asymmetrically compete with larger, more technologically diversified rivals. In addition, there are many discrete 4IR technologies – such as simple robots, AI, and offensive cyber systems – that could be successfully plugged into the existing force structures of 12

13

14

Sarah Kirchberger, “Maritime Power and Future of Conflict in the 21st Century: The Case of the Subsurface Domain,” Defense Innovation and the 4th Industrial Revolution: Security Challenges, Technologies, and National Responses, Nanyang Technological University, Singapore, February 19–20, 2019, 1. Peter Dombrowski, America’s Third Offset Strategy: New Military Technologies and Implications for the Asia Pacific, RSIS Policy Report (Singapore: S. Rajaratnam School of International Studies, June 2015), 5–6; see also Robert Martinage, Toward a New Offset Strategy: Exploiting US Long-Term Advantages to Restore US Global Power Project Capability (Washington, DC: Center for Strategic and Budgetary Assessments, October 27, 2014). Tuang, “The Fourth Industrial Revolution’s Impact,” 2.

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many small states. Systems such as unmanned aerial vehicles (UAVs) are already being increasingly used to complement or replace manned reconnaissance platforms and, while more innovative types of unmanned systems are so far limited in their deployment, the situation is dynamic and likely to change. Some smaller countries, for example, are already developing indigenous UAVs and experimenting with limited swarming concepts.15 Finally, it should be noted that the world in general is experiencing a revolution in networking and connectivity, via the Internet and social media. Piggybacking on huge, 4IR-related leaps in the commercial sector, many countries around the globe are actively exploring the militarization of cyber and information operations. In fact, the global military situation today is more suited than ever for cyber operations and hybrid warfare, and “the disruptive potential of cyber-technology is huge.”16 For all these reasons, therefore, there is growing interest in the potential for harvesting emerging critical commercial technologies – and particularly those technologies embedded in the 4IR – for their military potential. In addition, the proliferation of civilian-but-also-militarilyrelevant technologies is no longer simply a matter of their immediate (i.e., commercial) end-use but of all their potential uses.17 As mentioned earlier, 4IR technologies have mediate relevance to military modernization. Adapting available commercial technologies to meeting military needs can, for example, save money, shorten development and production cycles, and reduce risks in weapons development. Many militaries’ approaches to MCF have been particularly influenced by the power of the modern IT sectors, and MCF promises considerable potential to be an enabler and force multiplier in such areas as information warfare, digitization of the battlefield, and networked systems. MCF can also improve the quality of military equipment and contribute to more efficient production and acquisition of military systems. Above all, MCF can permit arms industries and militaries to leverage critical technological advances in sectors where the civilian side has clearly taken the lead in innovation. Today, this process refers to so-called 3IR technologies but increasingly 4IR technologies as well.18

15 16 17 18

Henrik Paulsson, Military-Technological Innovation in East Asia: Operational Perspectives (Singapore: S. Rajaratnam School of International Studies, 2017), 4–5. Ibid. Ariela D. C. Leske, “A Review on Defense Innovation: From Spin-Off to Spin-In,” Brazilian Journal of Political Economy 38, no. 2 (2018): 377–91. Dan Gouré, “Non-traditional Defense Companies Can Provide the Military With Unique Capabilities,” RealClear Defense, March 28, 2020, www.realcleardefense.com/

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More and more, as advanced militarily relevant technologies are increasingly found in the commercial sector, advocates for MCF have argued that dual-use technologies and commercial off-the-shelf systems (COTS) offer twenty-first-century armed forces a critical path to securing a military-technological advantage over competitors and adversaries.19 In particular, the combination of MCF and the 4IR promises to create a new set of opportunities when it comes to identifying what are novel and significant military-related technologies, how these technologies might create unanticipated, innovative military capabilities and advantage in the decades to come, and how they might be best absorbed in military R&D and armaments production.20 To elaborate on this argument, it is important to understand first the increasing limitations of the traditional defense industry to meet the demand of armed forces around the world for advanced weapons and equipment.

The Rise of the Military-Industrial Complex Despite all the importance placed on MCF, CMI, and dual-use technologies, the idea of military–civil fusion is still rather novel. This is in large part because, until around the middle of the nineteenth century, there really was no such thing as a “defense industry” to speak of.21 It is commonplace now to speak of the “military-industrial complex” (MIC), the “defense-industrial base” (DIB), or the “defense technology and industrial base” (DTIB). However, such concepts as the MIC, DIB, or DTIB are relatively recent creations. To be sure, humanity has been manufacturing weapons since the Neolithic period, and, as history progressed, there came into existence enterprises that produced weaponry and other types of instruments of war, and these could be called “defense industries.” Nevertheless, the idea of an overarching and distinct defense-industrial base is still quite novel. Throughout most of recorded history, armaments production was rather small-scale, ancillary, and generally embedded in the existing

19 20 21

articles/2020/03/28/non-traditional_defense_companies_can_provide_the_military_ with_unique_capabilities_115155.html; Lorand Laskai, “Civil–Military Fusion: The Missing Link between China’s Technological and Military Rise,” Council on Foreign Relations Blog, January 29, 2018, www.cfr.org/blog/civil-military-fusion-missing-linkbetween-chinas-technological-and-military-rise. Gouré, “Non-traditional Defense Companies.” John Curry et al., “Commercial-off-the-Shelf-Technology in UK Military Training,” Simulation & Gaming 47, no. 1 (2016): 7–30. Richard A. Bitzinger, “The Defense Industry in US History,” in Oxford Encyclopedia of American Military and Diplomatic History, ed. Timothy J. Lynch (Oxford: Oxford University Press, 2013), 313–17.

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economy of that time. The manufacture of items such as swords, pikes, shields, and the bow-and-arrow – the basic tools of warfare for thousands of years – were based on generic and universally available techniques. Warships were constructed at the same shipyards that also built trading vessels, using common production techniques and often even the same designs (such as the carrack, a common, square-rigged sailing ship). The manufacture of cannons, starting in the late middle ages, derived much of its technology from bell-making: indeed, the materials and techniques for casting cannon and bells were pretty much the same, and foundries for manufacturing church bells were often employed to make cannons.22 Only in the latter half of the nineteenth century and continuing into the twentieth century did there arise arsenals and private factories for producing rifles, ammunition, artillery, naval guns, and tanks, as well as specialized shipyards for constructing warships. In addition, beginning in World War I and continuing into the 1920s and 1930s, the fledgling aircraft sector designed and developed fighter planes and bombers.23 At the same time, however, arms manufacturing remained a relatively minor and sporadic business, rising and falling as wars and conflict (such as the American Civil War or World War I) waxed and waned. In most cases, private firms that produced arms were in the business of supplying the civilian market as much as they were producing for the military (such as Winchester Repeating Arms Company and its famous Model 1873 rifle). In other cases where government-owned enterprises predominated – such as the American Watervliet Arsenal, the Royal Naval Dockyards in Portsmouth, England, or Bofors of Sweden – they produced a highly specialized but also highly limited range of products that only a military required (destroyers, gun cannons, hydro-pneumatic recoil artillery pieces, etc.). Overall, therefore, arms production remained a peripheral business with few unique or exclusive technologies.24 Indeed, when one examines the many so-called revolutions in military affairs (RMAs) that occurred between the fifteenth and twentieth centuries, what stands out is how much these RMAs were firmly embedded in civilian technologies, products, or production methods.25 For

22 23

24 25

Hans Faulk and Andrei Chekhov were two sixteenth-century bellmakers who also cast cannons for the Russian tsar. David A. Hounshell, From the American System to Mass Production, 1800–1932: The Development of Manufacturing Technology in the United States (Baltimore: Johns Hopkins University Press, 1984). Bitzinger, “The Defense Industry in US History.” Krepinevich, “Cavalry to Computer,” 30–42.

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example, the era of the sail-powered, cannon-equipped wooden warship(“the revolution of sail and shot”) that lasted from the sixteenth to the nineteenth century, or the sixteenth-century “fortress RMA,” relied overwhelmingly on all-purpose technologies found in ship construction or large engineering projects. Even more significant is how much warfare in the middle of the nineteenth century depended on advances in the overall industrial revolution. Early industrial-age conflicts such as the American Civil War, the Crimean War, and the Franco–Prussian War of 1870 used many modern (at the time) technologies, products, or processes drawn from the civilian industrial base; troops were transported by railroads, military communications relied on the telegraph, rifles were manufactured using mass-production techniques (such as standardized and interchangeable parts) first introduced for commercial products. The Bessemer process permitted for the first time the use of cheap steel in warship production (culminating in the unprecedented “Dreadnought” warship concept) while trucks, telephones, and mass production in general revolutionized battlefield operations during World War I. As Chin put it, the “technological needs of the armed forces ‘were met out of the same scientific and technical knowledge that manufacturing industry had put to use in satisfying its commercial needs.’”26 Even rapid maneuver warfare in the twentieth century, epitomized by German blitzkrieg operations during the early years of World War II, depended on such commercial technologies as the internal combustion engine and two-way radio.27 At the same time, World War II was a critical inflection point for the global arms industry and, therefore, for the idea of MCF, and it accelerated during the subsequent Cold War. Globalized conflict, in one form or another, became permanent and continual; as a result, there was a requirement for a sizable, stable, and dedicated defense technology and industrial base that could meet the needs of large militaries locked in mutual competition and demanding the most technologically advanced military equipment available. After 1945 in particular, it was increasingly apparent that commercial industries could not keep up with the technological demands of postwar armed forces, which placed a premium on technological innovations that purposely benefitted modernizing militaries.28 In particular, the military increasingly required specialized systems for which there was either no civilian analog – such as nuclear weapons, nuclear propulsion, missiles, 26 27

Warren Chin, “Technology, War, and the State: Past, Present, and Future,” International Affairs 95, no. 4 (2019): 767. 28 Ibid., 767–8. Ibid.

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armored vehicles, and so on – or where the commercial sector at the time lacked the money, manpower, or public demand to function as an incubator for these technologies, for example, jet propulsion, satellites, and microelectronics (beginning with the transistor). In such a situation – where the need was so critical – the immediate postwar period inevitably saw the need for a permanent, stand-alone militaryindustrial complex. That meant that the state had to become more directly and intimately engaged in the business of producing arms, since only governments could marshal the vast resources to finance and oversee the kind of specialized R&D required to deliver innovation to modern militaries.29 Consequently, between 1945 and 1990, there emerged, around the world, companies and enterprises dedicated almost solely to armaments production. Moreover, these industrial sectors were almost entirely sealed off from the rest of the economy; these firms or factory enterprises existed entirely (or almost entirely) to develop, design, and produce modern weaponry and other military equipment: combat aircraft, missile systems, tanks and other armored vehicles, submarines, warships, artillery systems and ordnance, small arms, radar, communications systems, computers, trucks, jeeps, uniforms, protective equipment, and other specialized metals. This process of establishing exclusively defense-oriented companies and enterprises took place in the capitalist West, the communist East, and the developing world. In North America, Western Europe, and the rest of the liberal-democratic world, private companies – such as Lockheed, Bath Iron Works, Avro Canada, Dassault, Saab, English Electric, and Mitsubishi Heavy Industries – made headlong dives into armaments production. The Soviet Union created several “people’s commissariats” (later ministries) to produce fighter aircraft, bombers, naval vessels, and ordnance, while communist China established several machine-building ministries for manufacturing military materiel. In the 1950s, 1960s, and 1970s, governments throughout the developing world set up several state-owned enterprises for producing armaments including Brazil’s Empresa Brasileira de Aeronáutica (Embraer), Armscor (South Africa), Hindustan Aeronautics Ltd. (India), Israel Military Industries (IMI), Taiwan’s Aerospace Industrial Development Corporation (AIDC), the Pakistan Aeronautical Complex, IPTN (Indonesia), and so on.30 29 30

Keith Krause, Arms and the State: Patterns of Military Production and Trade (Cambridge: Cambridge University Press, 1992), 82. Richard A. Bitzinger, Towards a Brave New Arms Industry? Adelphi Paper 43, no. 356 (London: International Institute for Strategic Studies, 2003), 16–40.

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Nowhere was the emergence of such a dedicated, far-reaching, and sizable defense-industrial base more striking than in the United States. Before World War II, the United States possessed only a very small defense industry, just a handful of government-run arsenals and shipyards, and armaments production was a minor and marginal business. It experienced a brief flowering during the American Civil War (1861–5) when the needs of modern warfare spurred the development of many technologies, such as ironclad ships, repeating rifles, and the revolving gun turret. However, after that and each other war (the Spanish– American War, World War I), the US defense industry lapsed back into near inertia. As US forces shrank (for example, the US Army fell from over one million soldiers during the Civil War to around 27,000 men in the latter third of the nineteenth century), the US military’s need for ordnance waned accordingly. Similarly, naval shipbuilding went into abeyance, and it did not recover until the late 1880s. Moreover, US wars of the late nineteenth and early twentieth centuries were too short to have much of an impact on the national arms industries; for example, during World War I, US forces were forced to rely on the British and the French for tanks, artillery, machine guns, combat aircraft, and even helmets.31 Again, it was World War II that brought the US defense industry into the American mainstream. The impact of war production on the United States after 1939 was immediate and unmistakable. This was the era of “total war,” and armaments production transformed American life economically, socially, and politically. In terms of the national economy, most civilian manufacturing was interrupted as automobile factories converted over to manufacturing tanks, aircraft engines, and bombers, and as steel companies delivered steel plates to shipyards constructing destroyers, aircraft carriers, and submarines. Whole communities, in fact, came to depend on defense production. Additionally, as arms manufacturing became one of the country’s leading employers, it created new opportunities for previously disadvantaged groups such as women and African Americans. After World War II, the United States progressed almost seamlessly from being the “arsenal of democracy” to harboring the “military-industrial complex.” The US defense industry, instead of engaging in its usual postwar retrenchment, expanded during the Cold War era. More important, the private sector supplanted the

31

Davis Longenbach, “As the US Entered World War I, American Soldiers Depended on Foreign Weapons Technology,” The World, November 12, 2018, www.pri.org/ stories/2018-11-12/us-entered-world-war-i-american-soldiers-depended-foreign-weaponstechnology#:~:text=The%20basic%20infantrymen%20of%20the,the%20world%20at% 20the%20time.

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government-run arsenals and shipyards when it came to armaments production, and companies such as Lockheed, Northrop, General Dynamics, Newport News Shipbuilding, and North American Aviation became industrial leaders. Additionally, this commercial arms industry, powered by billions in US government funds for R&D, began to exert considerable influence over the technological and industrial development of postwar America. Finally, and perhaps most critically, armaments production became a big business, as defending the Western Bloc became central to US grand strategy. US defense spending rose dramatically – averaging around 7 to 10 percent of the country’s gross domestic product during the 1950s and 1960s – and defense contracts were secured in nearly every congressional district. This eventually resulted in the emergence of an “iron triangle” encompassing the military, the arms industry, and Congress, and it saturated the US political system (see Chapter 3).32 Apropos to the themes of this book, the global military-industrial complex that arose after World War II became the driver for some of the most important technological breakthroughs of the early Cold War era. From the 1940s to the 1970s, innovations in such areas as jet propulsion, rocketry, microwaves, radar, nuclear energy, rotary flight, microelectronics, telecommunications, and computing all had their genesis within the defense industry. Well into the Cold War era, even, the defense sector was instrumental in the development of the Internet, satellite navigation, wireless communications, and virtual reality.33 Arms manufacturing also had an impact on the development of such advanced production techniques as computer-aided design/computeraided manufacturing (CAD/CAM), numerical-controlled machine tooling, and modular shipbuilding, or advances in metallurgy and composites. In fact, much of the third (i.e., digital) industrial revolution had its roots in the military-industrial complex, initially at least. Heinrich’s study on military contracting during the early years of Silicon Valley revealed that “the government played a major role in launching and sustaining some of the region’s core industries through military contracting,” including the “microwave electronics, missile, satellite, and semiconductor industries,” and that the “demand for customized military

32 33

Bitzinger, “The Defense Industry in US History.” Chin, “Technology,” 770. See also Alic et al., Beyond Spinoff; Stuart W. Leslie, The Cold War and American Science: The Military-Industrial-Academic Complex at MIT and Stanford (New York: Columbia University Press, 1993); Jon Schmid, “The Diffusion of Military Technology,” Defence and Peace Economics 29, no. 6 (2018): 595–613.

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technology encouraged contractors to embark on a course of flexible specialization, batch production, and continuous innovation.”34 During the 1950s and 1960s, many Silicon Valley firms owed their origins, as well as the bulk of their initial revenues, to military contracts. This was particularly true when it came to microwave electronics (Silicon Valley’s first “high-tech industry,” according to Heinrich), as well as the region’s missile, satellites, and space electronics sectors (such as Lockheed Missile & Space Corporation, Philco [later Ford Aerospace], and Westinghouse).35 At the same time, the immediate postwar development of the US computer industry – both in terms of hardware and software – was also heavily supported and subsidized by the federal – and, especially, Defense Department – spending.36 During the 1950s, for example, the Silicon Valley–based semiconductor manufacturer Fairchild (one of the first makers of solid-state circuitry) sold half of all its output of transistors to the military.37 As Heinrich put it: Military demand for sophisticated designs and products shaped the structures and dynamics of Silicon Valley’s defense-tech industries, which included the microelectronics sector of the 1950s and 1960s. The result was a large variety of complex systems such as missiles featuring ever increasing degrees of accuracy, electronic warfare systems that collected and decoded exponentially growing amounts of data, customized microelectronics systems that turned military hardware into “smart weapons,” and military satellites that transmitted increasingly detailed images of “enemy” weaponry and troops in real time.38

Such technologically demanding armaments production required considerable resources and administration. Consequently, the state increasingly played an instrumental role in establishing and nurturing these postwar arms industries, and governments became intimately and actively involved in defense industrialization.39 As Chin put it: The role of the state was vital because it was the state that provided the critical financial resources required to take embryonic technologies and develop them at a speed unlikely to be matched by the civilian market. This facilitated a profound change in the relationship between the state and private industry and undermined the operation of the free market as governments opted to support defense

34 35 36

37 39

Thomas Heinrich, “Cold War Armory: Military Contracting in Silicon Valley,” Enterprise & Society 3, no. 2 (2002): 247. Ibid., 252–5, 258–67. David C. Mowery and Richard N. Langlois, “Spinning Off and Spinning On(?): The Federal Government Role in the Development of the US Computer Software Industry,” Research Policy 25, no. 6 (1996): 947–8. 38 Heinrich, “Cold War Armory,” 267. Ibid., 278. David E. H. Edgerton, “The Contradictions of Techno-Nationalism and TechnoGlobalism: A Historical Perspective,” New Global Studies 1, no. 1 (2007): 1.

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contractors capable of conducting large and complex forms of research and development (R&D).40

Defense production became a major preoccupation of the state, therefore. In many instances, arms manufacturing was either wholly or partly dominated by the state, through military-run or state-owned and -operated enterprises. While this could be expected in countries with state-run economies – the Soviet Union, communist China, or Nehruvian India – state-owned defense industries could also be found in many largely freemarket economies (e.g., France, Sweden, and Australia). In most developing countries (e.g., Brazil, Israel, Indonesia, and Taiwan), the state was often the only national actor capable of financing or managing the process of arms manufacturing. Even where weapons manufacturing was embedded in private industry – such as in the United States, Britain, Japan, or South Korea – governments generally underwrote defense production via direct support for R&D, guaranteed military contracts, tax incentives, monopoly sourcing, and other types of investments.

Challenges Facing the Military-Industrial Complex and the Growing Appeal of MCF The period running from 1945 to roughly the mid-1990s could be considered the “golden age” for the global arms industry. Around the world, modern militaries were increasingly demanding ever more complex, state-of-the-art military equipment, driven in large part by the ongoing Cold War and a resulting arms race. In response, governments in many industrialized and developing states undertook efforts to support the emergence and maintenance of dedicated military-industrial complexes. Beginning in the early 1990s, however, this classical model of the siloed and sealed-off military-industrial complex began to fray. This unraveling could be attributed to two changes. The first was the growing “affordability problem” with modern weapons systems, compounded, in many cases, by the first major downturns in postwar defense spending. As Figure 2.1 shows, since the last decade of the Cold War, in countries that possess advanced defense industries, governmental R&D expenditures on defense have decreased constantly. At the same time, the share of nongovernment spending on R&D has increased. In the case of the United States, for example – a leading world player in the realm of MCF – nongovernmental R&D expenditures rose from 49 percent to 40

Chin, “Technology,” 769.

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80 70

Percent

60 50 40 30 20 10

France

Germany

United Kingdom

United States

2019

2017

2015

2013

2011

2009

2007

2005

2003

2001

1999

1997

1995

1993

1991

1989

1987

1985

1983

1981

0

Italy

Figure 2.1 Defense R&D expenditure as a share of total government’s R&D expenditure, 1981–2019: Select countries Source: Organization for Economic Co-operation and Development (OECD), “Main Science and Technology Indicators,” https://stats.oecd.org/Index.aspx? DataSetCode=GBARD_NABS2007

63 percent, an increase of nearly 30 percent overall (see Figure 2.2). The second development occurred when innovation in the commercial sector began to outstrip the capacities of the MIC; subsequently, there was a systemic shift in technological invention and innovation from the military to the civilian R&D sector. This change was particularly critical when it came to information technologies (IT), at a time when many armed forces were increasingly focused on exploiting IT for new military capabilities.41 At the same time, the end of the Cold War ushered in an unprecedented period of austerity for many militaries. The “peace dividend” of the 1990s saw significant defense spending cuts in the West, in former Warsaw Pact countries, and especially in Russia.42 In the United States, the defense budget fell by 28 percent in real terms from 1990 to 1998. During this same period, military expenditures fell 12 percent in France, 21 percent in the United Kingdom, and 31 percent in Germany. 41 42

See, for example, Michael E. O’Hanlon, The Science of War (Princeton: Princeton University Press, 2009), 189–90. Molas-Gallart, “Which Way to Go,” 367–8.

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Military–Civil Fusion: A Conceptual Framework 80 70 60

Percent

50 40 30 20 10 0 1981

1990 France United Kingdom

1995

2005 Germany

2010

2015 Italy

United States

Figure 2.2 Business sector’s share of national R&D, 1981–2015: Select countries Source: Organization for Economic Co-operation and Development (OECD), https://stats.oecd.org/Index.aspx?DataSetCode=GBARD_NABS2007

Between 1992 and 1998 (the only years for which data is available), Russian defense spending fell by more than two-thirds.43 As a result, at the time, it was often argued that it was no longer “economically viable” to have two separate industrial bases, one military and one civilian. Rather, only by integrating them could militaries “exploit the market-driven efficiencies of the commercial sector.”44 Admittedly, this argument lost much of its salience in subsequent decades, when military expenditures in countries like the United States, Israel, and Russia began to rise again during the 2000s and 2010s (in China, defense budgets grew consistently and quite significantly – on average, about 10 percent a year, in real terms – over this same period). Nevertheless, many countries – particularly in Western 43 44

Data derived from SIPRI, “Military Expenditure Database.” Ray, An Analysis, 27.

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and Central Europe – still experienced years of stagnant defense spending. More than simple increases and cuts in defense budgets, militaries have been hit by the rising cost of new military systems. To use just one example – fighter jets – the price tag for each new generation of combat aircraft has climbed significantly, even after allowing for inflation: The three Joint Strike Fighter aircraft all cost much more than their predecessors. A F-35A Joint Strike Fighter costs approximately $100 million, far more than the $35–40 million of the F-16 it replaces. The $131.2 million carrier-borne F-35C Joint Strike Fighter replaces the $65 million F/A-18C Hornet, a 100 percent increase. The Marine Corps’ F-35B costs $131.6 million each, way up from the $50 million AV-8B Harrier II and the $60 million F/A-18 Hornet. The biggest cost difference is in air superiority fighters. The F-22 Raptor cost approximately $250 million, replacing the F-15 Eagle which cost $65 million each.45

Of course, each generation of fighter jets may be “exponentially better” than the one it replaces,46 but that did not resolve the affordability factor when it came to developing the next new combat aircraft system. If anything, the pressure to find savings in the R&D process by leveraging possible cost-offsetting technologies in the commercial sector had only become greater.47 This brings us to the second argument in favor of MCF, that is, the appeal of accessing cutting-edge high technology in the commercial sector. Proponents of MCF frequently assert that the “dynamic of innovation” has shifted from the military to the civilian/commercial sector. During the Cold War, this argument goes, the most advanced innovations and inventions occurred in the defense technology and industrial base: aerospace, solid-state microelectronics, computers, semiconductors, software, and so on. Since the late 1990s, however, this has changed, and now commercially based technologies are increasingly seen as having greater potential for military applications. Around 90 percent of all global, contemporary R&D spending is basically for civilian purposes,

45

46 47

Kyle Mizokami, “This Chart Explains How Crazy-Expensive Fighter Jets Have Gotten,” Popular Mechanics, March 14, 2017, www.popularmechanics.com/military/weapons/ news/a25678/the-cost-of-new-fighters-keeps-going-up-up-up. See also Loren Thompson, “Age and Indifference Erode U.S. Air Power,” in Of Men and Materiel: The Crisis in Military Resources, eds. Gary J. Schmitt and Thomas Donnelly (Washington, DC: AEI Press, 2007), 77–81. Ibid. Molas-Gallart, “Which Way to Go,” 367–8; Guy Paglin, Merutz hachidush: Technologiot mishariot vetzvai’yot bee’mtzaei lehima – nekudat ha’izun hamatima (The innovation race: Commercial and military technologies in military systems – The right balance) (Haifa: Chaikin Chair in Geostrategy, 2018), 8–9.

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and commercial R&D is ten times greater than military R&D.48 This trend is particularly apparent in the broad field of information technologies, where critical breakthroughs are increasingly found in civilian hightech industries; these include wireless and cellular communications (particularly 4G and 5G broadband networking), the Internet, social media, quantum computing, AI, robotics block-chains, big data, and the like. At the same time, military technologies and innovations are considered too esoteric and too arcane for commercial use, negating possibilities for the kinds of spin-off that existed during the Cold War.49 Consequently, the appeal of dual-use technologies – ones that are associated with the commercial high-tech sector but which have applications for military systems – has only grown in recent years. The potential benefits of exploiting such dual-use technologies for military uses are numerous. In the first place, they permit expanded access to new and cutting-edge technologies outside the defense technology and industrial base. They can also expand the prospective national innovation base for military systems, thereby lowering costs for military R&D and better leveraging R&D funding. Moreover, the successful exploitation of dualuse technologies in the defense sector can help create an “integrated national industrial base” that would inject greater competition into defense contracting, thereby promoting innovation while reducing procurements costs, life-cycle costs, and acquisition times. Finally, they may also provide improved surge capacities (i.e., the ability to ramp up armaments production in times of emergency) and greater overall national economic competitiveness.50 Utilizing these benefits through the exploitation of MCF has considerable implications for states’ military buildup and readiness, and, as part of it, for arms development and production. The military-industrial complex, which has enjoyed a near monopoly over these activities since the mid-twentieth century through the present, should be increasingly conceived as part of a national integrated industrial and technological base, which is commonly referred to as the “national innovation

48

49 50

Brzoska, “Trends in Global Military,” 1, 6. See also US Department of Defense, Defense Business Board, “Guiding Principles to Optimize DoD’s Science and Technology Investments: Task Group Update,” January 22, 2015, https://dbb.defense .gov/Portals/35/Documents/Meetings/2015/2015-01/RD%20Task%20Group%20Final %20Brief_6Feb2015.pdf. Molas-Gallart, “Which Way to Go?” 367–8. OTA, Assessing the Potential for Civil–Military Integration: Technologies, Processes, and Practices, OTA-lSS-611 (Washington, DC: US Government Printing Office, September, 1994), 47–8; Ray, An Analysis, 27–8, 49–51; Molas-Gallart, “Which Way to Go,” 371–4.

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system.”51 This model entails a coordinated and integrated network of several innovation actors and systems, operating in a more or less bonded process (i.e., enforcing or incentivizing cooperation and knowledgesharing). It includes such institutions as research universities, government laboratories, and corporate R&D institutes, as well as public and private manufacturing enterprises – all of whom would be guided and supported via government funding and direction (the National Science Foundation, the Defense Advanced Research Projects Agency [DARPA], the Chinse Academy of Sciences, China’s Central Commission for Integrated Military and Civilian Development, etc.). Within such a national innovation system, knowledge (i.e., R&D) would be widely shared between the various institutions and actors, who would then engage jointly in a variety of dual use or joint development of hightech military and commercial systems. Ideally, under such an innovation system, the national defense technology and industrial base would be able to draw from this common well of technologies and innovations and thereby be able to deliver to its customers (i.e., the national military and foreign buyers) the best product for the least costs.

Forms of Military–Civil Fusion Ideally, the involvement of civilian players and commercial know-how in the military research–development–acquisition (RDA) cycle can take place in different forms and in all major phases of the process: system requirements definition, R&D, production, and through-life support. A pioneering report by the US Congressional Office of Technology Assessment (OTA) argued that commonly accepted concepts of civil– military integration encompass “a number of different activities, each of which is viewed as an element of integration.” The OTA report goes on to state: For example, those advocating the increased use of non-developmental items, including commercial off-the-shelf items, consider such use to be CMI. Analysts recommending changes in government acquisition laws to promote combined R&D, or production of civilian and defense products on a single assembly line, consider such changes to be CMI. Others maintain that CMI involves increased cooperation between government research facilities and the private sector, in both R&D and manufacturing technologies. Still others claim that the rationalization of private and public depot-level maintenance facilities 51

Tariq H. Malik, “Defense Investment and the Transformation National Science and Technology: A Perspective on the Exploitation of High Technology,” Technological Forecasting & Social Change 127 (2018): 200–1; Ray, An Analysis, 27–8.

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(e.g., transferring jet aircraft engine maintenance and overhaul from military facilities to existing private sector facilities) is a component of CMI.52

Like CMI, military–civil fusion is more readily understood as a concept or idea whose execution has nevertheless proven to be much more difficult to realize. This is due in large part to the long-standing separation between civilian and military industrial bases. As detailed in the following chapters, in most countries, defense industries have functioned akin to hot-house flowers, siloed and protected from the vagaries of the free market.53 Implementing MCF, therefore, requires tearing down the high walls between the commercial and military sectors. This has led to several strategies, initiatives, and proposals for harnessing technological innovation in the commercial high-tech sector in support of the military. To set the stage for a comprehensive analysis of MCF implementation’s challenges and strategies, this section explores the various forms in which CMI and MCF can take place. In general, these forms have been traditionally grouped in one of three different approaches: spin-off, spinon, and dual use. Each will be addressed in turn. Spin-off is the process of applying military technology to commercial products. As already noted, during the Cold War, military R&D was a key player in many areas of science and technology. Military requirements particularly drove R&D efforts in the early decades of the Cold War, especially in electronics and new materials. Such innovations were then spun off, usually spontaneously, to the commercial sphere, for example, the transistor radio.54 Other areas where substantial spin-off has occurred include space systems (both manned space and satellites), the Internet, Global Positioning System (GPS) navigation, solar cells, digital cameras, and drones. Spin-off also usually refers to defense conversion or diversification. Defense conversion or diversification usually entailed the transition of existing defense facilities to manufacturing civilian products or the broadening of a defense company’s business into commercial product lines. Voss defines conversion as: The conversion of military capacity to civilian capacity. It implies that the company stops making some military products and changes over to civilian ones. People who were working on military projects then work on civil ones

52 53 54

OTA, Assessing the Potential, 43. Ronald J. Fox, The Defense Management Challenge: Weapons Acquisition (Boston: Harvard Business School Press, 1988), 300–8. Brzoska, “Trends in Global Military,” 19–20.

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and factory facilities that were being used for military products are turned over to the civil workforce.55

Conversion and diversification usually entail a defense company either starting a whole new commercial product line or else acquiring a commercial firm. This approach was particularly fashionable during the 1990s, when governments around the world initiated major cuts in defense spending in the wake of the ending of the Cold War (the socalled “peace dividend”). As defense enterprises scrambled for new sources of revenues, entering the commercial business seemed like a good idea. In the United States, Boeing diversified into manufacturing light rail cars (expecting a boom in federally funded and supported public transportation), Grumman built buses and solar panels, Martin Marietta got into energy and environmental services, and McDonnell Douglas entered the real estate business.56 China and Russia had their own forms of defense conversion. At the directive of their government, Chinese military-industrial enterprises began in the 1980s to produce everything from cardboard boxes to refrigerators to small automobiles. By the mid-1990s, 70 percent of all taxicabs, 20 percent of all cameras, and two-thirds of all motorcycles produced in China came out of converted weapons factories.57 By the late 1990s, upwards of 90 percent of the value of China’s defense industry output was estimated to be nonmilitary.58 For its part, Russia initiated an effort to get into the commercial airliner business, such as the Ilyushin Il-114 turboprop or the Sukhoi Superjet 100. It is probably more accurate to say that spin-off is a form of civil– military integration but not military–civil fusion. As clarified previously, military–civil fusion is mainly intended to aid the defense technology and industrial base directly, in the form of channeling advanced commercial technologies to the military technology and industrial sectors. CMI, in the form of conversion or diversification, was mainly a business tactic to keep defense firms operationally viable and financially solvent, and thereby able to remain in business and deliver defense products to its 55 56 57 58

Anthony Voss, Converting the Defense Industry (Oxford: Oxford Research Group, 1992), 1. Ray, An Analysis, 41. “PRC Defense Industry Turning Swords into Ploughshares,” Xinhua, September 29, 1997. John Frankenstein, “China’s Defense Industries: A New Course?” in People’s Liberation Army in the Information Age, eds. J. C. Mulvenon and R. H. Yang (Santa Monica, CA: RAND, 1999), 208; Paul H. Folta, From Swords to Plowshares? Defense Industry Reform in the PRC (Boulder: Westview Press, 1992); Jorn Brommelhorster and John Frankenstein (eds.), Mixed Motives, Uncertain Outcomes: Defense Conversion in China (Boulder: Lynne Rienner Publishers, 1997).

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key customer (i.e., the military). In the face of declining defense budgets and military procurement, defense conversion or diversification was seen as a smart way to avoid layoffs, plant closings, and business failures.59 It was also perceived as a good strategy to reduce a defense firm’s dependencies on one particular market (i.e., the arms business) or one major customer. As a means of locating and channeling breakthrough commercial technologies into the defense technology and industrial base, however, spin-off was a bit of a flop. Moreover, by the late 1990s, it was all too apparent that spin-off in the form of conversion or diversification was a failure as an economic readjustment strategy for national arms industries. Particularly in the United States, defense companies entered business areas where they were largely ignorant. They tended to be unfamiliar with their potential markets, with the free-market vicissitudes of their customer base, and with the fact that engineering for commercial products was very different from their accustomed defense R&D procedures.60 As Christopher Ray put it, when it came to CMI, “defense conversion proved to be the riskiest policy.”61 Defense conversion largely failed in other countries as well. Saab of Sweden attempted to diversify into commercial passenger jets, but its Saab-340 and Saab-2000 family of turboprop airliners was unable to secure enough orders. Chinese military factories manufactured lowquality civilian goods, and these products became uncompetitive in the face of new joint-venture companies that were set up in the thousands during the 1990s and 2000s and which received considerable amounts of advanced technologies from the West and other industrialized nations, such as South Korea and Taiwan. In fact, most defense firms either quickly abandoned or else never even attempted defense conversion and remained entrenched in military production. In addition, when global defense spending began to rebound in the twenty-first century (accompanied by a corresponding increase in the global arms trade), arms manufacturers felt much less pressure to convert or diversify into the civilian sector. Spin-on, conversely, refers to the transfer of civilian-derived technologies, processes, or innovations to the defense technology and industrial base. Spin-on applies not only to civilian-led technologies but also to human capital (know-how and skills), manufacturing processes, and 59 60 61

Ray, An Analysis, 25. Ibid., 39–42. See also Eugene Gholz and Harvey M. Sapolsky, “Restructuring the US Defense Industry,” International Security 24, no. 3 (2000): 30–5. Ray, An Analysis, 82.

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management techniques originally sourced in the commercial sector. What particularly differentiates “spin-on” is that the civilian sector takes the lead; for example, new weapons systems or other pieces of military equipment are based on or derived from technologies or products initially developed for civilian purposes, and which are then shared with the military R&D base or sold directly to the military.62 Sometimes, spin-on can be as straightforward as the use of COTS products. For example, large commercial aircraft originally built for the commercial market – such as the Boeing 707 and 767, or the Airbus A330 – have been widely adapted for military purposes (e.g., as airborne early warning [AEW] aircraft, transport planes, aerial tankers, and surveillance aircraft). Similarly, commercial jet engines have often been used to power military aircraft (like the C-17 cargo plane, which uses the Pratt & Whitney PW2000 turbofan). Other COTS products used widely by militaries include helicopters, trucks, software, and commercial satellite imagery. In other cases, militaries have modified commercial technologies and ideas; for example, the US armed forces have developed several smartphone apps specifically for the military. Finally, military and commercial manufacturing can take place in the same facilities or utilize the same equipment. For example, military uniforms can be produced at the same factory where commercial clothing is made.63 Naval shipbuilding often takes place in the same yards that also construct commercial vessels, utilizing the same machine tools or production facilities (e.g., drydocks, slipways, piers, cranes, and fabrication huts) and even the same personnel (e.g., engineers, project managers, welders, electricians, boilermakers, and painters). As detailed in Chapter 4, the twenty-first century saw an acceleration and expansion of spin-on in the Chinese military-industrial complex as well, and China began to seriously pursue the idea of leveraging advanced technologies and manufacturing processes found in the commercial sector to benefit defense R&D and production.64 Spin-on was viewed as a fast (or at least faster) and ready means to shortcut the military R&D process. This strategy was embodied in the principle of Yujun Yumin (locate military potential in civilian capabilities), first 62 64

63 Brzoska, “Trends in Global Military,” 23. OTA, Assessing the Potential, 33. Eric Hagt, “Emerging Grand Strategy for China’s Defense Industry Reform,” in The PLA at Home and Abroad: Assessing the Operational Capabilities of China’s Military, eds. Roy Kamphausen et al. (Carlisle, PA: US Army War College, July, 2010), 481–4; Brian Lafferty et al., “China’s Civil–Military Integration” (SITC), Research Brief 2013, January 10, 2013, 58; James Mulvenon and Rebecca Samm Tyroler-Cooper, China’s Defense Industry on the Path of Reform, China Economic and Security Review Commission (Washington, DC: October 2009), 57–8.

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enunciated at the Sixteenth Party Congress in 2002, as well as the 2006–20 Medium and Long-Term Science and Technology Development Plan (MLP) and the parallel 2006–20 Medium and Long-Term Defense Science and Technology Development Plan (MLDP).65 The timing of this strategy was not accidental. It gathered momentum just as leading Chinese firms and universities started catching up with the rest of the world and for the first time were able to provide the domestic military sector with advanced technologies to which it had previously little or no access. Key areas of China’s focus during this period included microelectronics, space systems, new materials (such as composites and metal alloys), propulsion, computer-aided manufacturing, and particularly information technologies. At the same time, Beijing encouraged domestic industries to invest in new advanced manufacturing technologies, such as CAD/CAM, multi-axis machine tools, and modular ship construction. Consequently, China’s aggressive pursuit of advanced commercial technologies development and their subsequent spin-on onto the defense sector has paid off in several areas including missiles and space, satellites, aircraft production,66 and especially shipbuilding. In the case of the latter, China’s military shipbuilding sector particularly profited from spin-on, as Chinese shipyards, with considerable assistance and technology inputs from overseas shipbuilding firms, greatly modernized and expanded their operations. China built new dry docks and acquired advanced ship designs and manufacturing technologies, particularly CAD (such as three-dimensional blueprinting) and modular construction techniques. As a result, collocated military shipbuilding programs were able to leverage these improvements when it came to design, development, and construction, and this has been evident in the comparatively higher quality and capacity of warships being delivered to the Chinese Navy since the 2010s.67 The Chinese military has also benefitted from piggybacking on the development and growth of the country’s commercial information and communications technology industry. According to Mulvenon and Tyroler-Cooper, the digitization of the People’s Liberation Army (PLA) has been greatly aided by the “growing use of COTS,” which has permitted the PLA to “directly 65 66

67

Mulvenon and Tyroler-Cooper, China’s Defense Industry, 5. In the aviation industry, for example, the Chinese acquired a number of advanced numerically controlled machine tools from McDonnell Douglas during the 1980s and 1990s, for use in commercial aircraft production; at least initially, however, end-user restrictions kept these from being diverted to military use. Evan S. Medeiros et al., A New Direction for China’s Defense Industry (Santa Monica, CA: RAND, 2005), 140–52.

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benefit from the globally competitive output of China’s commercial IT companies.”68 However, China’s experiences with COTS also show that efforts to implement spin-on can face serious hurdles. COTS-based acquisitions are still rare, and they have generally been confined to a few areas where a commercial product is a relatively clear-cut solution, for example, using and adapting a commercial airframe for military purposes. In more cases than not, there simply exists no corresponding civilian product (fighter jets, artillery systems, submarines, and so on) upon which to base a military system. In addition, militaries often maintain strict acquisition rules that greatly limit the use of commercial products or technologies.69 Among other things, for reasons of legislation or standard operating procedures (SOPs), the bid or request for proposal occasionally includes a requirement for a concrete technology, thus excluding a priori innovative civilian products or technologies. Similarly, defense acquisition bodies often incline to work with suppliers that are familiar with and responsive to the military’s professional jargon, organizational culture, and complex acquisition environment. Civilian firms only seldom fit into this mold.70 In addition, some commercial businesses may find defense contracting too complicated or too uneconomical to be worth the hassle (for example, the production volumes for a specialized military computer chip may be too small to be considered profitable), or they may not wish to release their technologies or intellectual property rights (IPR) to the military. Finally, since so much commercial manufacturing nowadays is being undertaken using global technology and industrial supply chains, IPR release could be difficult – indeed, many militaries are likely to be equally loath to depend on imported components or technologies.71 Aware of these hindrances, defense establishments and military acquisition experts have suggested alternative solutions. Among these are financial incentives for joint civil–military R&D projects, the opening of military acquisition bids to civilian firms, reduction of administrative and legislative burden involved with military bids and contracts, legal protection for firms’ IPR when being utilized in military projects, and recruitment of civil scientists and academic institutes for military R&D projects. As our country studies show, however, the implementation of these and other methods is contextualized by concrete local conditions and takes 68 69 70

71

Mulvenon and Tyroler-Cooper, China’s Defense Industry, 35–7. OTA, Assessing the Potential, 46. Paglin, Merutz hachidush, 74; Peter J. Dombrowski and Eugene Gholz, Buying Military Transformation: Technological Innovation and the Defense Industry (New York: Columbia University Press, 2006), 138–9. OTA, Assessing the Potential, 45–6, 49, 73–4.

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different forms in each state. These conditions and forms of implementation ultimately decide their results. Finally, a joint civil–military R&D effort at the earliest stages of a technology development process may occasionally take place in order to benefit both sectors with the new technology. Such a strategy is regarded here to be dual-use development (not to be confused with dualuse items). Rather than the military or the commercial sector propagating technologies or innovations within their own particular spheres and then sharing these out via spin-off or spin-on, dual-use development advocates the joint development of technologies that can have both military and commercial applications. In particular, dual-use development strategy centers around the idea of “developing generic knowledge and technology,” and the “general idea is to have military and civilian R&D contribute to a technology ‘pool’ from which both civilian and military users of technology can draw.”72 Like spin-on and spin-off, dual-use development strategies strive to reduce costs of developing and manufacturing new weapons systems while also promote a stronger defense-industrial base. And as with other forms of civil–military integration, dual use can apply to a broad spectrum of “technologies, knowledge, skills, production processes, management techniques that have current or prospective military and civilian applications.”73 However, dual-use development strategy differs significantly from spin-on and spin-off in one key respect: its primary focus is on promoting joint, cooperative, civil–military collaboration at the earliest stages of R&D – even at the level of basic and applied scientific research, if possible. Given this emphasis on the early-stage pursuit of joint technology development, dual-use development strategy could perhaps be better described as a spin-together strategy. As such, it probably best describes the present-day approaches and practices of contemporary MCF, as this book conceptualizes. In addition, dual-use development strategies can be either concurrent or integrated. Concurrent dual use concerns those technologies or products that have been developed in parallel but in ways that were also connected and mutually supporting. Brzoska has dubbed this process “warfare and welfare”: In some countries, beginning in the 1960s, governments … pursued a dual course of promoting military and civilian technology simultaneously, including

72 73

Brzoska, “Trends in Global Military,” 22. Haico te Kulve and Wim A. Smit, “Civilian–Military Co-operation Strategies in Developing New Technologies,” Research Policy 32, no. 6 (2003): 958.

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their mutual interaction. While sectors remain institutionally separate, cooperation [was] actively encouraged. This approach was, for instance, adopted in France from the mid-1960s. Military R&D received priority but was implemented in a manner to support strategic civilian industries. Thus, the high cost of developing an independent nuclear weapons force was matched with the development of a large nuclear power sector.74

The European aerospace corporation Airbus SE is a good example of a company that produces both commercial and military aircraft in a sectorally separate but mutually reinforcing way. For example, Airbus divisions frequently share S&T efforts and advances and internally communicate technological innovations between them. The company also shares staff and manufacturing know-how. Arguably, the most advanced form of civil–military technological integration and the one that fits most closely to the concept of MCF is integrated dual use, which refers to technologies or innovations that are developed in close coordination and cooperation between the commercial and military sectors. As part of this, civilian industry often takes the lead in R&D, but the military side would then embrace and support these R&D efforts as a collaborator. The underlying assumption is that civilian developments in “fast-moving sectors” (e.g., information technologies or advanced manufacturing processes, such as 3D printing) “drive technology, and that future defense needs can be ensured at lower costs” through strong partnerships with commercial industries.75 During the 1990s, for example, the US federal government and the Defense Department underwrote several schemes intended to advance US technology developments in areas considered critical to the military. These included the national Flat-Panel Display Initiative and SEMATECH, a government-funded effort to develop the manufacturing technologies necessary for future generations of semiconductors. In addition, the US government launched several collaborative R&D programs including Cooperative Research and Development Agreements (CRADAs) and the Technology Reinvestment Program (TRP), administered by the Defense Advanced Research Projects Agency (DARPA).76 For their part, CRADAs created joint military and commercial R&D centers to encourage technology-sharing and joint R&D; the US Army’s National Automotive Center (NAC), for example, established CRADAs with Ford Motors, General Motors (GM), and Chrysler.77 The TRP provided matching funds to companies to develop military products based

74 76

75 Brzoska, “Trends in Global Military,” 22. OTA, Assessing the Potential, 116. 77 Ray, An Analysis, 28–32. OTA, Assessing the Potential, 121.

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on commercial R&D and to then transfer such breakthroughs to the defense-industrial base.78 As the US Congressional Office of Technology Assessment defined it, “an integrated process is one in which common assets – technology, people, facilities, and administrative organizations – are used to produce both defense and commercial goods and services.”79 Therefore: Many of the processes used to design, develop, produce, and maintain military and commercial equipment are technically identical or very similar. Eliminating process integration barriers might lower acquisition and life-cycle costs, provide both sectors with greater access to innovative technologies, reduce acquisition time, expand the potential defense technology and industrial base (DTIB), and even enhance U.S. commercial competitiveness.80

Dual-use integrative R&D can operate on several levels, that is, at the facility, firm, or sectoral level. At the facility level, factories can share integrated processes involving commercial and defense products being developed, manufactured, or maintained side by side by the same personnel. Firm-level integration generally involves separate production lines (one for defense goods, the other for commercial products) but entails the joint military–civilian use of corporate resources (e.g., management, planning, labor, and especially R&D). Finally, integrated industrial sectors (such as aerospace or shipbuilding) can draw from a common pool of R&D efforts, technologies, and production processes (including joint industrial and government standards bodies and shared national test facilities); this last strategy is increasingly seen as the most potentially rewarding line of attack when it comes to MCF.81 At its center, dual-use technology development strategies – and especially integrated dual use – require strong government support and initiative, early buy-ins by the private sector, and strong public–private partnerships. These constituents are especially critical when it comes to leveraging emerging “fourth industrial revolution” technologies in support of modern-day military requirements. In several areas of the 4IR – particularly AI, machine-learning, autonomous systems, miniaturization, big data, quantum computing, additive manufacturing, and the like – the commercial R&D sector has taken a clear lead. For militaries to benefit from these breakthroughs, it demands a coordinated, top-down, and government-sponsored effort to drive dual-use development.

78 79

Kulve and Smit, “Civilian–Military Co-operation,” 957. 80 OTA, Assessing the Potential, 101. Ibid., 101–2.

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81

Ibid., 121.

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In this instance, and as our country analysis shows, China has been especially appreciative of the potential of the integrated dual-use technology development model. Beginning in the mid-1980s, Beijing began to lay the foundation for a high-tech economy with the launch of its 863 Program – a long-term S&T development program intended to expand and advance China’s high-technology base in several areas including IT, aerospace, lasers, opto-electronics, semiconductors, and new materials. The 863 Program was essentially a basic and applied research scheme, but many of its technology areas clearly had potential military applications. Thus, between 1986 and 2001, over 90 percent of the 863 Program’s leading categories had dual-use applications. In addition, defense scientists and engineers constituted nearly 20 percent of the human resources that were involved in projects under the 863 Program, working on more than 1,500 projects.82 Ultimately, the 863 Program bore mixed results, but this effort came to define and underscore current Chinese approaches to MCF. Under President Xi, China has embraced MCF as perhaps its best chance for narrowing the military-technological gap with the West, and it is keen to expand its efforts in this regard. In 2017, Beijing created the Central Commission for Integrated Military and Civilian Development, a new powerful body for overseeing MCF strategy and implementation. Also in 2017, China issued the Thirteenth Five-Year Special Plan for Science and Technology MCF Development, which “detailed the establishment of an integrated system to conduct basic cutting-edge R&D in AI, biotechnology, advanced electronics, quantum computing, advanced energy, advanced manufacturing, future networks [and] new materials,” in order “to capture [the] commanding heights of international competition.”83 At the same time, this new MCF approach appears to differ from earlier Chinese efforts at CMI in several critical ways. Mostly, current MCF activities are being explicitly used to help China’s military access to critical 4IR technologies. Above all, MCF entails the militarization of AI, as the PLA sees AI as critical for such tasks as command and control, for intelligence processing and analysis (e.g., imagery recognition and datamining), targeting, navigation, and so on.84

82 83 84

Tai Ming Cheung, Fortifying China: The Struggle to Build a Modern Defense Economy (Ithaca: Cornell University Press, 2009), 190–5. Tai Ming Cheung, “From Big to Powerful: China’s Quest for Security and Power in the Age of Innovation,” East Asia Institute, April, 2019, 12. Kathrin Hille, “Washington Unnerved by China’s ‘Military–Civil Fusion,’” Financial Times, November 8, 2018.

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Moving Forward The 4IR means that MCF will continue to grow in importance and value as a promoter of military modernization efforts around the world. The old structure of a nation’s military-industrial complex being largely segregated from the rest of the economy is becoming increasingly untenable and even counterproductive. If the technological vanguard is increasingly found in the high-tech commercial sector, then militaries and their traditional arms suppliers will either have to adapt or else risk losing access to emerging critical technologies that, in the future, could be the determining factors of military power and advantage. Our next step, therefore, is to examine and assess how militaries around the world are dealing with the potential of the 4IR and MCF.

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3

MCF in the United States of America

The United States occupies a unique niche within the global arms industry. It is the only country that is totally self-sufficient in arms procurement while it also maintains an across-the-board superiority in advanced defense technologies. It also possesses the world’s largest defense industry, employing more than 3 million civilian workers and accounting for perhaps three-quarters of all defense-industrial output globally. The commercial sector has long played a critical role in US arms manufacturing. The state-owned arms industry in the United States has always been modest, comprising a handful of government-run arsenals and naval shipyards. Especially during times of mass mobilization, the country has basically depended on private companies for the bulk of its armaments manufacturing and supply.1 During the Civil War, for example, the US government relied heavily on commercial railroads and telegraph companies (such as Western Union) for logistics and communications. Overall, arsenals may have made gun tubes for cannons and tanks, and designed rifles like the M1903 Springfield and the M1 Garand, but private firms were often contracted to manufacture these weapons. Naval shipyards constructed warships for the US Navy, but they also competed with private shipbuilders (the technologically revolutionary Civil War–era USS Monitor, for example, was designed by a private inventor, John Ericsson, and constructed at a commercial Brooklyn ironworks). Finally, ever since the invention of heavier-than-air flight, the US military has acquired its aircraft from commercial aeronautical and aerospace companies. Despite this traditional reliance on private industry when it comes to armaments production, US efforts at MCF – at least until quite recently – were generally far less ambitious and far less comprehensive than one might assume. Particularly during the Cold War years, the US military had been reluctant to tap innovative civilian technologies, preferring to

1

Gouré, “Non-traditional Defense Companies.”

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develop specialized (if parallel) defense technologies and products. This was not always so. According to Warren Chin, prior to World War II, the US and other militaries basically drew their technologies from the same well as the civilian and commercial sector, and the “technological needs of the armed forces ‘were met out of the same scientific and technical knowledge that manufacturing industry had put to use in satisfying its commercial needs.’”2 Nevertheless, by the end of the war and with the beginning of the Cold War, the military’s technological demands began to outstrip the ability of the commercial sector to deliver. As a result, the military sector became the central agent for breakthroughs and advancements in science and technology; in the United States, in particular, the Department of Defense (DoD) drove much of the country’s hightechnology R&D, especially in such areas as aerospace and electronics.3 During the 1960s, for example, the DoD alone funded about half of all national R&D, and, overall, the federal government accounted for around two-thirds of all R&D spending.4 Despite conscious efforts to persuade the US military to take advantage of advanced commercial technologies, therefore, their use was more and more the exception rather than the rule. That said, the United States is presently aware that it is losing the sizable “first-mover advantage” it once enjoyed in most areas of advanced technologies, which in turn enabled American military dominance. Potential adversaries are increasingly assembling the capacities to challenge America’s ability to project power in key strategic locales. In the face of this challenge, the United States understands that it must transform its way of warfighting to deter or defeat rivals or potential adversaries. As a result, the US military is continually looking for new technologies to reinforce its technological edge over its competitors.5 In this regard, the US Department of Defense and the American armed forces have become increasingly appreciative of the potential of advanced commercial technologies, particularly those embodying the so-called 4IR. The DoD is particularly keen to exploit innovations in these technology areas, and these aspirations will continue to draw the US militaryindustrial complex closer to 4IR innovators in the commercial high-tech

2 3 4 5

Chin, “Technology,” 767. Ibid., 767–8; Brzoska, “Trends in Global Military,” 19–20. Paul Scharre and Ainikki Riikonen, Defense Technology Strategy (Washington, DC: Center for a New American Strategy, November, 2020), 6. Ibid., 4.

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sector. These efforts will inevitably enhance the use of MCF as a means of accessing and exploiting commercial technological innovations.6

The Rise of the American Military-Industrial Complex By almost any measure, the United States of America possesses one of the largest and most capable militaries in the world. It boasts more than 2.2 million active-duty and reserve forces, which are deployed on every inhabited continent. The US military operates over 10,000 tanks and other armored vehicles, approximately 3,500 combat aircraft, 4,000 helicopters, more than 10,000 drones, 19 aircraft carriers and amphibious assault ships, and over 110 large surface combatants. This mammoth-sized armed force is supported by military expenditures totaling approximately US$750 billion in 2021, the largest defense budget in the world. In fact, US defense expenditures account for nearly 40 percent of all global military spending and are greater than the next ten largest defense spenders put together.7 What is surprising is just how recent this massive US military buildup has been. From its founding in 1776 until 1940, the United States was more notable for its lack of a large and permanent armed force. A large standing military was an exception to the historical rule: during the entirety of the nineteenth century, the US military never totaled more than 40,000 men, except at times of major conflict (e.g., the war of 1812, the American Civil War, and the Spanish–American War). During those periods, the US military would expand quickly – in the case of the US Civil War, to over 1 million men – but it would just as quickly shrink back to a small core of professional soldiers immediately following the cessation of hostilities. After the Civil War, for example, the US Army was reduced to around 26,000 soldiers, mostly engaged in campaigns against Native Americans on the Great Plains. At the same time, the US Navy declined from 60,000 seamen in 1865 to less than 10,000 in the 1880s. In addition, unlike most of Europe, the United States never had a system of obligatory national service, and it only used conscription during wartime (e.g., the Civil War). The early twentieth century was no different. During World War I, US military forces again grew quickly – to nearly 3 million men – and just as quickly contracted afterwards. The interwar period (1918–39) saw US armed forces stabilize at a quarter of a 6

7

See National Security Commission on Artificial Intelligence (NSCAI), Final Report (Washington, DC: NSCAI, 2021), www.nscai.gov/wp-content/uploads/2021/03/FullReport-Digital-1.pdf. SIPRI, “Military Expenditure Database.”

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million men (including approximately 150,000 in the US Army and 17,000 Marines).8 World War II changed all this. The national mobilization of America’s resources, including the implementation of a draft system, led to a huge expansion of the military, which reached 12 million servicemen and servicewomen by 1945. More importantly, though, this time the postwar drawdown was never as radical as after prior conflicts, and, in fact, with the rise of the Cold War, the US armed forces actually began to increase in size, resulting in the first peacetime growth in the US military strength. This emergence of a sizable peacetime military – around 3 million military personnel during the 1950s and 1960s – had a natural effect on armaments production in the United States. One could legitimately argue that before World War II, there was no US arms industry to speak of, and certainly not one on the same scale as exists today. To be sure, there had long existed armories producing rifles and cannon while US Naval shipyards (as well as private shipbuilders) constructed warships of all manner and classes. Also, the arms manufacturing did wield a certain influence over America’s political and economic development. Indeed, the very idea of mass production – of using uniform and interchangeable parts and of dividing labor between skilled manufacturing and semiskilled assembly – grew out of the US defense industry. In particular, the US government in the early nineteenth century wanted a means to cheaply outfit the US military with a standardized musket, which was solved using standardized, interchangeable parts, semi-automation, and rudimentary assembly lines. In particular, what later became known as the “American system of manufacturing” had much of its origins in the armories at Springfield, Massachusetts, and Harpers Ferry, West Virginia, leading arsenals in the design and production of muskets, cannon, shot, powder, fuses, howitzers, and rifles.9 Nevertheless, throughout the nineteenth and early twentieth centuries, the US defense industry remained a small and peripheral business – and a rather sporadic one at that, expanding and contracting as wars and conflict waxed and waned. The American Civil War was perhaps the one great exception, as industries in both the Union and the Confederacy expanded armaments production to meet the needs of some of the largest armies ever put on the field. The manufacture of rifles, pistols, cannon, mortars, warships, and other paraphernalia of warfare swelled. Moreover, the Civil War was the impetus for the development of several 8 9

US Department of Defense, Selected Manpower Statistics, Fiscal Year 1997 (Washington, DC: US Government Print Office, 1997), 46. Hounshell, From the American System.

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then revolutionary technologies including ironclad ships, repeating rifles, revolving gun turrets, observation balloons, and even submarines. However, after this and every other war in the nineteenth century, the American defense industry soon lapsed back into a torpor. The US Navy, for example, went into serious decline after the Civil War, and naval shipbuilding did not begin to recover until the 1880s, which culminated with the construction of the “Great White Fleet” during the administration of Theodore Roosevelt (1901–9).10 Even then, after World War I, US shipbuilding again declined, as the US Navy – in part because of limitations imposed by the Washington Naval Treaty and in part because of budget constraints – experienced a “building holiday” during much of the interwar period (1918–39).11 No American defense sector, however, experienced more loss than the military-aircraft industry did. Although the United States pioneered manned powered flight, by World War I, the US aeronautics sector had fallen far behind the Europeans when it came to the innovation and development of military aircraft. Thus, when the United States entered the war in 1917, it had no mass-produced fighters or bombers, and thus the fledgling US Army Air Service was forced to fly British or French combat planes. Furthermore, plans to expand US military-aircraft development and production were canceled after the armistice, and Congress slashed air appropriations by 90 percent. As a result, the US militaryaircraft sector did not recover until the late 1920s and while it made a critical contribution to the monoplane revolution of the 1930s – producing such aircraft as the XP-9 fighter and the Y1B-9 and B-10 bombers – production numbers remained low until the outbreak of World War II.12 The relatively minor and episodic role that the US arms industry played in American history up until World War II was reflected in the attention – or more precisely, the lack of attention – that this industry generally received from scholars and other observers, especially political scientists and economists. One of the few works about arms manufacturers that was written before the 1940s was Merchants of Death (1934), by H. C. Engelbrecht and F. C. Hanighen, and primarily, it bashed European firms, such as Krupp, Maxim, and Vickers; whatever criticism it had for American purveyors of death was reserved for companies such as DuPont (a leading supplier of gunpowder and explosives), US Steel, 10 11 12

Nathan Miller, The US Navy: A History (Annapolis, MD: Naval Institute Press, 1997), 143–92. Larry H. Addington, The Patterns of War since the Eighteenth Century (Bloomington: Indiana University Press, 1994), 180–5. Mark A. Lorell and Hugh P. Levaux, The Cutting Edge: A Half Century of US Fighter Aircraft R&D (Santa Monica, CA: RAND, 1998), 15–25.

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and the Morgan banking group, and not for the network of governmentrun arsenals and naval shipyards.13 Again, this all changed after World War II and the subsequent Cold War. These two events dramatically affected the scale, scope, and character of the US arms industry. The impact of war production on the United States during the period 1941–5 was immediate and unmistakable. The production of armaments permeated American life economically, socially, and politically. This was the era of “total war,” disrupting many lives. Vast swaths of civilian production were halted as automobile factories now produced tanks, aircraft engines, and bombers, and as steel companies now delivered steel plates to shipyards constructing destroyers, aircraft carriers, and submarines. Whole communities came to depend on defense contracts. Additionally, as arms manufacturing became one of the country’s leading employers, new opportunities emerged for previously disadvantaged groups such as women and Black Americans. More importantly, after World War II, the United States progressed almost seamlessly from being the “arsenal of democracy” to harboring the “military-industrial complex.” The US defense industry, instead of engaging in its usual postwar retrenchment, actually expanded during the Cold War. The private defense sector supplanted the governmentrun arsenal or shipyard, and companies such as Lockheed, Northrop, General Dynamics, Newport News Shipbuilding, and North American Aviation became industrial leaders. Additionally, this private arms industry, powered by billions of dollars in US government funds for R&D, began to exert considerable sway over the technological and industrial development of postwar America. From the 1940s to the 1970s, some of the most important technological breakthroughs – including jet propulsion, nuclear energy, microelectronics, communications, and computing – had their genesis in the defense industry. Arms manufacturing also promoted the development of advanced production techniques, such as computer-aided design and computer-aided manufacturing (CAD/ CAM). Finally, and perhaps most critically, as defending the Western world became central to US grand strategy, armaments production became big business. US defense spending rose dramatically – reaching as much as 10 percent of the country’s gross domestic product during the 1950s – and defense contracts were secured in nearly every congressional district. The US defense industry was large, pervasive, and privately run,

13

H. C. Engelbrecht and F. C. Hanighen, Merchants of Death: A Study of the International Traffic in Arms (New York: Dodd, Mead & Company, 1934).

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but, at the same time, it was funded, guided, and regulated by the state, blurring the distinction between the public and private sectors. This socalled “iron triangle” of the military, the arms industry, and government saturated the American political system.14 Surprisingly, the end of the Cold War did not significantly affect the American military-industrial complex. In the absence of a large-scale, existential threat to the United States, the defense industry has not only survived but thrived. No other segment of the American economy, save perhaps agriculture, has been so shielded from market forces. The US military continues to allocate huge sums to military R&D and to weapons manufacturing. Spending on defense procurement and R&D rose dramatically during the first decades of the twenty-first century, nearly doubling between 2000 and 2020, from US$138 billion to US$258 billion. Spending on military research, development, testing, and evaluation (RDT&E) alone grew from US$70 billion in 2002 to US$107 billion in 2020 (see Figure 3.1).15 An extensive and well-capitalized national network underwriting national science and technology (S&T) efforts, as well as the RDT&E of cutting-edge military technologies, also underpins the US defense ecosystem. While the federal government funds nearly all defense-related S&T and R&D, the actual execution of national R&D is carried out by private firms and various not-for-profit entities. For instance, in 2018 the private sector’s share of the US total expenditure on R&D (US$607 billion) was 63 percent, compared with a government’s share of 22 percent (see Figure 3.2). When it comes to promoting the national S&T base, for example, the National Science Foundation (NSF), a government-run agency, annually disburses billions of dollars in support of basic research, usually performed by universities, research centers, laboratories, and so on. The NSF funds approximately one quarter of all federally supported basic research conducted by the United States’ colleges and universities. The NSF mission supports all fields of fundamental science and engineering, except for medical sciences, and is specifically tasked with keeping the United States at the leading edge of

14

15

Stephen J. Majeski, “Mathematical Model of the US Military Expenditure DecisionMaking Process,” American Journal of Political Science 27, no. 3 (1983): 485–514; Thomas L. McNaugher, New Weapons Old Politics: America’s Military Procurement Muddle (Washington, DC: Brookings Institution, 1989); Karl Derouen and Uk Heo, “Defense Contracting and Domestic Politics,” Political Research Quarterly 53, no. 4 (2000): 753–67. US Department of Defense, National Defense Budget Estimates for FY2021 (Washington, DC: Office of the Under Secretary of Defense [Comptroller], April, 2020), 140–43. In constant 2021 US dollars.

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MCF in the United States of America 120 100

US$ billion

80 60 40 20

1948 1951 1954 1957 1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020 2021

0

Figure 3.1 US spending on military RDT&E (in constant 2021 US$) Source: US Department of Defense, National Defense Budget Estimates for FY2021 (Washington, DC: Office of the Under Secretary of Defense [Comptroller], April, 2020), 136–43

Overseas sources, Private-non-profit 7.2% sector, 4.0% Higher education, 3.3%

Government, 22.4% Business enterprises, 63.1%

Figure 3.2 US expenditures on R&D by source of funds, 2018 Source: Organization for Economic Co-operation and Development (OECD), “Main Science and Technology Indicators,” https://stats.oecd.org/Index.aspx? DataSetCode=GBARD_NABS2007

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discovery; in addition to funding research in the traditional academic areas, the agency also supports “high-risk, high pay-off” ideas.16 The US government also underwrites several federally funded research and development centers (FFRDCs), public-private institutions that carry out a variety of mostly military R&D for the US government. FFRDCs such as Los Alamos, Lawrence Livermore, and Oak Ridge undertake research on nuclear weapons while others are engaged in advanced aeronautics and aerospace, computing, cybersecurity, biodefense, and the like. In addition, the Defense Advanced Research Projects Agency (DARPA) formulates and executes exploratory and “blue sky” research to expand the frontiers of technology and science, with the aim of reaching beyond immediate military requirements. DARPA has an annual budget of approximately US$3.6 billion.17 While the United States continues to rely heavily upon the private sector for the bulk of its armaments production, the federal government has provided considerable support and protection to the national defense-industrial base. Private defense firms contract with the federal government and with the Department of Defense to carry out the applied research, development, prototyping, testing, evaluation, and – usually – production of actual weapons. This activity is covered under the DoD budget for RDT&E, which in FY2021 totaled approximately US$100 billion (see Figure 3.1). In addition, most defense companies operate technology incubators (such as Lockheed’s Skunk Works) and pursue self-funded R&D projects, with the hope that they will lead to contracted procurement programs. Finally, by maintaining high levels of R&D and procurement spending (which combined totaled nearly US$250 billion in FY2021), Washington keeps the national defense industry supplied with a stable and generally reliable source of long-term funding by which to underwrite R&D and production.18 Additionally, the government has insured that major arms manufacturers have received their “fair share” of defense contracts to keep them solvent. Defense projects are frequently distributed uniformly (if unofficially) among various competing firms. When it comes to combat aircraft, for example, Lockheed builds the F-16 and F-35 fighters while Boeing manufactures F15s and F/A-18s and Northrop Grumman produces bombers (the B-2 and the forthcoming B-21). Bath Iron Works and Ingalls Shipbuilding share

16 17 18

Walsh, “The Role,” 125–6, 127. Defense Advanced Research Projects Agency (DARPA), “Budget,” www.darpa.mil/ about-us/budget. Todd Harrison and Seamus P. Daniels, Analysis of the FY 2021 Defense Budget (Washington, DC: Center for Strategic and International Studies, 2020), 5.

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construction of the Arleigh Burke-class destroyer. “Preserving the defenseindustrial base” has frequently been used as a rationale for continuing certain weapons programs. The DoD frequently engages in enhancement programs, like upgrading the M1 tank to M1A2 standards and beyond, even if such efforts are deemed unnecessary.19 As a result, industrial efficiency has been largely abandoned in favor of maintaining duplicative production capacities, often resulting in over-capacitized and underperforming defense facilities: the US Navy, for example, insists on maintaining two submarine construction sites, even though the Navy plans on buying only two submarines a year (a number easily handled by a single sub-yard) for the next several decades. Finally, Washington has also protected US arms producers from foreign competition. Arms imports are for the most part prohibited because the Defense Department is subject to stringent “buy American” laws. Foreign direct investment in the US defense industry has also been mostly restricted. Overall, therefore, the federal government has placed the defense industry outside the bounds of most free-market economics – ensuring the continuation of a large, technologically advanced (and continually advancing) military-industrial complex – over considerations for efficiency and cost-effectiveness. Consequently, US arms manufacturers have become dominant in two of the world’s most critical arms markets – at home and in the global arms export business. The US defense market accounts for approximately half of all the world’s arms purchases, and US defense firms easily win more than 90 percent of all defense contracts in their home market. This large and highly protected national market also gives US defense firms a solid base of money-spinning procurement contracts and lucrative funding for R&D from which to dominate the global arms trade, and the US arms industry typically captures 40 percent of all contested overseas arms sales.20

The Postwar Military-Industrial Complex: From Spin-On to Spin-Off to Spin-Apart Dan Gouré has succinctly summed up the process of US arms manufacturing from roughly 1940 to the end of the Cold War: The U.S. military has a long history of relying on commercial companies to provide defense products, particularly in wartime or a national crisis. With the advent of the 19 20

Stew Magnuson, “Over Army Objections, Industry and Congress Partner to Keep Abrams Tank Production ‘Hot,’” National Defense, October 1, 2013. Stockholm International Peace Research Institute (SIPRI), “Arms Transfers Database,” www.sipri.org/research/armament-and-disarmament/arms-and-military-expenditure/ international-arms-transfers.

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Cold War, a class of companies arose that focused their efforts on providing goods and services for DoD and other government departments and agencies such as NASA and the Intelligence Community. At one point in time, defensefunded innovations led the commercial world in such areas as aeronautics, computers, nuclear power generation, long-distance communications, and space systems.21

As noted earlier, the US military before World War II greatly relied on the US commercial sector for technology as well as its manufacturing base. This dependency became particularly apparent during the interwar phase (1918–39) when technological development and innovation quickened in pace and expanded in range. Fields like electronics, communications, automotives, medicine, chemicals, and especially aeronautics grew rapidly during this period. At the same time, the US military was in the 1920s and 1930s too small and insufficiently funded to significantly affect invention and innovation. Consequently, most military-technological innovation during this period was embedded in the commercial economy and technology base. This was, therefore, an era mainly of civilian-to-military spin-on. Most major technological developments began in the commercial sector and were subsequently spun onto military uses. These included radio and wireless communications (e.g., walkie-talkies), radar, sonar, general automotives (e.g., suspensions and drivetrains that went into tanks and armored vehicles), and medicine (e.g., penicillin and morphine, which found widespread use on the battlefield). Civil aeronautics especially drove invention and technological advancement during the interwar period, perfecting such innovations as monoplane wing design, radial engines, cowlings, streamlining, retractable landing gear, variable-pitch propellers, monocoque structures, and the use of aluminum in airplane construction – all of which were subsequently adopted by militaryaircraft designers. The United States, therefore, entered World War II predominantly reliant on the technological – and later manufacturing – might of its comprehensive commercial-industrial economy. That war and the subsequent Cold War, however, laid the seeds for the rise of the US military-industrial complex, and for the emergence of a whole new set of defense-dependent industries. As the technological demands of modern warfare continued to grow – to include systems like nuclear weapons, jetpropelled combat aircraft and bombers, aircraft carriers, and submarines – it placed a new premium on innovation that specifically benefitted militaries.22 Increasingly, it was the civilian sector that was unable to 21

Gouré, “Non-traditional Defense Companies.”

22

Chin, “Technology,” 767–8.

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deliver on these new requirements. Some technologies were already too specialized and lacked a civilian analog, such as nuclear weapons, rocketry and missile systems, submarines, supersonic flight technologies, and the like. Others were too expensive for commercial industries to participate, unless the US government provided R&D funding, such as electronics, computing, and jet propulsion. As a result, companies began to emerge that either catered overwhelmingly or even solely to the esoteric technological needs of military, or else established stand-alone and segregated subsidiaries that engaged solely in defense production.23 While perhaps not an explicit set of initiatives intended to promote MCF, US military-technological innovation strategy during the early years of the Cold War (i.e., the 1940s and 1950s) certainly had that effect. According to Kathleen Walsh, during this period it essentially became the US government’s job – and particularly that of the Department of Defense – to direct S&T assets toward “developing technological solutions … spurred on perceived external threats to national security interests.” As such, government underwriting of national S&T research came to play “a dominant role in determining what scientific and technological advances would be pursued and for what purposes.”24 To these ends, the federal government subsequently established several government agencies including the DARPA and the NSF, but also the Atomic Energy Commission and the National Aeronautics and Space Administration (NASA). The mission of many of these institutions was decidedly narrow, however. They were dedicated primarily to pursuing basic (i.e., theoretical or experimental) scientific research. Applying any S&T breakthroughs to “real-world” situations – that is, R&D – was the job of other government organizations or private businesses (often both, working collaboratively). This significant expansion of defense-directed S&T was aided by an unprecedented – and sustained – rise in peacetime US defense spending. In 1948, the DoD spent just US$413 million (US$5 billion in 2021 dollars) on RDT&E; by 1958, this had risen to US$4.3 billion (US $33.7 billion in 2021 dollars) (Figure 3.1). This was matched by a similar growth in DoD procurement budgets (which indirectly underwrites R&D) – from US$3.69 billion (US$41 billion in 2021 dollars) in 1948 to US$9.7 billion (US$86 billion) a decade later (see Figure 3.3).25 Overall, US defense spending during the early years of the Cold War rose from 3.5 percent of gross domestic product (GDP) in 23 24 25

Ibid., 770. Walsh, “The Role,” 127. See also Brzoska, “Trends in Global Military,” 19–20. US Department of Defense, National Defense Budget, 136.

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250

US$ billion

200

150

100

0

1948 1951 1954 1957 1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020 2021

50

Figure 3.3 US spending on military procurement (in constant 2021 US$) Source: US Department of Defense, National Defense Budget Estimates for FY2021 (Washington, DC: Office of the Under Secretary of Defense [Comptroller], April, 2020), 139–40.

1948 to 13.8 percent in 1953 (its postwar peak); until the mid-1970s, US military expenditures rarely dropped below 7 percent of GDP (see Table 3.1).26 There are several examples of military-driven, commercially based technological innovation – and, therefore, embryonic efforts at MCF – during the 1950s and 1960s. For example, Thomas Heinrich, in his study of defense contracting in the Silicon Valley during the early years of the Cold War, demonstrated how instrumental the US military was to the development of the region’s electronics, missile, satellite, and semiconductor industries.27 During the 1950s and 1960s, many Silicon Valley firms relied heavily on military contracting. As he put it: “the [federal] government played a major role in launching and sustaining some of the region’s core industries through military contracting,” and, subsequently, the “demand for customized military technology encouraged contractors to embark on a course of flexible specialization, batch production, and continuous innovation.”28 Microwave electronics, arguably Silicon Valley’s first “high-tech industry,” was initiated and sustained, early on, by defense contracting; this list of industries later expanded to include missiles, satellites, and space electronics, which 26

Ibid., 292.

27

Heinrich, “Cold War Armory,” 247–84.

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Ibid., 247.

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Table 3.1 US defense spending as a percentage of GDP 3.5 4.9 10.5 9 7.1 7.8 5.4 4.8 5.9 5.1 3.6 2.9 3.9 4.7 3.3 3.3

1948 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

Source: US Department of Defense, National Defense Budget Estimates for FY2021 (Washington, DC: Office of the Under Secretary of Defense [Comptroller], April, 2020), 292

were almost entirely military in origin and scope, produced by such leading defense contractors as Lockheed Missiles and Space Company (LMSC – missiles and satellites), Philco (later Ford Aerospace – satellites), and Westinghouse (mainly radar systems).29 In another proto-MCF effort, the military was also a driving force behind the emergence of the American semiconductor industry, at least initially. During the 1950s and 1960s, the US Defense Department contracted extensively with Fairchild Industries, another Silicon Valley company, for microelectronics. Arguably, half of all Fairchild’s output of solid-state electronics in the 1950s was solely for military use. Moreover, military demand continued to drive development and innovation in the semiconductor sector (such as efforts at further miniaturization), even after commercial semiconductor production began to outstrip military purchases.30 As such, the US Defense Department’s demand for advanced military systems “shaped the structures and dynamics” of Silicon Valley during the 1950s and 1960s, particularly – but not limited to – its microelectronics sector: “The result was a large variety of 29

Ibid., 252–5, 258–67.

30

Ibid., 267–77.

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complex systems such as missiles featuring ever increasing degrees of accuracy, electronic warfare systems that collected and decoded exponentially growing amounts of data, [and] customized microelectronics systems that turned military hardware into ‘smart weapons.’”31 Military R&D funding was also instrumental to the early development of the American computer software industry. According to Mowery and Langlois, postwar development of the US computer software sector was heavily supported and subsidized by the US government, much of it in the form of R&D spending provided by the Pentagon.32 The US military was one of the earliest and largest users of computers, and this factor helped drive innovation in this field. For example, the SAGE (semiautomatic ground environment) air-defense system was one of the first computerized networking systems ever constructed, and it entailed, at that time, the largest computer programming effort ever.33 The federal government also heavily supported R&D in software development, as it did with semiconductors and computer hardware, particularly through the direct funding of universities, via the NSF and DARPA. For example, COBOL, an early computing programming language, was developed at the behest of the Department of Defense and was mainly used by the military.34 Even more than the semiconductor sector, the software industry was, at least in its early years, overwhelmingly dominated by military requirements for customized software.35 In sum, even if it was not an overt, policy-specific attempt at MCF, the military and the federal government (and especially the Defense Department) played a large and decisive role in initiating and sustaining many areas of advanced technology during the early years of the Cold War, particularly satellites, missiles, electronics, computers, and computer software. Most government-funded S&T activities during this period were focused mainly on potential application to national defense, and commercial uses were a secondary priority. Nevertheless, commercial applications were an “anticipated by-product” of this research.36 Hence, the early Cold War era also witnessed a limited degree of spinoff, that is, as mentioned earlier, the transfer of technologies and innovations originally developed in the military technology sector to the civilian/commercial sphere. Examples of spin-off during this period include computer hardware and software, electronics, aeronautics, jet engines, space systems, and nuclear power. Mowery and Langlois demonstrated that defense-related expenditures and activities in the software industry produced important “spillovers” into nonmilitary computer sectors, such 31 34

32 33 Ibid., 278. Mowery and Langlois, “Spinning Off,” 947–66. Ibid., 950. 35 36 Ibid., 951–6, 958. Ibid., 963. Walsh, “The Role,” 127–8.

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as the establishment of university labs and software start-up firms. They stated that “defense-related spending contributed to the creation of an infrastructure for the support of R&D, training, and technology development in computer science that provided important benefits to the commercial US software industry.”37 Other examples of early MCF, in the form of joint civil–military codevelopment, can be found in the design and development of large, jet-powered commercial airliners. The Boeing 707, for example, was based on the 367-80 project, a common large aircraft intended as both a commercial passenger plane and a military aircraft. Boeing – which up until the mid-1950s had been mainly a producer of military aircraft (such as the B-17, B-29, B-47, and B-52 bombers38) – was able to develop the 367-80/B-707 by exploiting its inhouse know-how derived from the manufacture of large airframes for military aircraft and then mating these with jet propulsion. The B-707 sold in the thousands and helped to launch the large, jet-powered commercial airliner business. The 367-80, meanwhile, became the basic airframe for the KC-135 air-to-air refueling plane and the C-135 cargo aircraft (the B-707 was also militarized in the form of the C-137 VIP transport plane, the E-3 Sentry airborne warning and command systems [AWACS] plane, and the E-8 JSTARS [joint surveillance and target attack radar system]). In another case, Boeing developed its 747 jumbo jet following a failed attempt to win a contract to build a next-generation heavy-lift transport plane for the US Air Force.39 Overall, therefore, defense-related procurement and R&D programs supported the growth of several postwar US high-technology industries including commercial aircraft, semiconductors, and computer hardware. In particular, government funding created a “virtuous circle” for US technological innovation: federal monies for S&T flowed into universities and laboratories, which bankrolled not only the US militaryindustrial complex (itself further fortified by considerable inputs of direct R&D funding for developing weaponry and other military systems) but it also underwrote spin-off opportunities for the commercial and academic communities. These practices, in turn, supported follow-on breakthroughs and innovations that attracted additional financial support. As the Cold War progressed, however, the military and the civilian technology sectors began to diverge more and more. For one thing, the

37 38

39

Mowery and Langlois, “Spinning Off,” 947–8. The only other commercial airliner built by Boeing after World War II was the Boeing 377 Stratocruiser, based on the C-97 Stratofreighter, originally produced for the US Air Force. It was not a very successful product, however, with only 56 units ever sold. Walsh, “The Role,” 129.

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nature of defense products had become increasingly esoteric and unique, making it increasingly difficult for the commercial industry to meet the increasingly demanding needs of the US military with systems or solutions drawn from a common well of technologies. Military equipment incorporated increasingly specialized technologies that could only be obtained from a dedicated defense S&T base. As John Alic et al. put it in their book, Beyond Spinoff: Since World War II … much military hardware has diverged from its nearest civilian analogs … When it comes to tanks, aircraft, and electronic command and control systems, similarities remain at component and subsystem levels. But whereas early World War I tanks were built from farm tractors, today few parallels can be found at the system level between the Army’s M-1 tank and civilian trucks, tractors, or off-road construction equipment.40

During the 1950s and 1960s, many commercial and civilian high-tech sectors began to build up their own stand-alone capacities and proficiencies when it came to S&T. Starting in the 1950s and continuing on to the present day, private-sector investments in R&D in key high-technology industries came to significantly outstrip military R&D spending; by the early 2020s, therefore, civilian R&D spending is about ten times greater than its military analog.41 As a result, the private commercial sector has overtaken the military-industrial complex in several areas of advanced technologies development, particularly microelectronics, computing, software, and wireless communications. First-generation solid-state electronic components (such as the transistor), for instance, fueled a boom in consumer electronics, such as compact transistor radios, solid-state television sets, microwave ovens, and the like. The first integrated circuits, originally developed for the US Air Force, quickly found their way into pocket calculators, mainframe computers (which were widely sold to businesses), and telephone networks. Today, semiconductors – especially microprocessors – have become ubiquitous in civilian products, such as automobiles, and gave birth to a host of new consumer products, such as personal computers, DVD players, portable media players (e.g., the Apple iPod), and cellphones. As a result, commercial goods, driven by consumer demand, have come to dominate R&D in the electronics sector. Mass demand has worked to the advantage of the electronics sector, as semiconductors, such as DRAM (dynamic random-access memory) chips, have provided capability and reliability, and have provided the large production volumes to keep costs down.

40

Alic et al., Beyond Spinoff, 37.

41

Brzoska, “Trends in Global Military,” 1.

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Similar developments have occurred in other high-tech sectors. The creation of NASA initiated the bifurcation of space into military and civilian operations, and this gradually led to a weakening of the links between the two sectors. Space, which had been dominated by the US military during the 1940s and 1950s, was soon overtaken by a civilian agency. In particular, NASA assumed responsibility for nearly all manbased and scientific space-related activities, and military space programs, such as the X-20 Dyna-Soar spaceplane and the US Air Force’s Manned Orbiting Laboratory (MOL), were abandoned in favor of Gemini and Apollo, the space shuttle, and the international space station. In addition, as the commercial passenger jet business took off during the 1960s and 1970s, it created a new segment of the aerospace industry largely separate from military R&D and contracting. Defense contractors such as Boeing, McDonnell Douglas, Lockheed, and General Dynamics established stand-alone civilian airliner subsidiaries. Lockheed, for instance, manufactured the L-1011 and attempted to build a supersonic passenger plane. In addition, General Dynamics’ Convair division produced the Convair 880 passenger jet. In the case of Boeing and McDonnell Douglas, civil airliners became a key – and separate – manufacturing undertaking. Design, R&D, and production of commercial jets were performed at separate facilities, set apart from military contracting, often even in different cities.42 As a result, over the course of the Cold War era, the military and commercial high-tech sectors began to separate and diverge. By the 1970s, for example, the commercial semiconductor industry not only began to outproduce the military segment but also took the lead in R&D in many critical areas. For example, the Intel Corporation, which invented some of the first microprocessor chips, specifically developed its x86 series of microprocessors for commercial uses. In a rare case of civil-to-military spin-on during the period, the US Defense Department, during the 1970s and 1980s, acquired commercial microprocessors – albeit customized to military specifications (i.e., “mil-spec’ed”) – and it eventually became a major consumer and user of these chips, accounting for up to 30 percent of all production.43 Such commercial-to-military activities proved to be the exception rather than rule during the mid- and late stages (1970s and 1980s) of the Cold War era, however. As commercial high-tech sectors went their own way in much of R&D and production, and as military requirements of advanced technology continued to narrow and be more demanding (in

42

Ray, An Analysis, 40.

43

Heinrich, “Cold War Armory,” 272.

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terms of specialization, miniaturization, ruggedness, and “military uniqueness,” e.g., traveling wave tubes or infrared sensors for air-to-air missiles), it became more difficult for the military side to find high-tech solutions in the civilian industry, at least ones that did not require considerable additional modifications. It was not for lack of interest; the “DOD, the armed services, and prime contractors valued technological spillovers from the commercial semiconductor industry because it saved them billions of dollars in development costs for military-grade devices.”44 Microprocessors, like the Intel x86-series chip, could be customized for military use, but DRAM and other types of “generic” chips were not as suitable. This forced the Defense Department to rely on small, “boutique” semiconductor companies for its specialized chips, such as ASICs (application-specific integrated circuits). If anything, this gulf between commercial and military technology in the United States only widened in many areas near the end of the Cold War era. The American semiconductor industry, for example, was not prepared to deal with imports of cheaper chips from Japan (and later Korea) in the 1980s and early 1990s. Consequently, the United States exited the lower end of the semiconductor business (such as DRAM chips) and chose instead to design and manufacture high-end, specialized, and customized electronics for the military; in many instances, this effort was aided by DoD-funded university research or direct DoD/ DARPA contracts.45 By the 1970s and 1980s, therefore, the US defense-industrial base was, for the most part, segregated within its own “high-tech ghetto.” There were several rationales for this “siloing” of the arms industry including: acquisition regulations; the belief that defense-unique products require defense-unique technologies and businesses; the need to meet certain military standards (“mil-specs”); the need to classify certain technologies (e.g., nuclear weapons, stealth); government acquisition cultures; the commercially uneconomical viability of certain defense products; and the fact that military use (computers, jet aircraft, etc.) can often crowd out commercial industries (at least initially).46 In any event, over the course of the Cold War, the US military-industrial complex gradually became one of the most highly protected segments of the nation’s economy. In particular, the US government and the US military came to place a high priority on self-sufficiency, or “autarky,” in armaments production. As a result, the national defense industry was largely placed outside the bounds of traditional free-market economics, and, as such,

44

Ibid.

45

Ibid., 274–7.

46

OTA, Assessing the Potential, 44–7.

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related standards such as efficiency, cost-effectiveness, and competition came to be seen as secondary to the belief that the US armed forces required the most technologically advanced weapons and military equipment possible. This system functioned reasonably well so long as Congress and the US Defense Department were prepared to underwrite the high cost of military-specific R&D. With the end of the Cold War (approximately 1989–91), however, this classical model of the siloed and sealed-off US military-industrial complex began to unravel. In the first place, the initial euphoria of the immediate post-Cold War era resulted in significant cuts – the so-called peace dividend of the early 1990s – in US military spending; for example, from 1989 to 1998, the military procurement budget fell by 28 percent in real terms (Figure 3.3).47 This made autarky and the maintenance of a segregated and stand-alone military-industrial complex increasingly untenable. Secondly, there was a reexamination of the potential of the civilian/commercial high-technology sector to satisfy military requirements. At the same time, many experts and policymakers were beginning to see that the cutting edge of technological invention and innovation was again shifting from the military-industrial to the civilian R&D base (as it was before World War II), and that innovation in commercial hightechnology industries was beginning to outstrip the capabilities of the defense-industrial base.48 These assertions were particularly critical when it came to the burgeoning field of commercial IT, at a time when many armed forces were increasingly focused on how they could exploit IT for new military capabilities and advantages. As a result, at the time, it was increasingly argued that it was no longer economically viable to have two separate industrial bases, one military and one civilian. Rather, only by integrating them could militaries “exploit the market-driven efficiencies of the commercial sector.”49

The 1990s: The Growing Appeal of Civil–Military Integration in the US Defense-Industrial Base By the end of the Cold War, the US military-industrial complex had been part of the American political-military-economic landscape for more than forty years. The idea of a distinct, segregated defense-industrial 47 48 49

US Department of Defense, National Defense Budget, 139–40. OTA, Assessing the Potential, 1–10; Ray, An Analysis, 27–8; Molas-Gallart, “Which Way to Go,” 367–8. Ray, An Analysis, 27.

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base had become largely “baked in,” but by the early 1990s, many began to argue that such a situation was no longer viable or sustainable. As a result, the 1990s saw the US government, the Defense Department, and the arms industry take their first serious and deliberate steps in the direction of CMI and the objective of creating an integrated industrial base that could meet the needs of both civilian consumers and the military. CMI had considerable appeal at the time. Many believed that it could expand the defense industry’s access to new, cutting-edge technologies found in the much larger commercial sector. This, in turn, could help shorten weapons system development times, lower acquisition costs, reduce acquisition times, aid surge production (when needed), lower life-cycle costs, and, overall, increase the pace at which technological improvements could be incorporated into new military systems. CMI could also conceivably inject more competition into defense contracting (that is, by reducing costs while also promoting innovation), and, at the same time, improve the competitiveness of the overall US manufacturing base, by transferring advanced, defense-derived innovations to the civilian sector.50 An earlier attempt at CMI, in the form of defense conversion, did take place in the 1970s in the wake of the post–Vietnam War drawdown. At that time, the US defense procurement budget fell nearly 40 percent in real terms, greatly impacting the arms industry.51 As a result, some defense contractors, with the support and encouragement of the US government, attempted to diversify into civilian production. For example, Boeing Vertol, manufacturer of such military helicopters as the CH-46 and CH-47, produced subway cars, even winning a federal government competition to develop and manufacture a standardized light rail vehicle (SLRV), which was intended to be the staple of various government-funded light rail projects around the country. The SLRV proved to be unreliable, however, and it sold poorly. The program was halted in 1979, and the only two cities that bought the SLRV (Boston and San Francisco) eventually scrapped their cars.52 Other examples of defense conversion during the 1970s included Grumman’s foray into producing transit buses; Northrop producing pollution controls and nuclear powerplant equipment; McDonnell Douglas getting into the real estate business and building medical equipment; Raytheon making 50 51 52

Ibid., 28, 49–51; OTA, Assessing the Potential, 47–8. US Department of Defense, National Defense Budget, 138. Joe Fitzgerald Rodriguez, “Last of Muni’s 1980s-Era Clunker Trains Will Be Scrapped,” San Francisco Examiner, May 31, 2016.

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microwave ovens and television transmitters; and TRW entering the telecommunications business.53 To be fair, some of these projects were successful, at least temporarily; in general, however, defense conversion in the 1970s failed, as defense contractors were “unfamiliar” with the markets they were trying to penetrate or how to operate without the expectation of considerable government support.54 In any event, when defense spending went back up in the 1980s, due to President Reagan’s renewed military buildup, most defense contractors sold off or closed up their commercial operations. The 1990s “peace dividend,” however, promised even deeper and longer-lasting cuts in defense spending and a more permanent drawdown in the US defense-industrial base. This, in turn, created a new impetus for the federal government to explore CMI as a mechanism for technology innovation and the diffusion of advanced commercial technologies to the military sector. Some of the first efforts at this more purposeful stage of CMI were initiated during the presidency of George H. W. Bush (1989–93). In particular, the Bush administration was responsible for creating the SEMATECH consortium, which used government funding to develop manufacturing technology for future generations of microchips, as well as the Advanced Technology Program (ATP), run by the National Institute of Standards and Technology (NIST); the ATP was intended to stimulate early-stage research in private industry (as opposed to academia or labs, which were usually supported by the NSF) that might not otherwise be funded.55 In addition, the DoD expanded the use of Cooperative Research and Development Agreements (CRADAs), which were designed to permit the transfer of technology to the private sector by allowing federal laboratories and private-sector partners to share resources in collaborative R&D.56 CMI, however, really got a boost after Bill Clinton was elected president in 1992, and when the White House subsequently fell into the hands of an interventionist Democratic Party eager to promote a high-tech economy. The Clinton administration was staffed with several officials (including self-proclaimed “technology enthusiast” Vice President Al Gore) who wanted the federal government to lead an effort to harness the country’s across-the-board, cutting-edge leadership in advanced 53 55

56

54 Ray, An Analysis, 39–41. Ibid., 41. OTA, Assessing the Potential, 116; Jay Stowsky, “The History and Politics of the Pentagon’s Dual-Use Strategy,” in Arming the Future: A Defense Industry for the 21st Century, eds. Ann R. Markusen and Sean A. Costigan (New York: Council on Foreign Relations, 1999), 126–7. OTA, Assessing the Potential, 120.

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technologies (both military and civil) in order to advance a neocorporatist “national innovation strategy” and an integrated industrial base.57 The intent, according to Michael Brzoska, was “to have military and civilian R&D contribute to a technology ‘pool’ from which both civilian and military users of technology can draw.”58 This effort became the US government’s first genuine attempt to engage in intentional MCF. As such, particular emphasis was placed on promoting the development of dual-use technologies, that is, products, services, standards, processes, or acquisition practices that were capable of meeting requirements for both military and nonmilitary purposes. For the first time as well, the Clinton administration took a deliberate and comprehensive approach when it came to implementing “dual-use” CMI.59 Moreover, such dual-use technologies were to be developed either jointly – that is, entailing cooperative R&D from the very beginning of the process – or else concurrently – that is, in parallel and separate civil and military R&D efforts, but also connected and mutually supporting.60 The Clinton administration subsequently undertook several initiatives intended to encourage and support, via federal seed monies, the pooling of civilian and defense technologies for the overall advancement of both segments of the economy. This new dual-use innovation strategy was to be led by the Department of Defense, administered by DARPA. As such, DARPA was renamed ARPA (dropping the “D” for “defense” to reflect the agency’s expanded – i.e., civilianized – mandate), and the new ARPA was put in charge of crafting and running several dual-use technology initiatives. The most important of these programs was probably the Technology Reinvestment Project (TRP), administered by ARPA but also sponsored by NASA, the NSF, the Department of Energy, the Department of Transportation, and the NIST. The TRP, in turn, had under its auspices several other programs including the Advanced Manufacturing Technology Partnerships, the Dual-Use Critical Technology Partnerships, and the Commercial–Military Integration Partnerships.61 The TRP provided matching funds, on a dollar-perdollar basis, to collaborative projects. Moreover, participating defense and commercial firms were obliged to partner with universities, state and local governments, or national laboratories.62

57 58 59 60 62

Stowsky, “The History and Politics,” 123–57; Ray, An Analysis, 28–32. Brzoska, “Trends in Global Military,” 22. Molas-Gallart, “Which Way to Go,” 369. 61 Kulve and Smit, “Civilian–Military Co-operation,” 959. Ibid., 957. Stowsky, “The History and Politics,” 130.

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The TRP was the Clinton administration’s primary tool to support defense conversion, via spin-off, as well as to find and leverage commercial high-tech innovations, via spin-on, by encouraging civilian companies to develop military products based on commercial S&T.63 On the one hand, the TRP was intended to help defense-dependent firms find spin-off opportunities in civil industry, and to aid scientists, engineers, and displaced workers find new employment in the commercial sector.64 It was also supposed to encourage the transfer of DoD-funded technologies into new commercial applications. As a result, TRP projects were to be chosen on the basis of their ability to result in practical, realworld solutions, that is, technologies that would result in commercially viable products. Spin-off projects supported by the TRP included turboalternators for electric-hybrid vehicles, low-cost night-vision systems,medical-imaging technology, and advanced composites.65 On the other hand, the TRP was supposed to encourage spin-on as well. Consequently, the TRP was to sponsor spin-on efforts that would leverage commercial technologies and the “market-driven development trajectories” of commercial R&D processes, in order to provide the US military with “superior technology that would, over time, become affordable because the technology had contributed through its own evolution to the creation of a self-sustaining commercial industry.” In other words, the TRP would support a “generic, flexible” R&D strategy that would benefit the US military as well as the American commercial high-tech sector.66 The Clinton administration aggressively pursued CMI during its first term (1993–7). In 1994, it budgeted US$1.7 billion for defense conversion and dual-use technology programs including US$404 million for the TRP.67 One of its bolder efforts was the Flat-Panel Display Initiative (FPDI). The administration was concerned that not only were Japan and South Korea potentially overtaking the US in flat-panel display technologies but also that these countries might refuse to supply FPDs to the Defense Department, which was beginning to incorporate this technology in various military systems (glass cockpits, shipboard combat information centers, computer monitors on tanks and armored vehicles, and so on). The FPDI, therefore, was intended to support the development of a commercial industry that could also meet the needs of a more limited defense market. Moreover, it was believed that the civilian FPD sector was more fast-moving technologically and that, therefore, a strong

63 65

Ray, An Analysis, 29. Ibid., 135, 138–9.

66

64 Stowsky, “The History and Politics,” 128. 67 Ibid., 139–40. OTA, Assessing the Potential, 119.

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commercial FPD industry could supply innovations to the military both more quickly and at a lower cost.68 Despite this initial hype, by the time of Clinton’s second term, CMI and defense conversion had largely been set aside. The TRP resulted in only a handful of innovations, and it is unclear which, if any, were successful in moving from one technological sphere to the other (i.e., military to commercial, commercial to military). The TRP, in fact, was basically rolled up after just three years, and in 1997 it was succeeded by the tri-service Dual Use Science and Technology (DUS&T) Program.69 In addition, ARPA reverted to DARPA around this same time. The Flat-Panel Display Initiative was a particularly embarrassing failure: the Defense Department was only interested in highly specialized, high-definition, military-specific flat-panel displays, small but very rugged, available in nonstandard sizes, and produced in batch quantities. Consequently, the FPDI simply could not convince US manufacturers to see that it was worthwhile to get involved in such a project.70 By the end of the Clinton administration, therefore, most of its earlier defense reinvestment, conversion, and dual-use technology initiatives had been abandoned in favor of higher military spending, which took considerable pressure off the defense industry and the military. In any case, by the time George W. Bush became president in 2001, CMI was largely a dead issue. To be sure, efforts at CMI during the 1990s did see some successes. For example, Boeing was able to militarize its 767 airframe (e.g., for AWACS aircraft), and AM General developed the Hummer, a civilianized version of the High Mobility Multipurpose Wheeled Vehicle (HMMWV).71 The Hughes Space and Communications Company (later acquired by Boeing) developed the dual-use HS-601 communications satellite; both the civilian and military versions employed common propulsion and power systems, altitude control sensors, digital computers, and structural systems.72 The C-17 transport plane is

68 69 70 71

72

Stowsky, “The History and Politics,” 140–3; OTA, Assessing the Potential, 116. Kulve and Smit, “Civilian–Military Co-operation,” 957. Stowsky, “The History and Politics,” 140–3. There are indications that the Hummer/HMMWV was a poor example of CMI. A 1994 report by the US Congress’ Office of Technology Assessment found that, while the manufacturer (AM General) had “realized some savings in the commercial Hummer, but the savings/penalty equation is complex. For example, components for the 12-volt commercial electrical system are cheaper and easier to obtain than the less standard 24volt system required by the military, but the entire electrical system must be different from the military type. And while the commercial Hummer is constructed on the same manufacturing Iine using many of the same components, interior outfitting and exterior painting occur in a separate building.” OTA, Assessing the Potential, 89. Ray, An Analysis, 31–2.

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equipped with the CFM-47 commercial jet engine while the Pratt & Whitney Canada JT15D turbofan powers both small business jets and military trainers. Of course, the two most famous dual-use programs to arise out of this period were the GPS satellite navigation network and the Internet. GPS was originally a US government program to provide the US military with a precision system for navigation, tracking, guidance, and reconnaissance; very quickly, however, it caught on with the civilian sector, which uses it for civilian navigation and tracking (of people, vehicles, shipping fleets, and commercial aircraft), mapping, disaster relief, autonomous vehicles, astronomy, and so on. The modern Internet, meanwhile, had its genesis in ARPANET, a DARPAsponsored, wide-area, packet-switching network begun in the 1960s, and initially used by government and universities; by the 1990s, it had expanded into a global computer “network of networks,” linked with civilian browser software (e.g., the worldwide web) and commercially produced hardware. Like GPS, the Internet started out as a limited government-military service but was greatly expanded in scope and utility once it caught the public’s imagination. In general, contemporary studies demonstrated that CMI, at the time, was a particularly bounded phenomenon. In a 1994 report on the future potential of CMI, US Congress’ Office of Technology Assessment (OTA) found that some CMI did occur during this era but it was still highly circumscribed. At the firm level, a few companies that possessed both sizable military and commercial operations, such as Boeing or Pratt & Whitney, were able to share corporate resources, for example, management, finances, and possibly R&D, across divisional lines. In some situations, too, some integration was found to take place at the facility level, for example, on the same factory floor or even on the same assembly line. These cases entailed the sharing of personnel, equipment, facilities, and material to research, design, produce, and maintain defense and commercial goods, or to provide defense and commercial services. Military and commercial lines might share the same equipment, such as machine tools, personnel, management resources, or the production facility itself. The OTA also found that “many facilities” manufacturing military parts, subcomponents, and materials operated within more or less integrated manufacturing facilities; these included “metal sealing material, silicone, dopants and wiring for defense electronics, glass for optical systems, chemicals for explosives, and certain resins for plastics.”73

73

OTA, Assessing the Potential, 127, 130–2.

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At the same time, these achievements seemed to have occurred independently of the Clinton administration’s efforts to promote CMI; moreover, if such CMI did take place, it tended to be the exception that proved the rule. These early attempts at CMI failed for several reasons. In the first place, there existed very high entry costs for civilian firms to enter military contracting and production, which discouraged dual-use and COTS spin-on. According to Christopher Ray, these disincentives included: (1) differences in accounting practices (i.e., the need to use government-approved cost-accounting systems in order to determine “acceptable” costs – for example, an effort by commercial telecommunications company Motorola to sell COTS cellphones to the military during the 1991 Gulf War were stymied by the DoD’s inflexible costaccounting rules74); (2) burdensome paperwork; (3) complex and arcane government bidding methods; (4) low profitability on defense work (due to fixed-price contracting methods); (5) inflexible procurement policies, and generally inflexible military specifications and standards (“mil-specs”); (6) disputes over who owns the rights to technical data and the products’ intellectual properties (in general, the government owns the property rights to technology developed with federal funds); and (7) unique contract requirements (“Buy American” restrictions, export controls, susceptibility to the Foreign Corrupt Practices Act [FCPA], etc.). Moreover, commercial firms would have to endure all these restrictions in the face of a general expectation of low profits; overall, it simply wasn’t worth many commercial firms’ efforts to work with the military or to collaborate with defense firms.75 The OTA also offered additional reasons why CMI efforts were so often impeded during the 1990s, particularly from the supply-side perspective of defense-dedicated firms. In the first place, OTA noted, there still existed many types of military-unique products – such as nuclear weapons, final assembly of fighter jets, armored vehicles, naval warships, ordnance – that had no civilian counterpart; therefore, special facilities for military manufacture would continue to be required. The production of highly classified military systems, such as nuclear weapons or stealth bombers, would still likely need to be kept entirely segregated, and workers on these programs would still need to be vetted for security reasons. In addition, the small production runs of weapons systems and other military products have made it less appealing for commercial companies to engage in armaments production; military contracting may simply be too much of an initial investment for civilian firms to

74

Ray, An Analysis, 69–70.

75

Ibid., 56–67.

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contemplate entering, especially when considering all the restrictions (listed in the previous paragraph) that the DoD imposes on its contractors. On the other hand, a defense contractor may choose to concentrate solely on defense work, to the exclusion of commercial, nondefense activities, simply because it is too challenging, too uncertain, and too expensive to attempt spin-off work. The OTA found that “the diversification patterns of successful businesses stressed the exploitation of similar ‘core capabilities’ for both new and old products.” As a result, these firms “tended to focus on developing a core of similar technical competencies,” rather than on developing and producing a disparate array of products. Finally, the US Defense Department was itself often reluctant to rely on commercially oriented firms, particularly when it came to R&D; rather, it preferred public-sector facilities such as national laboratories (e.g., Lawrence Livermore, Sandia, Los Alamos) or defenseoriented think tanks (e.g., RAND, the Aerospace Corporation), where the military had more direct control (and even ownership): as such, R&D could be more easily directed toward meeting specific needs of the DoD. At the same time, the US Congress favored government-owned and – operated (GOGOs) facilities, such as depots and arsenals, which directly provided jobs for constituents.76

The 2010s: The Third Offset Strategy, the Fourth Industrial Revolution, and the Emergence of Military–Civil Fusion After the initial flurry of excitement over CMI and defense conversion that took place during the first Clinton administration, interest in these concepts quickly waned. Throughout Clinton’s second term in office, during the presidency of George W. Bush, and even during the early years of the Obama administration, little attention was given to such concepts as CMI. For the most part, neither the Defense Department nor the defense industry appeared to be motivated to seek out innovative commercial technologies that might be applicable to military solutions. With the turnaround in defense spending beginning in the late 1990s and continuing throughout the 2000s (e.g., the US defense budget nearly doubled, in real terms, between 1998 and 201077), the military-industrial complex was under little financial pressure to experiment with approaches like CMI. 76 77

OTA, Assessing the Potential, 150–2. US Department of Defense, National Defense Budget, 140–1.

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Paradoxically, this lack of interest coincided with a time when some supporters of military reform were making very vocal arguments that certain advanced commercial technologies were even more efficacious than ever. This contention was particularly pushed by disciples of the idea that warfare in the 1990s was undergoing a “revolution in military affairs” (RMA). According to one of the RMA’s leading advocates, Andrew Krepinevich, an RMA occurred when “the application of new technologies into a significant number of military systems combines with innovative operational concepts and organizational adaptation in a way that fundamentally alters the character and conduct of a conflict.”78 In other words, an RMA had the potential to “transform” the way we would fight in the future. More specifically, many came to argue that there was new RMA on the horizon, made possible by rapid and extraordinary developments in the field of IT. This “IT-RMA” was, in other words, mainly driven by the breakthroughs in the commercial IT sector. The overall “information revolution” had made possible significant innovation and improvement in the fields of reconnaissance and surveillance, computing and communications, automation, precision-strike, sensors, and seekers. In one sense, therefore, defense transformation in the late twentieth and early twenty-first centuries was inexorably linked, among other things, to emerging concepts of network-centric warfare (NCW), that is, vastly improved battlefield knowledge and connectivity through IT-based breakthroughs that create more capable C4ISR networks. Other critical elements of this new IT-RMA included the greater precision and increased range of weapons systems and ammunition, and the ability to operate these forces unmanned and autonomously at great distances and under all weather conditions. Nowhere was this commitment to defense transformation more pervasive than in the US Department of Defense during the George W. Bush administration. Under the stewardship of Defense Secretary Donald Rumsfeld (2001–6), transformation along the lines of the IT-RMA became a guiding principle of the US military. Terms such as “networking,” “jointness,” “battlespace situational awareness,” and “reconnaissance-strike complexes” were given increasing credence in Rumsfeld’s Defense Department, and the belief in the power of defense transformation to bring about a dramatic expansion in the capabilities and effectiveness of the US military almost became an article of faith. The ITdriven transformation of the US armed forces was promoted as nothing

78

Krepinevich, “Cavalry to Computer,” 30.

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less than a fundamental shift in the way wars would be fought in the future. Nothing was sacred: every piece of defense dogma was on the table for debate and discussion – force structure, organization, equipment, budgets, doctrine, and strategy. The result was supposed to be a US military capable of wringing the maximum amount of effectiveness from every tool it was given, and which would cement the ascendancy of US military power for the next several decades. Consequently, military reformers continued to press for a variety of CMI-like approaches to military-technological innovation including more dual-use R&D and the expanded use of COTS technologies and systems. As a result, RMA proponents argued that the US defenseindustrial base would have to undergo its own “revolution in business affairs.” Consequently, in 2003 the Office of the Under Secretary of Defense for Industrial Policy (OUSD/IP) published a study, entitled Transforming the Defense Industrial Base: A Roadmap, which laid out several recommendations for aligning US defense-industrial policy in accordance with Rumsfeld’s transformational vision. This document recommended that the DoD approach the national industrial base – both civilian and defense-specific – as a cluster of “effects-based sectors” – such as combat support, power projection, precision engagement, and so on – that could support defense transformation. OUSD/IP also proposed that acquisition decision-making be reorganized around operational effects and not “programs, platforms, or weapons systems.”79 In particular, the report recommended that the Defense Department strive to identify new sources of industrial-technological innovation among small or nontraditional firms that often did not supply directly to the DoD.80 Despite this keen interest at the time in the IT-driven RMA – at least within the Rumsfeld Defense Department – and the recognition that advanced commercial technologies could play an important role in force transformation, very little was accomplished. Rumsfeld’s star began to dim in the aftermath of the postwar chaos in Iraq and Afghanistan and the US military’s inability to stabilize the situation in these countries; he was forced to resign in 2006. Rumsfeld’s departure also removed a critical advocate for the IT-RMA, and the US military began to drift away from the whole idea of force transformation. In any event, too, the ingenious military systems that did distinguish themselves in the Iraq and Afghan conflicts – such as unmanned aerial vehicles, armed drones, 79

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US Department of Defense, Office of the Under Secretary of Defense for Industrial Policy (OUSD/IP), Transforming the Defense Industrial Base: A Roadmap (Washington, DC: February, 2003), 2. Ibid., 13–15.

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GPS, precision-guided weapons, the E-8 JSTARS (Joint Surveillance Target Attack Radar System) aircraft, and so on – were all designed, developed, and manufactured within the traditional defenseindustrial base. Nevertheless, the idea of leveraging advanced commercial technologies for military capabilities and advantage never really went away; indeed, advocacy in favor of MCF has only grown in the following years. By the 2010s, there was a growing concern that the United States was losing its “near-monopoly” in reconnaissance-strike capabilities, as potential adversaries were able to field their own reconnaissance-strike networks to challenge US power projection.81 As such, the US military was increasingly vulnerable to long-range strike, modern integrated airdefense systems, more capable underwater systems, and attacks in the space and cyber domains. Washington was especially perturbed by China’s growing military-technological capabilities, and that its subsequent military buildup was beginning to sap the US “margin of superiority.”82 Such capabilities increasingly favored “a strategy of denial,”83 largely known as “anti-access/area denial” (A2/AD), undermining US military power where it must travel long distances before it can project such force. By employing a variety of A2/AD capacities and strategies – long-range ballistic and cruise missiles (both land-attack and antiship), submarines, sophisticated integrated air defenses, counter-space weapons (to blind military spy satellites and disrupt C4ISR infrastructures), and cyber weapons to cripple logistics – China might be able to prevent US forces from entering or operating with impunity within the Taiwan Strait and the East and South China Seas.84 In the face of this growing military challenge from China and Russia – and to a lesser extent from Iran (in the strategically important Persian Gulf region)85 – the United States began to search for technologies that would help neutralize these capabilities and preserve its military-technological lead. In 2010, this “counter-A2/AD revolution” was unveiled as AirSea Battle (ASB), later renamed the “Joint Concept for Access and Maneuver in the Global Commons” (JAM-GC). ASB/JAM-GC placed a particular emphasis on crafting “future joint forces [that would] leverage cross-domain synergy [i.e., air, sea, land, and cyberspace] to establish superiority in some combinations of domains that will provide the freedom of action required 81 82

83 85

Martinage, Toward a New Offset Strategy, iv. Thomas G. Mahnken, “Frameworks for Examining Long-Term Strategic Competition between Major Powers,” 2016 Conference on US–China Strategic Competition in Defense Technological and Industrial Development, La Jolla, July 27–8, 2016, 2. 84 Ibid., 7–8. Scharre and Riikonen, Defense Technology Strategy, 4. US Office of the President, National Security Strategy, December 18, 2017.

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by the mission.”86 Subsequently, jointness and networking were part and parcel of ASB: “networked, integrated attack-in-depth” in order to “disrupt, destroy, and defeat” enemy forces.87 This new operational concept would obviously require new capabilities and new enabling technologies. In order to supply the tools that ASB/ JAM-GC required, the US Defense Department in 2014 launched a new initiative, dubbed the “third offset strategy.” In a speech at the Reagan National Defense Forum in November of that year, then Defense Secretary Chuck Hagel announced this new program as a mechanism “to identify and invest in innovative ways to sustain and advance America’s military dominance for the 21st century.” In addition, as part of the third offset strategy, the DoD launched the Defense Innovation Initiative (DII) to identify, prioritize, and invest in innovative technologies to sustain and advance the US military’s technological advantage into the future.88 The third offset strategy put particular emphasis on acquiring “the most cutting-edge technologies and systems” to maintain the United States’ military-technological advantage and, therefore, its military dominance well into the twenty-first century. These included AI, autonomous systems and robotics, miniaturization, big data, cyber, hypersonic propulsion, and advanced manufacturing including 3D printing.89 In 2018, the Office of the Under Secretary of Defense for Research and Engineering listed its top-ten technology priorities as hypersonics; directed energy; command, control, and communications; space offense and defense; cybersecurity; AI and machine-learning; missile defense; quantum science and computing; microelectronics; and autonomous systems. At least six of these priorities involve advanced information and computing technologies. Subsequent priority lists added 5G networks, big data, and advanced manufacturing, all of which also entail the insertion of considerable information technologies.90 86 87

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US Department of Defense, “Joint Operational Access Concept,” Version 1.0 (Washington, DC: US Department of Defense, January 17, 2012), 38–9. General Norton A. Schwartz and Admiral Jonathan W. Greenert, “Air–Sea Battle: Promoting Stability in an Era of Uncertainty,” The American Interest, February 20, 2012, www.the-american-interest.com/article.cfm?piece=1212. Sydney J. Freedberg Jr., “Hagel Lists Key Technologies for US Military; Launches ‘Offset Strategy,’” Breaking Defense, November 16, 2014, https://breakingdefense.com/ 2014/11/hagel-launches-offset-strategy-lists-key-technologies; Dombrowski, America’s Third Offset Strategy, 4. Dombrowski, America’s Third Offset Strategy, 5–6; Martinage, Toward a New Offset Strategy, vi–vii; Patrick Tucker, “These Are the New Weapons the Pentagon Chief Wants for Tomorrow’s Wars,” Defense One, February 2, 2016; Freedberg, “Hagel Lists Key Technologies.” Scharre and Riikonen, Defense Technology Strategy, 14–15.

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Not surprisingly, most of these technologies are embedded in the 4IR, particularly AI, which in turn can enable autonomous systems, machinelearning, and man–machine interfacing. In fact, in April, 2016, then Deputy Secretary of Defense Bob Work stated that AI, along with autonomy, was going to be “the technological sauce” of the third offset strategy.91 Other critical 4IR technologies include block-chains (secure and decentralized ways of recording and sharing data), cloud computing, quantum computing, and IoT, which permit computers to process vast amounts of data faster than ever before, and then safely store and transfer this data from anywhere with internet access, at any time.92 Since the 4IR is almost entirely rooted in commercial R&D, it was recognized that the cutting-edge technologies required to bolster the US military’s technological edge vis-à-vis its competitors and adversaries would, accordingly, be increasingly drawn from the commercial hightechnology sector. This situation, in turn, has promoted a new round of MCF in the twenty-first century. Consequently, the US Defense Department and the armed services have created several institutions and projects designed to facilitate MCF in support of defense R&D and innovation. As part of the third offset strategy’s Defense Innovation Initiative, the DII has launched the Long-Range Research and Development Program Plan (LRRDPP) to help the Defense Department prioritize “new or unconventional applications of technology,” particularly focusing on system concepts that will have significant impact over the medium term (i.e., approximately ten years out).93 The DII has also set up the Defense Innovation Unit (DIU), with the goal of accelerating the military’s adoption of commercial technology. As of 2021, the DIU was focused on five technology areas where the commercial sector is deemed to be operating at the cutting edge: AI and machine-learning, autonomy, cyber, human systems, and space capabilities. This government organization is based in Mountain View, California, purposely to be closer to Silicon Valley.94 The DIU is also working with literally dozens of civilian companies including Airmap, VideoRay, Sherlock Biosciences, Kudu Dynamics, L3Harris, Device

91 92

93

94

Cited in Scharre and Riikonen, Defense Technology Strategy, 14. Devon McGinnis, “What is the Fourth Industrial Revolution?” Salesforce.com, December 20, 2018, www.salesforce.com/blog/2018/12/what-is-the-fourth-industrial-revolution4IR.html. US Department of Defense, Defense Innovation Marketplace, “The Long-Range Research and Development Program Plan,” (Washington, DC: 2014), https:// defenseinnovationmarketplace.dtic.mil/innovation/long-range-research-development. US Department of Defense, Defense Innovation Unit (DIU), official website, www.diu .mil.

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Solutions, and Logic Hub, awarding contracts to turn existing COTS technologies or systems into ones for military uses.95 At the same time, individual services within the US military are engaged in exploring the use of COTS in military applications. For example, the US Army and the US Marines have been using COTS computer games to support virtual reality training. One product has been Virtual Battle Space Mk.2 (VBS2), developed by a company called Bohemia Interactive.96 In addition, the DoD has undertaken several programs intended to reach out and access advanced commercial innovations, particularly in the IT sector. In 2018, the armed services established the Joint Artificial Intelligence Center (JAIC), whose mission is to accelerate “the delivery and adoption of AI,” via a “holistic approach” that includes partnerships with large established technology firms and small startups, as well as academia, allies, and other friendly countries.97 One initiative is Project Maven, an effort to build an AI-powered surveillance platform for unmanned aerial vehicles.98 A more ambitious project is JEDI (the Joint Enterprise Defense Infrastructure), which is supposed to develop a secure, capable cloud infrastructure for the US military; the first JEDI contract was awarded to Microsoft in 2020, and it could eventually be worth up to US$10 billion.99 Also, in August 2020, the Trump administration announced that it would make available up to US$1 billion in new funding for multidisciplinary AI and quantum computing research hubs, with the expectation that this funded research would benefit national security; in addition, some private tech firms agreed to make up to US $300 million in “technology-services donations” to this initiative.100 The US military is also partnering with several private companies (such as AT&T, Nokia, and General Electric) in a US$600 million project to

95 97 98

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96 Ibid. Curry et al., “Commercial-off-the-Shelf-Technology,” 13–14, 22–3. US Department of Defense, Joint Artificial Intelligence Center, “About the JAIC,” www.ai.mil/about.html. Tristan Greene, “Report: Palantir Took over Project Maven,” The Next Web, December 11, 2019, https://thenextweb.com/artificial-intelligence/2019/12/11/report-palantirtook-over-project-maven-the-military-ai-program-too-unethical-for-google. Notably, this award is being challenged by Amazon Web Services (AWS), which claims that President Trump intervened to deny the contract to AWS, in part because of his bias against Jeff Bezos, Amazon’s CEO. See Joseph F. Kovar, “AWS: Trump Interference, Errors Enough to Challenge Microsoft’s $10B JEDI Win,” CRN, December 15, 2020, www.crn.com/news/cloud/aws-trump-interference-errorsenough-to-challenge-microsoft-s-10b-jedi-win. James Vincent, “White House Backs AI and Quantum for National Security,” The Verge, August 26, 2020, www.theverge.com/2020/8/26/21402274/white-house-aiquantum-computing-research-hubs-investment-1-billion.

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experiment with 5G technologies at various military sites, “representing the largest full-scale 5G tests for dual-use applications in the world.”101 Aware of the importance of this pathway to military modernization, Congress has long been supportive of promoting MCF going back at least as far as the 1990s.102 Congress must approve funding for DoD and other government work on AI R&D, as well as protect US technology from foreign competition and theft. Congress also has the power to write and revise federal regulations regarding US government AI policy.103 In 2020, for example, it reformed government acquisition regulations in order to expand the use of “Other Transaction Authorities (OTAs)” in support of the procurement of civilian products by the DoD and to encourage commercial firms to engage in defense-oriented S&T efforts.104 The Pentagon is also exploring the idea of reinvigorating the US microelectronics industry by bringing back to the United States chip production and testing that is presently being done overseas. Microelectronics, such as microprocessor chips and semiconductors, are instrumental to 4IR technologies like AI, quantum computing and 5G wireless networks, as well as critical components in most weapons systems. The Defense Department wants to make more such chips in the United States to guarantee security and reliability (e.g., preventing malicious foreign manufacturers from installing malware, backdoors, or data exfiltration commands).105 At the same time, in 2017, DARPA launched its five-year Electronics Resurgence Initiative, to “nurture research in advanced new material, circuit design tools, and system architectures.” This initiative could allocate up to US$1.5 billion in seed monies over its five-year lifespan.106 In 2021, the Biden administration issued an executive order to study ways to increase US semiconductor production.107 Finally, some large, traditionally nondefense firms have decided to enter or re-enter the defense business, or else strengthen their defense 101 102 103 104 105 106 107

“Pentagon to Dish Out $600mn in Contracts for ‘5G Dual-Use Experimentation’ at 5 US Military Sites, Including to ‘Aid Lethality,’” RT USA News, October 9, 2020. OTA, Assessing the Potential. Artificial Intelligence and National Security, CRS Report R45178 (Washington, DC: Congressional Research Service, 2020), 5–9. Gouré, “Non-traditional Defense Companies.” Andrew Eversden, “Pentagon’s Acquisition Chief Wants Microelectronics Production to Return to the US,” C4ISRNET, August 21, 2020. Daniel Cebul, “A Senate Panel Wants to Spend an Extra $400 Million on Microelectronics,” C4ISRNET, June 28, 2018. Semiconductor Industry Association, “Semiconductor Industry Welcomes President Biden’s Executive Order on Critical Supply Chains,” press release, February 24, 2021, www.semiconductors.org/semiconductor-industry-welcomes-president-bidensexecutive-order-on-critical-supply-chains.

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work, by offering the US military with advanced products based on unique commercial capabilities. General Motors, for example, has established a new subsidiary, GM Defense, which is “focused on combining the best of an innovative start-up with the experience, infrastructure, and resources of a major manufacturing company.”108 Products include lightweight tactical vehicles, hydrogen-based propulsion, and autonomous systems. In general, therefore, the US military is becoming more and more a consumer of technological innovation emanating from outside the traditional military-industrial complex. The DoD is looking to piggyback on commercial breakthroughs in the broad area of IT including AI, cyber and computing, advanced microelectronics, data/communications networking, as well as biotechnology.109 This, in turn, implies a growing consensus as to the potential of 4IR technologies – which are mostly embedded in the commercial high-tech sector – to become major force multipliers when it comes to military power and advantage. In all these areas, the civilian sector has been taking the lead, and the military hopes to benefit through MCF (exceptions where military R&D still tends to predominate involve esoteric technology areas such as hypersonics and undersea warfare). This realization, in turn, had demanded more concerted efforts at MCF to harness these innovations. In the final analysis, MCF in the 2010s and 2020s differs significantly from CMI in the 1990s. In many ways, contemporary MCF is both simpler and more ambitious than its predecessors. It is simpler in that most current MCF is taking place at the level of basic research: it is more about supporting commercial S&T and then finding ways to transmit these breakthroughs to the military; it is not necessarily about pressuring civilian firms to work with the defense industry to develop a tangible military product (such as the ill-fated Flat-Panel Display Initiative). This is particularly evident in the DoD’s support for AI, quantum computing, the IoT, and 5G wireless networks, which has been mainly to encourage private companies to step up their game in terms of basic research. At the same time, contemporary attempts at MCF are more ambitious than previous CMI efforts in that they are more intensely and deliberately focused on the exploitation of some of the most advanced technologies currently under development. If done right, these technologies have the potential to radically transform how militaries fight.

108 109

Gouré, “Non-traditional Defense Companies.” Scharre and Riikonen, Defense Technology Strategy, 7.

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Conclusions It is too soon to determine how successful current US efforts at MCF will be. Many of the current programs and initiatives sponsoring MCF are still at the stage of exploration, experimentation, and evaluation. It is likely that some – perhaps many – of these efforts will not yield significant results; in addition, MCF must contend with long-standing prejudices – and interests – on the part of a US defense establishment that favors breakthroughs that come out of the traditional military-industrial sector. At the same time, some commercial firms may be reluctant, out of moral or ethical concerns, to participate in defense programs; Google, for example, abandoned Project Maven because many of its employees objected to the idea of their company being “in the business of war.”110 That said, there does appear to be a sea change in attitudes within the DoD, the US military, and the civilian sector when it comes to the potential impact of advanced commercial (and especially 4IR-based) technologies on future military capabilities, particularly when it comes to areas like IT, communications, microelectronics, software, and the like, commercial products and services, and the participation of the private sector in their development for military use rather than the traditional acquisition system. Moreover, the potential for MCF in other technological areas is conceivable, such as power generation, propulsion systems, drive trains, transmissions, aerostructures, and guidance technologies.111 AI is particularly driving this new appreciation for MCF, since it is increasingly regarded as the force multiplier of future warfare. As the US National Security Commission on Artificial Intelligence (NSCAI) put in their 2021 Final Report: A new warfighting paradigm is emerging because of AI … This idea has been called “algorithmic” or “mosaic” warfare; China’s theorists have called it “intelligentized” war. All these terms capture, in various ways, how a new era of conflict will be dominated by AI and pit algorithms against algorithms. Advantage will be determined by the amount and quality of a military’s data, the algorithms it develops, the AI-enabled networks it connects, the AI-enabled weapons it fields, and the AI-enabled operating concepts it embraces to create new ways of war.112

The report goes on to state that: AI-enabled warfare will not hinge on a single new weapon, technology, or operational concept; rather, it will center on the application and integration of

110 111

Scott Shane and Daisuke Wakabayashi, “‘The Business of War’: Google Employees Protest Work for the Pentagon,” New York Times, April 4, 2018; Greene, “Report.” 112 Gouré, “Non-traditional Defense Companies.” NSCAI, Final Report, 75.

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AI-enabled technologies into every facet of warfighting. AI will transform the way war is conducted in every domain from undersea to outer space, as well as in cyberspace and along the electromagnetic spectrum. It will impact strategic decision-making, operational concepts and planning, tactical maneuvers in the field, and back-office support.113

Not surprisingly, therefore, supporters of MCF frequently assert that the “dynamic of innovation” has, since the early 1990s or so, shifted from the military to the civilian/commercial sector. Commercially based technologies are increasingly seen as having great potential for military applications. This trend is particularly significant in the broad field of IT, where critical breakthroughs are increasingly centered in the civilian high-tech industries including AI, robotics, automation, 5G broadband networking, quantum computing, big data, and the like. As a result, MCF appears to be going through a revival within the US military establishment. The DoD, the US armed forces, Congress, and national security think tanks are increasingly drawn to the idea of MCF and its potential benefits. More and more, it is seen as an instrumental way forward, as a recent study argues: The United States will need to adopt a technology strategy appropriate for today’s technology landscape. The approach the United States used in the 1960s, ’70s, and ’80s won’t work today, when innovation is increasingly globalized and driven by the private sector. Nor does the U.S. military have sufficient resources to invest in every conceivable technology, even with a $700 billion-plus defense budget. The Department of Defense (DoD) will have to make strategic bets in the technologies most likely to rapidly transform warfare, while hedging against surprise with smaller bets elsewhere.114

Overall, MCF and 4IR technologies (especially AI) promise to create a new set of opportunities and challenges for the US military when it comes to identifying what are new and significant military-related technologies, how such technologies will create new military capabilities and advantage in the decades to come, and how they should be best absorbed in military R&D and production. In order to effectively exploit MCF, it will demand a radical new approach to military R&D and acquisitions. The US Defense Department and the armed forces are already taking steps toward establishing both initiatives and institutions to identify and leverage promising technologies found in the commercial sector. These include the DIU, the JAIC, Project JEDI and Project Maven, and the Electronics Resurgence Initiative. In addition, the military is trying to make it easier for small businesses and companies outside the traditional

113

Ibid., 79.

114

Scharre and Riikonen, Defense Technology Strategy, 4.

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defense-industrial realm to win DoD contracts, for example, using creative schemes such as “pitch days,” whereby a firm (or a lab or academic institution) can propose a project and be awarded a same-day contract.115 In any event, MCF will almost certainly be an increasingly attractive idea when it comes to future trajectories of US military R&D.

115

“Inaugural Air Force Pitch Day: New Contracts, New Partners,” AFNS, March 8, 2019; Debra Werner, “International Space Pitch Day Offers Model for Future Events,” Space News, November 18, 2020.

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MCF in China

China, like many countries, has long been keenly aware of the potential benefits of MCF in reducing the costs and risks of weapons development and production, and in accelerating the process of military modernization. Additionally, the Chinese leadership has traditionally viewed CMI – the overreaching form of MCF – as advancing its long-term objective of greater self-sufficiency in arms procurement by enabling the People’s Liberation Army (PLA) “to source more of its critical and sensitive technologies domestically” and subsequently reduce its dependencies upon foreign suppliers for its most advanced weapons.1 For China, therefore, MCF is basically a new wrinkle on the classic technonationalist development strategy of a joint government–industry–military effort to acquire, nurture, indigenize, and diffuse critical dual-use technologies deemed essential to national security and defense.2 China, therefore, has a considerable stake in making MCF work. That viewpoint has become ever more valid with the recent technological development in the world, and particularly the appearance of 4IR, which further erodes the already blurring distinction between military and civilian technologies. Actually, few countries are more appreciative of the potential military impact of commercial 4IR technologies than China. China is keen to expand its efforts at civil–military integration – or MCF, as Beijing started calling it in the early 2000s – as a means of driving military breakthroughs in these areas. MCF, particularly in such areas as AI, robotics, advanced microelectronics and computing, and quantum technologies, is especially critical to the PLA’s most recent phase of modernization effort: informationization. In 2015, President

1 2

Cheung, Fortifying China, 201. On China’s techno-nationalism and rooted practice of utilizing commercial technology for military use, see Evan A. Feigenbaum, China’s Techno-Warriors: National Security and Strategic Competition from the Nuclear to the Information Age (Stanford: Stanford University Press, 2003); Roger Cliff, The Military Potential of China’s Commercial Technology (Santa Monica, CA: RAND, 2001).

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Xi Jinping made the “aligning of civil and defense technology development” a national priority, and in 2017, Beijing established the Central Commission for Integrated Military and Civilian Development, responsible for overseeing MCF and headed by President Xi.3 That was followed by various activities aimed at breaking down the administrative and political barriers between different sectors and organizations in China’s technology and industry establishments. New policies and bodies were created to coordinate and advance MCF, new rules and regulations were issued to enable inter-sectorial cooperation, and financial incentives were offered to encourage on-the-ground collaborations. Nevertheless, China’s efforts to harness MCF have so far been mixed.4 As it has carried out different forms of civil–military technological integration over the years, with only limited success, it should be explored in what ways the current campaign is different.

China’s Military-Industrial Complex The evolution of CMI in China has been tightly related to the features and hindrances of the country’s defense industry complex and military procurement system. To provide the PLA with the advanced weapons and equipment it requires to accomplish its missions, China needs access to technologies and hardware from either domestic or foreign sources. It should also allow the PLA to play a dominant role in the design and development of the acquired weapons, as well as in the quality assurance of their manufacturing and supply conditions. Finally, it should keep the

3

4

US Department of Defense, Annual Report on Military and Security Developments Involving the People’s Republic of China (Washington, DC: Office of the Secretary of Defense, 2019), 21, 96, 102. For reports and analysis outside the PRC on China’s MCF, see David Yang, “Civil– Military Integration Efforts in China,” SITC Research Brief 24, SITC (2011); Lafferty et al., “China’s Civil–Military Integration”; Laskai, “Civil–Military Fusion: The Missing Link”; Marcel Angliviel et al., Open Arms: Evaluating Global Exposure to China’s DefenseIndustrial Base (Washington, DC: Center for Advanced Defence, 2019), https://static1 .squarespace.com/static/566ef8b4d8af107232d5358a/t/5d95fb48a0bfc672d825e346/ 1570110297719/Open+Arms.pdf; Li Huaqiu, “Zhonggong junmin ronghe fazhan zhanlüe chutan” (A probe into the CCP’s strategy of civil–-military fusion), Guojia zhengci yanjiu jijinhui (National policy research foundation), January 28, 2019, www .npf.org.tw/1/20157; Lorand Laskai, “Civil–Military Fusion and the PLA’s Pursuit of Dominance in Emerging Technologies,” China Brief 18, no. 6 (2019); “Special Issue: Military–Civil Fusion and Its Prospects for the PLA and Chinese Industry,” China Brief 19, no. 18 (2019); Alex Stone and Peter Wood, China’s Military–Civil Fusion Strategy: A View From Chinese Strategists (Maxwell: China Aerospace Studies Institute, Air University, 2020); Bitzinger et al., “China’s Military–Civil Fusion Strategy” (Roundtable), Asia Policy 16, no. 1 (2021): 2–64.

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procurement process within a given budget framework.5 Indeed, the PLA has always craved technology – and, in particular, the most up-todate technology possible – even while it embraced the idea of People’s War, that is, a doctrine that was heavily based on infantry and guerrillastyle warfare. At the same time, the emphasis on technology was tempered by other national requirements, particularly the achievement of near total self-reliance, or autarky, in armaments production. In this, China is by no means unique, but the form that this has taken in China has been distinctive and testifies to its particular national security imperatives and policy objectives. In many states, practical efforts to promote defense-industrial autonomy are restricted to a production capacity, but in China, the development of autarky with respect to both R&D and production was considered crucial. Thus, technological superiority was not desirable if the price to be paid was excessive dependencies on foreign suppliers, systems, and inputs. Consequently, much of the history of China’s military-technological development revolved around this tug of war between the acquisition of state-of-the-art weapons and the political goal of self-sufficiency. That approach has guided China’s enormous efforts since the early 1950s to operate a vast military-industry complex which can provide the PLA with the entire range of arms and equipment that it requires. China’s post-1949 defense-industrial model was broadly similar to that of the Soviet Union. Defense-industrial activity in China was the exclusive domain of the state. China’s defense-industrial base featured highly centralized control and a very bureaucratic structure. All arms production was undertaken by ministerial manufacturing units, and later on state-owned enterprises (SOEs), and defense-related R&D was either allocated to a research institute answering to one of the Ministries of Machine Building (MMB) responsible for various aspects of China’s arms programs or undertaken by academic institutions that answered to the state. Through the late 1970s, when China launched its economic reform policy, there was no apparent requirement to ensure that arms production was economically viable, though the substantial arms requirements of the PLA undoubtedly resulted in considerable economies of scale in many cases. In addition, the lack of interest in commercial considerations also meant that no resources were devoted to developing arms tailored to the particular requirements of potential export customers. Finally, at no point did China strive to even approach

5

Richard A. Bitzinger, “Reforming China’s Defense Industry,” Journal of Strategic Studies 39, no. 5–6 (2016): 763.

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foreign arms in qualitative terms, choosing instead to focus on the largescale production of relatively unsophisticated arms for the PLA. The result was a military procurement system that suffered from several chronic problems.6 It relied on an inefficient, even corrupt, technologically backward defense-industrial complex. In addition, there existed a monopolistic and poorly regulated client–supplier relationship between the PLA and the large defense industry conglomerates, which reduced the former’s bargaining power with the latter. There was very limited access to Western arms markets due to the formal and informal arms embargo that has been imposed upon China for the longest period of its existence. Finally, since the late 1970s, the defense industry has been involved in fierce competition with other national priorities.7 To overcome these problems, China began a multi-year, multi-phase effort to modernize its military procurement system and defense technology and industrial base – a crucial condition to bring the PLA into the twenty-first century. This was fueled by a significant increase in Chinese defense spending, starting in the late 1990s. Between 1997 and 2019, Beijing increased its annual defense spending by over 13 percent on 6

7

For a comprehensive overview of the progress and setbacks in China’s defense industry, see Béraud-Sudreau and Nouwens, “Weighing Giants,” 151–77; Tai Ming Cheung, “Keeping Up with the Jundui: Reforming the Chinese Defense Acquisition, Technology, and Industrial System,” in Chairman Xi Remakes the PLA: Assessing Chinese Military Reforms, eds. Phillip C. Saunders et al. (Washington, DC: National Defense University Press, 2019), 585–626; Andrea Gilli and Mauro Gilli, “Why China Has Not Caught Up Yet: Military-Technological Superiority and the Limits of Imitation, Reverse Engineering, and Cyber Espionage,” International Security 43, no. 3 (2019): 141–89; Richard A. Bitzinger et al., “Locating China’s Place in the Global Defense Economy,” in Forging China’s Military Might: A New Framework for Assessing Innovation, ed. Tai Ming Cheung (Baltimore: Johns Hopkins University Press, 2014), 169–212; Mikhail Barabanov et al., Shooting Star: China’s Military Machine in the 21st Century (Minneapolis: East View Press, 2012); Tai Ming Cheung, “The Chinese Defense Economy’s Long March from Imitation to Innovation,” Journal of Strategic Studies 34, no. 3 (2011): 325–54; Mulvenon and Tyroler-Cooper, China’s Defense Industry; Richard A. Bitzinger, “Reforming China’s Defense Industry: Progress in Spite of Itself?” Korean Journal of Defense Analysis 19, no. 3 (Fall, 2007): 99–118; Medeiros et al., A New Direction; Evan S. Medeiros, Analyzing China’s Defense Industries and the Implications for Chinese Military Modernization (Santa Monica, CA: RAND, 2004); David Shambaugh, Modernizing China’s Military: Progress, Problems, and Prospects (Berkeley: University of California Press, 2002), 225–83; Richard A. Bitzinger, “Going Places or Running in Place? China’s Efforts to Leverage Advanced Technologies for Military Use,” in The PLA After Next, ed. Susan Puska (Carlisle Barracks: SSI Press, 2000), 9–54; John Frankenstein and Bates Gill, “Current and Future Challenges Facing Chinese Defense Industries,” China Quarterly 146 (1996): 394–427; Eric Arnett, “Military Technology: The Case of China,” in SIPRI Yearbook 1995: Armaments, Disarmament and International Security (Oxford: Oxford University Press, 1995), 359–86. Joseph Fewsmith, “China’s Defense Budget: Is There Impending Friction between Defense and Civilian Needs?” in Civil–Military Relations in Today’s China, eds. David M. Finkelstein and Kristen Gunness (Armonk, NY: M.E. Sharpe, 2007), 202–13.

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US$ million

250,000 200,000 150,000 100,000

Official figures

2019

2017

2015

2013

2011

2009

2007

2005

2003

2001

1999

1997

1995

1993

1991

0

1989

50,000

SIPRI estimation

Figure 4.1 China’s military expenditures, 1989–2019 Source: China National Statistics Yearbook (various years); SIPRI, “Military Expenditure Database”

Note: The official figures have been originally indicated in RMB and were converted to US$ by the authors according to the average exchange rate in each year.

average, and, as a result, the PLA budget went from around US$10 billion in 1997 to around US$260 billion in 2019 (see Figure 4.1). Moreover, during this period, the expenditure on equipment has made the largest growth compared with the other components of military expense: personnel and training and maintenance. According to a 2021 Stockholm International Peace Research Institute (SIPRI) estimation of China’s military expenditures, between 2010 and 2017, the share of equipment expenses out of the total military budget increased from 33 to 41 percent. At the same time, the shares of personnel and of training and maintenance declined from 35 to 31 percent and from 32 to 28 percent, respectively (see Figure 4.2). To be sure, constituting the lion share of this expenditure has been local development and production of weapons rather than arms imports. By the early 2010s, China’s arms imports had already decreased from their 2005 peak of US $3.5 billion to less than US$1 billion in 2010, and, with the exceptions of 2012 and 2018, remained below US$1.5 billion annually throughout this period (see Figure 4.3). Concurrently, the expanse on weapons RDT&E remained constantly the largest item of all the spending categories that are not included in China’s official national defense budget. According

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45 40 35

Percent

30

25 20 15 10 5 0

2010

2011

2012

2013

2014

2015

2016

Equipment

Personnel

Training & maintenance

Linear (equipment)

2017

Figure 4.2 Breakdown of Chinese military expenditures, 2010–17 Source: Tian and Su, A New Estimate of China’s Military Expenditure, 5

Figure 4.3 Chinese arms imports, 1999–2020 Source: SIPRI, “Arms Transfers Database”

to SIPRI’s estimation, between 2010 and 2019, this expenditure constituted over 10 percent of China’s total defense expenses, reaching US$25 billion in 2019.8 8

Nan Tian and Fei Su, A New Estimate of China’s Military Expenditure (Solna: SIPRI, 2021), 18, 22–3.

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One significant aspect of the military modernization effort was the 1998 large-scale reform of the military procurement system. That included, among other things, the transfer of the military acquisition function from the Commission for Science, Technology, and Industry for National Defense (COSTIND) – a body that oversaw the defense industry and concurrently ran military procurement – to the PLA. For this purpose, a PLA directorate at the same hierarchical level as the General Staff Department – the General Armaments Department (GAD) – was established. Under this capacity, the GAD became responsible for weapons acquisitions, but also for military R&D as well as the testing and assessment of new weapons systems. Thus, the PLA was assigned the responsibility for defense innovation and R&D.9 This change was supposed to ease the inherent conflict of interests in the earlier structure, rooted in COSTIND’s dual responsibility for both the defense industry (the supplier) and arms acquisition (the demand). Another aspect of the reform was the fostering of competition within the defense industry sector. To this end, each of the five major defense industry groups (which held respective monopolies in the aerospace, aviation, shipbuilding, armament, and nuclear fields) was split into two corporations that would compete with each other. In addition, the Chinese government and the PLA began to pursue CMI and civilianto-military spin-on in a serious fashion. As detailed later, in the mid-2000s, the State Council (the executive organ of the Chinese government) issued an order to introduce civilian enterprises into military acquisitions in order to promote integrated dual-use industrial systems capable of developing and manufacturing both civilian and military goods.10 This move was meant to strengthen the market economy mechanism in military acquisitions, introduce civilian technological capabilities into the defense sector, and ultimately promote innovation in China’s military R&D system. In this framework, acquisition contracts and payment transfers between the army branches and the defense industries heretofore conducted by the PLA’s financial units were now handled directly between the army branches and their suppliers, who would be chosen by tender. Thus, the army branch unit that placed the order would have much greater control over the type and quality of the

9

10

Harlan W. Jencks, “COSTIND Is Dead, Long Live COSTIND! Restructuring China’s Defense Scientific, Technical and Industrial Sector,” in People’s Liberation Army in the Information Age, eds. James Mulvenon and Richard Yang (Santa Monica, CA: RAND, 1999), 59–77. Tai Ming Cheung, “Dragon on the Horizon: China’s Defense Industrial Renaissance,” Journal of Strategic Studies 32, no. 1 (February, 2009): 41–3.

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product ordered and the supply conditions, through direct control of the payment. In addition, efficacious steps were taken in management and technology, such as increasing the financial and administrative supervision of the factories, encouraging workers to excel, adopting thousands of new technological standards and work procedures, and developing new capabilities in project management and systems integration. Also, in the defense industries, there was a sharp distinction made between civilian and defense production. Furthermore, after many years in which the military had only limited access to weapons R&D and production processes, it was finally allowed to place its representatives in the development and production organizations and to become more involved in both planning the products and ensuring their quality.11 Lastly, new channels were created to recruit funds for the defense industry’s research institutes and enterprises through the capital market. For the first time, some defense industries were permitted to float shares and bonds. Although this process occurred in great secrecy, with absolute control and ownership in the hands of the Chinese government, it was a breakthrough financially. It also placed the defense companies under the rigid standards of management and supervision required of public companies. As part of it, the defense corporations were instructed to operate like all other SOEs regarding their loss-making affiliates. Accordingly, defense industry enterprises were sold, closed down, or merged in order to reduce the large losses accumulated by the defense industry sector over the years. The result has been the strengthening of the defense industry. Reportedly, average annual revenues from the ten leading state-owned defense corporations since the mid-2000s through the early 2010s grew by about 20 percent, so that total reported revenues of these firms amounted to an estimated RMB 1.477 trillion (US$233 billion) in 2011. Profitability has risen as well: between 2004 and 2015, the total profits of the big ten corporations increased from RMB 15 billion (approximately US$1.8 billion) to RMB 120 billion (approximately US $19 billion).12 Nevertheless, these reform measures did not address the fundamental problems of China’s military procurement. Splitting the defense corporations inflated the bureaucracy and increased waste rather than promoted competition. In fact, the defense industry conglomerates 11

12

Tai Ming Cheung (ed.), The Chinese Defense Economy Takes Off: Sector-by-Sector Assessments and the Role of Military End Users (La Jolla, CA: The University of California Institute on Global Conflict and Cooperation, 2013), 27. Ibid., 59; Cheung, “Keeping Up with the Jundui,” 586.

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remained a huge state-owned complex including more than 1,100 enterprises, factories, and research institutes with nearly 2 million employees.13 One of the results has been the remerge of some of the defense industry conglomerates that had earlier been split (see Table 4.1). In addition, the goal of raising money for the defense industries through the stock exchange encountered obstacles and did not achieve the expected results. Mostly, the low profitability of the defense industry corporates, their large debt-to-asset ratios, and the state’s refusal to allow shareholders any influence over their management kept them away from materializing their 1 trillion RMB potential of capital raising.14 Realizing that the existing procurement structure could not tackle the defense industry’s problems, in 2015 China led another round of reforms, which were part of the PLA’s largest restructuring since the 1950s. The GAD, which was largely preoccupied with the modernization of the ground forces, was replaced with a newly created Central Military Commission (CMC) body – the Equipment Development Department (EDD). Concurrently, some more defense industry corporations that had been previously split were merged (see Table 4.1). Centralizing arms development and military procurement under the CMC – China’s supreme military policy-making and supervising body – the EDD is intended to oversee weapons development for the entire PLA (rather than the ground forces alone, as was largely the situation with GAD). It will also institute reforms to the defense R&D and procurement systems. As such, it will set priorities and streamline procurement efforts for all of the PLA’s arms and services. Being part of the formal CMC bureaucracy, it will arguably be easier for the EDD than its predecessor to oversee the procurement process and make sure it is compatible with the PLA’s buildup plans.15 Nevertheless, these reforms still did not alter the main determinants behind China military procurement’s impediments. This system is still dominated by mammoth, inefficient SOEs that are not subject to market forces, have no embedded incentive to increase efficiency, and suffer from limited innovative capacity. Consequently, buyers such as the PLA have a limited impact on the design of weapons and equipment and costs are high. In addition, it is likely that the supply of weapons and

13 14 15

According to data reported on the nine conglomerates’ respective websites. Zi Yang, “Privatizing China’s Defense Industry,” The Diplomat, June 7, 2017, https:// thediplomat.com/2017/06/privatizing-chinas-defense-industry. Joel Wuthnow and Phillip C. Saunders, Chinese Military Reforms in the Age of Xi Jinping: Drivers, Challenges, and Implications (Washington, DC: Institute for National Strategic Studies, National Defense University, 2017), 35–7.

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Table 4.1 Defense industry reorganization during the reform period 1982

1993

1999

2008

2018

Ministry of Nuclear Industry

China National Nuclear Corp. (CNNC)

China National Nuclear Corp. (CNNC)

CNNC

CNNC (CNECC merged into CNNC)

China Nuclear Engineering and Construction Corp. (CNECC) China Aviation Industry Corp. I (AVIC-I)

CNECC

Ministry of Aviation Industry

Ministry of Electronics Industry Ministry of Ordnance Industry

China State Shipbuilding Corp. (CSSC)

Ministry of Aerospace Industry

Aviation Industries of China (AVIC)

Ministry of Electronics Industries (MEI) China North Industries Corp (NORINCO)

CSSC

China Aerospace Corp. (CASC)

China Aviation Industry Corp. II (AVIC-II) China Electronics Technology Group Corp. (CETC) (established in 2002) NORINCO/CNGC China South Industries Group Corp. (CSGC) CSSC

China Shipbuilding Industry Corp. (CSIC) China Aerospace Science and Technology Corp. (CASTC) China Aerospace Science and Industry Corp. (CASIC)

Aviation Industries of China (AVIC) (a merger of AVIC-I and AVIC-II)

AVIC

CETC

CETC

NORINCO/CNGC

NORINCO/CNGC

CSGC

CSGC

CSSC

CSSC

CSIC

CSIC

CASTC

CASTC

CASIC

CASIC

97

Sources: Yoram Evron, China’s Military Procurement in the Reform Era: The Setting of New Directions (London: Routledge, 2016), 55; South China Morning Post, January 31, 2018

98

MCF in China

equipment is irregular, that there is a relatively large share of defective products, and that the maintenance of the equipment is insufficient.

The Long Way from Civil–Military Economic Integration to MCF China CMI roots can be tracked back directly to Mao Zedong’s People’s War doctrine, and, more vaguely, even to the imperial period and earlier. Chinese strategists have always been aware of the tight connection between military forces, war, and civilian economy. One of the most striking and explicit demonstrations of this awareness is Sun Zi’s iconic text Art of War (Bing Fa, ca. fifth century BC), which its second chapter opens with a detailed calculation of the war’s economic cost for the state: “If you expose the army to a prolonged campaign, the state’s resources will be inadequate. When the weapons have grown dull and spirits depressed, when our strength has been expended and resources consumed, then the feudal lords will take advantage of our exhaustion to arise.” From this, he deduced the correct way to recruit army manpower: “One who excels in employing the military does not conscript the people twice or transport provisions a third time.”16 Concern over the material aspects of military activity and forces remained high in the following centuries, and various methods interlinking the military with civilian activity and resources have been adopted to address this challenge. Thus, to save on feeding troops stationed along China’s emoted boundary, the border garrisons were required to provide for themselves. Consequently, for the larger part of imperial history, they set up farms and raised crops and animals for food while other conscripts were assigned to work at sponsored farms probably established for the same purpose.17 Apparently, the involvement of military forces in the civilian economy remained an unseparated part of military life in China, and army officers occasionally utilized the work force under their command for economic initiatives. Evidently, already during the Republican era (1912–49) there were cases where local army units ran factories as a source of income while using their soldiers as the workforce.18 16 17

18

Sun Zi, “Art of War,” in The Seven Military Classics of Ancient China, eds. and trans. Ralph D. Sawyer and Mei-chun Sawyer (Boulder: Westview Press, 1993), 159. Arthur Waldron, The Great Wall of China: From History to Myth (Cambridge: Cambridge University Press, 1990), 82–3; Michael Loewe, “The Western Han Army,” in Military Culture in Imperial China, ed. Nicola Di Cosmo (Cambridge, MA: Harvard University Press, 2011), 83. Peng Dehuai, Memoirs of a Chinese Marshal: The Autobiographical Notes of Peng Dehuai (1898–1974) (Hawaii: University Press of the Pacific, 2005), 84–5.

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The People’s War doctrine, which Mao conceptualized in the late 1920s through the late 1930s, took China’s CMI a huge step forward, both conceptually and practically. Constituting the basis of the communists’ military struggle against the nationalist and Japanese forces, the doctrine regarded the country’s entire population and material resources as a potential pull of resources to feed its war efforts. Such a conception, which was blended well with the communists’ ideological position on property ownership, gave the authorities and the military forces almost free access to civilian, private-owned means and, in fact, blurred the distinction between private and public, civilian and military, resources. Military units were engaged in agriculture work while operating commercial, small factories of different types, and even mines, with the goal of self-reliance.19 And when the forces were less busy with military struggles, Mao expected them to engage in civilian production and administrative work. Thus, delivering a report on the struggle against the nationalist forces (Guomindang [KMT]) and the Japanese in the early 1940s, he said: “Not only did the people of the Border Region provide us with grain … The government established many industries to meet the needs of the Border Region, the troops engaged in an extensive production campaign and expanded agriculture, industry and commerce to supply their own needs.”20 The fact that guerilla commanders also served as governors in practice of the isolated territories they took over during the pre-1949 wars only strengthened that. Being largely dependent on local resources for their war efforts and required to assure the population’s economic survival, they turned those territories into giant bases with a dual civil–military function. While such measures were largely developed out of necessity during the revolutionary war, Mao did not see them as a temporary solution but as a long-term policy. In early 1949, when the victory over the KMT forces was already in sight, Mao wrote to the top military command: “All army cadres should … be … good at managing industry and commerce … and solving the problems of food, coal and other daily necessities and good at handling monetary and financial problems … In short, all urban problems.”21 Then, making a distinction between time of war and time of peace, he referred to the latter: “The Army is still a fighting force … Nevertheless, the time has 19 20

21

James Mulvenon, Soldiers of Fortune: The Rise and Fall of the Chinese Military-Business Complex, 1978–1998 (Armonk: M.E. Sharpe, 2001), 24–35. Mao Tse-tung, “Economic and Financial Problems in the Anti-Japanese War,” in Selected Works of Mao Tse-Tung, Vol. III (Peking: Foreign Languages Press, 1969), 112. Mao Tse-tung, “Turn the Army into a Working Force,” in Selected Works of Mao TseTung, Vol. IV (Peking: Foreign Languages Press, 1969), 337.

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come for us to set ourselves the task of turning the army into a working force … We have to rely chiefly on the army to supply our working cadres.”22 The engagement of the Chinese military in economic activities remained in place well after the establishment of the People’s Republic of China (PRC) in 1949. It retained the factories, farms, and mines it had run during the revolutionary period while expanding and modernizing them, and established new ones. While the defense and civilian industries were strictly separated by thick bureaucratic walls, still defense industries produced various products of civilian character such as food, clothing, trucks, and the like. Civilian factories, for their part, were used if needed to provide materials and parts to military projects.23 In addition, combat units had produced their own basic supply while some rear units were formed specifically to construct and operate civilian infrastructure projects such as dykes and railroads. Altogether, during the Maoist period (1949–76), PLA units at various hierarchical stages ran up to 2,400 factories and mines and over 2,000 farms. As James Mulvenon noted, “there is no evidence to suggest that there was ever a period after 1949 when the military might have withdrawn from economic affairs altogether.”24 The objectives behind such activity, as well as its particular nature, were threefold. First, in line with his guerilla doctrine, Mao believed that military units should maintain a high level of self-reliance and engage for this purpose in production activity. Secondly, inclining for a world power status and striving for a national-level military selfreliance, China established and operated a vast defense industry complex, which was supposed to provide the PLA with the entire arsenal of weapons, ammunition, and military equipment. Finally, Mao regarded the PLA as an unseparated part of the nation’s building, and called for it time and again to engage in agriculture, industry, and infrastructure construction and operation. Production and infrastructure construction were not, however, the only fields were military–civilian distinction blurred. Another important field was science and technology. The aspiration for military self-reliance required China to set a comprehensive arms production infrastructure but also to establish weapons development capability. That goal ultimately resulted in a merger of its civilian and military science and technology systems. The step that fully expressed and initiated this was the 22 23 24

Ibid., 338. Yu Yongbo (ed.), China Today: Defense Science and Technology, Vol. I (Beijing: National Defense Industry Press, 1993), 50. Mulvenon, Soldiers of Fortune, 38.

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launch of the National Plan on the Prospect of the Development of Science and Technology (1956–67), or, in short, the Twelve-Year Plan. Its purpose was to raise China to the level of world research and technology within twelve years. In this framework, over 600 projects were defined and classified into twelve main categories. The plan included a subsidiary program for promoting military capabilities, called the Defense Science and Technology Development Plan, directed by Marshal Nie Rongzhen. The subjects headed the list of projects, military and general alike – all defined as intended for military application: nuclear energy, jet and rocket technology, semiconductor technologies, computer technologies, and automatic control technologies. Thus, China bound together R&D for defense technology and for the general development of the country. A complemented organizational move was the establishment in 1958 of the National Defense Science and Technology Commission (NDSTC), a Party body that also reported to the State Council (and, more specifically, to the Ministry of Defense). The head of this body was Marshal Nie, who also headed the State Commission for Science and Technology, a body that supervised China’s civilian science and technology system. This made Nie the top leader of China’s science and technology sector, both military and civilian, throughout the Maoist period, with both legitimacy and capacity to divert civilian scientific and technological resources to military use.25 Indeed, as various sources reveal, civilian scientists, engineers, and students have been mobilized intensively to military projects.26 CMI in China took on a new direction and new emphasis following the death of Mao and the resurgence of Deng Xiaoping as China’s paramount leader. Beginning in the late 1970s, China shifted away from promoting class struggle in favor of stable economic development; this development, in turn, forced the defense industry to develop new ways of engaging with the civilian sector. The Chinese arms industry’s first attempts after the Maoist period at CMI ran from roughly the early 1980s to the mid-1990s, and were basically an effort to rectify its acute economic, structural, and organizational problems through a concerted attempt to convert military factories to the manufacture of civilian products. In particular, commercial production was seen as a means of absorbing excess capacity and manpower in the arms-producing sector, 25

26

Yoram Evron, China’s Military Procurement in the Reform Era: The Setting of New Directions (London: Routledge, 2016), 36, 45. See also Zuoyue Wang, “The Chinese Developmental State During the Cold War: The Making of the 1956 Twelve-Year Science and Technology Plan,” History and Technology 31, no. 3 (2015): 180–205. For example, Yu, China Today, Vol. II, 573–4, 860–1; John W. Lewis and Xue Litai, China Builds the Bomb (Stanford: Stanford University Press, 1988), 125.

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providing defense enterprises with additional sources of revenues to compensate for their under-performing military product lines and budget cuts, and encouraging their directors and managers to bring their enterprises more in line with market forces. This strategy was officially embodied in Deng Xiaoping’s so-called Sixteen Character slogan, which called for “combining the military and civil, combining peace and war, giving priority to military products, and making the civil support the military.”27 With Beijing’s enthusiastic blessing, therefore, the defense industry branched out into a broad array of civilian manufacturing during the 1980s and 1990s. China’s aviation industry, for example, established a number of commercial joint ventures with Western aircraft companies. The McDonnell Douglas Corporation set up a production line in Shanghai to build MD-82 and MD-90 passenger jets. Boeing, the European Airbus consortium, Sikorsky Helicopter, and Bombardier of Canada all established facilities at various China aircraft factories to produce subassemblies and parts for Western civil aircraft.28 Beginning in the 1980s, Chinese shipyards successfully converted much of their production to more profitable civilian products, such as bulk carriers and general cargo ships. China’s missile industry entered the lucrative civilian satellite-launching business with its series of Long March space-launch vehicles. Additionally, many defense enterprises became engaged in commercial ventures far outside their traditional economic activities. Ordnance factories assembled motorcycles, aircraft companies built mini-cars and buses, and missile facilities put together refrigerators, television sets, and even corrugated boxes. By the mid-1990s, 70 percent of all taxicabs, 20 percent of all cameras, and two-thirds of all motorcycles produced in China came out of former weapons factories.29 By the late 1990s, 80 to 90 percent of the value of China’s defense industry output was estimated to be nonmilitary.30 Very little of this earlier conversion effort actually aided the Chinese military-industrial complex, however. For one thing, defense conversion has been no guarantee of financial success, and many former weapons factories have actually lost money on civilian production. In particular, many failed to create reliable, “mainstay” product lines or develop a more consumer-savvy attitude when it came to price, quality, and adding 27 28 29 30

Frankenstein, “China’s Defense Industries”, 208. “Joint Ventures Star in Beijing,” Aviation Week & Space Technology, October 16, 1995, 22–3. “PRC Defense Industry.” Frankenstein, “China’s Defense Industries,” 205; Folta, From Swords to Plowshares; Brommelhorster and Frankenstein (eds.), Mixed Motives, Uncertain Outcomes.

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new features.31 More important, defense conversion did little to benefit China’s defense industry in terms of acquiring and diffusing potentially useful commercial technologies to the military sector.32 The concern put forth by one Western analyst – that conversion meant a process of “swords into plowshares … and better swords” – was largely unfounded.33 If anything, spin-off – that is, the transfer of military technologies to civilian applications (such as in the development of China’s space-launch business, which was initially based on the commercialization of its intercontinental ballistic missile systems) – was more important during this period than civilian-to-military spin-on. Indeed, opportunities for the direct spin-on of civilian technologies to military production remained limited. In the aviation industry, for example, while the Chinese acquired a number of advanced numerically controlled machine tools, for use in commercial aircraft production, enduser restrictions kept these from being diverted to military use.34 With regard to the shipbuilding industry, even as late as the mid-1990s, commercial programs had little impact on improving China’s ability to produce modern warships or to develop advanced naval technologies.35 During this same period, the shipbuilding industry’s low technology base, while sufficient for building cargo ships, offered little value-added to the development and construction of warships. In particular, advanced naval designs required certain technologies and know-how, such as damage control and survivability, which were not attainable via commercial ship modeling and construction.36 This is not to say that some efforts at dual-use technology development did not take place during this period. In fact, a critical science and technology development effort, the so-called 863 Program, was launched in the mid-1980s; the 863 Program was a long-term initiative to expand and advance China’s high-technology base in a number of areas, many of which had potential military applications including aerospace, lasers, opto-electronics, semiconductors, and new materials. The 863 Program, 31 33 34

35

32 Cheung, Fortifying China, 74. Frankenstein, “China’s Defense Industries,” 207. Folta, From Swords to Plowshares, 1. In the mid-1990s, as part of the MD-90 commercial airliner coproduction arrangement, China did receive from McDonnell Douglas a number of used (but still serviceable) computer-controlled machine tools, including multi-axis milling and profiling machines, and some of these were subsequently discovered to have been transferred (in violation of the export license) to a military aircraft production facility, where they were placed in storage. The diversion was found out before the equipment could be put into possible use for military production, however. US General Accounting Office, Export Controls: Sensitive Machine Tool Exports to China, GAO/NSIAD-97-4 (Washington, DC: US Government Printing Office, November, 1996). 36 Medeiros, Linking Defense Conversion, 20. Ibid., 14–15, 19.

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however, was essentially a basic and applied research activity and, initially, it was not set up (or funded) in order to promote and diffuse these technologies for practical – and particularly military – uses.37 At best, therefore, efforts at CMI during this period only indirectly aided Chinese weapons development and production, to the extent that the military-industrial complex benefitted from overall economic growth. In some cases, defense conversion did help to reduce overhead costs and generate new sources of income to underwrite new arms production. In general, however, there were few linkages between military and civilian production and, in particular, very few efforts to develop dual-use technologies or to apply innovative civilian technologies to military uses.38

Shifting Back to Military Modernization: CMI and Exploitation of Dual-Use Technologies China’s approach to CMI began to change around the mid-1990s and entailed a crucial shift in policy, from conversion (i.e., switching military factories over to civilian use) to the promotion of integrated dual-use industrial systems capable of developing and manufacturing both defense and military goods. This new strategy was embodied and made a priority in the defense industry’s Five-Year Plan for 2001–5. It emphasized the dual importance of both the transfer of military technologies to commercial use and the transfer of commercial technologies to military use, which, therefore, called for the Chinese arms industry not only to develop dual-use technologies but to actively promote joint civil–military technology cooperation. Consequently, the spin-on of advanced commercial technologies both to the Chinese military-industrial complex and in support of the overall modernization of the PLA was made an explicit policy.39 According to many analysts, such CMI was a central feature of defense industry reform roughly during the period of 1997–2017.40 CMI was viewed as a fast (or at least faster) and ready means to shortcut the R&D process when it came to advanced weapons systems; to cherry-pick civilian manufacturing practices in high-tech sectors (CAD and CAM, program management tools, etc.); exploit dual-use technologies (e.g., space systems for surveillance, communication, and navigation) to support the military; and, in particular, to take advantage of the latent 37 39 40

38 Cheung, Fortifying China, 193–4. OTA, Other Approaches, 21. Cheung, Fortifying China, 176–234. Hagt, “Emerging Grand Strategy,” 481–4; Lafferty et al., “China’s Civil–Military Integration”, 58; Mulvenon and Tyroler-Cooper, China’s Defense Industry, 57–8.

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capabilities found in commercially based IT in order to advance the IT-based RMA, which China aspired to promote. Such civil technologies could be both domestically developed or obtained from foreign sources via joint ventures, technology transfer, or even espionage.41 This new strategy was embodied in the principle of yujunyumin (“locate military potential in civilian capabilities”), which could be traced back to the 1956 Twelve-Year Plan for scientific and technological developments and was enunciated at the Sixteenth Party Congress in 2002.42 Subsequently, yujunyumin has been made a priority in the subsequent Five-Year Defense Plans as well as the 2006–20 Medium and Long-Term Science and Technology Development Plan (MLP) and the parallel 2006–20 Medium and Long-Term Defense Science and Technology Development Plan (MLDP). The MLP included many topics with direct and indirect military relevance (see Table 4.2) and defined indigenous innovation as the promotion of original innovation by reassembling existing technologies in different ways to produce new breakthroughs and absorbing and upgrading imported technologies. Meanwhile, the MLDP made the recombination by implementing policies and measures that support the importation, absorption, and re-innovation of foreign technology. These plans and strategies combined emphasized the importance of the transfer of commercial technologies to military use and called upon the Chinese arms industry to not only develop dual-use technologies but to also actively promote joint civil–military technology cooperation.43 The key areas of China’s focus during this period on dual-use technology development and subsequent spin-on included microelectronics, space systems, new materials (such as composites and metal alloys), propulsion, missiles, CAM, and, particularly, IT. Over the period of 1997–2017, that is, since the initiation of the defense industry and military acquisition’s earlier reform efforts until the elevation of MCF to a high-priority military modernization strategy, Beijing worked hard both to encourage further domestic development in the defense industry and civilian high-technology sectors and to expand linkages and collaboration between them. Factories were also encouraged to invest in new manufacturing technologies, such as CAD, computer numerically controlled (CNC) multi-axis machine tools, computer-integrated manufacturing systems (CIMS), and modular construction in shipbuilding, as 41 42 43

Hagt, “Emerging Grand Strategy,” 514–18; Mulvenon and Tyroler-Cooper, China’s Defense Industry, 35–7, 38–43; Cheung, “Dragon on the Horizon,” 47. Mulvenon and Tyroler-Cooper, China’s Defense Industry, 5. Hagt, “Emerging Grand Strategy,” 481–4.

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Table 4.2 Major areas of focus and mega projects of the 2006–20 MLP Frontier technologies Biotechnology Information technology Advanced materials technology Advanced manufacturing technology Advanced energy technology Marine technology Lasers technology Aerospace technology Engineering mega projects Advanced numeric-controlled machinery and basic manufacturing technology Control and treatment of AIDS, hepatitis, and other major diseases Core electronic components, high-end generic chips, and basic software Drug innovation and development Extra-large-scale integrated circuit manufacturing and technique Genetically modified new-organism variety breeding High-definition Earth observation systems Large advanced nuclear reactors Large aircraft Large-scale oil and gas exploration Manned aerospace and Moon exploration New-generation broadband wireless mobile Telecommunications Water pollution control and treatment Science mega projects Development and reproductive biology Nanotechnology Protein science Quantum research Source: People’s Republic of China, the State Council, “The National Mediumand Long-Term Program for Science and Technology Development (2006–2020): An Outline,” www.itu.int/en/ITU-D/Cybersecurity/Documents/ National_Strategies_Repository/China_2006.pdf; Cong Cao et al., “China’s 15-Year Science and Technology Plan,” Physics Today 59, no. 12 (2006): 43

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well as to embrace Western management techniques. In 2002, for example, the Chinese government turned the Ministry of Electronic Industries (MEI) into a new industry enterprise group, the China Electronics Technology Group Corporation (CETC), to promote national technological and industrial developments in the area of defense-related electronics. In addition, under the Tenth Five-Year Plan (2001–5), many technology breakthroughs generated under the 863 S&T Program were finally slated for development and industrialization. Defense enterprises formed partnerships with Chinese universities and civilian research institutes to establish technology incubators and undertake cooperative R&D on dual-use technologies while foreign hightech firms wishing to invest in China were pressured to set up joint R&D centers and to transfer more technology to China. In this regard, it is worth noting that during the Tenth Five-Year Plan, four times as much funding (22 billion yuan, or approximately US$3 billion) was allocated to the 863 Program as during the entire period of 1985–2000.44 Chinese efforts at CMI during the 1997–2017 period appeared to have paid some dividends. China’s aggressive pursuit of advanced commercial technologies development and their subsequent spin-on to the defense sector have shown some success in a number of areas, such as electronics and IT, shipbuilding, aviation, space-launch vehicles, satellites, and advanced manufacturing. In particular, China’s military shipbuilding sector appears to have particularly benefitted from CMI efforts over the past decade. Following an initial period of basically low-end commercial shipbuilding – such as bulk carriers and container ships – China’s shipyards have since the mid-1990s progressed toward more sophisticated ship design and modular construction work. In particular, moving into commercial shipbuilding began to bear considerable fruit beginning in the late 1990s as Chinese shipyards modernized and expanded operations, building huge new dry-docks, acquiring heavy-lift cranes and computerized cutting and welding tools, and more than doubling their shipbuilding capacity. At the same time, Chinese shipbuilders entered into a number of technical cooperation agreements and joint ventures with shipbuilding firms in Japan, South Korea, Germany, and other countries, which gave them access to advanced ship designs and manufacturing technologies. As a result, military shipbuilding programs – which are usually collocated at Chinese shipyards engaged in mostly commercial activities – were able to leverage these considerable infrastructure and software improvements when it came to design,

44

Cheung, Fortifying China, 193.

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development, and construction of military vessels, and this was evident in the comparatively higher quality and capacity of warships being delivered to the PLA Navy.45 China’s rapidly expanding aircraft and space industry also spurred the development and application of dual-use technologies that are basically commercial in nature but which serve military purposes as well. Take the decision to enter the large commercial aircraft market, which was made at the very top by the State Council of China and by the Central Committee of the Chinese Communist Party (CCP). In 2008, Beijing created the state-owned Commercial Aircraft Corporation of China Ltd. (COMAC), which openly viewed its mission as equivalent to the nation’s development of nuclear weapons and the launch of the country’s first satellite some decades before. China currently has two passenger jets in the works, the ARJ-21 regional jet and the C-919 narrow-body jet. Other passenger jets are also envisioned: COMAC has already begun to plan for the production of two wide-body airliners, the 300-seat CR-929 and the 400-seat C-939.46 Such projects are aimed at having spin-on effects for China’s defense sector, particularly when it comes to the design and production of large military aircraft such as bombers and transport aircraft. With regard to aerospace, CMI has favorably impacted China’s space-launch business and its emerging capacities for the development and manufacture of various spacecraft including telecommunications satellites, the Beidou navigation satellite system, and the Yaogan and Ziyuan types of Earth observation satellites. In addition, many of the technologies being developed for commercial reconnaissance satellites, such as charge-coupled device cameras, multispectral scanners, and synthetic aperture radar imagers, have obvious spin-on potential for military systems.47 Despite these achievements, Chinese CMI efforts – particularly when it came to commercial-to-military spin-on – remained limited. As of the late 2010s, there was little evidence of any significant CMI in the Chinese defense industry, particularly in the aviation industry where one might expect CMI to be a naturally occurring phenomenon. Commercial and military aircraft manufacturing in China was still carried out not only (and perhaps unavoidably) on separate production lines but also in separate facilities and often in separate enterprises, with little apparent

45 46 47

Medeiros et al., A New Direction, 140–52. The CR-929 is a collaborative project with Russia’s United Aircraft Corporation to develop a wide-body commercial airliner. Richard A. Bitzinger, Arming Asia: Technonationalism and Its Impact on Local Defense Industries (New York: Routledge, 2017), 64.

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communication and crossover between these compartmentalized operations. Moreover, with the exception of helicopters (and possibly transport aircraft), the technological overlap between civil aviation and military aircraft (particularly fighter aircraft) was small and not very conducive to CMI. As such, there were few opportunities to share personnel, production processes, and materials, and perhaps even fewer prospects for joint R&D or collocated production. Likewise, until rather recently, China’s overall record of indigenous high-technology development and innovation was mixed, further limiting opportunities for CMI. There still existed many gaps and weaknesses in China’s S&T base, and very little indigenous design and manufacturing actually takes place in many of China’s high-technology sectors. For one thing, during the period from the early 1980s to the 2000s, China still lacked sufficient numbers of skilled designers, engineers, scientists, and technicians in crucial high-technology sectors, particularly IT, and so most high-end items, such as microprocessor chips, must have been imported. For another, many of the country’s high-technology incubators were still very much in their nascent stage, and Beijing spent relatively little on high technology compared to the United States and the rest of the West. In 2010, its R&D expenditure-to-GDP ratio was 1.7 percent, and as late as 2018 it reached 2.19 percent, still considerably lower than the United States’ 2.84 percent, Germany’s 3.1 percent, and Japan’s 3.26 percent, to name just a few examples.48 At the same time, much of China’s high-technology R&D and industrial base was, particularly during the early part of this period, still heavily foreign-controlled, either through foreign-owned companies or joint ventures. Foreigners owned virtually all of China’s high-technology intellectual property and most of its manufacturing capacity (such as semiconductor plants) and, as such, 85 percent of China’s high-tech exports came from foreign-owned or joint-venture operations. In addition, many foreign-established so-called R&D centers were actually geared more toward training and education than joint S&T development.49 In general, therefore, CMI in China remained very limited in scope and operation, and both civilian and military authorities were unable to formulate and implement a specific strategy for more effectively exploiting CMI. As one consequence, therefore, the R&D of defense-specific 48

49

The World Bank, “Research and Development Expenditure (% of GDP) – India,” The World Bank Open Data, February 18, 2021, https://data.worldbank.org/indicator/GB .XPD.RSDV.GD.ZS?locations=IN. Kathleen A. Walsh, Written Testimony for the Hearing before the US–China Security Review Commission (Washington, DC: US–China Commission Export Controls and China, January 17, 2002).

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technologies, as well as the importation of such technologies, continued to be crucial in the modernization of the country’s military-industrial complex and in the development of next-generation weapons systems. Overall, through the mid-2010s, China’s successes with CMI turned out to be much less than meets the eye. It was difficult for the central authorities to entice commercial enterprises into getting into defense work or to partner with defense firms on joint projects that entailed diffusing technologies and innovations to the military side. Consequently, according to Cheung, “less than one percent of China’s commercial high-tech firms were ever engaged in defense work,” and, as a result, CMI “barely scratched the surface of the Chinese economy.”50 According to Lafferty, Shraberg, and Clemens, there still existed many impediments to deepening and broadening CMI including (1) weak institutions, mechanisms, and guidelines to promote and support CMI; (2) high barriers between civilian enterprises and the defense market; (3) corporate parochialism on both sides (commercial firms were too often overly protective of their intellectual property while military secrecy made technology-sharing problematic); (4) insufficient resource-sharing; and (5) underdeveloped industries dedicated to CMI.51 Overall, until well into the second decade of the twenty-first century, civilian firms were still only tangentially engaged in armaments production.

Military–Civil Fusion under Xi: Turning a New Page? Although the term “military–civil fusion” was used by then General Secretary Hu Jintao (2002–12) as far back as the Seventeenth Party Congress in 2007, MCF is mostly associated with Xi Jinping.52 According to Laskai, since Xi has come to power, “civil–military fusion has been part of nearly every major strategic initiative.”53 Xi’s personal involvement in MCF has been instrumental in overcoming earlier reluctance to embrace CMI. Thus, Xi already in 2015 enunciated the “aligning of civil and defense technology development” as a national priority. In addition, China’s 2015 White Paper on Military Strategy called for an “all-element, multi-domain and cost-efficient pattern of CMI.”54 Nevertheless, it was not until the Nineteenth Party Congress 50 51 52 53 54

Cheung, “The Chinese Defense Economy’s Long March,” 343–4. Lafferty et al., “China’s Civil–Military Integration,” 58–60. This section draws partially on Yoram Evron, “China’s Military–Civil Fusion and Military Procurement,” Asia Policy 16, no. 1 (2021): 25–44. Laskai, “Civil–Military Fusion: The Missing Link.” People’s Republic of China, State Council, China’s Military Strategy (Beijing: Information Office of the State Council, 2015), Chap. 4.

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in October 2017 that Xi appeared to be truly able to fully realize his vision for MCF as a way to tackle the Chinese military and defense industry’s lack of competitiveness and innovation. As Béraud-Sudreau and Nouwens put it, MCF “has become an integral part of Xi’s strategy to complete the modernization of China’s armed forces by 2035 and turn them into a world-class army by mid-century.”55 Indeed, during the 2017 Party Congress, Xi declared that “we will … deepen reform of defense-related science, technology, and industry, achieve greater military–civilian integration, and build integrated national strategies and strategic capabilities.”56 In line with this policy, in 2017, Beijing created the Central Commission for Integrated Military and Civilian Development, a new body for overseeing MCF strategy and implementation. Also in 2017, China issued the Thirteenth Five-Year Special Plan for Science and Technology MCF Development, which “detailed the establishment of an integrated system to conduct basic cutting-edge R&D in AI, bio-tech, advanced electronics, quantum, advanced energy, advanced manufacturing, future networks [and] new materials,” in order “to capture commanding heights of international competition.”57 In particular, AI has gained special attention as a critical technology that could prove consequential to both China’s economic development and its strategic competition with the United States. Chinese military thinkers believe AI will likely be the key to surpassing the US military as the world’s most capable armed force. Consequently, in 2017, China laid out its ambitious “New Generation Artificial Intelligence Development Plan,” aimed at turning it into a world leader in AI by 2030.58 It should come as no surprise, therefore, to see that MCF has intertwined military modernization with civilian technological innovation in a number of critical dual-use technology sectors including aerospace, advanced equipment manufacturing, and alternative sources of energy. At the same time, MCF involves greater integration of military and civilian administrations at all levels of government and in different areas of activity: in national defense mobilization, airspace management and civil air defense, reserve and militia forces, and border and coastal defense.59

55 57 59

56 Béraud-Sudreau and Nouwens, “Weighing Giants,” 162. Quoted in Ibid. 58 Cheung, “From Big to Powerful,” 12. NSCAI, Final Report, 25. Greg Levesque, “Military–Civil Fusion: Beijing’s ‘Guns AND Butter’ Strategy to Become a Technological Superpower,” China Brief 19, no. 8 (2019), emphasis added in original.

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MCF’s Objectives MCF is supposed to advance the efficiency of China’s arms development and production process and bring its arsenal to world level while overcoming CMI’s embedded limitations. However, civilian firms and professionals are not expected to improve the entire arsenal of the PLA nor be involved equally in all phases of procurement: the definition of a weapon system’s requirements, its development, manufacture, deployment, and through-life support. Put differently, MCF cannot and is not supposed to tackle all of the deficiencies in China’s defense industry and military procurement system. MCF is focused mostly on military R&D. Its goal is to help the defense industry complex overcome its shortage of well-trained professionals, insufficient investment in R&D, inefficiency and overstretching, lack of innovation, and, consequently, strong dependence on imported knowhow. For example, China still relies heavily on imported high-end microchips due to limitations in its home-grown semiconductor industry; this situation in turn makes it difficult for China to “truly dominate” 4IR technologies.60 Thus, the “Opinion of the General Office of the State Council on Promoting the Deep Development of Military–Civilian Fusion of National Defense Science, Technology and Industry,” Government Document (2017) no. 91 (hereinafter Document 91) – one of China’s defining documents of the post-2015 MCF – devotes its longest section (Section 3) to innovation while no specific sections are devoted to manufacturing or maintenance.61 According to this and other documents, MCF is supposed to accomplish its goals by including civilian firms, universities, and research institutes in China’s defense R&D process, leveraging the knowledge of high-level professionals for R&D efforts in weapons and acquiring access

60 61

Sebastien Falletti, “US Chip Ban Strikes at China’s Digital Achilles Heel,” Asia Times, February 11, 2021. The State Council Information Office of the PRC, “Guowuyuan bangongting guanyu tuidong guofang keji gongye junmin ronghe shendu fazhan de yijian, guobanfa (2017) 91 hao” (Opinions of the General Office of the State Council on promoting the deep development of military and civilian fusion of National Defense Science, Technology and Industry), government document no. 91 (2017), December 4, 2017, www.scio.gov .cn/xwfbh/xwbfbh/wqfbh/39595/40930/xgzc40936/Document/1658974/1658974.htm. On the central place of R&D in MCF, see also The State Council of China, “Guofang ke gong ju jiedu tuidong guofang keji gongye junmin ronghe de yijian – gaige pojie nanti chuangxin zengqiang huoli” (State Administration for Science, Technology and Industry for National Defense’s interpretation of promoting defense science, technology and industry of military–civilian fusion: Bring new ideas to solve problems and increase vigor innovatively), December 7, 2017, www.gov.cn/zhengce/2017-12/07/ content_5244986.htm.

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to sensitive foreign know-how.62 By adding these assets to the defense industry’s capabilities and experience, MCF is intended to produce a broad variety of advanced technologies that will improve China’s arsenal and raise it to world-class level. However, as we can infer from Chinese government documents and semi-official analyses, this list of technologies is not unlimited. In fact, it emphasizes 4IR technologies, such as AI, big data, IoT, and autonomous vehicles,63 which are also in compliance with China’s civilian S&T plans (i.e., the 2006–20 MLP and “Made in China 2025”) as well as with its vision of mechanized, informationized, armed forces. This vision includes, inter alia, robotics, big data analysis, machine-learning, vehicles propelled by new energy sources, composite materials and composite material products, advanced metal alloy materials and products, high-end manufacturing equipment in general, and the introduction of high-tech industrialization processes to the defense industry. In particular, MCF entails the militarization of AI, as the PLA sees this as critical for such tasks as command and control, intelligence processing and analysis (e.g., imagery recognition and data mining), targeting, navigation, and so on.64 Relating these technologies to concrete military utilizations, China seeks to leverage MCF in the following areas.65

62

63

64 65

Zhang Liang, “Xinshidai xia tongyong hangkong chanye junmin ronghe shi fazhan zhanlue yanjiu” (Studying the development strategy of military and civilian fusion in aviation production under Xinshidai Group), CAAC News, April 16, 2018; The Cyberspace Administration of China and the CCP’s Office of the Central Cyberspace Commission, “Wangluo xinxi tixi junmin ronghe zhanlüe de sikao” (Thinking of the military–civilian fusion strategy of network information system), November 12, 2018, www.cac.gov.cn/2018-11/12/c_1123701001.htm. On MCF’s emphasis on emerging technologies, see The State Council of China, “Guofang ke gong ju jiedu tuidong guofang keji gongye junmin ronghe de yijian”; “Xingcheng xinxing lingyu junmin ronghe fazhan geju” (Forming new patterns of MCF development forms), Kexuewang, February 21, 2019, news.sciencenet.cn/ htmlnews/2019/2/423100.shtm. Hille, “Washington Unnerved.” The following analysis relies on Hebei sheng renmin zhengfu (The People’s Government of Hebei Province), “Guanyu shenbao 2013 nian sheng ji junmin jiehe chanye fazhan zhuanxiang zijin xiangmu di tongzhi” (Notice on application for provincial military– civilian fusion industry development funds in 2013), July 18, 2013, http://info.hebei.gov .cn/eportal/ui?pageId=6778557&articleKey=3747206&columnId=330890; Luan Dalong, “Junmin ronghe zouxiang xin shidai” (Military–civil fusion heads for a new era), Quanqiuhua Zhiku (Center for China and Globalization), March 8, 2018, http://www .ccg.org.cn/archives/33082; The Cyberspace Administration of China, “Wangluo xinxi tixi junmin ronghe zhanlüe de sikao”; “Woguo junmin ronghe chanye fazhan qingkuang” (General situation of China’s military–civil fusion’s industry development), Zhongguo gaoxin jishu chanye daobao (China High Tech Industry Herald), April 15, 2019, http:// web.archive.org/web/20191010233919/http://www.chinahightech.com/html/paper/2019/ 0415/521151.html.

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Information and electronics: Priorities include developing a network information system that connects the military and civilian sectors and is protected from foreign cyberattacks; improving the Chinese military’s detecting capabilities; improving the design and construction of military electronic information test sites, as well as identification and precision guidance capabilities; developing and improving existing core devices such as computer servers, high-end chips, semiconductors, and computer processors (CPUs) to reduce China’s dependence on imported devices. Other areas include the development of measurement and control equipment, integrated circuit design and manufacturing, intelligent transportation-related technologies, and a new generation of broadband communication. Aerospace: Satellite design and R&D, parts manufacturing, communication and ground applications, remote sensing, and navigation; designing an aerospace infrastructure, and developing heavy-load launching vehicles, nuclear power plants for use in space, aerospace measurement and control systems. Aviation: Making progress in the entire range of technologies related to the aviation industry including metallurgy, materials development, electronics, avionics, and jet engines and propulsion systems in general, as well as the manufacture of high-end equipment. Shipbuilding: Promoting the construction of deep-sea test sites, developing underwater detecting technologies and sensing abilities in oceans, nuclear-powered offshore floating platforms, high-grade icebreakers, various polar vessels such as polar semi-submarine transport vessels, polar rescue vessels, and polar core-supporting equipment. As for the nuclear and armament industries, unlike other sectors where technology spin-on appears to dominate MCF, in these sectors, technology spin-offs are more evident.66 In the case of the nuclear sector, this outcome is due to the marginal role of civilian bodies in this industry and the limited connection with foreign industries (except for basic research undertaken in civilian universities). The armaments industry, on the other hand, can surely benefit from spin-on processes in various technologies. However, due to the declining priority of ground forces (i.e., the PLA Army) in China’s military modernization, a smaller effort is being made in this realm anyway.67

66 67

The assessment of the spin-on–spin-off balance in the various sectors relies on “Woguo junmin ronghe.” Dennis J. Blasko, “The Biggest Loser in Chinese Military Reforms: The PLA Army,” in Chairman Xi Remakes the PLA, eds. Saunders et al. (Washington, DC: National Defense University Press, 2019), 345–92.

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Similar to military R&D, the incorporation of MCF in military production is expected to be selective as well. According to a report published in the Zhongguo gaoxin jishu chanye daobao (China High Tech Industry Herald), the participation of civil companies and research institutions in different phases of military manufacturing is decided upon the size of the financial investments and the level of secrecy involved in each phase. Dividing arms production into four stages – major systems integration, system production, parts production, and materials – the report states that civilian bodies are mostly involved in the last two phases.68 According to the report, the systems integration stage is the most complicated and confidential one and, therefore, is basically carried out by China’s main defense industry enterprise groups. The systems production stage includes the development and production of systems such as avionics and engines as well as their subsystems. These are the main components that are integrated at the systems integration stage and their production is very complicated and confidential too. Consequently, this stage is also dominated by companies and research institutes that are part of the main defense industry groups. The production of the components and parts comprising the weapon systems and subsystems, however, is less sensitive and simple enough to allow the involvement of civilian companies. Moreover, this stage involves know-how and hardware that are not necessarily regarded as military. For these reasons, the involvement of civilian firms in this stage, alongside defense industries, is welcome. In addition, this stage involves the production and integration of core devices, such as high-end integrated circuits, semiconductors, and processors, which at least partly are beyond the current production capability of the local defense industry. Civilian companies can bridge this gap more easily for several reasons. First, some of the relevant know-how is civilian by nature and already available in the civilian sector. As Document 91 states, MCF will promote the integration of existing mature technologies in weapons systems.69 Second, civilian companies and other bodies are in a better position than their military peers to import sensitive, dual-use technologies. The importation of such products by civilian companies may help overcome export restrictions in the country of origin while allowing China to hide its defense industry’s weaknesses and intentions. Indeed, in 2010, an official document stated bluntly that MCI, as it was called then, should promote the introduction of advanced foreign technologies into China. MCI was encouraged to use new and existing channels of 68 69

“Woguo junmin ronghe.” The State Council Information Office of the PRC, “Guowuyuan bangongting,” Item 18.

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technological cooperation and evade export restrictions concerning such technologies in the countries of origin.70 The greatest participation of civilian companies in arms production is expected at the stage of producing and processing materials. To be sure, some of the products included at this stage such as certain alloys and composite materials are sensitive and sophisticated and should, therefore, be handled by companies with the appropriate level of security clearance. On the other hand, the civilian classification of many products included in this category allows the utilization of imported know-how, to which civilian bodies have greater access. Finally, civilian companies are expected to play a role in the maintenance, support, and service of arms systems and military equipment. Surely, many of these activities are carried out routinely by military units. Nevertheless, Document 91 clarifies that MCF should improve the maintenance of high-tech weapons and military equipment including during training and wartime.71 Unfortunately, this reference to the servicing of products is quite unique among MCF documents. Furthermore, unlike other procurement phases, the implementation and challenges of combining civilian bodies in support activities is not discussed. Hence, it is reasonable to assume that the involvement of civilian bodies in military procurement as maintenance and service providers is expected to occupy a limited place in China’s overall MCF effort.

MCF Implementation Since 2017, China has made extensive efforts to enhance MCF’s implementation. It reshaped its guiding policy, restructured its overall management, and took measures to streamline its operational aspects in the main phases of military procurement: weapons R&D, manufacturing, and through-life support. MCF’s potential impact on military R&D lies in the incorporation of civilian enterprises, research institutes, and individual experts in the arms development process. The value that these organizations and individuals bring with them consists first and foremost of the advanced know-how that they possess, largely through their access to military-related and other types of foreign 70

71

State Council of China, Central Military Commission, “Guanyu jianwei he wanshan junmin jiehe yu jun yu min wuqi zhuangbei keyan shengchan tixi de ruogan yijian” (Several views on the establishment and improvement of MCI’s weapons research and production system), government document no. 37 (2010), October 24, 2010, People’s Government of Hebei Province, July 8, 2015, Item 8, http://info.hebei.gov.cn/eportal/ui? pageId=6778557&articleKey=6462929&columnId=330890. The State Council Information Office of the PRC, “Guowuyuan bangongting,” Item 27.

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know-how.72 However, the possession of advanced know-how in the civil sector is not sufficient by itself to promote civilian participation in military R&D. In fact, such an outcome depends on the existence of certain conditions, which the MCF policy intends to provide. A preliminary condition for the participation of civilian enterprises in military R&D projects is information-sharing about the availability of such opportunities. To that end, several platforms have been established since the late 2000s. One prominent platform is the online military procurement system (quanjun wuqi zhuangbei caigou xinxi wang) that was launched in 2015 by the PLA’s procurement department, the EDD. It provides information on requested military systems and equipment, and allows civilian organizations to submit proposals. Examples of military systems and projects that this platform presents include telecommunication systems, software testing tools, and funding for military-related research.73 Other important platforms for information-sharing are the “Civilian Participation in Military Technology and Products Catalogue” (min canjun jishu yu chanpin tuijian mulu) (hereinafter, the Catalogue) and the National Military–Civilian Integration Public Service Platform (guojia junmin ronghe gonggong fuwu pingtai) (hereinafter, the MCF Public Service Platform). Established jointly by the Ministry of Industry and Information Technology (MIIT) and the State Administration for Science, Technology, and Industry for National Defense (SASTIND), the Catalogue has been published annually since 2009.74 It presents dozens of military projects annually, inviting civilian S&T organizations to take part in them through various R&D activities, financial investment, and the like. The MCF Public Service Platform was established in 2017 also by the MIIT and SASTIND. It lists advanced dual-use R&D and manufacturing means and services, and allows registered users – civilian and military units alike – to connect directly to each other.75

72 73

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“China Encourages Private Sector Participation in Weapons Development,” Xinhua, February 27, 2017, www.xinhuanet.com//english/2017-02/25/c_136083431.htm. Quan jun wuqi zhuangbei caigou xinxi wang (Military weapons and equipment purchase information network), http://web.archive.org/web/20191227010956/http://www.weain .mil.cn. “Liang bumen lianhe fabu 2018 niandu ‘junyong jishu zhuan minyong tuiguang mulu’ he ‘min can jun jishu yu chanpin tuijian mulu’” (Two departments jointly released the 2018 Catalogue of Military Technology Transfer to Civilian Use and the Catalogue of Civilian Participation in Military Technology and Products), Sina, December 4, 2018, https://news.sina.com.cn/o/2018-12-04/doc-ihmutuec6000646.shtml. Zhonguancun ronghe chuangxin fuwu pingtai (Zhonguancun fusion innovation service platform), www.zgcjm.org/default.

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In addition to the procurement website and catalogue, various other means have been initiated since the mid-2010s to promote know-howsharing and increase cooperation in military R&D between the civilian and military sectors. One such means is exhibitions of military-related technologies and products, which have taken place annually since the mid-2010s and present technologies and products that were developed by civilian firms and institutions (solely or jointly with military industries). The exhibitions aim, inter alia, to share information about specific needs in the area of technology developments and innovation, engage more organizations in this area of activity, and enhance the industrialization of dual-use technologies.76 Through such methods, these information-sharing tools can potentially make a double contribution to China’s military procurement: incorporating advanced know-how and other capabilities into military R&D and increasing competition among the PLA’s suppliers, thereby strengthening the PLA’s buyer position visà-vis the defense industry.77 Nevertheless, exposing civilian organizations to military R&D opportunities is not enough to prompt their participation. It is also necessary to provide them with incentives and collaboration frameworks. An important tool in this respect are MCF industrial demonstration zones (junmin ronghe chanye jidi), which provide favorable conditions for civilian companies and research institutes that engage in military-related development and for civil–military partnerships of this type. Established for the first time in 2009, by mid-2019, thirty-two such bases were operating in provinces and cities across China.78 Intending to encourage MCF activity (and following the central leadership’s orders), regions and local authorities set up such demonstration bases, offering various incentives to enterprises that met their conditions. For instance, Hebei province demanded that companies and research institutes operating in the industrial base engage in R&D projects with civil–military convertibility capability and convertible technology that is relevant to military R&D. Such projects should also be innovative, yet proven to some degree, and have a clear commercial potential. Enterprises that meet these conditions are

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On such exhibitions, see, for example, Hebei sheng renmin zhengfu (The People’s Government of Hebei Province), “Guanyu juban di er jie ‘zhongguo-hebei junmin ronghe guofang gongye xietong chuangxin chengguo zhanshi qiatan hui’ de tongzhi” (Notice on the second China Hebei exhibition of the innovation and industrial achievements of military–civilian fusion in the area of national defense), December 28, 2015, http://info.hebei.gov.cn/eportal/ui?pageId=6778557&articleKey=6503674&col umnId=330890; “Junmin ronghe gongshi Qingdao shiqi!” (Military–civilian fusion offensive, Qingdao rise!), Phoenix Network Qingdao, February 25, 2019. 78 Luan, “Junmin ronghe zouxiang xin shidai.” “Woguo junmin ronghe.”

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prioritized in the allocation of MCF’s funds, participation in military R&D projects, and the allocation of other funds.79 Special contests and research funds provide other types of incentives to increase enterprises’ participation in MCF projects. For instance, an annual contest of dual-use projects, which has been held since 2016 by MIIT, SASTIND, EDD, and other organizations, brings together over 100 high-tech, dual-use projects – most of them innovative – and grants the winners funds worth 1–3 million RMB.80 Similarly, the government of Sichuan announced that it would award local enterprises that develop MCF-related products 2 percent of their R&D investment up to 10 million RMB.81 Nevertheless, providing opportunities and incentives is not enough to increase civilian participation in military R&D projects. It is also necessary to remove the obstacles that prevent them from doing so. Examples of these obstacles include the high degree of compartmentalization between, and inside, the military and civilian establishments, insufficient technology standardization between the two sectors, and insufficient legal protection of civilian entities’ intellectual property (IP).82 So far, military and civilian products and R&D processes have been subject to different technological standards, making it difficult to transfer technology and R&D collaborations between the sectors. To address this problem, ongoing efforts at the national level have been undertaken to introduce new technology standards that apply to both sectors.83 A similar effort has taken place in the area of IP legislation. Realizing that civilian enterprises avoid sharing know-how with their military counterparts out of concern that their IP is legally unprotected, MCF’s 79

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Hebei sheng renmin zhengfu (The People’s Government of Hebei Province), “Guanyu yinfa ‘Hebei sheng junmin ronghe chan xueyan yong shifan jidi rending guanli banfa’ de tongzhi” (Notice on distributing the ‘administrative measures for the selection of industries for the military–civilian fusion study and research demonstration base in Hebei province), August 15, 2018, http://info.hebei.gov.cn/eportal/ui?pageId= 6778557&articleKey=6802900&columnId=330890. “120 ge xiangmu juezhu zhongguo junmin liang yong jishu chuangxin yingyong dasai juesai” (120 projects compete for the finals of China’s military–civil dual-use technology innovation contest), Xinhua, November 26, 2018, www.xinhuanet.com/politics/201811/26/c_1123769935.htm. PRC Central People’s Government, “Sichuan duo cuo bingju cujin guofang keji gongye junmin ronghe fazhan” (Sichuan takes multiple measures to promote the development of military–civil fusion in National Defense Science, Technology, and Industry), October 25, 2018,www.gov.cn/xinwen/2018-10/25/content_5334324.htm. “Baogao: junmin ronghe zongti fazhan taishi xiang hao dan tizhi jizhi gaige xiangdui zhihou” (Report: Overall development of military–civil fusion is better, but reform of institutional mechanisms is relatively lagging), 21 Caijing Sousuo, January 21, 2019; “Junmin ronghe gongshi Qingdao shiqi!” “Junmin ronghe gongshi Qingdao shiqi!”; Zhang, “Xinshidai.”

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leading bodies – at the national and sub-national levels – have taken measures to strengthen IP laws.84 In addition to R&D, MCF’s tools aim to enhance China’s military procurement in other ways. They can strengthen the PLA’s bargaining position vis-à-vis its suppliers, permit better management of acquisition contracts, and ultimately use China’s military procurement budget more efficiently while equipping the PLA units more adequately than before. For instance, the online military procurement system allows civilian suppliers to bid for a large variety of non-weapon items requested by the PLA’s arms and services. Construction works, software, communication equipment, vehicle equipment, and laboratory equipment are just a few examples. The request for proposal includes a target price and other conditions that the price proposal should meet, and the price proposal is sent directly to the military department that will utilize the respective item.85 Such a practice can potentially weaken the defense industry enterprises’ monopoly over the PLA’s supplies, while ensuring better compatibility between the PLA’s actual needs and its budget, the selected proposal, and the product that is ultimately supplied. Similarly, MCF measures such as the demonstration industrial bases and funding of special projects allow China’s procurement bodies relatively tight control over their acquisition contracts and expenses. Unlike the defense industry groups, which enjoy strong political and economic power, civilian entities taking part in military projects are strictly subject to contract conditions and have little bargaining power vis-à-vis the PLA’s procurement bodies. Furthermore, incentives, funds, and other financial benefits that are included in the MCF policy are subject to regular and random audits, which can hardly be applied to defense industry groups.86

MCF’s Interim Achievements Given the endemic problems of China’s defense industry, the involvement of civilian enterprises, S&T organizations, and individual professionals in military R&D, manufacturing, and support services can potentially improve China’s military procurement in all these areas. 84 86

85 Zhang, “Xinshidai.” Quan jun wuqi zhuangbei caigou xinxi wang. For example, Hebei sheng renmin zhengfu (The People’s Government of Hebei Province), “Guanyu dui shengji junmin jiehe chanye fazhan zhuanxiang zijin zhichi xiangmu chou shenji de tongzhi” (Notice regarding random audit of special funds to support province-level projects of military–civil integration’s industry development), Hebei Military Department’s Document no. 194 (2015), September 18, 2015, http:// info.hebei.gov.cn/eportal/ui?pageId=6778557&articleKey=6493986&columnId= 330890.

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However, to date, the involvement of these players is significantly lower than its potential and has made only limited change. Despite significant efforts made since 2015, the political, legal, and organizational barriers between the defense and civilian sectors are still high. Among these, it takes many months – occasionally over a year – for civilian companies to acquire a defense sector supplier license. Moreover, procedures and regulations concerning this license often change and companies which applied for such have to start the application process all over again once regulations have changed.87 In addition, private companies – often small start-ups – which can potentially conduct R&D of dual-use or military-related products, do not get financial support that allows them to take the risk that is involved in turning their core technology into a prototype and subsequently to a mature product.88 And, legislative and regulatory measures that have been taken to protect civilian organizations’ IP are insufficient, leading civilian enterprises to avoid sharing their technologies with defense industry enterprises.89 Worse, at least some of these impediments are intentional. A Fazhi ribao (Legal Daily) 2019 analysis argues that the involved players have intentionally blocked the legislation required for the introduction of the market economy into the defense sector and the implementation of MCF. Attempting to protect narrow organizational interests, they either use MCF-related legislation to expand their authority or block it altogether. In other cases, the vague division of legislative authority between the military, provincial, and other related bodies as well as the failure to consider the financial costs involved in the new laws further complicate the situation.90 As a result, China has failed to create the necessary administrative-commercial-legal environment for the largescale participation of civilian enterprises in military-related activity, and the scale of their participation in military R&D and production remains small. As of early 2019, about 2,000 civilian enterprises have been

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“Zenme zuo, keji minqi cai neng zou hao ‘canjunlu’” (How to make science and technology civilian companies do well in ‘joining the military road), Zhongguo keji wang, March 12, 2019, www.stdaily.com/zhuanti01/2019nlianghui/2019-03/12/ content_754852.shtml. Ibid.; “Po bilei, zhong fuhua, qiang rencai – laizi di liu jie ke bo hui de junmin ronghe qishi” (Breaking down barriers, re-incubating, and strengthening talents: Insights from the sixth military–civilian fusion science and technology fair), Xinhua she, September 8, 2018, www.gov.cn/xinwen/2018-09/08/content_5320407.htm. “Baogao.” “Zhiyue junmin ronghe lifa zhi wenti fenxi” (An analysis of the problems restricting military–civilian fusion’s legislation), Xinhuanet, February 28, 2019, http://web.archive .org/web/20200219185524/http://www.xinhuanet.com/mil/2019-02/28/c_1210069822 .htm.

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licensed as suppliers for the defense system – a small number considering the size of China’s military forces, defense industry, and civilian sector.91 To a limited extent, this problem has been reduced as organizations holding military supplier licenses purchase technologies and products of enterprises that do not have it, thus “laundering” them, and sell them as their own.92 Yet, such a practice adds an extra cost and to a large degree goes against the logic and objectives of MCF policy. Under such conditions, MCF can hardly change the basic structure of China’s military procurement, that is, the lack of market economy and the PLA’s weakness amid the defense industry. Hence, it is not expected to remedy the defense industry’s inefficiency and limited innovation capacity. Instead, MCF’s contribution seemingly lies in its ability to improve military R&D through introduction of foreign cutting-edge know-how. Such an assumption is supported by available evidence. Assessing MCF advancement in various dimensions, a 2017 official report found that the greatest progress thus far had been in the fusion of technologies while fusion in the area of manufacturing (i.e., industrial fusion) has lagged behind.93 Given MCF’s obstacles and the basic relations between China’s military and civilian sectors, the reasons for this are quite clear. First, the relatively easy access of China’s civilian organizations and professionals to advanced dual-use foreign know-how provides them with a certain advantage over their military peers. Indeed, the 2017 report claimed, for example, that, of all MCF’s aspects, the one involving foreign capabilities made the greatest progress.94 This is less the case, however, in the industrial (manufacturing) realm, where, reportedly, China’s defense industry has greater technological capacity than the civilian one.95 Secondly, organizational barriers between China’s civilian and military S&T sectors have never been as high as the barriers between the defense and civilian manufacturing bases. For instance, China’s universities and scientists have occasionally been involved in military projects, and midand long-term national S&T programs have often combined military and civilian aspects (e.g., the 1956 Twelve-Year Plan and the 863 Program).96 Involvement of civilian enterprises in military manufacturing remained, however, highly limited. According to official sources, less than 3.5 percent of the relevant civilian enterprises in China participated in 2016 in military development and production – a very small number

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92 93 “Zenme zuo, keji minqi cai neng zou hao ‘canjunlu.’” Ibid. Ibid. Ibid. The State Council of China, “Guofang ke gong ju jiedu tuidong guofang keji gongye junmin ronghe de yijian.” Cheung, “Keeping Up with the Jundui,” 595–602.

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compared to civil–military collaboration in the United States where, reportedly, over 90 percent of military technology is dual use and where leading arms manufacturers have well-reputed civilian products and services.97

MCF’s Strategic and Political Implications Given such conditions, how is MCF affecting China’s military procurement, and how does it affect the country’s strategic and political position? Starting with MCF’s implications for China’s military strength, its main contribution in this field thus far is probably the exposure of China’s defense industry to advanced scientific and technological know-how. MCF promotes China’s military R&D in two major ways. First, it allows China to integrate wholly or partially imported dual-use know-how, equipment, and methods into its military R&D. Secondly, incorporating civilian enterprises and research organizations can potentially increase R&D efficiency and strengthen the PLA’s involvement in, and influence on, the R&D process and products. Contrary to R&D projects undertaken by defense industry groups, those carried out by civilian organizations are more likely to comply with the PLA’s requirements and budgets. It is noteworthy that overstretched R&D efforts have been an endemic problem in China’s defense industry and have had a negative effect on both the quality of its R&D and other phases of procurement. China’s intention since the late 1990s to build a world-class military capability, coupled with its failure to introduce a market economy into the state-owned defense industry, exacerbated this problem.98 While MCF does not alter the basic client–supplier relations governing China’s military procurement, the insistence that MCF projects have a commercial basis allows to somewhat limit this problem wherever it takes place. Moreover, to some degree, MCF actually indicates the general direction that military R&D should follow. Thus, as early as 2015, China reduced the number of MCF R&D projects by over 60 percent.99 Apart from R&D, however, MFC seems to have had a very limited impact on other aspects of military procurement, that is, manufacturing and the maintenance and servicing of products. In particular, the involvement of civilian enterprises in arms manufacturing seems limited to the lower phases of the supply chain, so they can hardly compete with 97 98 99

“Baogao”; “Woguo junmin ronghe.” Yoram Evron, “China’s Military Procurement Approach in the Early 21st Century and Its Operational Implications,” Journal of Strategic Studies 35, no. 1 (2012): 74–85. Luan, “Junmin ronghe zouxiang xin shidai.”

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defense industry groups as the PLA’s suppliers. Therefore, MCF fails to affect either the arms manufacturing process or the buyer–supplier relationship between the PLA and the defense industry. This failure leaves most of the endemic problems plaguing China’s military procurement unchanged. A striking example of this situation is the fact that, as of 2019, military products were still being sold to the PLA on a “cost plus 5 percent” profit basis.100 Such a pricing model discourages defense industry groups from increasing their efficiency and adds the burden to the military budget. Thus, we can conclude that MCF most likely allows China’s defense industry to narrow the technological gap with the West and develop more advanced weapons. However, given that other aspects of military procurement still lag behind, this achievement has only a limited impact on the PLA’s armament. MCF has hardly changed the PLA’s ability to dictate the technical specifications and operational requirements of its weapons, validate the quality of new products, improve supply conditions, or keep its weapons and equipment well maintained throughout their deployment period. As sophisticated as China’s new weapons systems are, these aspects will ultimately decide the PLA’s level of readiness. What does all this mean for China’s strategic posture? Given that MCF’s immediate effect is basically limited to advanced R&D projects, it is more plausible that it will have a direct impact on advanced highpriority systems or critical subsystems that enjoy large budgets and attract the leadership’s attention. Examples of such projects include aircraft carriers, engine jets, aerospace systems, and command and control systems. Certainly, such systems can have a strong strategic impact, even if they are deployed in small numbers. On the other hand, these systems are very complex, require careful maintenance, and should be interlinked with a wide variety of other military means. For these and other reasons, their impact on the PLA’s readiness as a whole can be expected to be limited since large parts of PLA units are equipped with less sophisticated weapons. Hence, it can be expected that MCF has a limited effect only on the PLA as a whole as large parts of it remain dependent on China’s existing military procurement system and its traditional suppliers. Another area where MCF impacts China’s strategic posture is in international relations. Increasingly aware of China’s MCF policy, 100

“Zhiyue junmin ronghe lifa zhi wenti fenxi.” It is noteworthy that the figure mentioned in the source is profit+50%, but this is probably an error. See Cheung, “Keeping Up with the Jundui,” 614.

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foreign states – mostly the United States – have increased their scrutiny of Chinese commercial and scientific-technological activities in their territory, trying to limit the exposure of sensitive technologies to Chinese companies and scientists. For instance, in 2019, for the first time the US DoD referred to MCF in its annual report on China’s military development, pointing at it as one of China’s means for modernizing its military.101 Consequently, the US government is increasingly concerned that normally benign technology transfers and commercial joint ventures taking place between US and Chinese private companies could lead inadvertently to helping the PLA become a technologically more advanced adversarial force. There is particular concern that algorithms used for AI and machine-learning – some of the most difficult pieces of software (and, therefore, the hardest to simply copy) – would be particularly vulnerable to theft. Nevertheless, as Christopher Ashley Ford, US Assistant Secretary of State for International Security and Non-Proliferation, put it, MCF means that “it is very difficult and in many cases impossible to engage with China’s high-technology sector in a way that does not entangle a foreign entity in supporting ongoing Chinese efforts to develop or otherwise acquire cutting-edge technological capacities for China’s armed forces.”102 This has considerable implications for Sino–US relations and global politics in general. As the US has an obvious interest in retarding China’s military modernizations, it continuously opposes the lifting of the Western ban on arms sales to China.103 But dual-use technology exports are much harder to control, however, particularly since such transfers are overwhelmingly commercial and, therefore, seen as benign and beneficial to both seller and buyer alike. In addition, many of these technologies are already widely diffused throughout the world and it would be difficult and even impractical to try to restrict their sales. Consequently, the United States may not be able to halt the process of Chinese MCF and dual-use technology exploitation. As a result, the United States takes various measures such as attempting to restrict activity on its territory of Chinese companies and academic institutions with connections to the PLA, confirming that their access to sensitive American technologies is 101 102

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US Department of Defense, Annual Report, 21. See also Richard P. Appelbaum et al., Innovation in China (Cambridge: Polity, 2018), 58. Kate O’Keeffe and Jeremy Page, “China Taps Its Private Sector to Boost Its Military, Raising Alarms,” The Wall Street Journal, September 25, 2019, www.wsj.com/articles/ china-taps-its-private-sector-to-boost-its-military-raising-alarms-11569403806. Yoram Evron, “The Enduring US-Led Arms Embargo on China: An Objectives– Implementation Analysis,” Journal of Contemporary China 28, no. 120 (2019): 995–1010.

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blocked. It also tries to block their infiltration to the supply chain of US defense system suppliers, and, even more broadly, the concern over sensitive technology leakage to China has been a major force behind the United States’ trade war with China.104 Finally, the US puts growing pressure on its allies and partners worldwide to severely limit Chinese activity in their territories. The pressure it puts on its European allies to avoid Huawei’s fifth generation (5G) communication infrastructure, the measures it took to prevent concrete acquisition of European technology firms by Chinese companies, and the demand that it made to its allies for a stronger foreign investment screening mechanism are some striking examples.105 Thus, the MCF policy not only undermines its own objectives. It also intensifies the tension between the United States and China and forces various Western countries to take sides in this struggle. Conclusions China’s post-2017 MCF appears to differ from earlier efforts at CMI in several critical ways. In the first place, it seeks to fully integrate its civilian industrial base into the PLA’s supply chain; more than any time before, nondefense companies are being encouraged to sell directly to the military. Second of all, MCF is being explicitly used to help China’s military access critical advanced technologies, particularly 4IR technologies. Third, given its demands for cutting-edge commercial technologies, MCF inevitably necessitates the redirection of foreign technologies to support the modernization of the PLA. This is because much of China’s high-tech industrial base is still highly dependent on imported technologies, designs, and manufacturing equipment and processes. In many instances, private Chinese firms are being encouraged by the government to acquire foreign technology for its military.106 Finally, and perhaps most importantly, MCF is part of a long-term and broad-based strategic 104

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O’Keeffe and Page, “China Taps Its Private Sector”; Demetri Sevastopulo, “US Target Companies with Chinese Military Ties,” Financial Times, September 12, 2019; Tao Liu and Wing Thye Woo, “Understanding the US–China Trade War,” China Economic Journal 11, no. 3 (2018): 319–40. Michael Peel et al., “US Warns Europe against Embracing China’s 5G Technology,” Financial Times, February 16, 2020, www.ft.com/content/19fa7046-4fe5-11ea-8841482eed0038b1; Eyk Henning, “US Regulators Move to Stop Chinese Takeover of German Tech Firm Aixtron,” The Wall Street Journal, November 20, 2016, www.wsj .com/articles/u-s-regulators-move-to-stop-chinese-takeover-of-german-tech-firmaixtron-1479549362; Noa Landau, “Israel Panel to Monitor Chinese Investments Following US Pressure,” Haaretz, October 30, 2019, www.haaretz.com/israel-news/ .premium-israel-to-form-committee-to-monitor-chinese-investments-following-u-spressure-1.8058754. O’Keeffe and Page, “China Taps Its Private Sector.”

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effort by Beijing to position China as a “technological superpower,” by pursuing guns and butter and having them mutually support each other. According to Levesque, Chinese leaders are using MCF to position the country “to compete militarily and economically in an emerging technological revolution.”107 In this respect, Chinese MCF is far more ambitious and far-reaching than any present US efforts at CMI, particularly in its determination to fuse China’s defense and commercial economies. At the same time, MCF has its limits. Its contribution to China’s military procurement, and hence to China’s military buildup, lies mostly in its ability to identify and incorporate advanced technologies and methods – partially or completely imported – into China’s arms development system. In so doing, MCF can help the defense industry overcome existing weaknesses and narrow specific gaps, shorten the arms development process, and ultimately acquire arms development capabilities that allow China to create world-class indigenous weapons. Concurrently, MCF does not address the fundamental hindrances of China’s defense industry and military procurement system. As the successive reforms that these systems have undergone since the late 1990s show, pouring abundant financial resources and importing advanced foreign technologies is not enough to fix the endemic problems of China’s military procurement system. Such an outcome also requires the injection of free-market forces. And the significant progress of China’s weapons in the twentyfirst century notwithstanding, MCF is nowhere near achieving such an outcome as the large state-owned defense industry groups still monopolize China’s defense market. Consequently, the basic buyer–supplier relationship between the PLA and the defense industry remains tilted against the former. In that sense, MCF has not realized the Chinese leadership’s expectations. According to Chinese reports and analyses, the main reason for that is insufficient top-down vision, policies, overview, and regulations concerning MCF realization.108 Consequently, the solutions for MCF problems are sought in this dimension as well: forming new overviewing and coordination bodies and even the personal involvement of China’s president Xi Jinping. However, the analysis presented here shows that a major reason behind the low participation of civilian companies in military R&D, manufacturing, and support is the lack of interest by the existing players involved in China’s military procurement to open this market for new players – either state-owned or private organizations. Due to their strong position in China’s political system and their connection with

107

Levesque, “Military–Civil Fusion.”

108

For example, see “Baogao.”

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national and local administrative bodies, they can use different means to block new players from joining in. As elsewhere, their ability to do so stems from China’s centralized political and economic system, which provides them with enormous power.109 Nevertheless, China is well organized, well resourced, and determined to exploit 4IR technologies through MCF and other methods in order to expand national economic and military power. Its mastering of AI – a central component of its strategy – illustrates this well. According to the US National Security Commission on AI: China has moved more quickly and with more determination than the United States, guided by a constellation of AI plans for government ministries, universities, and companies. These strategic documents reflect Beijing’s view that advances in AI will fundamentally reshape military and economic competition in the coming decades. China has backed up its strategic plans with significant state subsidies to technology firms and academic institutions that engage in cutting-edge AI research. China preserves its capital by taking advantage of basic research done by the West so that it can focus more on applications. It pours significant sums of money into research and talent in relevant fields, and it promotes “national champion” companies to win markets abroad. Through its military–civil fusion programs, China has sought to integrate advances in AI from the commercial and academic worlds into military power.110

Consequently, “China stands a reasonable chance of overtaking the United States as the leading center of AI innovation in the coming decade.”111 This leads us to make two major conclusions. First, strengthening topdown management under the existing system will probably have little, if any, impact on enhancing MCF across China’s vast military acquisition establishment. Instead, reducing the relative power of China’s traditional state-owned military suppliers will open more room for the participation of other potential suppliers and increase the PLA’s ability to involve such players in the military procurement process. Second, MCF nevertheless contributes to some aspects of China’s military modernization and innovation, but it severs significantly the country’s relations with leading technological powers and may paradoxically limit its long-term access to advanced know-how.

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As has been extensively studied, the oppressing effect of centralized political and economic systems over economic initiatives and innovation is considered to be a universal phenomenon. See Mahmood and Rufin, “Government’s Dilemma,” 338–60. 111 NSCAI, Final Report, 161. Ibid.

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Increasing the defense industry’s efficiency and equipping the armed forces with the most suitable weapons to meet their missions are, in many cases, the main goals behind a country’s efforts to enhance the participation of the civil industry in military procurement. This is not necessarily the case for India, though. Equally, or even more important, is the pursuit of military self-sufficiency and the acquisition of a worldlevel military R&D and production capacity – a must-have condition for any country that aspires to world power status. Arguably, CMI serves both ends. As elaborated in previous chapters, the integration of private companies into the arms acquisition system can potentially lower the costs of armed systems while introducing advanced technology and working methods to defense R&D and production. The growing interest of the Indian military in emerging technologies and the existence of a relatively strong civilian IT industry in India reinforce this logic and clear the way for MCF. However, the dual demands of equipping the forces with suitable armaments and strengthening India’s military self-sufficiency can be contradictory. Indigenization of weapons systems can involve additional costs compared with arms importation, and these costs may ultimately accumulate into sums that compel the armed forces to shorten their buying list or to compromise on the quality and performance of the acquired weapon systems; in some cases, it may do both. This reality, coupled with low and occasionally inefficient national investments in defense R&D, has confronted India’s CMI with multiple difficulties – ones that add another layer of challenges to the unavoidable barriers that, by its very nature, CMI faces everywhere. That, in turn, reduces the prospects for an effective deployment and, consequently, a meaningful assimilation of 4IR technologies in the Indian armed forces. Aware of this situation, India has taken various measures over the years to expand private industries’ participation in military procurement. It has developed multiple channels and forms of civil–military industrial cooperation, offered incentives, and acted to lower civilian companies’ 129

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entrance barriers to defense projects. Yet, two decades after it first initiated CMI, and facing ever stronger pressures to expand it, the forces of bureaucratic inheritance, low R&D investments, and strategic circumstances – pushing respectively against and in favor of CMI – are still at odds. Tracing these trajectories, this chapter explores their impact on India’s adoption of MCF.

India’s Military-Industrial Complex Like China, India possesses one of the largest and most broad-based defense industries in the world.1 It produces fighter aircraft, surface combatants, submarines, tanks, armored vehicles, helicopters, artillery systems, and small arms. The country also has a huge defense R&D establishment with considerable experience in indigenous weapons design and development dating back to the early 1950s. That said, India has long faced serious impediments to its efforts to build a stateof-the-art arms industry. While the rest of India appears to be racing into the twenty-first century, powered by a dynamic, market-oriented economy, the defense sector seems mired in the country’s Nehruvian socialist and protectionist past. Consequently, the nation is saddled with a still predominantly bloated, non-competitive, and non-responsive militaryindustrial complex – capable, it seems, of producing only technologically inferior military equipment, and even then, never on time and nearly always way over the original cost estimates.2 1

2

Recent studies on the Indian defense industry include Stephen P. Cohen and Sunil Dasgupta, Arming without Aiming: India’s Military Modernization (Washington, DC: Brookings Institution, 2010); Deba R. Mohanty, Arming the Indian Arsenal (New Delhi: Rupa, 2009); Ajay Singh, “Quest for Self-Reliance,” in India’s Defense Spending: Assessing Future Needs, ed. Jasit Singh (New Delhi: Knowledge World, 2000), 125–56; Deba R. Mohanty, Changing Times? India’s Defense Industry in the 21st Century (Bonn: Bonn International Center for Conversion, 2004); Rahul Bedi, “Two-Way Stretch,” Jane’s Defense Weekly, February 2, 2005; Manjeet S. Pardesi and Ron Matthews, “India’s Tortuous Road to Defense-Industrial Self-Reliance,” Defense & Security Analysis 23, no. 4 (2007): 419–38; Timothy D. Hoyt, Military Industry and Regional Defense Policy: India, Iraq, and Israel (New York: Routledge, 2007), 22–66; Laxman Kumar Behera, Indian Defence Industry: An Agenda for Making India (New Delhi: Institute for Defence Studies and Analyses, Pentagon Press, 2016); Laxman Kumar Behera, “Indian Defence Industry: Will ‘Make in India’ Turn It Around?” in The Economics of the Global Defence Industry, eds. Keith Hartley and Jean Belin (London: Routledge, 2019), 506–26; Ash Rossiter and Brendon J. Cannon, “Making Arms in India? Examining New Delhi’s Renewed Drive for Defence-Industrial Indigenization,” Defence Studies 19, no. 4 (2019): 353–72; and Bitzinger, Arming Asia, 74–91, on which this chapter’s first section partially draws. Oishee Kundu, “Risks in Defence Procurement: India in the 21st Century,” Defence and Peace Economics 32, no. 3 (2021): 343–61.

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Aspiring since its early years to acquire indigenous world-class arms development and production capability, India has been concurrently aware of its limitations and, accordingly, has drawn a distinction between “self-sufficiency” and “self-reliance.” The former requires that “all stages in defense production (starting from design to manufacture, including raw materials) … be carried out within the country.”3 Selfreliance, on the other hand, is a much more modest goal, entailing the indigenous production of armaments but allowing for the importation of foreign designs, technologies, systems, and manufacturing knowhow. While self-sufficiency was the preferred approach, self-reliance has long been the practice when it comes to Indian armaments production. As such, New Delhi has long conceded the need to import considerable amounts of foreign military technology – mostly from the Soviet Union/Russia but also from France, the United Kingdom, Israel, and the United States – in order to establish and expand its indigenous military-industrial complex. Thus, from the early 1960s to the late 1980s, India undertook the licensed production of several foreign weapons systems, including MiG-21 and MiG-27 fighter jets, Jaguar strike aircraft, Alouette III helicopters, T-55 and T-72 tanks, Milan antitank guided missiles, Carl Gustaf recoilless rifles, Leander-class frigates, and Tarantul corvettes.4 At the same time, however, the Defense Research and Development Organization (DRDO) pushed relentlessly for replacing licensed production with indigenously developed and designed weaponry. Defense Public Sector Undertakings (DPSU) such as Hindustan Aeronautics Limited (HAL) and Bharat Electronics Ltd (BEL) also began complementing the licensed manufacture of foreign-sourced military systems with local products.5 A striking example is India’s first indigenous fighter jet, the HF-24 Marut, which HAL began developing in 1956 with the Orpheus aerospace engine procured from the United Kingdom. Truly indigenous armaments development and production, however, took off in the 1980s with the inauguration of several ambitious home-grown projects, such as the Light Combat Aircraft (LCA, renamed the Tejas in 2005), the Advanced Light Helicopter (ALH), the Arjun tank, and, especially, the Integrated Guided Missile Development Program (IGMDP), which involved the development of strategic systems such as

3 4

5

Singh, “Quest for Self-Reliance,” 127. Angathevar Baskaran, “The Role of Offsets in Indian Defense Procurement Policy,” in Arms Trade and Economic Development: Theory, Policy, and Cases in Arms Trade Offsets, eds. J. Brauer and J. P. Dunne (London: Routledge, 2004), 211–13, 221–6. Pardesi and Matthews, “India’s Tortuous Road,” 421–9.

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the Prithvi and Agni ballistic missiles as well as tactical missile systems like the Akash and Trishul air defense missiles and the Nag antitank guided missile. Some of these “indigenous” programs, with the exception of the strategic missile systems, still incorporated considerable amounts of foreign technology or subsystems. However, the objective was always to reduce this dependency along the lines of the evolutionary “ladder-of-production” model.6 Traditionally, Indian armaments production has been entirely embedded within a huge government-run military-industrial complex. Even in the third decade of the twenty-first century, and notwithstanding a few modest reforms (discussed later), the vast bulk of defense manufacturing remains in the hands of the state. As such, the Indian government-run defense-industrial base consists of nine government-owned DPSUs, 41 ordnance factories (OFs), and, at the top, the powerful DRDO, which includes some 50 laboratories focused on defense R&D as well as management and administrative bodies. In addition, there are some 3,500 private companies – the large majority of which are micro, small, and medium-sized enterprises (MSMEs) and the rest are large industrial corporations – which possess both civilian and defense production lines and take part in India’s defense production (these are commonly regarded as private defense industries). Among the large private-sector companies are Tata, Larsen & Toubro (L&T), Bharat Forge, Mahindra, and Ashok Leyland. As elaborated later, these companies serve mainly as suppliers and subcontractors of the public defense industries but gradually – though still limitedly – also as prime contractors. The size of India’s defense sector workforce is about 1.4 million people, of whom about 85,000 work in the OFs, 65,000 within the DPSUs, and some 25,000 scientists, engineers, and staff within the DRDO; the remainder work in the private defense industries.7 The DPSUs and OFs carry out the bulk of Indian arms manufacturing according to the following division: the OFs manufacture weapons and equipment for the various ground forces (infantry, armor, artillery, engineering forces, etc.) while the DPSUs produce weapons systems for the air force and the navy, missiles and space systems, electronic systems, metal alloys, and special vehicles for military use (see Table 5.1). With some exceptions, the public defense industries operate mainly as monopoly suppliers. HAL, for example, is the sole DPSU engaged in aircraft production, including combat aircraft, helicopters,

6 7

Bitzinger, Towards a Brave New Arms Industry? 16–18. Behera, “Indian Defence Industry: Will ‘Make in India’ Turn It Around?” 515.

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Table 5.1 India’s defense public sector undertakings DPSU

Year of establishment

Area of activity

Hindustan Aeronautics Ltd. (HAL)

1964

Aircraft and aircraft systems

Bharat Electronics Ltd. (BEL)

1954

Military electronic systems

Bharat Dynamics Ltd. (BDL)

1970

Tactical and ballistic missiles

Bharat Earth Movers Ltd. (BEML)

1964

Special vehicles for military use

Mazagon Dock Ltd. (MDL)

1934

Shipbuilding

Garden Reach Shipbuilders and Engineers Ltd. (GRSE)

1960

Shipbuilding

Goa Shipyard Ltd. (GSL)

1967

Shipbuilding

Hindustan Shipyard Ltd. (HSL)

1952

Shipbuilding

Mishra Dhatu Nigam Ltd. (MIDHANI)

1973

Metal alloys and special materials

Source: Behera, “Indian Defence Industry: Will ‘Make in India’ Turn It Around?,” 513

trainers, and transport planes as well as avionics and engines.8 Bharat Dynamics Ltd. (BDL) builds tactical and strategic missiles for the Indian military. BEL is India’s DPSU responsible for the production of radars and electronic warfare systems for the Indian armed forces.9 Even in the shipbuilding area, where four separated DPSUs operate, a division of labor exists as carriers, destroyers, frigates, and corvettes are loaded onto the different DPSU shipyards based on their capacity, ensuring that each is full at all times. The four chief DPSUs in charge of naval construction are Mazagon Dock Ltd. (MDL), Garden Reach Shipbuilders and Engineers Ltd. (GRSE), Goa Shipyard Ltd. (GSL), and Hindustan Shipyard Ltd. (HSL). MDL, located in Mumbai, operates the country’s oldest shipyard founded in 1934 and nationalized in 1960. MDL is India’s main naval shipbuilder and has built, among other vessels, the Kolkata-class destroyers, the Shivalik-class frigates, and the Franco-Spanish Scorpène-class submarine. GRSE is based in Kolkata 8

9

Hindustan Aeronautics Limited, 56th Annual Report (Bangalore: Hindustan Aeronautics Limited, 2018–19), 19, https://hal-india.co.in/Common/Uploads/Finance/Annual% 20Report%202018-19.pdf. Bitzinger, Arming Asia, 76–7.

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and was founded in 1960. It has built the Kamorta-class anti-submarine corvettes, along with various fast-attack craft and patrol vessels. MDL and GRSE are both involved in building the Project 17A vessels. GSL, founded in 1967 and based in Vasco da Gama (Goa), produces frigates, offshore patrol vessels, missile corvettes, and fast patrol vessels. HSL is based in Visakhapatnam and was founded in 1952. It specializes in patrol vessels, training ships, and other support vessels for military use as well as civilian ships. Interestingly, due to the size of its building dock, India’s indigenous aircraft carrier, the INS Vikrant, which entered service in 2022, was not built at a naval DPSU but rather at the Cochin Shipyard in Kochi. Cochin is traditionally a commercial shipbuilder (but still a state-owned firm, or PSU) manufacturing bulk carriers, tankers, and platform supply vessels. Given its likely construction of two or more indigenous carriers, however, Cochin may come to compete heavily for naval contracts with other shipbuilding DPSUs. Championing India’s defense R&D is the DRDO. The organization has primary responsibility for the design, manufacture, and management of indigenous weapons programs and weapons systems for the Indian armed forces and, at any single moment, is engaged in hundreds of research projects. In addition, the DRDO traditionally has very close ties to the DPSUs and OFs although – as specified below – it occasionally prefers to form industrial partnerships with private-sector firms as it does not appreciate the DPSUs’ and OFs’ manufacturing capabilities. In particular, the DRDO has acted as the Defense Ministry’s principal investigator and evaluator of defense procurement programs. Consequently, the organization frequently serves as the mediator between the military services and the local defense industry, particularly when it comes to determining requirements and coordinating weapons R&D and production.10 To pay for all this, India has greatly increased military expenditure in recent years. According to data provided by SIPRI, India’s defense spending grew 4.8 times between 2001, the year it opened its armsproduction market to the civilian sector, and 2019, from US$14.6 billion to US$71 billion (in current US dollars), of which US$18.5 billion was spent on weapons and arms platforms. However, in relative terms, India’s military procurement budget is in decline. Measured as a share of military expenditure, despite an increase from 19 to 28 percent between 2001 and 2019, the overall trend is negative. The relative share of India’s arms procurement expenditure out of its military expenditure reached its peak in 2004 (38 percent) and, thereafter, has declined almost

10

Ibid., 78.

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300,000

250,000

US$ million

200,000

150,000

100,000

China

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

0

2001

50,000

India

Figure 5.1 India’s and China’s military expenditures, 2001–19 (current US$) Source: SIPRI, “Military Expenditure Database”

constantly. In addition, military expenditure as a whole has been declining as a share of both GDP and government expenditure, dropping from 2.7 to 2.4 percent and from 19 to 12 percent, respectively.11 Compared with the military expenditure of China – one of India’s two main traditional rivals (the other being Pakistan) and the only one with a worldlevel military budget – India’s has failed to keep pace (see Figure 5.1). As China’s military expenditure grew 9.4 times between 2001 and 2019, from US$27.8 billion to US$261 billion, the initial 100 percent gap between the two countries grew more than 3.5-fold.12 Altogether, despite seven decades of effort, the Indian armaments production process has mostly been a vicious cycle of ambitious program 11 12

SIPRI, “Military Expenditure Database”; Behera, “Indian Defence Industry: Will ‘Make in India’ Turn It Around?” 508. SIPRI, “Military Expenditure Database.” China’s official defense budget in the same years presented here was 30–35 percent lower than the SIPRI estimation.

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overreach followed by technological setbacks and lengthy delays, too often resulting in equipment that, typically, has been of substandard quality and suboptimal performance. In 2006, for example, a government audit of the OFs revealed that about 40 percent of OF products had “not achieved the desired level of quality despite the fact that most items were in production for decades.”13 In addition, the technology gap between Indian and foreign weapons systems has widened over the last decades as the country has tried, unsuccessfully in most cases, to move from self-reliance to self-sufficiency.14 At the same time, costs have skyrocketed; according to one source, the country’s most important weapons programs – including the Tejas fighter and the Arjun tank – have come in at least two and a half times over their original budgets.15 Overall, endemic delays and setbacks in domestic weapons programs have forced the Indian military to continually scrounge for foreign stopgaps to compensate for these shortfalls and to sustain force recapitalization. For example, due to ongoing delays in the Tejas program, the Indian Air Force (IAF) in the mid-2000s instituted the Medium Multi-Role Combat Aircraft (MMRCA) competition to buy 126 foreign fighter jets (with an option for up to 74 additional aircraft) at a cost of up to US$10 billion; in 2012, the IAF evaluated six different fighters from Britain, France, Russia, Sweden, and the United States.16 In addition, the IAF has acquired over 250 Russian Su-30MKIs, which are being licensed-produced by HAL. Due to setbacks in the Nag program, the Indian army has also purchased 15,000 Russianmade Konkurs-M and 4,100 French Milan-2T antitank missiles; both have been licensed-assembled by Bharat Dynamics.17 Finally, the Indian Navy has had to acquire Russian and Israeli surface-to-air missiles for its ships because local missile systems are still unavailable. Consequently, the Indian arms industry still functions mainly as an assembler rather than an across-the-board innovator.18 In 1995, New Delhi announced that within ten years it would increase the “local content” of weapons in the Indian armed forces from 30 to 70 percent. By 2005, however, foreign weapons systems (that is, both imports and 13 14 15 16 17 18

Vivek Raghuvanshi, “Report: Indian Products Defective,” Defense News, January 9, 2006. Mohanty, Changing Times, 28, 36–7; Pardesi and Matthews, “India’s Tortuous Road,” 432–4; Baskaran, “The Role of Offsets,” 213, 216–18. Brian Cloughly, “Analysis: DRDO Fails to Fix India’s Procurement Woes,” Jane’s Defense Weekly, June 28, 2010. Six aircraft originally competed for the MMRCA: the US F-16 and F/A-18, the Russian MiG-35, the Swedish Gripen, the French Rafale, and the Eurofighter Typhoon. Gordon Arthur, “Indian Armed Force Programs: Large Budget Increases,” Defense Review Asia 3, no. 2 (2009): 14. Author’s interviews in India, March, 2011.

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licensed production) still comprised around 70 percent of the Indian military’s acquisitions.19 In the mid-2010s, the percentage of imported systems still hovered around 70 percent.20 Under these circumstances, India has become one of the largest arms buyers in the world. According to SIPRI, during the period of 2015–2019, New Delhi imported US$16.7 billion worth of arms, accounting for nearly 10 percent of global arms deliveries and making it the world’s second largest importer.21 In addition to the aforementioned systems that are being licensed-built in India, the country has made such off-the-shelf purchases as Phalcon airborne early-warning aircraft, Barak surface-toair missiles, and UAVs from Israel; C-130J and C-17 transport aircraft, P8 maritime patrol aircraft, and artillery-locating radar from the United States; and lightweight howitzers from the United Kingdom.22 The problems with India’s defense industry are structural, financial, and, above all, cultural. Traditionally, a cabal of monopolistic stateowned enterprises has dominated the arms-production process. In turn, these DPSUs and OFs are larded with bloated workforces and excessive productive capacity. In addition, there is a tradition of a lack of coordination between the defense establishment and the armed forces with regard to requirements, planning, and production.23 Finally, and equally important, the defense industry has been starved of capital for the modernization required to keep pace with the global state-of-the-art arms production. India’s expenditure on defense R&D is relatively low and spent inefficiently. Thus, funding for defense R&D for 2018–19 amounted to US$2.7 billion, barely 6.5 percent of total military expenditure; in contrast, the United States spent US$55 billion on defense R&D in FY2017.24 In fact, accounting for a total of 0.65 percent of GDP in 2018, India’s national R&D expenditure is considerably lower than the world’s average R&D expenditure (2.27 percent) as well as the other cases that this book includes (see Figure 5.2). Moreover, despite a

19 20

21 22 23 24

Singh, “Quest for Self-Reliance,” 151; Bedi, “Two-Way Stretch.” “Arms Race: India Approves Defence Procurements Worth $3.5 BN, Says Report,” The Express Tribune, July 19, 2014, https://tribune.com.pk/story/738177/arms-race-indiaapproves-defence-procurements-worth-3-5-bn-says-report. SIPRI, “Arms Transfers Database.” Ibid.; Rahul Bedi, “India Announces 12% Defense Budget Increase,” Jane’s Defense Weekly, March 3, 2011. Pardesi and Matthews, “India’s Tortuous Road,” 432–4; Singh, “Quest for SelfReliance,” 148–9. Behera, “Indian Defence Industry: Will ‘Make in India’ Turn It Around?” 511; Government Expenditures on Defense Research and Development by the United States and Other OECD Countries: Fact Sheet (Washington, DC: Congressional Research Service, 2020), 1.

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MCF in India 4.8 5 4.5 4

Percent

3.5

2.84

3

2.27

2.19

2.5 2 1.5 1

0.65

0.5 0 India

China

US

Israel

World

Figure 5.2 R&D expenditures as a percentage of GDP (2018): A comparative perspective Source: The World Bank, https://data.worldbank.org/indicator/GB.XPD.RSDV .GD.ZS?locations=IN

constant increase in real values (US$15.4 billion, compared with US$14 billion in 2017 and US$13 billion in 2016), their share of GDP was at its lowest point for over twenty years.25 The share of defense R&D out of India’s total R&D expenditure was not negligible, however. It accounted for 17 percent of the national R&D expenditure and 36 percent of the public (i.e., government agencies and stated-owned companies) R&D expenditure, totaling US$2.6 billion. Yet, this expense is neither large nor efficiently spent. As mentioned earlier, China’s expense on weapons RDT&E was US$25 billion in 2019 alone. Concurrently, the private sector’s involvement in India’s defense R&D hardly existed; the DRDO was in charge of 94 percent of the nation’s weapons R&D, thereby justifying the assumptions concerning India’s inefficient defense R&D. Yet, the private sector has been playing a major role in industrial R&D including in fields such as IT, metallurgy, electronics, and other defense-related fields. In this area, the private sector’s R&D expenditure accounted for over 85 percent of the total national R&D expenditure, totaling nearly US$5 billion, providing it with much potential to enhance 25

Government of India, Ministry of Science and Technology, Research and Development Statistics, 2019–20 (New Delhi: Department of Science and Technology, 2020), 3. Unless otherwise mentioned, all the figures related to India’s R&D expenditures pertain to the 2017–18 fiscal year.

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weapons development and production.26 One result of this situation is that the Indian defense sector has been unable to train enough highly qualified technicians, engineers, and scientists.27 Despite these obvious deficiencies, there was, for a long time, little incentive within the arms industry to reform and restructure itself. A “statist” mindset generally permeated the Indian military-industrial complex and the government, DPSUs, and OFs operated in a cozy, sealed environment. Under the guise of “self-reliance,” state-run defense firms were pretty much guaranteed production work; little stress was put on meeting project milestones or ensuring quality or operational effectiveness. Moreover, the private sector was not permitted to bid on major weapons contracts. For their part, the Indian armed forces were essentially forced to accept indigenous military equipment, whatever their preferences.28 In 2005, one Indian Defense Ministry official was quoted as saying that “the DPSUs have no need to be competitive as they face no competition and have a captive market in the military.”29 At the same time, defense industry employees were organized within a powerful union and together, these workers constituted an influential voting bloc. This, in turn, made it difficult to shed excess labor or engage in other kinds of structural reforms such as privatization or plant closures. Even where some downsizing was achieved – the OFs, for example, cut their workforce from 150,000 in 1989 to 87,000 in 2018 – it was accomplished mainly by instituting a hiring freeze, resulting in a loss of new talent. Moreover, according to Rahul Bedi, personnel reductions in many OFs were “lopsided,” resulting in labor surpluses in those factories “where production lines face closure or are winding down.”30 Much of the blame for the failure of the Indian military-industrial complex to perform adequately has been laid directly at the door of the DRDO.31 In particular, the institution has been accused of arrogance, self-promotion, weak leadership, and placing a stronger emphasis on the acquisition of technology and know-how than on their actual application. In addition, insisting that maintaining an indigenous defense R&D and

26 28 29 30 31

27 Ibid., 16–19, 32. Pardesi and Matthews, “India’s Tortuous Road,” 424. Author’s interviews in India, March, 2011. Quoted in Bedi, “Two-Way Stretch,” 28. Ibid., 26; Behera, “Indian Defence Industry: Will ‘Make in India’ Turn It Around?” 513. Bedi, “Two-Way Stretch,” 27; Rahul Bedi, “India Launches ‘Thorough’ Audit of DRDO’s Effectiveness,” Jane’s Defense Weekly, January 24, 2007; Rahul Bedi, “Making Decisions,” Jane’s Defense Weekly, January 25, 2010; Manoj Joshi, “If Wishes Were Horses,” Hindustan Times, October 18, 2006.

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industrial base is a strategic technological and economic imperative, the DRDO historically took a reflexive approach that overwhelmingly and relentlessly favored indigenous solutions over foreign options. Particularly during the 1980s and 1990s, when India began its attempts to move from licensed, production-based self-reliance to more autarkic self-sufficiency, the DRDO adopted a position according to which it could “provide services in, and make any product related to, aeronautics, armaments, electronics, combat vehicles, engineering systems, instrumentation, missiles, advanced computing and simulation, special materials, naval systems, life sciences, training and information systems.”32 Consequently, the organization has displayed a persistent tendency to overestimate the technological abilities of the local defense sector while, at the same time, lowballing weapons costs and development timelines. The result has been the adaptation of “a classic foot-in-the-door strategy: winning initial support by promising products on the cheap but later citing sunk costs to demand more money.”33 This strategy has been bolstered by the DRDO’s longstanding ability to “kill any procurement proposal from the armed forces” and to block or delay military technology imports in favor of indigenous research and development.34 At the same time, the Indian military must bear some of the blame for delays and failures in indigenous weapons programs. It often tries to add new requirements and new capabilities to weapons projects that are already well into R&D, slowing development and deployment and sometimes even leading to the cancellation or scaling back of a program. This, in turn, forces the military (or gives it an excuse) to acquire an (often superior) foreign system. The Indian government has certainly long been aware of the deficiencies affecting the country’s defense-industrial base and, since the early 2000s, has pursued a number of initiatives intended to reform and revitalize the defense sector. Of these, integrating the private sector into arms development and production has been one of the most important. The Evolution of CMI in India In 2001, following the procurement deficiencies exposed during the 1999 Kargil War, India for the first time allowed private-sector participation in defense contracting up to 100 percent of the value of the program and foreign direct investments (FDI) in this area permissible up to

32 33

Joshi, “If Wishes Were Horses.” Cohen and Dasgupta, Arming without Aiming, 33.

34

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26 percent.35 Acknowledging the embedded deficiency of the Indian military-industrial complex, the Indian government hoped that, by permitting commercial businesses to “manufacture all types of defence equipment after obtaining an Industrial Licence” and to create joint ventures with foreign defense companies, they would force the DPSUs and OFs to become more market-oriented and cost-effective, and also more responsive to customer requirements (i.e., the Indian military’s). In addition, a formalized offsets policy was established in order to strengthen India’s industry in general and the defense industry – public and private alike – in particular.36 India’s 2001 assumption concerning the private sector’s relative strength has remained valid. For instance, discussing different measures to increase the efficiency of national defense expenditures, a 2009 report of the Ministry of Finance stated that “there exists considerable scope to improve the quality and efficiency of defence expenditure through increased private sector engagement.”37 Frustrated by the public defense industry’s inefficiency, high-ranking officers made similar claims. Thus, in 2007, Major General Marinal Suman argued that India had failed to indigenize its military procurement and, in his view, “Over-dependence on the public sector has been one of the major reasons for this failure.”38 Referring to the military-operational consequences of this weakness, Admiral Arun Prakash claimed in 2012 that “with their best efforts, [India’s public defense industries] lack the infrastructure, the capacity and the productivity to deliver ships at the rate that the Navy needs.”39 The following year, Air Marshal B. D. Jayal made a similar claim: “Whilst India has invested heavily in the aeronautics industry,” he observed, “The IAF … for [a] long [time] has suffered at the hands of the industry being run as a government department.”40 With this dawning realization, India fell into line with other countries that have discovered that the state-run defense industry cannot efficiently and by itself provide the armed forces’ materiel needs. However, unlike 35

36 37 38 39 40

Ministry of Defence, Standing Committee on Defence (2008–9), Indigenisation of Defence Production – Public–Private Partnership, Thirty-Third Report (New Delhi: Lok Sabha Secretariat, 2008), 14. Ibid., 12; author’s interviews in India, March, 2011. Government of India, Ministry of Finance, Thirteenth Finance Commission 2010–2015 (2009), 83, www.prsindia.org/uploads/media/13financecommissionfullreport.pdf. Marinal Suman, “FDI in Defence Industry,” Indian Defence Review, January 1, 2007, www.indiandefencereview.com/news/fdi-in-defence-industry. Arun Prakash, “Outsourcing of Defence Production,” Indian Defence Review, June 20, 2012, www.indiandefencereview.com/news/outsourcing-of-defence-production/2. B. D. Jayal, “Indian Aeronautics: Self Reliance Needs Innovative Action Not Platitudes,” Indian Defence Review 28, no. 1 (2013): 7–18.

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other countries, increasing the efficiency of military procurement was not the only goal behind India’s CMI effort. In fact, India’s CMI motivations were threefold: (1) providing the Indian forces with the advanced weapons and equipment needed to maintain constant readiness and ensure national security; (2) establishing a world-class, independent defense industry that can provide the Indian military with the entire arsenal of indigenous weapons and equipment it requires, regardless of the particular military challenges it faces at any given moment; and (3) strengthening India’s industrial capacity (both military and civilian) and increasing exports. The pronouncements of Indian administrative bodies, high-ranking officers and officials, and defense analysts of CMI have touched upon all these objectives either separately or conjunctionally. The involvement of civilian industries is considered crucial to providing the armed forces with the advanced armaments they need to meet their challenges and to keep them well maintained throughout their service life. For instance, Air Chief Marshall Naik has argued that “Private sector entrepreneurship and innovation can help augmentation of R&D base and creation of system integration capabilities.”41 Former Navy Chief Admiral Nirmal Verma expressed a similar belief concerning the private sector’s production ability and its contribution to the Navy’s military readiness: “Equal opportunity for the private sector is a must to achieve the force levels that the Navy seeks to achieve.”42 Repeating the same line of argument, former Navy Chief Admiral Arun Prakash was even clearer. After expressing his disappointment with the public defense industry’s performance, he argued decisively that “the time has come to invite the private sector to contribute to warship building in whatever manner possible.”43 Finally, defense officials assessed that private companies can also reduce the cycle time and costs of weapons maintenance and repair; by so doing, they would turn maintenance, repair, and overhaul/ operations (MRO) into “a force multiplier” as this would allow the forces to efficiently maintain a higher level of readiness.44

41

42

43 44

“Indian Defence Private Industry Should Move from Fringes to Mainstream: Air Chief PV Naik,” IDR News Network, October 15, 2010, www.indiandefencereview.com/news/ indian-defence-private-industry-should-move-from-fringes-to-mainstream-air-chief-pv-naik. “Private Sector’s Involvement Must to Promote Indigenization,” IDR News Network, November 24, 2010, www.indiandefencereview.com/news/private-sectors-involvementmust-to-promote-indigenisation. Prakash, “Outsourcing of Defence Production.” Chandrika Kaushik, “Public–Private Partnership for MRO in Defence: Application to Aerospace and Land Systems,” Journal of Defence Studies 11, no. 3 (2017): 59.

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4,000 3,500

US$ million

3,000 2,500 2,000 1,500 1,000 500 0 2000 India

2005 China

2010 Saudi Arabia

2015 Pakistan

2019 India (exp)

Figure 5.3 India’s arms imports (comparative view) and exports: Selected years Source: SIPRI, “Arms Transfers Database”

The importance of equipping the forces with adequate and wellmaintained advanced weapons notwithstanding, CMI seemed to attract even greater attention as a means of promoting military self-sufficiency and, to a lesser extent, also strengthening Indian industry in general. Engaging in arms production of all types for decades, India has nevertheless remained far and away the world’s top arms importer during the first two decades of the twenty-first century. Indian arms imports during this period (2000–19) was worth US$50.1 billion compared with China’s US$37.5 billion and Saudi Arabia’s US$29.2 billion (the world’s second and third largest arms importers, respectively) (see Figure 5.3).45 Accordingly, India’s top leadership and defense establishments have been greatly frustrated by the country’s enduring failure to master advanced arms development and production capacity. Such capacity would allow India not only to reduce its massive arms imports but also to become a significant arms exporter, a stated objective that it has to date totally failed to achieve. With arms exports worth only US$115 million in 2019, India was ranked as the world’s nineteenth largest arms 45

SIPRI, “Arms Transfers Database.”

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exporter, far below countries such as Belarus and Australia, neither of which under no condition shares India’s aspiration to become a first-tier defense industry.46 Statements and assessments made by Indian defense bodies and officials leave no doubt as to the importance they assign to this consideration with respect to CMI. As noted earlier, Major General Suman identified over-dependence on the public sector as a major reason for India’s failure to indigenize its military procurement. The solution, in his view, is greater involvement of the private sector in arms development and production: “The private sector … had already proved its credentials by emerging as a vibrant and dynamic force,” and he further claims that private enterprises are the most suitable candidates for absorbing imported know-how that will allow India to develop state-of the-art weapon systems.47 Similarly, Admiral Verma has argued that the only way to decrease the share of imports in India’s defense procurement is to increase the active participation of the private-sector industries.48 The best summary of the issue is found in the Defense Acquisition Procedure 2020 document, which states that the participation of the private sector in arms development and production “will help to reduce current dependence on imports and gradually ensure greater self-reliance and dependability of supplies essential to meet national security objectives.” The private sector can achieve such outcomes, according to the document, as it has the capacity to “enhance competition, increase efficiencies, facilitate faster and more significant absorption of technology, create a tiered industrial ecosystem, ensure development of a wider skill base, trigger innovation, [and] promote participation in global value chains as well as exports.”49 While the various objectives that the Indian defense establishment ascribes to CMI may seem complementary, this is not necessarily the case. In fact, in some aspects, they can be contradictory. For example, an imported military technology may occasionally provide the armed forces with the most suitable solution to a certain operational challenge while the insistence on weapons’ indigenization may involve some compromises over performance. However, in Indian eyes, these objectives do appear complementary. Thus, the MoD’s 2011 Defense Production Policy document declares: The objectives of the [defense production] Policy are to achieve substantive selfreliance in the design, development and production of equipment/weapon 46 49

47 48 Ibid. Suman, “FDI in Defence Industry.” “Private Sector’s Involvement.” Government of India, Ministry of Defence, Defence Acquisition Procedure 2020 (New Delhi: 2020), Chap. 7, Para. 2.

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systems/platforms required for defence in as early a time frame as possible; to create conditions conductive for the private industry to take an active role in this endeavour; to enhance potential of SMEs in indigenization and to broaden the defence R&D base of the country.50

Similarly, discussing the MRO of weapons systems, Chandrika Kaushik, a high-ranking DRDO official, argued that the acquisition of defense services from local service providers would “provide the industry with exposure to repairing and maintaining equipment as required; provide domestic manufacturers experience in upgrading, enhancing or retrofitting equipment and assets to suit the present contingency; and help to independently pursue an agenda of … overall evolution of military equipment.” Concurrently, it would increase India’s innovativeness and self-sufficiency, because “as long as India is dependent on imports and foreign OEMs [original equipment manufacturers] to meet her MRO capability needs, there will be little de facto control over the long-run direction or vision for technological innovation and evolution.”51 Even more broadly, investment in defense production is regarded as a means of advancing Indian industry in general. Analyzing the possible impact of India’s Armed Forces Long-Term Integrated Perspective Plan (LTIPP) on national development, a high-ranking defense economist in India’s administration argued that the LTIPP should be related to a national development plan because “defence consumes very significant resources of the nation, [and, therefore,] can be used to leverage growth by developing industry capabilities, driving innovation, and creating employment opportunities.”52 India’s CMI Policies The multiplicity of objectives associated with CMI can be seen in the complex and vague policies that India has issued since 2002. Until the early twenty-first century, India had limited the private sector’s participation in defense production to the supply of raw materials and a handful of components and parts to the DPSUs and OFs. In that capacity, the private sector supplied 20 to 25 percent of the DPSUs’ and OFs’

50 51 52

Government of India, Ministry of Defence, Defence Production Policy, January 1, 2011, Para. 2, www.mod.gov.in/dod/sites/default/files/DPP-POL.pdf. Kaushik, “Public–Private Partnership,” 61. Vandana Kumar, “Reinventing Defence Procurement in India: Lessons from Other Countries and an Integrative Framework,” Journal of Defence Studies 7, no. 3 (2013): 20.

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requirements.53 That started to change in the early 2000s. As part of the lessons of the Kargil War and in line with the efforts in the late 1990s of the influential Confederation of Indian Industry (CII) to involve the private sector in defense production, the government decided in 2001 to open the defense production market to the private sector.54 The main framework of private industries’ participation in India’s military procurement has been the “Buy,” “Buy and Make,” and “Make” categorization of arms acquisition, which since 2002 has been an integral part of India’s official defense procurement procedures (DPP). Intended first and foremost to strengthen India’s weapons’ indigenization and military self-reliance, this categorization aimed to maximize the share of local industry in India’s military procurement. To that end, the DPP set different acquisition categories – each one setting a certain form and share of local producers’ involvement in any arms acquisition project – which the MoD’s arms acquisition bodies would decide for each arms acquisition project. As part of this, the DPP clarified the type and level of participation by private industries in any arms development, manufacturing, and service project. Over the years, the MoD has recognized that the private sector has gradually bridged the technological gap with the public defense industry and has updated and amended the DPP accordingly to provide the former with a greater access to and role in India’s military procurement. As a complementary measure, the “Buy,” “Buy and Make,” and “Make” categorization system also incorporated India’s private defense industry in the national defense offset system: any purchase of defense products or services worth INR 2000 Crores (around US$275 million) and above from a foreign supplier, under the “Buy (Global)” or “Buy and Make” categories, requires the foreign supplier to undertake defense offsets: purchasing defense products of, or services provided by, the Indian public or private defense industry that holds the respective industrial license.55 The DPP 2002 was the first to set acquisition measures that allowed private industries to supply military products directly – and not as suppliers of the DPSUs or OFs – to the military. The “Buy,” “Buy and Make,” and “Make” system provided the framework that defined the 53

54 55

Ganesh K. Raj and Vikram Yadav, Enhancing Role of SMEs in Indian Defence Industry (Kolkata: Ernst & Young, 2009), 55, www.cii.in/webcms/Upload/Enhancing%20role% 20of%20SMEs%20in%20Indian%20defence%20industry1.pdf. Ibid., 22–3, 27. Government of India, Ministry of Defence, Defence Procurement Procedure (Capital Procurements) (New Delhi: various editions). The INR 2000 Crores limit was stipulated in the DPP 2016 version. Earlier versions set a bar of INR 300 Crores (approximately US$40 million).

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specific conditions for this. In the early stages, it allowed private industries to participate in military procurement, mostly through “Buy and Make” projects, that is, by transferring imported military technology to a local firm (the private industry in question), which produced the product in question locally and supplied it to the military. As part of this, various defense items have been re-categorized as “licensed products” rather than “reserved” (for the public defense industry), thus allowing private companies to compete in a wider range of bids and, so long as they have obtained a government license, production.56 The technology transfer and products’ indigenization process can be carried out in various ways. One is the setting up of a joint venture (J/V) between the foreign technology supplier (most often a foreign defense industry) and a local partner (a private company). Initially, the share of foreign holding permissible was up to 26 percent and the J/V (or the local firm alone if the technology transfer was undertaken in a different way than J/V) had to receive a license for defense equipment production. As foreign defense industries have shown relatively little inclination to set up joint ventures in India, the maximal share of foreign holding has been gradually raised – first to 49 percent and by 2020 it had reached 74 percent. In special cases, considered likely to result in access to advanced technology, the authorities even approved, under certain conditions, foreign investment of up to 100 percent.57 On the other hand, arms acquisition projects of the (separate) “Buy” and “Make” categories (not to be confused with the “Buy and Make” category) provided limited room for private companies’ participation – at least as main contractors. The “Buy” category, in its initial version (as set out in the DPP 2002), referred to products that were imported as a whole because local producers did not have the capacity to produce them or because the required quantity did not justify the technology transfer effort. The “Make” category concerned sophisticated weapons systems that were subject to strict export control monitoring in other countries and, consequently, had to be developed and produced indigenously. While the government increasingly assigns “Make” projects to private companies,58 these types of projects have been typically executed by the 56 57

58

Ibid., 23. Amit Cowshish, “Increase in FDI Cap Alone Not Enough for Defence Sector,” Indian Defence Review, September 16, 2020, www.indiandefencereview.com/increase-in-fdicap-alone-not-enough-for-defence-sector. For example, see Government of India, Ministry of Defence, “Programmes Under ‘Make’ Category,” December 11, 2019, https://pib.gov.in/PressReleasePage.aspx? PRID=1595876; Manu Pubby, “Major Deal for Private Sector: Defence Ministry Inks Rs 2,580 Cr Pinaka Deal with L&T and Tata,” The Economic Times, September 1, 2020.

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DRDO, the DPSUs, and the OFs, which have contracted private industries, civilian universities, and other S&T institutions as suppliers or subcontractors. By 2006, the MoD was forced to accept that the DPP 2002 had not actually provided suitable conditions to involve private industries in military procurement, particularly in providing incentives for foreign arms producers to create J/Vs in India. Concurrently, it assessed that the growing technological and industrial capacity of local private industry required the expansion of its role in military procurement: We are … witnessing today a significant growth of our private sector with many industries becoming global players. We have also seen a shift in the role of the private sector in the field of indigenisation. From the role of suppliers of rawmaterial, components, sub systems they have now become partners and manufacturers of complete advance systems. Private Sector can today harness available expertise of management, scientific and technological skills and also raise resources for investment in research and development.59

Consequently, the DPP 2006 revised the category of “Buy” projects, giving private industries a new mode of participation when it came to military procurement. The category was now reclassified as “Buy (Indian)” and “Buy (Global),” where “Buy (Indian)” meant that Indian companies, public and private alike, would serve as vendors or service providers as long as the product they supplied had a minimum 30 percent indigenous content.60 Unlike the “Make” category, projects under this category did not include strategic and classified weapons systems, which remained the exclusive responsibility of the public defense industry. These projects were also less technologically sophisticated than the “Make” category ones. Yet the reclassification allowed private industries to participate in military acquisition independently of technology transfer processes and by teaming up with foreign defense industries. At about the same time, the Kelkar Committee, which was set up to recommend changes in the military acquisition process, proposed the designation of several private-sector companies as “Champions of Industry” (Raksha Udyog Ratnas – RUR). According to the committee’s recommendations, the RURs were supposed to be entitled to the same benefits as DPSUs as well as the authority to design, develop, and 59 60

Government of India, Ministry of Defence, Defence Procurement Procedure (Capital Procurements) 2006 (New Delhi: 2006), Chap. 2, Para. 2. Ibid., Chap. 1, Item 4(a); Alok Perti, “Firming Up the ‘Buy’, ‘Buy & Make’, and ‘Make’ Decision and Relevance of Pre-feasibility Study,” Journal of Defence Studies 14, no. 1 (2010): 16.

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manufacture military equipment categorized as “Make.” They could also produce defense systems developed by the DRDO. Moreover, the RURs were supposed to be entitled to the same economic benefits as DPSUs including the duty-free import of defense research-related equipment, to receive R&D funding and the like.61 However, only a short time after its including the RUR concept in India’s procurement procedures (DPP 2006) and after only about a dozen local firms applied for RUR status, the government abandoned it for fear of labor union pressure in the DPSUs. More broadly, despite the government’s efforts, the participation of private industries in military procurement as a whole remained minimal.62 To address this problem, the DPP 2013 and the DPP 2016 further developed the “Buy,” “Buy and Make,” and “Make” categories, intending to place more weight on and give more opportunities to private industry. This effort was interwoven with government policies and procedures intended to expand the indigenization of arms and military equipment. The more the government pursued this goal – and the more it recognized the public defense industry’s limitations in narrowing the gap with the world level – the more hopes it had that the private sector would fill that gap. Accordingly, the amended arms acquisition categories assigned more room for local industry in arms acquisition while reducing the barriers that blocked private industries’ participation in such projects. Thus, the DPP 2013 gave higher preference than before to indigenous products in all acquisition categories. For instance, it specified more clearly than before that under the “Buy (Indian)” category, “a minimum 30 percent indigenous content [should be] ensured in the Basic cost of equipment at all stages of contract [emphasis added]” and added a new acquisition category: “Buy and Make (Indian).”63 This latter category required the “purchase from an Indian vendor (including an Indian company forming a joint venture/establishing production arrangement with [foreign] OEM), followed by licensed production/indigenous manufacture in the country” on the assurance that products purchased under this category “have minimum 50 percent indigenous content on cost basis.”64 61

62 63 64

Government of India, Ministry of Defence, Defence Procurement Procedure (Capital Procurements) 2006. See also Guy Anderson, “India’s Defense Industry,” RUSI Defense Systems (February, 2010): 69; Jon Grevatt, “India Delays Defense Reforms Again in Face of Multiple Pressures,” Jane’s Defense Weekly, December 21, 2007. Grevatt, “India Delays Defense Reforms”; Raj and Yadav, Enhancing Role of SMEs, 23. Government of India, Ministry of Defence, Defence Procurement Procedure (Capital Procurements) 2013 (New Delhi: 2013), Chap. 1, Para. 4. Ibid.

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The DPP 2016 introduced the “Buy (Indian – Indigenously Designed, Developed, and Manufactured – IDDM)” category, which referred to products that met one of the following conditions: a minimum of 60 percent indigenous content or a minimum of 40 percent indigenous content but indigenously designed, developed, and manufactured (IDDM).65 Placing emphasis on design and development, this category pursued an increased involvement of private defense companies, which by this time were regarded as more innovative and competitive than public ones.66 In addition, the DPP 2016 divided for the first time the “Make” category into two separate subcategories – “Make-I” and “Make-II” – which expanded further the room for private industries’ participation. Like the original and basic “Make” category, the “Make-I” subcategory focused on projects “involving design and development of equipment, systems, major platforms or upgrades thereof.” In addition, these projects involved large-scale investment and long periods of time, and the government funded 90 percent of the cost.67 Such projects were to be implemented mostly by public defense industries. The “Make-II” category, however, involved new aspects. Intending to advance weapons’ indigenization, it covered projects of “design and development of equipment, minor platforms, systems, sub-systems, components, parts or upgrades thereof.” To that end, it called for the use of “readily available commercial [and] military or dual use mature technologies.”68 Projects under this category were to be funded by the industry and their basic criteria – that is, the emphasis on dual-use and available commercial components (i.e., COTS products) – provided more room for the participation of private industries. But this was not all. The DPP 2016 placed particular emphasis on micro, small, and medium enterprises (MSME) – key players in the private, and particularly the high-tech, industry. Thus, it stated that MSMEs would take priority in projects under the “Make-I” category when their prototype development cost was lower than INR 10 Crores (around US$1.35 million) and INR 3 Crores (around US $400,000) for projects under the “Make-II” category.69

65 66 67 68

69

Government of India, Ministry of Defence, Defence Procurement Procedure (Capital Procurements) 2016 (New Delhi: 2016), Chap. 1, Item 6. Kaushik, “Public–Private Partnership,” 47. Government of India, Ministry of Defence, Defence Procurement Procedure (Capital Procurements) 2016, Chap. 3, Para. 6. Ibid., Chap. 3, Para. 12. The “Make-II” category is associated with the Modi government’s 2014 “Make-in-India” initiative, which aimed to turn India into a worldlevel design and manufacturing hub in all sectors, the defense included. Ibid.

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Finally, the Defence Acquisition Procedure 2020 (DAP 2020 – the latest version of the DPP to date) has added new acquisition and supplier categories to further increase private companies’ participation in arms acquisition. One such category has been the Strategic Partnership Model (SPM). Under this category, a partnership of a private Indian entity and the MoD is supposed to build “an extensive eco-system comprising development partners, specialized vendors and suppliers.”70 The strategic partnership (SP) can take the form of J/Vs, equity partnerships, technology-sharing, royalty, or any other mutually acceptable arrangement. In addition, the DAP 2020 took measures to make all players compete on equal terms, declaring that the government mandated that private companies, DPSUs, and OFs pay similar taxes and duties and be subject to similar foreign exchange conditions. Finally, it reduced the monopoly of the OFs by shortening by almost a half the “core items” list, that is, products on which the OFs had a monopoly on production and were exempted from bidding on.71 As mentioned, the ultimate goal of these measures was not only to enhance the efficiency of military procurement but also to advance weapons’ indigenization. According to DAP 2020, “The selected SP in each segment will be required to present a roadmap for future development” and, as part of this roadmap, the “SP shall develop tiered industries in each segment … including … MSMEs, DPSUs, OFs, other PSUs, DRDO and foreign companies … so that an eco- system of domestic manufacturers in [the] Indian defence sector is developed, including for spares and [service].”72

CMI Implementation In accordance with the previously mentioned policy guidelines, since the early twenty-first century, India’s defense bodies have undertaken various measures to increase the participation of the private sector in military acquisition projects. Arguably, the most important of these measures have been those that have in practice allowed private industries access to the defense market. While the defense market was supposedly already open to private firms, as detailed later, many barriers remained in place. A major effort to address this challenge has been the constant reduction of the list of products that have remained open only to public defense 70 71 72

Government of India, Ministry of Defence, Defence Acquisition Procedure 2020, Chap. 1, Para. 17; Chap. 7, Para. 3. Behara, “Indian Defence Industry: Will ‘Make in India’ Turn It Around?” 523–4. Government of India, Ministry of Defence, Defence Acquisition Procedure 2020, Chap. 7, Para. 40(b).

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industries and the removal of barriers that prevented private industries’ applications for defense projects. Thus, in the early 2010s, the MoD had already published a document specifying the Indian armed forces’ technological needs for the next fifteen years, intending to expose them to the private sector and encourage its participation in military procurement.73 The publishing of the sequential DPP versions complemented that move as they included clear guidance to private industries on how to submit proposals to defense acquisition projects. Concurrently, India has allowed private industries to submit proposals for an increasing list of weapons and military equipment, until the MoD 2018–19 Annual Report stated: “There will be no limit to the number of industry [sic] who may respond to the Expression of Interest (EoI) for development of the prototype subject to meeting the minimum qualification criteria.”74 In 2018, the limitation on private industries’ initiation of defense projects to the military was removed as well; companies were permitted, for the first time, to suggest projects to the military and not just to respond to requests for proposals or bids as before.75 Another set of facilitating measures was directed at private industries’ ability to compete on equal terms with public defense industries on arms procurement projects. Due to their size, experience, access to internal information, and various preferential laws and regulations, DPSUs enjoyed favorable conditions when bidding over defense projects. In particular, the imported parts and components they used enjoyed exemptions or reductions of import duties and they were excused from the tiresome and costly licensing procedures that civilian companies bidding for military projects had to go through. To eliminate this advantage, various administrative measures were taken to reduce private industries’ costs. For example, they were allowed to undertake import and export activities on similar (improved) terms like the public defense industries, the industrial license issuing process was eased, they were awarded a “Green Channel Status” that exempted them from some cumbersome procedures (as long as they met certain conditions), the waiting time for responses to offers they made was reduced, and the quality assurance process that their products were subject to was

73

74 75

Government of India, Ministry of Defence, Headquarters Integrated Defence Staff, Technology Perspective and Capability Roadmap (TPCR) (New Delhi: April, 2013), www .mod.gov.in/sites/default/files/TPCR13.pdf. Government of India, Ministry of Defence, Annual Report 2018–19 (New Delhi: 2018), 64. Ibid.

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streamlined.76 To further assist private industries to navigate the burdensome bureaucratic process involved with proposals’ submission and examination, the defense establishment also set up special bodies to consult with private industries and facilitate their participation in defense projects. One such body was the DRDO’s Directorate of Industry Interface & Technology Management (DIITM). Established in 2009, the DIITM aimed to coordinate “Policies and matters related to Industry Interface and Technology Management” and the production by private industry of DRDO-developed products.77 Another body was the Defence Investor Cell (DIC). Initiated in 2018 “to act as a friend to industry working in [the] defence sector,” the DIC aimed to facilitate investment in the defense production sector and to provide private industries and investors with relatively easy access to the field.78 Nevertheless, India’s CMI efforts have so far yielded limited results. On the one hand, the country has managed to erode the public defense industry’s monopoly over arms acquisition. By 2010, local commercial firms were earning about US$800 million annually from defense contracting and, in 2019, the turnover of India’s private industry reached US$2.4 billion out of a military procurement worth US$11.4 billion in total.79 In addition, private-sector companies have increased their investments in capabilities and facilities for armaments production; in 2016, for example, the MoD claimed that over 1,000 private industries and SMEs were involved in the DRDO’s programs. In particular, it is noteworthy that private companies have increasingly become the prime contractor of large weapon systems. For instance, in addition to supplying the Indian military with a variety of armored vehicles, military trucks, and airfield upgrading, in 2019, Tata was also assigned a US$160 million contract to supply ship-borne 3D air surveillance radars.80 In 2017, L&T, in collaboration with Hanwha Techwin of South Korea, was awarded a US$6 billion contract for 100 155 mm howitzers for the Indian army and, in 2020, was given an order to supply the Indian armed forces – in collaboration with BEML (a DPSU) and Tata – six regiments of Pinaka rocket launchers including 76 77

78 79 80

Government of India, Department of Defence, “Make in India,” https:// makeinindiadefence.gov.in. Defence Research and Development Organisation, “Directorate of Industry Interface & Technology Management (DIITM),” 2021, www.drdo.gov.in/headquarter-directorates/ about-us/industry-interface-technology-management. Government of India, Ministry of Defence, Annual Report 2018–19, 66. Vivek Raghuvanshi, “Tata Seeks ‘Level Playing Field’ in India,” Defense News, February 2, 2011; Behera, “Indian Defence Industry: Will ‘Make in India’ Turn It Around?” 515. “Tata Power SED Bags Rs 1,200 Cr Contract from Defence Ministry,” The Economic Times, March 22, 2019.

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radars and command posts.81 In 2021, Bharat Forge received a US$24 million order from the MoD for armored vehicles.82 Such contracts permit these and other Indian private companies to engage in the development, design, and production of various weapons and military equipment. To that end, they have established business divisions and factories that are solely focused on defense products and have set up joint ventures and other forms of collaboration with foreign defense firms. As such, they are increasingly diluting the public defense industry’s monopoly over defense production and – as argued later – help lay the ground for MCF in 4IR-related defense products. Nevertheless, the private sector’s participation in military procurement projects has remained low. According to the DAP 2020, the measures that India has taken to facilitate private companies’ access to arms acquisition projects have not achieved the desired outcome: Though defence manufacturing has been open to private sector participation for well over a decade, private companies have pointed to the lack of a level playing field compared to DPSUs and Ordnance Factories (OFs), which continue to enjoy a commanding role based on various forms of governmental support over the past decades, including long-term purchase arrangements.83

Official data on private firms’ participation in defense production as prime contractors or vendors of specific weapons systems (rather than suppliers of the public defense industries) provide another indication of the limited progress made in this area. Between 2001, when India’s defense production was first opened to private companies, and mid2014, the MoD issued 215 defense production licenses to a total number of 108 private Indian firms. In the subsequent year, seventy-two additional production licenses were granted and by mid-2016 a further fiftyfive. During the following two years, that number grew by only thirtyseven and, by mid-2019, with the addition of sixty-three licenses, the total number of private companies’ defense production licenses had reached 442. The accumulative value of these projects has reached a little more than INR 15,000 Crores (around US$2 billion) – an average

81 82

83

“Defence Ministry Inks Contract Worth Rs 2,580 Crore with Indian Firms to Boost Army’s Firepower,” Hindustan Times, August 31, 2020. “L&T Gets Contract to Supply 100 Howitzers to Army,” Business Standard, May 12, 2017; “L&T Wins ‘Large’ Contract from Indian Army for Advanced IT-Enabled Network,” Business Standard, April 7, 2020; “Bharat Forge Receives Order Worth Rs 178 Crore from Indian Army,” The Economic Times, February 23, 2021. Government of India, Ministry of Defence, Defence Acquisition Procedure 2020, Chap. 7, Para. 1.

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of US$4.5 million a project or US$105 million a year.84 As India’s annual military procurement since 2010 has been US$7–10 billion,85 direct civilian participation in military procurement has been no more than a fraction. The reasons for this low participation of the private sector in the various phases of military procurement – arms design and development, production, and service – are multiple. As in many countries, they include a cumbersome acquisition bureaucracy, which increases the cost of participation in military projects. In India, each case of military acquisition involves numerous documents that the applying company has to submit; various committees and other examination and approval bodies – in different ministries and at different stages of the project; an unclear legal framework that underlies private companies’ participation in arms acquisition projects; and, occasionally, the time given for the submission of technical and commercial proposals is inadequate for new players in the field.86 In addition, orders have often included too few a number of product units – and no long-term commitment for future purchases – to justify the cost of development; the armed forces’ requirements have tended to be too ambitious for Indian private industries to handle; and the MoD was simply not familiar enough with the private sector to know which companies to approach.87 Finally, despite repeated efforts to put private and public defense industries on equal terms, this has not yet happened. In Behera’s words: “The public sector entities still continue to enjoy a privileged position, which allows them to be awarded large orders without competition, while the private sector is required not only to compete for each contract but mostly has to wait [an] inordinately long period to see the contract fruition[,] if it happens at all.”88 India’s political and bureaucratic culture, as well as the relatively marginal importance it assigns to the military realm, further exacerbates the problem. Apparently, meeting the regulations and avoiding 84

85 86

87 88

The data on India’s defense production licenses is based on the following announcements, published by the Government of India, Press Information Bureau, Ministry of Defence, https://pib.gov.in/indexd.aspx: “Private Participation in Defence Production,” July 24, 2015; “Manufacturing of Defence Equipments,” July 29, 2016; “Private Sector Involved in Defence Manufacturing,” July 25, 2017; “Privatisation of Defence Production,” July 18, 2018; “Private Sector Investment in Defence Production,” July 22, 2019; “Government for Promoting Private Industry Investment in Defence Sector, Says Raksha Mantri Shri Rajnath Singh,” August 9, 2019. Behera, “Indian Defence Industry: Will ‘Make in India’ Turn It Around?” 510. Mrinal Suman, “Private Sector in Defence Production,” Indian Defence Review 22, no. 3 (2007): 3; Kumar, “Reinventing Defence Procurement,” 14–16; Kaushik, “Public– Private Partnership,” 60. Suman, “Private Sector,” 4; “Private Sector’s Involvement.” Behara, “Indian Defence Industry: Will ‘Make in India’ Turn It Around?” 521.

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accusations of mismanagement govern India’s arms procurement processes. Thus, officials in charge of arms systems’ operational aspects tend to follow acquisition procedures strictly at the cost of inefficiency and considerable extension of projects’ confirmation processes. As Vendana Kumar, a high-ranking official in India’s defense establishment, argued, procurement officials seem to ignore the fact “that there are tradeoffs between performance, cost and time; [and] the time taken in decision-making matters.” Accordingly, “Defence acquisition-related decision-making in India is characterized by [a] focus on compliance of procedures, risk avoidance and mistrust.”89 Under such conditions, considerations such as the project’s costs, its completion within a defined timeframe, and the suitability of the product in question to its operational requirements become secondary. As such practices have severe implications for the projects’ profitability, it is unsurprising that private companies have been largely reluctant to undertake defense acquisition projects.

The Road to MCF Acknowledging the Need for MCF Arguably, one factor that could advance the private sector’s participation in military procurement is a threat-driven strategic focus, which emphasizes an urgent need for military modernization. Such a focus could push India to equip its forces with state-of-the-art weapons and equipment, encourage it to streamline its arms acquisition process, and ultimately open the door wide to the nation’s most efficient and innovative technological and industrial forces. As India strove for weapons’ indigenization and military self-sufficiency, it would make all possible efforts to involve the private industry in weapon design, development, production, and service – either directly or as a supplier of existing technologies and COTS parts, components, and subsystems to the public defense industry. In other words, India would be forced by exigencies to engage MCF. At first glance, it seems that India’s threat environment provides the conditions for exactly such a scenario.90 Not only does it require India to develop a diverse arsenal of state-of-the-art weapons and military equipment but its top commanders are convinced that India cannot develop 89 90

Kumar, “Reinventing Defence Procurement,” 16. For official assessments of India’s security environment and defense threats, see Government of India, Ministry of Defence, Joint Doctrine Indian Armed Forces, 7–10; Government of India, Ministry of Defence, Annual Report 2018–19, 2–8.

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and produce them without the participation of the nation’s civilian S&T institutes and private industries. Indeed, India’s security challenges are immensely complex. They include Chinese and Pakistani efforts to solve by force their respective territorial disputes with India, efforts that each makes both separately and collaboratively against India. Among other things, China has supplied Pakistan with both conventional weapons and nuclear weapons technology that can serve it against India. India thus faces two collaborating countries, one of which – China – has the world’s largest military force, the second highest military budget, and has engaged in extensive military modernization efforts since the late 1990s. As part of these efforts, the Chinese PLA has acquired advanced ground, maritime, air, space, and cyber capabilities, which are supported by various 4IR technologies that it increasingly assimilates. Finally, India is highly disturbed by what it perceives as China’s growing maritime and ground presence along the Indian Ocean and the Eurasia region as well as China’s aspiration for naval dominance in the maritime sphere encompassing Asia. China’s growing presence in the seaports of Pakistan, Sri Lanka, and other neighboring states only intensifies this threat perception. On other fronts, India also faces severe threats of terrorism and insurgency along its borders with Pakistan and China (mostly in Jammu and Kashmir) as well as across its territory. Related to radical Islamic opposition and leftist movements, the terror activity in India is supported by certain Pakistani forces, thus intertwining external and domestic threats. Certainly, India faces a highly challenging security environment, which includes state and non-state players, with an intricate web of conventional and nonconventional, external and domestic, and ground and maritime threats on all warfare dimensions. Responding to these challenges, in 2006, India consolidated its military doctrine, the revised, open version of which was issued in 2017. This doctrine acknowledges India’s complex security environment and, in a move that opens the way to MCF, identifies advanced technology as one of the main challenges it faces. Thus, the doctrine claims that the “easy access [of India’s rivals] to high end technology has increased the threats, making it [sic] multi-dimensional.” More specifically, it states: “Technology has been a major driver to the evolution of the character of conflict. Today’s stand-off precision munitions with satellite control systems have altered the physical component of conflict.”91 In a similar way, the doctrine emphasizes advanced technology when discussing India’s response to these challenges. For instance, having stated that

91

Government of India, Ministry of Defence, Joint Doctrine Indian Armed Forces, 10.

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“Exploiting information technology and Integrated Reconnaissance, Surveillance and Command, Control, Communications, Computers, Information and Intelligence systems will win battles,” it argues that “emphasis on cyber including cyberspace and communication is critical, as it is the backbone of all functions today.” And, of course, it assigns great importance to the space domain as critical for “Network centric operations” as well as for “intelligence, surveillance and reconnaissance, besides navigation and communication.”92 This military doctrine’s discussion of advanced technology’s impact on India’s security environment is not an isolated case. Other military documents and analyses by high-ranking officers and strategists express a similar view. For instance, the Indian army’s 2018 Land Warfare Doctrine states that emerging technologies, such as “Artificial Intelligence, Quantum Computing, Nano Technology, High-Energy Lasers, Directed Energy Weapons, Hypersonic Weapons etc.,” are likely to shape future conflicts.93 In response, it argues, the Indian army must modernize to address such threats. Among other things, it will have to develop the means to engage in information warfare, cyber warfare, and electronic warfare as well as space technologies and the like. Most important of all, it will have to carry out an “effective integration of soldiers, Artificial Intelligence (AI) and Robotics into warfighting systems.” Such integration, the document clarifies, will be at the core of India’s future military planning.94 Similarly, the Chief of the Army Staff, General Naravane, stated in 2020: “The Indian armed forces need to invest heavily in ‘disruptive technologies’ that are becoming critical in modern day war-fighting” and, accordingly, have undertaken “a major study … on niche technologies, which range from drone swarms, robotics, lasers and loiter munitions to artificial intelligence, cloud computing, big data analysis and algorithmic warfare.”95 Discussing specifically the deployment of Lethal Autonomous Weapon Systems (LAWS) in armed forces around the world, the head of India’s Corps of Signals, Lieutenant General R. S. Panwar, argued: “The relevance of the ongoing debate on LAWS in the context of the Indian military landscape cannot be overemphasized” as such systems can play a significant role in various scenarios. Moreover, the Indian army already deploys various non-lethal

92 93 94 95

Ibid., 49. Indian Army, Land Warfare Doctrine 2018, 11, www.ssri-j.com/MediaReport/Document/ IndianArmyLandWarfareDoctrine2018.pdf. Ibid., 9–11. Rajat Pandit, “Indian Armed Forces Need to Invest in Disruptive Technologies: Gen. Naravane,” The Times of India, August 25, 2020.

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autonomous systems and many more, of different types, may be deployed in the future.96 The former Deputy Chief of Army Staff, Major General (retired) J. P. Singh, took this one step further, adding a dimension of urgency to the discussion. He has argued that India needs to introduce emerging technologies to its military forces, such as cyber, information warfare, AI, and unmanned autonomous systems, in order to compensate for its “declining defense spending, persistently low investment in R&D, an archaic and weary acquisition system and a small defense industrial base.”97 Concurrently, a general understanding exists that, given the public defense industry’s weakness, private industries – and IT companies in particular – must play a significant role in these developments. As certain private Indian firms meet the world level and are clearly more efficient than their public equivalents, high-level officers and analysts consider them crucial to India’s military modernization effort. Moreover, they assume that they are the only ones that can provide the Indian armed forces with 4IR technology-based products. Thus, Major General Singh argued that, to assimilate emerging technologies for military use, India must use commercially accessible technologies and COTS products. More broadly, it has “to exploit entrepreneurship and innovation of technology SMEs which are nimble and can rapidly develop new technologies and prototypes of products based on such technologies.”98 Other high-ranking officers have expressed similar views. For example, discussing the Navy’s modernization, Admiral Prakash placed emphasis on ICT, in which the private sector is the prominent player. Accordingly, he argued: “The Navy expects substantial participation by the private sector in building the structures for ‘Network Centric Warfare’ or NCW, which is dominated by ICT … [since the] private sector has the strength for various building blocks in which software development will play a major role.”99 Considering 4IR technologies as a remedy for India’s “twin challenges of an assertive China and stressed budgets,” Lieutenant General (retired) D. S. Hooda argued that the only suitable suppliers are to be found in the ICT sector. In his words, to develop such capabilities, “we must leverage our considerable talent and skills that

96

97 98

R. S. Panwar, “Artificial Intelligence in Military Operations: Technology, Ethics and the Indian Perspective,” IDSA Comment, January 31, 2018, www.idsa.in/ idsacomments/artificial-intelligence-in-military-operations-india_rspanwar_310118. J. P. Singh, “Disruptive Technologies and India’s Military Modernisation,” National Security 2, no. 2 (2019): 153–4. 99 Ibid., 154, 162. Prakash, “Outsourcing of Defence Production.”

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exist in the civil industry and academia. Relying on government R&D institutions that are neither agile nor innovative in ICT could be counterproductive.”100 Interestingly, while the MoD has questioned the private sector’s capacity to produce main arms platforms,101 it has shared the previously mentioned positive views about its potential contribution in the area of ICT and other emerging technology-related fields. Thus, in the early 2010s, the Indian military was already expressing hopes of leveraging the capabilities of local industry when it came to COTS solutions in the area of IT. The expectation was that COTS-based solutions would be quicker, more cost-effective, and more easily upgradeable, particularly in such areas as communications, command and control systems, situational awareness, and network management.102 Around a decade later, the DAP 2020 discussed the acquisition of ICT products including cyber systems, AI projects, certain space technologies, C4ISR systems and the like, and acknowledged a situation in which projects’ completion will require the involvement of civilian bodies: “where in-house expertise for conceiving the [ICT] project, its implementation and methodology for development is not adequate, external experts, institutions/consultancy firms/academicians (from premier academic institutions) having required specialized knowledge/capability may be engaged.”103 Similarly, in 2018, the MoD announced that it intended to assign AI an important role in India’s military modernization, observing that it is basically a dual-use technology, noting that India has a strong IT industry and a large pool of related professionals, and hence declaring that the private sector would play a major role in defense AI projects.104 Complementing this line of thought, the DAP 2020 required that, out of security concerns, all the sensitive components of such systems would be developed and produced indigenously (with the approved exception

100 101

102 103 104

D. S. Hooda, “Sharpen Tech Focus to Boost Defence Prowess,” The Tribune, November 28, 2020. Reflecting a negative view about private industries’ capacity to develop and produce main weapon systems and platforms, the DAP 2020 says bluntly that “in the Indian private sector currently there is limited experience in defence manufacturing and even lesser [sic] in respect of final integration of complex defence systems and sub-systems.” Government of India, Ministry of Defence, Defence Acquisition Procedure 2020, Chap. 7, Para. 6. Author’s interviews in India, March, 2011. Government of India, Ministry of Defence, Defence Acquisition Procedure 2020, Chap. 8, Para. 9. Government of India, Press Information Bureau, Ministry of Defence, “AI Task Force Hands over Final Report to RM,” June 30, 2018, https://pib.gov.in/newsite/ PrintRelease.aspx?relid=180322.

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of particular items that exceeded the technological capacity of the local S&T sector).105

MCF Implementation: Stimulation Measures and Initial Results The efforts to assimilate emerging technology-related systems in the Indian military and the acknowledgement that civilian scientific and industrial entities should play a significant role in this work have presented the Indian defense establishment with ample opportunities, but some severe challenges as well. Not only has a two decades-long effort to increase the private sector’s participation in military acquisition yielded unsatisfactory results but the involvement of civilian entities in the development of emerging technology-related systems carries unique requirements and risks. For instance, the DAP 2020 mentioned the security risks, such as cyberattacks and leakage of data and information, which such projects can face as well as the ownership issues around projects’ IPR.106 Addressing these challenges requires the civilian organizations involved to undertake various measures and to negotiate their legal and commercial rights (in the case of IPR). This can be a lengthy, tedious, and costly bureaucratic process. Aware of these barriers, the MoD has taken various steps to encourage and facilitate the participation of civilian experts, research institutions, and high-tech companies in high-technology-intensive projects. In general, these measures include improved access for such organizations to defense projects, financial support of different types to civilian organizations that engage in defense-related R&D, transfer of defense-related technologies to civilian industries, access to military test facilities, the provision of assistance during the certification issuance and production licensing processes, and initiation and support of defense-related research in universities, to name the main ones.107 The main bodies through which the MoD has been executing these support measures are the MoD’s Department of Defence Production (DDP) and the DRDO – its main arms of weapons production and R&D. Each of these MoD bodies implements various programs and measures, which are together intended to reduce the barriers that block civilian organizations’ 105 106 107

Government of India, Ministry of Defence, Defence Acquisition Procedure 2020, Chap. 8, Para. 19. Ibid., Chap. 8, Paras. 15, 20. Department of Defense Production, “Ease of Doing Business” 2021, https:// makeinindiadefence.gov.in; Defence Research and Development Organisation, “Support to Indian Industry,” 2021, www.drdo.gov.in/sites/default/files/inline-files/ Support-to-Indian-Industry_1.pdf.

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participation in defense procurement projects and encourage them to engage more significantly in such activities. The DDP’s main framework in this area is Innovation for Defence Excellence (iDEX), which is funded mainly by HAL and BEL as well as the MoD and, occasionally, other DPSUs. Initiated in 2018 with the objective of bringing high-tech companies into innovation, technology development, and problem-solving related to defense and aerospace areas, iDEX was the first such initiative of its kind in the country. Its declared aim is to create an “ecosystem to foster innovation and technology development in Defence and Aerospace by engaging Industries including MSMEs, Start-ups, Individual Innovators, R&D institutes and Academia” by providing them with funding and other types of support to carry out R&D.108 iDEX’s flagship program is the Defence India Start-Up Challenges (DISC). DISC is a competitive framework in which India’s military forces and public defense industry introduce reallife technological problems, which start-up companies are expected to address. DISC’s problems have included, for example, the development of a 4G-tactical area network, a GPS anti-jam device, countermeasures for unmanned drones, unmanned surface and underwater vehicles, and an individual protection system for soldiers.109 To reach out to as many start-ups as possible, iDEX collaborates with partnering incubators, which trace and examine suitable start-ups and MSMEs. Finally, iDEX includes additional programs such as open DISC challenges; longduration incubation, piloting, prototype investments, and so on, which it runs in collaboration with its partnering incubator; programs to encourage and support defense innovation activities at colleges and schools around the country; and matching start-ups’ investments in defense R&D (Spark-II program), to name the main ones.110 Similar to the DDP, the DRDO also takes measures to increase the participation of high-tech companies and research institutions in R&D and production of advanced defense technologies, albeit with one main difference. In charge of defense production and the public defense industry, the DDP’s efforts to promote MCF are largely intended to expand the technological capacity of the DPSUs and OFs. In fact, DPSUs are the main financial supporters of its flagship program in this area, the iDEX. Consequently, it is reasonable to assume that its efforts to promote MCF will not reach the threshold of threatening the public defense 108 109 110

Government of India, Ministry of Defence, Annual Report 2018–19, 61. Innovation for Defence Excellence, “IDEX for FAUJI,” 2021, https://idex.gov.in. Innovation for Defence Excellence, “Resources,” 2021, https://idex.gov.in/node/ 70#Guidelines.

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industries’ interests. The DRDO, on the other hand, is unquestionably committed to the public defense industry, but its commitment may be more limited than that of the DDP and it is more in favor of integrating the private sector into defense production. Hence, we can expect it to take bolder moves to promote MCF. In line with the DRDO’s efforts to integrate private players in military R&D, it has allocated the responsibility to design, develop, and manufacture certain military products to the industry. As of early 2021, the list of such products contained 108 items.111 As is to be expected, some consist of matured or even low-end technologies, which shows that their inclusion on the list merely reflects a recognition of private industries’ efficiency compared with the public defense R&D establishment rather than an intention to rely on advanced civilian technologies. Modular bridges, bulletproof vehicles, and tank transporters are a few striking examples. But other products, such as mini- and micro-UAVs, display processors, hardware for fire control systems, and image-intensifiedbased weapon sights, utilize advanced civilian technology for military purposes. Hence, assigning civilian industries the responsibility to design and develop such products clearly can be regarded as MCF. DRDO programs that directly promote MCF include Advanced Technology Centres (ATC) and the Technology Development Fund (TDF) Scheme. Focusing on defense-related scientific research, ATCs are research centers in Indian universities and prominent research institutes that the DRDO supports to facilitate research of cutting-edge defense technologies or existing foreign technologies that India is lacking. More specifically, the ATCs serve the DRDO as a means of directing academic research in defense-related areas that it is interested in with the declared objective of turning India into “one of the best research centre in world [sic] within a decade.”112 As of the early 2020s, India has eight such centers, which operate at leading universities and S&T centers including Jadavpur University of Kolkata, the University of Hyderabad, the Indian Institute of Technology (IIT) Bombay, and IIT Delhi. The various ATCs are engaged in basic and applied scientific projects such as brain-computer interface and brainmachine intelligence (Joint Advanced Technology Centre at IIT Delhi), unmanned and robotic technologies (Jagadish Chandra Bose Centre of

111

112

Defence Research and Development Organisation, “Systems and Subsystems for Industry to Design, Development and Manufacture,” 2021, www.drdo.gov.in/ systems-and-subsystems-industry-design-development-and-manufacture. Defence Research and Development Organisation, “Advanced Technology Centres,” 2021, www.drdo.gov.in/adv-tech-center.

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Advanced Technology at Jadavpur University), and laser-based technologies for detection (Advanced Centre of Research in High Energy Materials at the University of Hyderabad).113 Engaging a more advanced acquisition stage, the TDF Scheme focuses on product design and intends to harness Indian companies – MSMEs in particular – to enhance India’s defense development production. Similar to other military acquisition initiatives, TDF does not concentrate solely on promoting India’s defense technology capacity but also aims to promote its defense self-sufficiency. To address these two goals, it provides financial support to local industries (at least 51 percent Indian ownership), which collaborate with the academic or research institutes in developing state-of-the-art products required by the armed forces, the DRDO, or DPSUs. The projects are openly presented on the DRDO website and Indian entities (firms with at least 51 percent local ownership, experts, innovators, and research institutes) are encouraged to submit proposals online. Individual TDF project costs can reach up to INR 10 Crore (US$1.35 million), of which 90 percent is funded by the DRDO; an organization that executes the project must obtain an MoD license.114 In line with the MoD’s efforts to involve private firms in the development of advanced military equipment, as of the early 2020s, India has made some initial progress in this area. Among other things, local firms have begun to win military contracts not only for traditional weapons, as was demonstrated earlier, but also for the production of components, subsystems, and complete weapons systems, which are partly or entirely associated with 4IR technologies, for instance, components for rocket launchers, hulls and control systems for India’s new nuclear-powered submarine, equipment and systems for the aviation and space industry, and armored vehicles.115 Thus, in 2011, Tata won, for example, a US $186 million contract to provide the Indian army with an electronic warfare system and, in 2018, was selected to develop a battlefield management system (BMS) worth over US$6.8 billion.116 L&T, in 113 114 115

116

Ibid. Defence Research and Development Organisation, “Technology Development Fund (TDF) Scheme,” https://tdf.drdo.gov.in. Josy Joseph, “Private Sector Played a Major Role in Arihant,” Daily News & Analysis, July 27, 2008, www.dnaindia.com/india/report_private-sector-played-a-major-role-inarihant_1277435; Vivek Raghuvanshi, “Private Firms to Bid for Indian Vehicle Project,” Defense News, August 23, 2010; Piyush Pandey, “Godrej, L&T Play a Role in Successful Moon Mission,” The Hindu, July 22, 2019. “Tata to Provide Electronic Warfare Systems to Indian Army,” Army Technology, October 27, 2011; Amrita Nair Ghaswalla, “Tata Power SED to Develop Battlefield Management System,” The Hindu Business Line, January 20, 2018.

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collaboration with Hanwha Techwin from South Korea, was awarded, in 2017, a US$6 billion contract for 100 howitzer guns for the Indian army and, in 2020, won a US$350 million to US$700 million contract from the Indian army for an advanced IT-enabled network. Bharat Forge secured, in 2017, an order from the MoD to supply 1,050 items of dual-technology detection equipment.117 However, in line with some basic MCF characteristics and India’s market features, India’s MCF includes not only large corporates but also MSMEs, start-ups in particular. For example, in 2021, the Indian army awarded a US$20 million contract to ideaForge, a Mumbai-based startup, to build drones. This drone will be used for intelligence, surveillance and reconnaissance (ISR), and comes with encrypted communication and long-range target detection with HD optical zoom payload.118 In the same year, the Indian Navy concluded a deal for drones from Sagar Defence Engineering, closing an initial contract worth US$2 million (which could eventually expand to US$40 million). These drones can take off and land on warships in different kinds of weather.119 In addition, in 2018, IROV Technologies supplied a DRDO maritime laboratory with an underwater drone while VizExperts, a start-up focusing on virtual and augmented reality technologies, took part in the establishment of a virtual reality center for the purpose of warship design.120 Progress has also been made regarding private-sector start-ups in defense R&D. The DDP has conducted four DISC rounds (as of 2021) including about thirty challenges in total. Out of the 1,200 startups and innovators that have participated in the DISC rounds, sixty winners have been chosen, gaining INR 1.5 Crore (around US $200,000) each for the development of a prototype, for a total of US $12 million.121 The DRDO has also tried to integrate civilian industries and research institutes in defense R&D. By 2018, the ATCs had run a little over 110 projects at a total cost of INR 463 Crore (around US$62 117

118 119 120

121

Bharat Forge, “Bharat Forge Secures Maiden Order from Ministry of Defence,” press release, August 10, 2017, www.bharatforge.com/assets/pdf/notices/notice-10-aug-17 .pdf Yogita Rao, “Mumbai Start-Up Bags Rs 140-Crore Deal to Supply Drones to Army,” The Times of India, January 15, 2021. PortXL, “Sagar Defence Engineering’s ‘Boat in a Box,’” May 7, 2021, https://portxl .org/alumni-feature/sagar-defence-engineering/ Gireesh Babu, “Kochi Start-Up Makes India’s First Commercial Underwater Drone for DRDO Lab,” Business Standard, September 18, 2018; VizExperts, “VizExperts Is Proud to Be Associated with The Indian Navy,” www.vizexperts.com/pr/virtualprototyping-center-at-indian-navy-cad-to-vr. India Education Diary, “iDEX – Start-Up Manthan to Promote Innovation in Defence Organised at Aero India 2021,” February 5, 2021, https://indiaeducationdiary.in/idexstart-up-manthan-to-promote-innovation-in-defence-organised-at-aero-india-2021.

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million), an average of US$500,000 per project. In addition, the DRDO had assigned 114 projects to other academic institutes across India at a total cost of INR 57 Crore (US$7.5 million) or US$65,000 per project on average.122 By early 2021, the DRDO had run about seventy-five TDF projects while offering (at least publicly) six new ones.123 While indicating a certain progress, these examples and figures also show that efforts to integrate Indian civilian entities in development and production of emerging technology-based weapons and equipment have so far yielded only limited results. This has particularly been the case for start-up companies, whose involvement so far has been marginal both in terms of scale and substance. Apparently, the same hindrances that limited CMI in the past are also blocking MCF in the present. These include red tape as well as commercial and financial burdens that increase private companies’ costs, compared with public defense industries, when engaging defense projects. To be sure, such hindrances impact CMI efforts worldwide but India’s cumbersome bureaucracy and its vague national defense strategy provide extra encumbrances. Arguably, a clear national security strategy could have mitigated these problems by setting a clear procurement direction and imparting a sense of urgency to India’s military modernization and arms acquisition. However, the lack of a strategic culture, together with a profound distrust of the military on the part of the civilian leadership, has resulted in an India that has traditionally avoided defining its security considerations in military terms and setting long-term national security plans accordingly.124 Inter-service rivalries have further stalled such efforts and, consequently, India remains the only world power that does not regularly produce anything resembling an official national security planning document.125 Without such a policy direction, as one analyst puts it, “defence planning … may lack the necessary strategic guidance, and is at risk of proceeding on an ad-hoc basis.”126 122 123 124 125

126

Government of India, Ministry of Defence, Annual Report 2018–19, 111–12. Defence Research and Development Organisation, “Projects,” https://tdf.drdo.gov.in/ fundings. Kumar, “Reinventing Defence Procurement,” 13. Prakash Menon, “Evolving India’s Military Strategy,” Strategic Perspective, July– September, 2020, https://usiofindia.org/publication/cs3-strategic-perspectives/ evolving-indias-military-strategy; Arzan Tarapore, “Indian Army’s Orthodox Doctrine Distorts Military Strategy in Ladakh-Type Conflicts: Study,” The Print, August 31, 2020, https://theprint.in/opinion/indian-armys-orthodox-doctrine-distorts-militarystrategy-in-ladakh-type-conflicts-study/492132. Abhijnan Rej and Shashank Joshi, “India’s Joint Doctrine: A Lost Opportunity,” ORF Occasional Paper 139 (2018): 6. See also Harsh V. Pant and Kartik Bommakanti, “India’s National Security: Challenges and Dilemmas,” International Affairs 95, no. 4 (2019): 836–43.

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The absence of a clear national security strategy fails India’s MCF in various ways. For one thing, it leaves India’s race for world power status with no clear direction in terms of military buildup. Consequently, the country often prioritizes symbol over substance, a tendency that goes hand in hand with the national quest for military self-reliance and a world power status. As weapons indigenization and military self-reliance overshadows other military procurement objectives, India may be willing to sacrifice weapons’ sophistication and innovativeness127 – strong driving forces behind MCF – for this end. Furthermore, lacking a sophisticated national security concept, India’s defense policy has traditionally followed an offensive doctrine that centers on large army formations and capturing enemy territory. As part of this policy, India favors conventional offensive operations and discourages the assimilation of emerging technology-related means, which are often associated with limited operations and surgical strikes.128 Under such conditions, other priorities and preferences concerning military procurement may dominate related decisions while pushing back efforts to equip the forces with emerging technology-related systems and also, as a byproduct, MCF. The lack of a clear military strategy provides the conservative voices within the military with considerable influence over the acquisition of advanced weapons and equipment. Similar to other countries, and probably unavoidably, there is a certain amount of resistance in the Indian military to replace traditional military methods and force structures with emerging technology-related ones. As Lieutenant General Hooda, a former high-ranking army officer, observed when analyzing India’s army assimilation of AI-based systems, [T]here is still some hesitation in the military to move firmly in this direction. The military leadership has grown up with and is comfortable with the existing organisational structures and systems. There is an understandable reluctance to lessen the reliance on high-value monolithic platforms … that have served us well in the past.129

The more the army adheres to traditional warfighting concepts and methods, the less it believes that advanced technologies and their private suppliers are needed.

127

128 129

Lauren Holland, “Explaining Weapons Procurement: Matching Operational Performance and National Security Needs,” Armed Forces and Society 19, no. 3 (1993): 356. Tarapore, “Indian Army’s Orthodox Doctrine.” Hooda, “Sharpen Tech Focus.”

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Conclusions Despite a two decades-long effort and broad recognition within the defense establishment that such a step is necessary, India still has not managed to streamline the participation of private entities in arms acquisition. While the absolute monopoly that the public sector once enjoyed over arms acquisition has been eroded, the private sector’s participation in this area remains small. This is also the case in the realm of emerging technologies, including AI, to which India’s strategists assign much importance and where private industry and civilian universities enjoy proven and acknowledged advantage over the public defense industry. In striking contrast to the latter, the world has marveled at India’s globally competitive IT sector. The overriding reasons for this sluggishness when it comes to embracing radical change in India’s defense acquisition process – including the embrace of 4IR technologies and MCF – are: (1) the country’s cumbersome bureaucracy; (2) an army-dominated defense doctrine that favors large, offensive land forces over high-tech limited operations; and (3) an embedded preference for the state-owned defense industry. These and other related barriers, which prevail to some extent in many other countries, raise the cost and increase the risk that civilian players bear when participating in arms acquisition projects. Consequently, their willingness to engage in arms development programs remains low. To be sure, since the early 2000s, India has taken various measures to tackle these problems, intending, among other things, to increase the involvement of private high-tech companies and local universities in the development of emerging technology-based systems. However, India’s unique defense concepts, coupled with a relatively very low investment in R&D in general and defense R&D in particular, have arguably reduced the force of these measures in overcoming the existing barriers to CMI and MCF. While India’s strategic environment has become increasingly complex and challenging, its leadership has largely avoided setting out a comprehensive national defense strategy that could guide India’s military buildup and, consequently, its military acquisitions. At present, such a scheme simply does not exist and, instead, India’s military procurement is entangled with the various threads of an ad hoc military, economic, and political approach. In addition to equipping the armed forces with advanced weapons and equipment, India also aims to achieve military self-sufficiency (or at least self-reliance), increase the country’s arms exports, and strengthen India’s industry in general. However, this aggregation of objectives does not allow the armed forces’ demand for sophisticated weapons to clarify the order of priorities, which might pave the

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way for greater participation of private firms in arms development and production – and, therefore, the increased incorporation of 4IR technologies via MCF. Instead, local defense companies – even private firms – still serve largely as foreign technology receivers, or as manufacturers of or subcontractors to arms programs based on foreign-sourced weapons systems. The development of indigenous and original state-of-the-art military systems – an objective that can benefit much from, and give benefits back to, the private industry – remains, in the meantime, in the back seat.

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MCF in Israel

The assimilation of 4IR technologies in the Israel Defense Forces (IDF) has coincided with a profound doctrinal change in the military that began in the late 1990s.1 The underlying logic of this new doctrine has been the replacement of extensive ground maneuvers, and the consequent seizures of large amounts of enemy territory, with precise, lethal operations against the enemy’s critical capabilities in wartime and between wars. While 4IR technologies have not been the driving force behind the new operational concept, they have enabled it and moved it forward.2 As argued earlier, technology is the most visible component of military innovation, yet new technology is rarely the main reason behind military innovation. In the case of Israel, it was the country’s political and strategic conditions that drove the IDF’s doctrinal change; 4IR technologies simply facilitated and shaped it. In particular, they allowed the IDF to carry out more frequent, yet limited, accurate operations at long range and with a smaller number of casualties. In doing so, these technologies, which some have characterized as leading to “the blurring of lines between the physical, digital and biological spheres,”3 also blurred some of the traditional operational distinctions related to the military realm. In particular, they allowed military doctrines and operations that obscured the distinction between war and ceasefires, the frontlines and the home

1

2

3

The term “military doctrine” is dubbed “operational concept” in Israel’s military terminology. In this chapter, these terms are used interchangeably when referring to Israel and the IDF. On the role of technology in military innovation, see Barry R. Posen, The Sources of Military Doctrine: France, Britain, and Germany between the World Wars (Ithaca: Cornell University Press, 1984), 35, 54–5; Krepinevich, “Cavalry to Computer,” 30–42; I. B. Holley, Technology and Military Doctrine: Essays on a Challenging Relationship (Maxwell: Air University Press, 2004); Adamsky, The Culture of Military Innovation, 7. For a different view, which assigns technological innovation a central place in military innovation, see Chin, “Technology,” 765–83. Clement Wee Yong Nien et al., “At the Leading Edge: The RSAF and the Fourth Industrial Revolution,” Pointer: Journal of the Singapore Armed Forces 44, no. 2 (2018): 2. See also Schwab, The Fourth Industrial Revolution, 8.

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front, and combat and non-combat units.4 The operational dimension is not the only one, however, where 4IR technologies blur traditional military-related boundaries. Lacking the capacity to develop the entire range of emerging technologies and associated products by itself, the Israeli defense establishment relies increasingly on advanced technologies developed by civilian entities for the civilian market, thereby turning Israel into another case of MCF. Israel’s Military-Industrial Complex Israel’s defense industry was established out of a concrete necessity to provide the national armed forces with adequate means to meet their military challenges. Over the years, the national military-industrial complex has developed in line with the evolving political, economic, and military conditions, turning Israel into a global-scale arms exporter. While producing only a small variety of weapon platforms, and while its largest defense firm only ranked twenty-ninth among the world’s leading defense companies (in 2017),5 Israel has, nonetheless, become a world leader in many areas of military technology and one of the ten largest arms exporters in the world. As will be shown, the determinants that have been responsible for this development are largely the same ones that have promoted MCF within Israel’s military-industrial complex. The roots of Israel’s defense industry lie in the military acquisition system that the Jewish leadership in Mandatory Palestine created before the state’s formation in 1948. The system consisted of illegal military imports together with underground arms production focusing on light weapons, ammunition, and explosives. After the establishment of the state of Israel, the creation of a self-sustaining domestic arms industry became only more critical. While initially most armaments – and certainly most major weapons platforms – were acquired from abroad, Israel’s leaders saw the need for a strong indigenous arms industry. During the 1950s and early 1960s, the country designed, developed, and manufactured many kinds of weapons considered uniquely 4

5

Recently, Tristan A. Volpe highlighted one particular form of this feature: the growing difficulty in distinguishing between civilian and military motives. Tristan A. Volpe, “Dual-Use Distinguishability: How 3D-Printing Shapes the Security Dilemma for Nuclear Programs,” Journal of Strategic Studies 42, no. 6 (2019): 814–40. See also Yoram Evron, “4IR Technologies in the Israel Defense Forces: Blurring Traditional Boundaries,” Journal of Strategic Studies 44, no. 4 (2021): 572–93, on which some parts of this chapter draw. SIPRI, “Top 100 Arms-Producing and Military Services Companies, 2017,” www.sipri .org/publications/2018/sipri-fact-sheets/sipri-top-100-arms-producing-and-militaryservices-companies-2017.

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necessary for Israel’s security including small arms (such as the iconic Uzi submachine gun), the Gabriel antiship cruise missile (ASCM), and the Shafrir-1 air-to-air missile.6 Israel’s main defense industry organizations were established during this period. The oldest production facility was Israel Military Industries (IMI), which was based on pre-1948 arms production facilities and, after 1948, became Israel’s premier arms and ammunition producer. Israel Aerospace Industries (IAI, originally called Israel Aircraft Industries) was established in 1953 as a small state-owned company providing maintenance services to airplanes and airplane engines. In 1958, Rafael was established as an MoD unit in charge of weapons and ammunition development, particularly missile systems. In addition, the IDF established units to undertake the maintenance of military vehicles (which later were also put in charge of tank repairs and upgrades) and, ultimately, factories producing tanks and other armored vehicles. Concurrently, and despite Israel’s centralized and semi-socialist economy during its first decades of existence, several private defense industry companies were also established, the first being Elron Electronic Industries established by retired Rafael engineers; this company later formed a daughter company named Elbit Systems, which has become one of Israel’s leading defense industries. Israel did not necessarily pursue a self-reliant defense capability during its early years. It attached greater importance to offsetting its rivals’ quantitative superiority, an objective it could not achieve by relying on its own sources. Nevertheless, the Israeli arms industry engaged in indigenous military R&D from the very beginning. In 1947, a military scientific unit was already operating as part of the Haganah – the main Jewish paramilitary organization in Mandatory Palestine – and, in 1948, following the formation of the state of Israel and the IDF, a department in charge of scientific research with close organizational ties to the operations division of the General Staff was also established. In 1952, that department became an MoD unit and a few years later Rafael, which during its first decades of existence served as the MoD’s in-house 6

Recent studies (in English) on Israel’s defense industry include Dov Dvir and Asher Tishler, “The Changing Role of the Defense Industry in Israel’s Industrial and Technological Development,” Defense Analysis 16, no. 1 (2000): 33–51; Yoad Shefi and Asher Tishler, “The Effects of the World Defense Industry and US Military Aid to Israel on the Israeli Defense Industry: A Differentiated Products Model,” Defense and Peace Economics 16, no. 6 (2005): 427–48; Hoyt, Military Industry, 67–114; Yaakov Katz and Amir Bohbot, The Weapon Wizards: How Israel Became a High-Tech Military Superpower (New York: St. Martin’s Press, 2017); Uzi Rubin, “Israel’s Defense Industries – An Overview,” Defense Studies 17, no. 3 (2017): 228–41; Sasson Hadad et al. (eds.), Israel’s Defense Industry and the US Security Aid (Tel Aviv: INSS, 2020).

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military R&D establishment. To some extent, it has kept this position through to the present.7 To be sure, such an approach was not wholeheartedly welcome. In the early years, the IDF was concerned that the defense industry would require a relatively large portion of the defense budget and, moreover, it did not trust the local defense industry to be able to provide it with advanced and reliable arms systems. In one of the early tests of Rafael’s Luz guided missile during the late 1950s, the Air Force chief told the project scientists that he was ready to stand in the middle of the target, being certain that the missile would never hit it. Fortunately, he did not do so.8 Still, over the years, military R&D remained a national priority. During the 1980s, just before Israel’s high-tech sector took off, defense R&D constituted 65 percent of all national R&D spending and around half of the scientists and engineers in the industrial sector were employed by the local arms industry.9 Since then, the share of defense-related R&D spending has declined but it has nevertheless remained relatively high. In 2017, for example, the R&D expenses of the military-industrial complex constituted over 11 percent of all Israeli R&D spending.10 Not surprisingly, the defense industrial base came to play a significant role in the development of Israel’s high-tech sector. A national strategy of self-reliance and self-sufficiency was doubly reinforced by the arms embargo imposed on Israel by France (Israel’s main arms supplier at the time) in the 1960s, coupled with arms export restrictions imposed by the United Kingdom, another key arms supplier.11 Consequently, the period from roughly 1967 to 1987 was the height of Israeli “munitions independence.”12 The IDF and the Israeli MoD pursued self-sufficiency in major weapons platforms as a policy priority. During this period, the country undertook the indigenous R&D and manufacture of several categories of large weapons systems including the Merkava main battle tank, the Sa’ar-4 and Sa’ar-4.5 classes of missile

7 8

9 10

11 12

Paglin, Merutz hachidush, 36–7. Zeev Bonen and Dan Arkin, Rafael: Mema’abada lema’aracha (Rafael: From laboratory to the battlefield) (Israel: NDO, 2003), 25. See also Yaacov Lifshitz, Kalkalat bitachon: hateoria haklalit vehamikre ha’Israeli (Defense economics: The general theory and the Israeli case) (Jerusalem: The Jerusalem Institute for Israel Studies and Ministry of Defense Publishing House, 2000), 360. Paglin, Merutz hachidush, 33. Israel Central Bureau of Statistics, “Hahotza’a lemechkar vepituach bamigzar ha’iski beshnat 2017” (Business expenditure on R&D in 2017), August 21, 2019, www.cbs.gov .il/he/mediarelease/DocLib/2019/258/12_19_258b.pdf. Yaacov Lifshitz, “Defense Industries in Israel,” in The Global Arms Trade: A Handbook, ed. Andrew T. H. Tan (New York: Routledge, 2009), 266–8. Rubin, “Israel’s Defense Industries,” 231–2.

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boats (initially armed with the indigenous Gabriel ASCM), and many types of tactical missile systems (e.g., the Popeye standoff air-to-surface missile and the Python family of air-to-air missiles). During this period, Israel also manufactured its own combat aircraft, the Kfir (Lion Cub), based on the Dassault Mirage-5 (acquired through espionage), and later the Lavi (Lion), an indigenous effort to design and develop an advanced (fourth-generation) multirole fighter jet. Just as important, Israel began to undertake the development of first-generation UAVs including tactical reconnaissance UAVs (e.g., the Scout and Mastiff) and loitering antiradiation drones (e.g., the Harpy). By the mid-1980s, the Israeli defense industry was at its peak. Its capital assets constituted 30 percent of the Israeli industry in total and it employed 20 percent of the total employees and over 50 percent of the scientists and engineers of the entire industrial sector. In addition, armaments accounted for 25 percent of all Israeli exports.13 Starting in the late 1980s, however, it had become increasingly clear that a broad range of autarky in armaments was unsustainable. In the first place, the costs of developing large state-of-the-art weapons systems such as the Lavi were becoming increasingly untenable. In the case of the Lavi, the United States, which had been underwriting much of its R&D financial assistance to Israel through Foreign Military Sales (FMS) funding, decided to stop supporting this particular program and the aircraft program was subsequently cancelled in 1987. The cancellation of the Lavi aircraft project, along with a collapse in arms sales following the end of the Cold War, forced Israel to refocus and restructure its process of arms development and production, putting the defense industry on a new path of development.14 Beginning in the mid-1980s, therefore, Israel began to push a new policy of “focused self-reliance” in which the Israeli defense industry could “develop only such ‘force multiplier’ systems that are uniquely tailored for the IDF” or were unavailable on the global market.15 Consequently, after 1987, the domestic defense industry started focusing on supplying the IDF with indigenous, technology-intensive force multipliers to be installed largely on imported platforms (with the exception of certain indigenously produced platforms such as the Merkava 13 14

15

Lifshitz, Kalkalat bitachon, 364–5. Yitzhak Rabin, who acted as defense minister during the cancellation of the Lavi project, argued that such “self-reliance was illusory,” since Israeli platforms still relied on foreign sources for propulsion systems (for combat aircraft, tanks, missile boats) and “other key components.” Rubin, “Israel’s Defense Industries,” 233. See also Dvir and Tishler, “The Changing Role,” 33–51. Rubin, “Israel’s Defense Industries,” 233.

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tank, various UAVs, the Iron Dome missile defense system, etc.), thus upgrading their capabilities significantly. As a result, the Israeli arms industry began to transform into a specialty manufacturing sector. This strategy permitted it to concentrate on a few niche areas where it had particular core competencies, especially when it came to long-term evolutionary product development. By the end of the twentieth century, therefore, key areas for the Israeli defense industry included UAVs; air-to-air missiles; missile defenses and counter-rocket, artillery, and mortar (C-RAM) systems; anti-tank munitions; armored vehicle protective systems; C4ISR systems; and electrooptics and systems for electronic and cyber warfare, to name the main ones.16 That fitted well the IDF’s increasing reliance after 1967 on advanced technology solutions, which, as Dima Adamsky convincingly argued, kept pushing in turn for additional development of cutting-edge niche military technologies.17 It has also shaped the development ever since of the military-industrial complex and its relations with the civilian industry. As of the late 2010s, Israel’s military-industrial complex consisted of 600 to 700 companies, including local subcontractors and sub-suppliers, which participated in the indigenous development, production, and integration of arms, ammunition, and military equipment. The total number of workers directly employed in these companies was around 72,000, about 17 percent of all workers in Israel’s manufacturing and mining sector.18 A recent study by Elfassy, Manos, and Tishler laid out Israel’s militaryindustrial structure as follows. At the peak are seven industrial enterprises that develop and manufacture major weapon platforms or military systems-of-systems, that is, companies that fit the traditional definition of a “defense industry.”19 These include IAI, Israel Shipyards, Rafael, Elbit, Tomer,20 Aeronautics Ltd., and the Tank and APC Directorate

16 17 18

19 20

William F. Owen, “Punching Above Its Weight: Israel’s Defense Industry,” Defense Review Asia 4, no. 3 (2010): 12–16; Katz and Bohbot, The Weapon Wizards. Dmitry Adamsky, “The Israeli Approach to Defense Innovation,” SITC Research Briefs, 10 (2018): 3. Guy Elfassy et al., “Possible Effects of the Change in Foreign Currency Aid on the Structure of the Israeli Defense Companies,” in Israel’s Defense Industry and the US Security Aid, ed. Hadad et al., 79; Israel Central Bureau of Statistics, “Seker koakh adam” (Labor force survey), 2019, 221–5, www.cbs.gov.il/he/publications/DocLib/ 2019/lfs17_1746/h_print.pdf. Elfassy et al., “Possible Effects.” Tomer is a former division of IMI, which was privatized in 2018. The company was excluded from IMI’s privatization and remained an independent, state-owned company focusing on development and production of missile engines.

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at the MoD.21 These companies, except for Aeronautics and Elbit, are state-owned; nevertheless, Elbit has become the country’s largest defense industry after absorbing much of the privately owned defense sector in Israel during the 1990s.22 These first-tier defense industries are responsible for over 95 percent of Israel defense industries’ sales, employ approximately 45 percent of the local military-industrial complex’s workforce, and possess 32 R&D and production facilities.23 Occupying the second tier of the defense production supply chain are approximately 100 companies that develop and produce military subsystems or other specialized defense products. These include cannons and mortars, weapon systems and electronic systems that are installed on weapon platforms, electro-optical systems, and the like. These companies are privately owned, less advanced technologically than first-tier firms, and employ some 13,500 workers – roughly 20 percent of the defense industry’s workforce. Companies that supply subsystems, parts, or services to companies of the first and second tiers of the supply chain constitute the next category, comprising some 400 private-owned companies and employing 23,000 workers. Their technological level is average and their products include such items as electronic cards, metal castings, software services, and electrical cables. It is worth noting that, in sharp contrast to companies of the first tier, companies of the second and third tiers sell their products mainly to the local market. Finally, there are several dozen companies that provide import and testing services to firms throughout the arms production supply chain; these firms account for nearly 15 percent of the military industry’s employees and are mostly privately owned.24 Altogether, Israeli arms sales in the late 2010s were worth approximately US$10 billion annually, of which 75 to 80 percent were to foreign customers.25 The accumulated revenues from non-Israeli customers of the three major defense industries (Elbit, IAI, Rafael) accounted for about 70 percent of their total revenues (see Figure 6.1). As such, the 21

22

23 24 25

The Merkava and Armored Vehicles Directorate bears overall responsibility for the design, development, and production of Israel’s tanks and other armored vehicles as well as the establishment and expansion of related industries. Israel Ministry of Defense, “Tank and APC Administration,” 2020, https://english.mod.gov.il/Departments/Pages/ Tank_and_APC_Administration.aspx. In 2019, Rafael and a private investor purchased Aeronautics (50 percent each). Elbit is a public company owned by the public and a private holding firm. For the division of sales between state-owned and private or public companies, see Paglin, Merutz hachidush, 35. Asher Tishler and Gil Pinchas, “Challenges of the Israeli Defense Industry in the Global Security Market,” in Hadad et al. (eds.), Israel’s Defense Industry, 38. Elfassy et al., “Possible Effects,” 74–80. Tishler and Pinchas, “Challenges of the Israeli Defense Industry,” 38.

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12,000 69%

10,000

US$ million

71% 8,000

70%

6,000 4,000 2,000

30%

29%

2017

2018

31%

0 Revenues Israel

2019

Revenues overseas

Figure 6.1 IAI, Rafael, and Elbit’s revenues by market, 2017–19 Source: Elbit Systems Ltd., Annual Report (various years), https://elbitsystems .com/investor-relations/financial-results; Rafael Advanced Defense Systems LTD., Annual Report (various years), www.gov.il/he/Departments/ DynamicCollectors/companies_data_and_reports?skip=0&company_neme= 56&report_type=02; Israel Aerospace Industry Ltd., Annual Report (various years), www.gov.il/he/Departments/DynamicCollectors/companies_data_and_ reports?skip=0&company_neme=36&report_type=02

total output of Israel’s defense industry comprised 15 percent of the national industrial production while defense exports constituted 13 percent of Israel’s total exports.26 This exceptionally high rate of exports (in most countries, the lion’s share of defense industries’ sales is to the national military) is the result of two complementary factors. The first is an acute need for large military R&D budgets, which are essential for preserving the IDF’s qualitative edge over regional adversaries. As Table 6.1 indicates, the R&D expenses of Israel’s top defense industries constitute an unproportioned share of their revenues in Israel, reaching 35 percent or more. The second is diminishing sales to the IDF because US military aid to Israel compels the IDF to purchase an increasing share of its weapons, ammunition, and other military supplies directly from the United States. According to the current (2019–28) US$38 billion security assistance agreement, signed between the United States and Israel in 2016, the share of military aid

26

Paglin, Merutz hachidush, 35.

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Table 6.1 Israel’s top defense industries’ R&D expenditure as a share of revenues in Israel (SRI), 2008–17 Elbit Systems

R&D expenses (US$ million)

Rafael1

IAI

Revenues in Israel (US$ million)

R&D as SRI

R&D expenses (US$ million)

Revenues in Israel (US$ million)

R&D as SRI

R&D expenses (US$ million)

Revenues in Israel (US$ million)

R&D as SRI

2017

265

740

35%

182

830

22%

198

1,160

17%

2018

287

740

38%

180

945

19%

226

1,160

19%

2019

332

1,060

31%

191

1,070

18%

236

1,135

20%

Source: Elbit Systems Ltd., Annual Report (various years); Rafael Advanced Defense Systems LTD., Annual Report (various years); Israel Aerospace Industry Ltd., Annual Report (various years) Note: (1) Rafael’s annual reports are originally in NIS. Conversion to US$ is based on the average exchange rate in the respective year.

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that can be spent outside the United States will gradually decline from 25 percent in 2019 to none in 2028.27 This shrinking domestic market coupled with foreign customers’ increasing preference for localized arms suppliers is responsible for another development involving Israel’s first-tier defense industries, that is, the establishment or acquisition of overseas defense subsidiaries. Thus, Israel’s three biggest defense industries now possess several overseas affiliates of different types including production, investment, and marketing companies in Europe, North and South America, Asia, and Australia. Using these subsidiaries, they can participate in bids that are limited to or give priority to local companies, sell their products to the IDF by using US FMS funding, and collaborate with local defense companies overseas.28 To be sure, this practice serves Israel’s defense industries well but also foreign states and defense industries, which for various reasons may prefer to avoid formal business connection with Israeli defense companies or military forces while still being involved in their projects. This, however, has not been sufficient to address the many challenges facing Israel’s defense industry. As foreign markets are the source of most of their income, Israeli defense companies compete on a regular basis against much bigger market leaders. To secure deals under such conditions, their products and solutions have to be highly cost-effective. Consequently, the Israeli arms industry has undergone a major transformation since the 1970s. In the first place, first-tier defense industries have reduced industrial production of hardware and basic weapons and shifted focus to development, design, and integration of sophisticated and costly weapon systems or system-of-systems. As part of this, they increased their reliance on subcontractors for the supply of components, parts, software modules, and, to some degree, also subsystems for the arms systems they develop. Production remained focused on pure military products such as explosives and special means with no civilian utilization.29 Such a development required civilian firms to meet the defense industry’s standards. At the time, Israel’s civilian industrial and electronic companies could not meet the defense industries’ standards 27

28

29

Jeremy M. Sharp, US Foreign Aid to Israel, RL33222 (Washington, DC: Congressional Research Service, 2019), 5–6. See also Shefi and Tishler, “The Effects of the World Defense Industry,” 427–48. For a complete list of Elbit’s, IAI’s, and Rafael’s subsidiaries, see their respective financial reports. See also Tal Inbar, “Business Abroad Using Subsidiaries,” Israel Defense, February 9, 2012. Guy Paglin, “New/Old Trends Affecting the Defense Industries,” in Israel’s Defense Industry, eds. Hadad et al. (Tel Aviv: INSS, 2020), 118–19.

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and the defense industries were, therefore, responsible for the production of a large share of their arms systems’ supply chain.30 That began to change, however, after Israel’s high-tech sector started to evolve and the pace of technological development began to rise. Defense firms began to rely on civilian firms not just as subcontractors but (as will be detailed later) also as suppliers of state-of-the-art technologies.31 One reason for this was the absolute and relative decline in the R&D expenses of Israel’s traditional defense industries. According to official data, the defense industries’ R&D expenses in 2016–18 (the only period for which such data are available thus far) declined from NIS 7.7 billion (approximately US$2 billion) to NIS 6.1 billion (approximately US$1.7 billion), and from 12.9 percent to 8.5 percent of Israel’s total business R&D (see Figure 6.2).32 These expenses do not include, of course, R&D of dual-use and other defense-related products that are being developed by civilian high-tech companies and ultimately end up being assimilated into defense products. Calculated as “civilian” R&D, this part of Israel’s defense R&D obviously increases as long as the R&D of the traditional defense industry declines. Consequently, the share of private companies, as well as civilian technologies, suppliers, and collaborators in Israel’s arms development and production, has increased significantly in the early decades of the twenty-first century. Setting the Stage for MCF: The IDF’s Quest for Emerging Technologies The IDF’s interest in 4IR technologies is the continuation of a longstanding legacy. Since its early years, the IDF has emphasized materiel technological superiority over its quantitatively superior rivals as the key to Israel’s survival.33 As part of this guiding principle, Israel established the capability to develop and produce arms in house, the underlying 30 31 32

33

Bonen and Arkin, Rafael, 35; Lifshitz, Kalkalat bitachon, 383. Lifshitz, Kalkalat bitachon, 376–7. All figures are in current prices. Conversion to US$ is based on the average exchange rate in the respective year. Israel Central Bureau of Statistics, “Hahotza’a lemehkar vepituach bamigzar hai’ski beshnat 2017” (The R&D expenses in the business sector in 2017); Israel Central Bureau of Statistics, “Hahotza’a lemehkar vepituach bamigzar hai’ski beshnat 2018” (The R&D expenses in the business sector in 2018), September 17, 2020, www.cbs.gov.il/he/mediarelease/DocLib/2020/298/12_20_298b.pdf. This concept was part of a set of principles and guidelines put together in the early 1950s by Israel’s first prime minister and minister of defense, David Ben-Gurion, and served as the IDF’s operational concept through the late twentieth century. Israel Tal, Bitachon leumi: meatim mul rabim (National security: The few against the many) (Tel Aviv: Dvir, 1996), 11; Itamar Rabinovich and Itai Brun, Israel Facing a New Middle East: In Search of National Security Strategy (Stanford: Hoover Institution Press, 2017), 2–3.

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25

14.0%

12.0% 20

US$ billion

10.0% 15

8.0%

6.0%

10

4.0% 5 2.1

2.0 0

2016

2017

1.7

2018

2.0%

0.0%

Total business R&D Defense industry R&D Defense R&D as share of total business R&D

Figure 6.2 Israel’s defense industry’s R&D expenses as a share of national commercial R&D, 2016–18 Source: Israel Central Bureau of Statistics, “Press Announcement,” August 21, 2019, www.cbs.gov.il/he/mediarelease/DocLib/2019/258/12_19_258b.pdf; Israel Central Bureau of Statistics, “Press Announcement,” September 17, 2020, www .cbs.gov.il/he/mediarelease/DocLib/2020/298/12_20_298b.pdf

rationale of which was ultimately consolidated by the late 1980s: Israel’s military superiority would rely on domestic state-of-the-art technologies installed (with some exceptions) on imported platforms, thereby upgrading their capabilities. Concurrently, the role of technology in the Israeli military’s buildup and deployment steadily expanded. Its reliance on technological solutions has resulted in a wide array of techno-military innovations.34 The development and assimilation of world-class tactical missiles, radars, observation satellites, precise-guided ammunition, fire 34

Adamsky, The Culture of Military Innovation, 113–15. See also Amir Rapaport, “On the Superpowers’ Playing Field,” Israel Defense, December 19, 2011, www.israeldefense.co .il/en/content/superpowers%E2%80%99-playing-field.

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control systems, and heads-up display (HUD) systems, to name a few striking examples, illustrate this point.35 The emphasis on technology in Israel’s strategic thinking has only intensified over the years as its security forces have faced an ever more complex environment in terms of both military challenges and political and social conditions. On the one hand, the country faces increasingly unconventional and asymmetrical challenges such as the launching of missiles and rockets at its home front, its enemies’ attempts to develop nuclear military capabilities, various cyber threats, and terror and guerrilla attacks by organizations that operate in crowded urban areas and compensate their materiel inferiority with COTS technologies (e.g., drones, sensors, IT systems). On the other hand, the public expects the government to provide it with a safe environment while being unwilling to accept long wars and the cost associated with the long-term seizure of enemy territory, both measured in large numbers of casualties.36 Attuned to the prevailing theoretical presumptions of military innovation, it is these strategic and socio-political developments rather than technological advances that, since the early twenty-first century, have driven the changes in Israel’s military doctrine.37 These changes, in turn, have proven feasible, and even capable of expanding, due to the availability of new technologies. The new IDF military doctrine was officially presented in 2015 in a first of its kind official document, entitled IDF Strategy (Estrategiat Tzahal), delineating Israel’s strategic conditions, military attributes, and courses of action.38 In this document, as well as in analyses by high-ranking officers and military experts, the IDF assumes a strategic situation of enduring enemy efforts to prepare for war or to conduct one.39 To meet this challenge, the IDF must constantly be engaged in 35 36

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Katz and Bohbot, The Weapon Wizards. Yagil Levy, “Social Convertibility and Militarism: Evaluations of the Development of Military–Society Relations in Israel in the Early 2000s,” Journal of Political and Military Sociology 31, no. 1 (2003): 76–80; Rabinovich and Brun, Israel Facing a New Middle East, 25–44; Ariel Levite, Offense and Defense in Israeli Military Doctrine (New York: Routledge, 2019), 63–106. See Note 2. The conceptualization of the 2015 document’s guidelines was the outcome of a decadeand-a-half-long effort following the realization that the existing operational concept no longer suited the existing political and strategic circumstances. Rabinovich and Brun, Israel Facing a New Middle East, 1–5, 109–11. See also Charles D. Freilich, Zion’s Dilemmas: How Israel Makes National Security Policy (Ithaca: Cornell University Press, 2012), 27–60. Israel Defense Forces (IDF), Estrategiat Tzahal (IDF strategy), April, 2018, Clause 8, https://web.archive.org/web/20200410190838/https://www.idf.il/media/34416/strategy .pdf.

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either low-scale warfare aimed at shaping the starting conditions of the next war in Israel’s favor, dubbed by the IDF as “a campaign between wars,” or in a full-scale campaign or war. When a war breaks out, most likely against a non-state actor, the tactics of large-scale ground maneuvers and the consequent seizing of control of vast enemy territories, as the IDF had done through the early 1980s, are regarded as no longer feasible politically. Instead, efforts will be made to penetrate the enemy’s territory swiftly in order to destroy critical military capabilities and various strategic infrastructures and thwart the enemy’s capability to hit the Israeli home front. As part of this approach, the IDF emphasizes the massive use of precise, lethal, and often standoff fire.40 Realizing this goal requires the ability to acquire and analyze accurate, current information about the enemy’s forces, means, and infrastructure prior to and during the battle, and transferring it to field units. Other capabilities include precise and intense firepower of various types; the ability to swiftly penetrate the enemy’s strongholds to pursue and destroy its forces; and the ability to protect the civilian front, including sensitive communication infrastructures and cybernetic space.41 The elements that play a major role in implementing this strategy are the Air Force, highly trained and equipped special units, intelligence forces, strategic defenses and other anti-missile systems, as well as IT, cyber, and logistics units, all jointly operated through an efficient C4ISR system.42 It is against this backdrop that the assimilation of 4IR technologies into the IDF’s war preparations and warfare comes into full view. Public IDF publications, MoD bids, and press reports have revealed that Israel’s defense establishment is profoundly interested in 4IR technologies and is, in fact, already engaged to varying degrees in the acquisition, development, and deployment of some of these including robots, multi-sensor autonomous vehicles, nanotechnology and nanomaterials, advanced sensors and sensing technology, the networking of people and things, AI, technological human empowerment, electromagnetic pulse (EMP) weapons, and quantum technology for diverse uses.43 The deployment of

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Ibid., Clause 10.a; Rabinovich and Brun, Israel Facing a New Middle East, 113–15; Charles D. Freilich, Israeli National Security: A New Strategy for an Era of Change (New York: Oxford University Press, 2018), 203–33; Raphael D. Marcus, Israel’s Long War with Hezbollah: Military Innovation and Adaptation under Fire (Washington, DC: Georgetown University Press, 2018), 143, 215–18. 42 IDF, Estrategiat Tzahal, Chaps. B, E. Ibid., Chap. B. Technion R&D Foundation Ltd., “IMoD DDR&D: Call for a Proposal for Research for the Defense Establishment,” www.trdf.co.il/heb/kolkoreinfo.php?id=4332; “Technologia besde hakrav ha’atidi” (Technology in the Future Battlefield),

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such systems had already begun in the mid-2000s. For instance, in 2006, the IDF began deploying the Digital Ground Army (DGA) advanced command and control system, which provides field and staff commanders with real-time visual and other data on the battlefield including the location of “friend and foe” forces, assesses the nature of threats to friendly forces, recommends means of attack, and identifies communication problems among IDF forces and their automatic repair. The system has been continuously upgraded: for example, the Shaked Warfare system, a customized Android smartphone and digital watch. Among other things, this system allows field commanders and soldiers to navigate and direct the battle using a digital blue-red map of the enemy and of friendly forces, provides alerts and updates regarding enemy forces and terrain conditions, recommends the vehicles to be used, detects whether the target can be reached on foot, and permits flagging and tracking a target by smartphone.44 The deployment of these systems is not an isolated event. There are various indications that in the 2010s, the IDF, having realized the revolutionary impact of such technologies, assigned an even greater role to the combination of sensors, large databases, AI, IoT, advanced energy preservation means, and other related technologies. In 2017, the commander of a large IT development unit in the IDF’s C4ISR and Cyber Defense Directorate (Lotem) stated that the IDF is a “multi-sensor machine in every one of its dimensions – from computing systems with excellent network learning capabilities to the battle tank – and the challenge is to get the maximum benefit of this information.”45 His high rank – Brigadier-General – reflects the importance that the IDF assigns to such empowering technologies. Still, the deployment and assimilation of 4IR technologies involve a variety of considerable challenges. Covering all of the major challenges exceeds the scope of this book but two in particular – the individual and the organizational – are especially germane to IDF. On the individual level, the challenges that pertain to soldiers and commanders naturally

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Ma’arachot 477 (April, 2018): 48–53; Hertzi Halevy, “Elionut modi’init beidan technologi” (Intelligence superiority in a digital era), Ma’arachot 477 (April, 2018): 26–31; “Hauniversita haivrit tivne madgim leumi letikshoret quantit” (The Hebrew University will build a national demonstrator for quantic communication), TechTime, June 12, 2017, https://techtime.co.il/2017/06/12/quantum-communications. “IDF Technological Revolution Reaches Warrior on Field,” iHLS, December 28, 2017, https://i-hls.com/archives/80503. See also Elad Rotbaum, “Hatsayad Hamshudrag” (The upgraded DGA), Bamahane, September 19, 2017. Na’ama Zaltzman, “Mefakedet yehidat lotem: ‘anachnu lokhim et hameida vemvi’im oto lesde hakrav’” (Lotem unit commander: “We take the information and bring it to the battlefield”), Bamahane, November 28, 2017.

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include the latter’s skepticism when it comes to new technologies and their reluctance to rely on AI-enabled decision-making support systems as well as combat soldiers and commanders’ need for specific training when it comes to operating sophisticated digital equipment. Additional concerns are that overreliance on such equipment will erode basic military skills and the IDF’s core values such as the “follow me” ethos (i.e., commanders personally leading their units into battle) and the idea that “the man in the tank will win” (i.e., the superiority of human beings over technology).46 One example of these concerns was the fierce criticism of field commanders who allegedly commanded their units from the rear in the 2006 Lebanon War by using advanced intelligence and communication systems.47 Ever since, any introduction of sophisticated equipment into combat units has been followed up by warnings that they should not replace basic capabilities but only support them.48 On the macro level, despite its routine engagement in fighting wars, the IDF is nevertheless a “large, conservative, and hierarchical organization, which engages in an operational reality … and therefore … doesn’t tend to take risks.”49 Uzi Rubin, the founding director of the MoD’s missile defense directorate, provides a less flattering observation. Being a large and relatively old organization, he says, the IDF tends to reject “almost instinctively” any new large-scale technological project that can disrupt its existing buildup and working plans.50 Either way, it is clear that the IDF struggles to find the right balance between equipping itself with the very latest means while concurrently ensuring that these technologies are safe and reliable. According to a senior officer, with some exceptions, the IDF does “not follow any new trend … We try identifying technologies that are not too new but are still in the first third of their life

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Tali Caspi-Shabbat and Or Glik, “Mahapechat hameida baolam hamivtsai harav-zroi betzahal” (The information revolution in the IDF’s multi-arm operational world), Bein Haktavim 18 (2018): 38–47; Yossi Hatoni, “Kli haneshek haba shel tzahal: bina mlachutit” (The IDF’s new weapon: Artificial intelligence), Anashim Ve’mahshevim, October 24, 2017, www.pc.co.il/news/251638. Amir Rapaport, The IDF and the Lessons of the Second Lebanon War, Mideast Security and Policy Studies 85 (Ramat Gan: The Begin-Sadat Center for Strategic Studies, Bar-Ilan University, 2010), 49. For example, Yoav Zeitoun, “Hamishkefet hadigitalit hachadasha shel tsahal” (The IDF’s new digital binoculars), YNET, June 25, 2019, www.ynet.co.il/articles/0,7340, L-5533205,00.html. Caspi-Shabbat and Glik, “Mahapechat hameida,” 32. Uzi Rubin, Memilhemet hakohavim ad Kipat barzel: hama’avak as hahagana ha’aktiviy beIsrael (From Star Wars to Iron Dome: The controversy over Israel’s missile defense) (Modi’in: Effi Melzer, 2019), 11.

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cycle.”51 However, in a rapidly changing environment, armed forces do not often have the luxury of being so selective. Indeed, the IDF Strategy document states that rapid technological challenges and the fast exhaustion of military-use technologies are major challenging features of Israel’s strategic environment.52 These challenges do not, of course, stop 4IR technologies from being increasingly deployed across the IDF’s arms and services, which, in turn, raises one of the most crucial questions concerning their assimilation into the armed forces: their source of supply. Certainly, the defense establishment, the IDF included, has R&D units of its own that have successfully undertaken various 4IR-related developments. Prominent examples include the intelligence forces’ 8200 and 81 units, the technological unit of the ground forces, the Israeli Air Force’s Ofek 324 unit for software development, and the technology units of the external and internal intelligence bodies (i.e., the Mossad and the Shin-Bet, respectively).53 However, as 4IR-related R&D is increasingly expanding into new scientific fields involving advanced basic research, and its progress is constantly accelerating, neither the IDF nor the defense industries have the ability to undertake related developments entirely in house in order to close the gaps. Acknowledging this reality, these organizations are searching for collaborations with the civilian sector while struggling to achieve the precise balance between in-house development and reliance on external sources.54 Elaborating on this issue, a former commander of a military R&D unit said: “What’s important is our relative advantage. We keep asking ourselves where the line is between what we purchase from civilian sources and what we should develop by ourselves.”55

From CMI to MCF At no stage has Israel ever defined a formal policy of CMI – and later of MCF – as a means by which to enhance its civilian and defense industrial development. Even without making such a policy, however, CMI

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“Haetgar hagadol hu mitzuy hayeda” (Knowledge exploitation is the big challenge), Israel Defense, May 15, 2013. IDF, Estrategiat Tzahal, Clause 8.A.5. Websites of the IDF, the Israel Air Force, Mossad, and Shin-Bet. “Government Industries Are Not Investing in Research,” Israel Defense, February 16, 2012, www.israeldefense.co.il/en/content/%E2%80%9Cgovernment-industries-are-notinvesting-research%E2%80%9D; “Technologia besde hakrav ha’atidi,” 53; “Ha’etgar hagadol hu mitzuy hayeda.” “Ha’etgar hagadol hu mitzuy hayeda.”

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practices have been part of its military and civilian development since its early days, thus setting the preconditions for MCF. One of the basic conditions for the development of CMI in Israel has been the low barriers between the state’s civil and military sectors. Israel’s military has developed in close interaction with the civilian sector since its early days. The military organizations that preceded the IDF were established by rural settlers who undertook guarding missions while engaging with farming and other construction works. During the struggle for national independence, these rudimentary organizations turned into underground paramilitary organizations and the collective rural communities (the kibbutzim) provided them with clandestine bases for training, concealed bunkers for illegal weapons and ammunition, hid illegal immigrants, and the like. Similar cooperation between paramilitary underground organizations and the civilian population took place in the cities as well: private apartments, houses, and cars were used to transfer and hide illegal weapons and hunted underground organizations’ members; public buildings and institutions were used as recruitment and training bases; and civilian workshops and factories served as underground arms production facilities.56 After the establishment of Israel, the content and forms of cooperation between the defense and the civilian sectors changed. However, they remained very strong. As Udi Lebel, who has written extensively on Israel’s civil–military relations, claimed, “the army’s responsibilities extended well beyond the traditional aspects of security operations and touched on every aspect of daily life for Israelis – from settlements and education to the media, immigrant absorption, transportation, and urban construction.”57 Similar to the IDF’s involvement in the civilian sector, the latter was closely involved in national defense and the armed forces. For example, the establishment of new civilian settlements along the country’s borders has helped to reaffirm and practically realize – politically and strategically – the new state’s territorial claims. To that end, a department in charge of new civilian settlements was established as part of the Operations Devision of the IDF’s General Staff.58 Those

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For example, Henry Near, “Hahityashvut ha’ovedet” (The labor settlement), in Toldot hayeshuv hayehudi be’ertz Israel me’az ha’aliya harishona – Tkufat hamandat habriti (The history of Jewish Life in Israel since the first Alyiah: The British mandate period), ed. Moshe Lissak (Jerusalem: The Bialik Institute, 2008), 459–90. Udi Lebel (ed.), Communicating Security: Civil–Military Relations in Israel (London: Routledge, 2008), vii. Iris Graitzer and Amiram Gonen, “Itsuv hamapa hayeshuvit shel hamedina bershita” (The shaping of the settlements map in Israel’s early years), in Toldot hayeshuv hayehudi be’ertz Israel me’az ha’aliya harishona – Medinat Israel: ha’asor harishon (The history of

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settlements operated armed civilian guard units and maintained close contacts with regional military commands. Concurrently, just as the civilian sector addressed defense challenges, the defense sector served civilian needs. During the late 1960s, the rapid growth of the defense industry played a central role in Israel’s recovery from an economic recession it was then undergoing; the defense sector provided employment opportunities in the state’s peripheral and less developed areas and for newly immigrated scientists and engineers, created the foundations of a high-tech sector, and elevated the overall standard of Israeli industry. As a result, between 1965 and 1975, the share of periphery-located employees in the metal and electronics industries increased from 14 to 22 percent of the workforce. Between the late 1960s and the early 1980s, the aggregated share of the electronic aircraft products and optical and precision devices subsectors in Israel’s total industrial output increased from 6 to 24 percent.59 The growth of the defense industry and its growing connection with the civilian industry are regarded as the prime factors behind this development. An important bridge between military and civilian life has been the compulsory and reservist military service obligations of a relatively large part of the population. Compulsory military service covers the majority of the male and female Jewish population as well as, respectively, a large part and some segments of the Druze and Arab minorities. Conscription lasts two and a half to three years for males and about two years for females and longer for service officers and soldiers who serve in special combat or professional positions. Those who become professional military serve through their mid-forties. After being released from military service, veterans often maintain contacts with the military, occasionally through reservist service and mostly through associations with serving or other military personnel.60 Consequently, joint military service has become an important source of social and professional networking in Israeli society. That is particularly the case for professional officers who become civilian citizens in their forties or early fifties and often join

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Jewish Life in Israel since the first Alyia: The state of Israel: The first decade), ed. Moshe Lissak (Jerusalem: The Bialik Institute, 2009), 257. Lifshitz, Kalkalat bitachon, 374–6. In the mid-1990s, about 30 percent of males from the ages of 22 to 51 were doing reserve service. By the 2010s, the share of active reserve soldiers out of the relevant population segment went down to less than 5 percent but, as detailed later, the share of reserve soldiers in sectors involved in CMI (e.g., the high-tech industry) remained higher. Lifshitz, Kalkalat bitachon, 251; Amir Bohbot, “Margishim fraierim? Rak shlish mema’arach hamiluim mityatsev” (Do you feel like a sucker? Only one-third of the reserve soldiers serve), Walla News, August 8, 2012, https://news.walla.co.il/item/ 2556790.

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private- or public-sector organizations as mid- or high-level executives. In such capacities, they are in a position to introduce military-related know-how, values, and cooperation opportunities to the civilian organizations they work for.61 As elaborated later, these veterans and reserve soldiers constitute an important link between the IDF and the civilian scientific and industrial sectors in Israel.

Civil–Military Scientific and Industrial Relations Among other areas of activity, close relations between the Israeli civil and military sectors have taken place within the scientific research and the high-tech sectors. The IDF and the MoD have relied on and collaborated with Israeli universities and scientists since independence. For example, in 1948 (a few months before the state of Israel was formed), the future state’s underground leadership laid the foundations of the future military science service, which, in the early 1950s, became the MoD’s R&D unit and later Rafael. This unit was established by a group of professors and students at the Hebrew University. After independence, leading scientists were nominated by the prime minister and minister of defense as scientific advisors and they consulted frequently and closely with the MoD and the IDF.62 As such, they assisted the defense establishment in identifying new scientific fields and state-of-the-art technologies with military potential, served in various defense-related scientific committees, took part in various military R&D projects, and were involved in other military-related scientific activity that aimed to maintain the IDF’s qualitative edge in the region. Connections between Israel’s academic establishment and the defense system have remained strong ever since. Certainly, that did not include the entire academia; many scientists and scholars avoid connection with the defense (and, more generally, the political) establishment out of professional considerations, ideological principles, or a lack of interest. But others maintain different forms of connections including serving as scientific consultants, participating in defense-related projects financed by MoD grants, serving as members of the MoD’s scientific committees, 61

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Alex Mintz, “Military-Industrial Linkages in Israel,” Armed Forces & Society 12, no. 1 (1985): 19–23; Udi Lebel and Henriette Dahan-Caleb, “Marshalling a Second Career: Generals in the Israeli School System,” Journal of Educational Administration and History 36, no. 2 (2004): 145–57. Uzi Eilam, Keshet Eilam: Hatechnologia hamitkademet (Eilam’s arc: How Israel became a military technology powerhouse) (Tel Aviv: Yedioth Ahronoth, 2011), 151; Uriel Bachrach, Beko’ach hayeda: prakim betoldot heil hamada (The power of knowledge: History of HEMED the science corps of Israel defense forces) (Ben Shemen: Modan, 2015), 39–78.

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and participating in defense-related R&D activities as part of their military reserves service. Allowing and advancing collaboration between the scientific and military sectors are various platforms and mechanisms that have been established to this end over the years. One such framework is the atuda academit (Academic Reserve), a military recruitment track first formed in the 1950s, which allows some 1,000 distinguished high-school graduates annually to complete their academic studies before joining the army (unlike most high-school graduates in Israel who start compulsory military service immediately after high school). After joining the military, they occupy positions closely related to their academic training.63 Another mechanism is academic units that are supposed to forecast military-related future technological trends, for example, the Technology and Social Forecast Unit at Tel Aviv University that began operating in the early 1970s with the financial support of the MoD’s R&D division. Aiming to follow recent scientific developments and predict future technological developments with national defense implications,64 this center still operates and its current defense-related research programs demonstrate how it introduces and assimilates 4IR technologies into national defense thinking. Included here are projects such as terror threats related to new technologies, new nanobiotechnology-related materials, acoustic concealment, and advanced composite materials.65 These academia–defense establishment connections notwithstanding, the most important force behind Israel’s CMI – and later MCF – is the relationship between the defense establishment and the local high-tech industry. Until the mid-1980s, the military-industrial sector was Israel’s largest and in many aspects leading industrial branch.66 As already detailed, this affected many civilian companies – private, public, and state-owned alike – which subsequently became suppliers and subcontractors of the Israeli defense industry. However, the civil–military-industrial integration in Israel has not been solely related to the defense industry’s supply chain; the local defense industry has also advanced civilian production through conversion and spin-off. IAI, for example,

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Gil Baram and Isaac Ben-Israel, “The Academic Reserve: Israel’s Fast Track to HighTech Success,” Israel Studies Review 34, no. 2 (2019): 75–91. Ibid., 163. Tel Aviv University, The Social and Technological Forecasting Unit, https://education .tau.ac.il/ictaf/odot. Moshe Lissak, “The Permeable Boundaries between Civilians and Soldiers in Israeli Society,” in The Military in the Service of Society and Democracy: The Challenges of the Dual-Role Military, ed. Daniella Ashkenazy (Westport, CT: Greenwood Press, 1994), 14.

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has provided maintenance and repair services for civilian aircraft and aircraft engines since the 1950s. In addition, beginning in the early 1960s, IAI designed and manufactured business jets, utilizing the know-how it had acquired in the development of military products. Similarly, in the early 1980s, Rafael established its Galram subsidiary intended to transfer Rafael’s military-related know-how to civilian products.67 Later, other local arms industries established civilian subsidiaries or else invested in new start-up companies that utilized their know-how to develop civilian products. For example, Given Imaging Ltd. (now known as Medtronic), created by Rafael, and the civilian firm Elron Electronic Industries cooperated to use Rafael technology to develop capsule endoscopy systems.68 Another type of civil–military-industrial integration was the transformation of firms that had begun their life as defense companies, that is, firms that initially focused on defense products and subsequently shifted to the manufacture of mainly civilian products. Interestingly enough, in some cases, defense systems remained an important element of those companies.69 Yet, Israel’s major defense industries have never managed to turn civilian products into a major field of activity and what initiatives there were remained relatively marginal.70 A more effective means of technology spin-off – and a much more tumultuous frontline of industrial CMI – has taken place within Israel’s high-tech sector, which has been closely related to the local defense establishment since its early days. Many of Israel’s first major high-tech companies – mostly focused on electronics and IT – were founded by veterans of military-technological units. For instance, Uzia Galil, founder of Elron Electronic Industries and other leading high-tech companies, was commander of the electronic systems R&D department in the Israeli Navy. Zohar and Yehuda Zisapel, founders of the software RAD-Bynet group of companies, served in the operational-technological unit of the intelligence forces (the former headed this unit). Efi Arazi, founder of Scitex – the flagship of the Israeli high-tech industry at the time – studied at the Israeli Air Force’s (IAF) tech school and later served in the IAF where he designed path-breaking radars. These companies 67 68

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Bonen and Arkin, Rafael, 144–5. Rafael Development Corporation, “Given Imaging Ltd.,” https://web.archive.org/web/ 20140802064832/http://www.rdc.co.il/default.asp?catid=%7BCAB37C31-E9B2-4549ABC6-64327B120209%7D. Lifshitz, Kalkalat bitachon, 377. Ibid., 377, 385–6; Dan Galai and Yossi Shahar, Ha’avarat Technologiot veizruach proiektim bata’asiya habithonit beIsrael (Technology transfers and spin-off projects in Israel’s defense industry) (Jerusalem: The Israel Democracy Institute, 1993), 27–43.

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and others kept absorbing IDF veterans in the years to come and became the backbone of the country’s high-tech sector. They established subsidiaries, invested in start-ups, and their employees and executives became leading high-tech entrepreneurs. Later on, they were joined by other leading high-tech companies, such as Check Point Software Technologies and Gilat Satellites, which started in a similar way and had a similar impact on the local high-tech sector.71 Civil–military relations affected the development of the high-tech sector through more than just the military background of the high-tech entrepreneurs and employees. The newly created high-tech sector got a significant boost in the 1970s with the formation of the Israeli Industry Center for R&D (MATIMOP, transformed in 2016 into the Israel Innovation Authority). A governmental organization under the Ministry of Commerce and Industry (later called the Ministry of Economy and Industry), this body aimed to support industrial R&D in Israel by exposing local high-tech firms to business opportunities and by directly supporting financially their R&D activity. MATIMOP’s founder was Brigadier-General (retired) Yitzhak Yaakov, the former commander of the IDF’s division for weaponry and military equipment development. As he later described, key players in the establishment of this important organization were industrial entrepreneurs with whom he had worked in his former capacity at the IDF as well as the then president of Israel Ephraim Katzir, who had served earlier as chief scientist of the MoD.72 For all these reasons, Israel’s high-tech sector has made rapid progress while serving as a gateway for state-of-the-art technologies, many of which are military-related. As of the early 2020s, Israel’s vibrant and innovative high-tech sector included some 5,000 start-up businesses with 600 new companies being established yearly – the largest number in the world relative to the size of a country’s population.73 As such, this sector enjoys relatively large investments and excellent support conditions.

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For the contribution of IDF technological units’ veterans to the development of Israel’s high-tech sector, see Dan Breznitz, “The Military as a Public Space: The Role of the IDF in the Israeli Software Innovation System,” MIT Working Paper IPC-02-004 (April, 2002); Benson Honig et al., “Social Capital and the Linkages of High-Tech Companies to the Military Defense System: Is There a Signaling Mechanism?” Small Business Economics 27, no. 4–5 (2006): 420–1. Itzhak Yaakov, Adon klum baribua (The memoires of Mr. Zero Squared) (Tel Aviv: Yedioth Ahronoth, 2011), 274–5. Other sources claim that, as of 2018, over 8,300 high-tech companies were active in Israel, the great majority of them start-up companies. IVC Research Center, “Israeli High-Tech Companies That Ceased Operations,” December, 2018, www.ivc-online .com/Portals/0/RC/Media/Ceased%20Operation%20-%20report%20FINAL% 20241218.pdf?timestamp=1545809432251.

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Israel’s R&D investments in 2017 accounted for 4.2 per cent of its GDP – the second largest in the world74 – and it enjoyed close collaboration with the global economy and high-tech scene. In 2016, 87 per cent of the revenue of Israel’s elite technology companies was from exports. The following year, foreign investments constituted 77 per cent of the total investments in the high-tech sector. Over the last several decades, over 350 multinational corporations, including Intel, Apple, Google, Microsoft, Facebook, IBM, Toshiba, Huawei, Samsung, Ford Motors, General Motors (GM), HP, and Phillips, have established R&D canters in Israel.75 This international connection expands the availability of 4IR technologies to the military by keeping Israeli high-tech companies close to recent technological developments. In addition, collaborating with Israeli civilian companies, rather than directly with the defense sector, is politically easier for many European companies, particularly when dual-use or other military-related technologies are involved.76 Interestingly enough, contrary to such cases or to certain high-tech companies in Western countries that have political or ideological reservations about defense projects (see Chapter 3), Israeli high-tech companies face few obstacles of that sort collaborating with the defense establishment. Thanks to the IDF’s strong professional image, engaging in military-related projects or becoming an MoD supplier can often promote a company’s reputation. A 2006 study found a positive correlation between the selling of technologies to the IDF and a start-up’s ability to obtain investments.77 As of 2018, there were approximately 700 such Israeli companies.78 The growing involvement of Israel’s high-tech companies in 4IR technologies enhances significantly the potential for MCF. As of 2018, at least 230 start-ups in Israel were focused on core 4IR-related technologies including AI, robotics, IoT, big data, energy, operation optimization, autonomous vehicles and drones, and nanotech. The field that

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UNESCO Institute for Statistics, “Startup Ranking,” http://uis.unesco.org/apps/ visualisations/research-and-development-spending; Israel Innovation Authority, https:// innovationisrael.org.il/en. Techtime, “Economy of Knowledge: 362 R&D Centers of Multinational Companies,” December 26, 2019, https://techtime.news/2019/12/26/vc-8; John Ben-Zaken, “Mehkar IVC: 77% mehahashkaot bahigh-tech haIsraeli – zarot” (IVC research: About 77% of the investments in the Israeli high-tech are foreign), Anashim Ve’Machshevim, November 26, 2018, www.pc.co.il/news/279233; Israel Innovation Authority, “Innovation in Israel,” 2020, https://innovationisrael.org.il/en/contentpage/innovation-israel. Tzila Hershko, “Haroman mithadesh?” (Is the love affair starting over?), Ma’arachot 456 (2014): 37. 78 Honig et al., “Social Capital,” 429. Paglin, Merutz hachidush, 35.

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attracts the most interest is AI.79 To be sure, breakthroughs in these areas have been the result of considerable business incentives but also of government and academic initiatives and investments. In the late 2000s and early 2010s, Israel made a concerted effort to become a leading global player in the area of cyber security and to this end, it built on existing capabilities and demands in this field, established several academic research programs and centers, and promoted collaborations between academia and industry. A similar process appears to be taking place in the fields of quantum computing and AI. In 2014, the Technion – Israel’s leading academic institute of technology – and the Council for Higher Education passed a resolution declaring quantum computing to be a national priority.80 The resolution was echoed by a call from the Israeli High-Tech Association, which identified quantum computing, together with digital healthcare and robotics, as a field of considerable potential that should be further developed through governmental investments.81 In May 2018, Prime Minister Benjamin Netanyahu announced that Israel was about to develop the quantum field as part of a national science and technology program for national security.82 Subsequently, as of 2018, about 800 researchers have engaged in quantum computing and related research centers have been established in five out of Israel’s eight research universities.83 Concurrently, and perhaps as a competing strategy, the government has also encouraged the advancement of AI R&D on the national level in order to turn it into one of the future pillars of Israel’s high-tech industry and national defense. Thus, following a 2018 discussion led by the prime minister, an ad hoc committee headed by former heads of the MoD’s Directorate of Defense Research and Development (DDR&D) and the Israel National Cyber Bureau consolidated a proposed national plan to strengthen Israel’s national security, focusing on the development of 79

80

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Gil Press, “230 Industry 4.0 Startups in Israel Playing a Leading Role in Data-Driven Digitized Production,” Forbes, August 5, 2019; Agmon David Porat, “Infographica: mapat hevrot hastartup betchum ta’asiya 4.0” (Infographic: Map of startup companies in the area of industry 4.0), unpublished database, 2018. Tal Shahaf, “Israeli Gov’t Allocates NIS 300m for Quantum Computing,” Globes, July 2, 2008, https://en.globes.co.il/en/article-government-allocates-nis-300m-for-quantumcomputing-1001244244. Nati Yefet, “Hevrot high-tech alulot la’avor lehul shelo meshikulim technologiyim” (High-tech companies may move out of the country for non-technological reasons), Globes, May 12, 2018, www.globes.co.il/news/article.aspx?did=1001235492. Shahaf, “Israeli Gov’t Allocates.” Ibid.; Avi Blizovsky, “Hatochnit haleumit lehishuv quanti hiunit lekach sheIsrael tishaer bahazit” (The national program for quantum computing is crucial for Israel’s position at the front), Hayadan, June 5, 2018, www.hayadan.org.il/nadav-katz-on-quantumcomputing-0606183.

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advanced AI infrastructure and capabilities. One of its conclusions was that Israel should make a concentrated effort to place itself as one of the world’s five leading countries in the AI field.84 Three months after the submission of this report, another expert committee – this time including leading experts from academia, the MoD, and some civilian government bodies – issued a comprehensive report that further emphasized the importance that AI should occupy in Israel’s academia, industry, and national infrastructure. While having no special focus on national defense and military issues, it touched upon national security in various ways, addressing, for example, the national infrastructure’s security and export control of AI products.85

MCF Implementation Israel’s circumstances provide good conditions for MCF. Not only are the demands for and the supply of advanced civilian technologies for military use equally high but the state’s economic and social attributes have helped to lower the almost unavoidable barriers between these sectors and, instead, advance their interaction. However, even under such conditions, MCF faces obstacles. As mentioned earlier, no official document has so far formulated Israel’s concepts, intentions, and objectives concerning MCF. Rather, they must be inferred through initiatives and semi-official announcements and analyses. A 2017 article by Brigadier-General Nir Halamish, the head of the R&D division of the DDR&D (MAFA’T), is a striking case. Analyzing the utilization of advanced civilian technologies in 84

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Isaac Ben-Israel et al., Hameizam Haleumi lema’arachot nevonot betuchot leha’atzamat habitachon haleumi vehahosen hamadai’-technologi: Estrategia leumit leisrael, doch meyuhad lerosh hamemshala (The national initiative for intelligent-secure systems for the advancement of national security and the S&T strength: A national strategy for Israel, a special report for the prime minister), Yuval Ne’eman Workshop for Science, Technology and Security, Tel Aviv University (September, 2020). It is noteworthy that the report has not been published but was mentioned on various occasions. For example, Chagai Tzuriel, “Mega-trends, Trends, and their Convergences,” unpublished presentation (Tel Aviv, April 19, 2021); Israel Innovation Authority, Vaadat bina mlachutit vemada hantunim (Artificial Intelligence and Data Science Committee), December 6, 2020, Note 4, https:// web.archive.org/web/20220328095048/https://innovationisrael.org.il/sites/default/files/ %D7%93%D7%95%D7%97%20%D7%A1%D7%95%D7%A4%D7%99%20%D7% A1%D7%99%D7%9B%D7%95%D7%9D%20%D7%95%D7%95%D7%A2%D7% 93%D7%AA%20%D7%AA%D7%9C%D7%9D%20%D7%9C%D7%AA%D7%9B% D7%A0%D7%99%D7%AA%20%D7%9E%D7%95%D7%A4%20%D7%9C%D7% 90%D7%95%D7%9E%D7%99%D7%AA%20%D7%91%D7%91%D7%99%D7% A0%D7%94%20%D7%9E%D7%9C%D7%90%D7%9B%D7%95%D7%AA%D7% 99%D7%AA%20-.pdf. Vaadat bina mlachutit.

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military R&D, he argued that “enduring and continuous learning about [technological] progress in the civilian world allows … to save efforts on reinventing the wheel and … utilize and adapt civilian [technological] assets in a minimum time and financial investment to meet unique military challenges.” He added that the defense establishment has realized that “civilian R&D offers opportunities for the military R&D to make a better use of the existing resources” and, more so, the civilian sector is better equipped nowadays than the defense establishment to make technological progress in areas of focus.86 This allows the defense establishment to shift gear and engage with specific questions and challenges of MCF implementation. One major question, however, is what specific R&D efforts can be aided by relying on existing civilian technologies. According to Halamish, a major consideration in this respect is whether the civilian sector can make significant R&D investments and technological breakthroughs in the area of concern. Obviously, making such an evaluation is challenging and should take into account market demand and regulations, among other things. Taking drone R&D as an example, he explained that the defense system decided to avoid R&D efforts in the area of flight obstacles, assuming that the civilian regulatory bodies would force civilian drone producers to meet high flight safety standards and thus push them to make the considerable R&D investments in this field. On the other hand, a similar assessment led the MoD to engage in significant R&D efforts in the areas of energy consumption and flight over the horizon. Concerning the former, the defense establishment assumed that civilian drones producers would not make substantial R&D efforts to extend drones’ flight range since the civilian market’s needs in this aspect are considerably lower than those of the military. Hence, whatever progress it makes, it would not meet the military’s requirements. Concerning the latter, the assessment of low civilian investment in this area relied on existing regulations at the time, which restricted flight over the horizon, thus discouraging civilian R&D investments in this field. Consequently, the defense system focused R&D efforts on those areas but utilized advanced civilian technologies as part of the process.87 A related question concerns the utilization of COTS products as components assimilated into arms systems or even as complete products for military use. Acknowledging that COTS products often bear lower 86

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Nir Halamish, “Lirkov al hagal: etgarei haMOP habithoni beshnot tarash ‘Gidon’” (To ride on the wave: The defense R&D challenges during ‘Gidon’ multiannual plan), Ma’arachot 472 (July, 2017): 36. Ibid.

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R&D and production costs than their military equivalents, shorter R&D time spans, and higher quality and reliability due to their large volume of production, the defense establishment is also aware of the possible risks, indirect costs, and additional challenges the utilization of COTS products can involve. They might be more vulnerable to cyberattacks, their interface with military devices or systems can face problems, and their adaptation to military use can be costly and impact their performance, among other things. Accordingly, the MoD’s decision to use civilian items takes into consideration a long list of factors: how vulnerable the item is to external penetration (e.g., cyberattack) and how confidential the military activity it is supposed to serve is or the equipment in which it is installed; what adaptation it needs to go through (for operational reasons, to decrease dependency on external suppliers, or to increase information security) and how costly it is; to what extent the assimilation process impacts the item’s performances; whether it is available already and if not when it is expected to be commercialized; how long the item’s expected life cycle is and if it can be upgraded; and to what extent it requires external service and maintenance. The dilemma of whether to use such technologies is greater when the civilian item in question is subject to export control regulations (as in the case of imported COTS products).88 To be sure, these dilemmas pertain to both hardware and software items as the defense establishment makes increasing use of open code software, software modules, and the like.89 In that case, security risks are a major consideration and it is only reasonable to assume that such products are mostly in use in systems that do not take part in highly classified activities, that is, training simulators or tactical COTS products modified for military use. According to Brigadier-General Guy Paglin, a former head of the MoD’s Merkava and Armor Vehicles Directorate, these criteria make COTS products attractive in the case of single parts or components that are installed in complex subsystems or systems. The development and production of arms systems and system-of-systems, on the other hand, will remain in the hands of the traditional defense industry for the foreseeable future. MCF Channels Despite the existing limitations, the share of advanced civilian technologies and COTS products in arms systems and other military equipment

88 89

Paglin, “New/Old Trends,” 117–19. Interview with Brigadier-General Guy Paglin, October 11, 2020.

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grows constantly,90 and their tracing and assimilation in weapons and military equipment – or, in other words, MCF – require ever more efficient channels and means. The leading body behind Israel’s MCF is the DDR&D. Subordinate to the MoD, the DDR&D serves as a staff body for both the MoD and the IDF and it is responsible for drawing up the defense establishment’s R&D policy. In practice, DDR&D serves as the link between the planning bodies and the R&D’s management in the MoD and the IDF and between the IDF, defense industries, and other companies and non-profit entities that engage in defense-related R&D. As part of its work, the DDR&D traces civilian companies and technologies that can take part in military R&D projects and acquires development projects for the IDF from various types of entities including academia, high-tech companies, and even collaboration with other countries and foreign firms. Yet, tracing technologies and solutions under conditions of increasing decentralization of R&D and innovation leaves the DDR&D with a twofold challenge: how to trace state-of-the-art technologies and solutions that it is not necessarily aware of in a highly dynamic global market that includes thousands of players, and how to search openly for new solutions without exposing the IDF’s weaknesses and operational plans. Presuming a reducing relevance of traditional means such as calls for proposals, since the early 2010s, the DDR&D has started to develop new means. Similar to other countries that are included in this research, one of the earliest ones has been technological competitions that the DDR&D holds in various areas of interest. The competitions, known as the “MAFA’T Challenge,” set specific yet generic technological challenges that companies worldwide are invited to address through advanced technological means. For example, accurately classifying whether a radar signal segment represents a human or an animal, or automatically exploiting fine-grained information from aerial imagery data. The competition has attracted entries from hundreds of technology firms and, apart from a financial prize, it has also provided the winners (and to some extent all the competitors) with exposure, prestige, and conditions to test and demonstrate these companies’ solutions and prototypes. This latter benefit is particularly important for small startup companies that do not always have the capacity to undertake such tests and demonstrations.91 90 91

Paglin, Merutz hachidush, 10–11. Israel Ministry of Defense, Directorate of Defense Research & Development (DDR&D), “Mafa’t Challenge,” https://mafatchallenge.mod.gov.il; interview with Peri Muttath, an innovation spotter at DDR&D, October 27, 2020.

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Another important tool entails collaboration with start-up incubators, which assist the DDR&D in locating start-up companies that can potentially develop the technology it is looking for and support their activity. Similarly, it collaborates with various venture capital (VC) funds, which hold databases on local and foreign start-up and other high-tech companies, civilian R&D projects under process, and the like.92 The cooperation with trusted accelerators and VC funds allows the DDR&D to trace civilian suppliers without exposing publicly the IDF’s specific needs. Concurrently, it reflects the DDR&D’s acknowledgment that civilian bodies such as accelerators and VC funds are better equipped to identify and reach out to civilian technology providers.93 Finally, the DDR&D operates a scientific research organization – the division for technological research and infrastructure – that works closely with academic institutes to assess the military potential of new S&T developments. Using traditional practices such as calls for proposals, research grants, and contacting specific experts, it is able to assemble academic experts in different disciplines and from different institutes to work on various multi-year research projects.94 The central role of DDR&D in promoting MCF notwithstanding, it is not alone. Another body that serves as a spin-on channel is the Israel Innovation Authority. A reincarnation of the previously mentioned MATIMOP, this is a governmental agency responsible for planning and executing the country’s innovation policy. As part of its mission, the authority promotes cutting-edge technology projects, supports entrepreneurs and start-up companies in developing their innovative technological concepts, promotes the technological innovation of mature companies, and supports academic groups seeking to transfer their ideas to the market. It also supports joint projects of Israeli and foreign companies. The authority’s main tools are programs that provide financial support, access to government-owned trial sites and facilities, and the opportunity to participate in national R&D programs.95 Focusing on civilian activities, this body nevertheless constitutes an important channel for technology spin-on. Using its incentive programs for innovation with government entities, it supports R&D in defense92 93 94

95

Interview with Peri Muttath. See also IHLS Innofense, https://accelerator.i-hls.com/ innofense. Interview with Peri Muttath. Israel Ministry of Defense, “Technological Research and Infrastructure Unit,”2020, www.mod.gov.il/Defense-and-Security/Pages/science_research.aspx; interview with Peri Muttath. Israel Innovation Authority, Endless Possibilities to Promote Innovation (Jerusalem: 2018), https://innovationisrael.org.il/en/sites/default/files/Booklet_2018.pdf.

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related areas. A typical case is a program encouraging R&D in the field of space technologies, operated jointly with the Israel Space Agency.96 As many advanced capabilities in the field of space can have a military use, the military relevance of the program is self-evident. Likewise, the authority runs several programs in the area of cyber, operated respectively with the National Cyber Directorate at the Prime Minister Office and the MoD, supporting the development of innovative solutions for the defense and commercial markets. In addition, the Innovation Authority has programs to transform academic knowledge into applied knowledge that will be implemented in industry and to develop generic groundbreaking knowledge through the collaboration of researchers from academia and industry. This framework provides substantial support for programs associated with 4IR and military-related technologies. Most relevant in this respect, however, is the Meimad program, which focuses on R&D in dual-use technologies. Operating since 2012 as a joint venture between the Innovation Authority, the Ministry of Finance, and the DDR&D, this program supports the development of innovative solutions for the defense and commercial markets and its designated “clients” are small and medium-sized Israeli enterprises (rather than established defense industries), university research institutes and research centers, and entrepreneurs that engage with R&D of dual-use technologies and products.97 Finally, of utmost importance as well are the deep personal connections of high-tech companies’ workforce found at all levels with the IDF. Being a unique feature of Israel’s high-tech sector and CMI, veterans of the IDF’s technology and combat units comprise around 60 per cent of Israel’s high-tech entrepreneurs, top executives, and employees and constitute a crucial link between high-tech companies and R&D bodies within the defense establishment.98 This relationship is particularly true for veterans of the IDF’s technology units, many of whom first acquired the basis of their professional expertise during compulsory military service. After their skills are identified in a pre-recruitment screening process, such soldiers undergo intensive training programs, which occasionally include academic studies, and at a relatively young age, they become involved in large-scale, technologically advanced, and complex

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Ibid., 20–2. Israel Innovation Authority, “Leveraging R&D for Dual Use Technologies – MEIMAD,”2021, https://innovationisrael.org.il/en/program/leveraging-rd-dual-usetechnologies-meimad. Ori Swed and John S. Butler, “Military Capital in the Israeli Hi-tech Industry,” Armed Forces & Society 41, no. 1 (2015): 127.

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development projects.99 Their military service in these units, as well as their personal connections with their contemporary and former soldiers, peers, and commanders, provide them with ideas for new technologies and products as well as a clear understanding of the IDF’s technological needs. It also gives them multiple opportunities to present their products to the IDF and the defense establishment while concurrently making them natural candidates when the defense establishment looks for certain technologies or products, or when it searches for R&D contractors or partners. Thus, these veterans serve as an important link in the symbiotic relationship between spin-off and spin-on. They often move into the civilian sector as entrepreneurs, executives, or employees, developing new products based on their military experience. Some of these products then find their way into the IDF and other defense organizations after being adapted to military use. This spin-on process occurs both from the top down and the bottom up: sometimes it is the IDF that approaches these companies and asks them to develop certain technological solutions; in other cases, it is the companies that suggest new products to the defense establishment. Personal connections also constitute a long-term spin-on channel, thanks to the experts’ reserve service, through which they continue to participate in military R&D projects while preserving and expanding their personal networks. Furthermore, the reserve service often includes teaching in the IDF’s professional courses and, given their strong loyalty to their units, they can share valuable professional know-how by writing reference books and training materials. Indeed, some of these experts admitted they would never reveal such professional secrets in civilian circles. In addition, given their personal acquaintances, high-tech leaders are occasionally asked to advise or serve as mentors in the IDF’s technology projects. For instance, as part of a start-up accelerator-like project in the IAF in 2018, the teams received professional guidance from hightech industry professionals.100

MCF’s Challenges and Tools Clearly, the willingness to include civilian organizations and technologies in Israel’s defense project is strong and connections between the civilian and military sectors are tight. That does not mean, however, that MCF implementation is free of obstacles. Even under Israel’s convenient MCF 99 100

Ibid., 133; Breznitz, “The Military,” 16–22. Breznitz, “The Military,” 28–34; Nophar Blit, “IAF Startup Accelerator,” Israeli Air Force, November 1, 2018, www.iaf.org.il/4478-50651-en/IAF.aspx.

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conditions, the inclusion of civilian companies in defense projects still requires to secure classified information, particularly when sensitive technologies are involved. It also challenges the exclusive position of traditional defense industries, which may take measures to block civilian companies’ participation in defense projects. It may also require the defense establishment to adjust itself to a new business environment. From the civilian companies’ perspective, the high costs that come with participating in defense projects are a major hindrance. Among other things, companies are required to obtain the requisite security classification when supplying classified products to the MoD. Acquiring such a classification requires the company to take various costly steps such as installing security measures and implementing special procedures, all of which can exceed the means of small firms. In addition, just as becoming an MoD supplier can increase the likelihood of start-up companies attracting investments, in other cases it can have a negative effect. Investors may assume that being an MoD supplier will negatively impact the start-up’s sales to the civilian markets abroad. In such cases, start-ups might be wary about such a relationship from the outset.101 Also, companies’ ability to sell products or know-how developed with MoD’s support and funds is occasionally restricted. According to the MoD’s regulations, any know-how developed or obtained with its support “will remain under the sole ownership of the ministry [of defense] and the supplier will not be allowed to use it for any other purpose than this order.” Similarly, the supplier is not allowed to produce or supply the product or any of its parts to anyone but the MoD unless the ministry approves it specifically.102 Such conditions can reduce significantly companies’ prospects of making profits from the product and, consequently, discourage them from taking part in MoDfinanced R&D projects. Replying to a question about whether his company was involved in an R&D project for the MoD, an executive at an Israeli high-tech firm that developed 4IR-related vision technologies said, “No way. That would force the company to get MoD’s approval for every sale.”103 Finally, Israeli civilian companies face many of the challenges that civilian firms all over the world are experiencing when engaging in military projects, such as very long selling cycles, rigid and

101 102

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Paglin, Merutz hachidush, 70–7. Israel Ministry of Defense, “Nispach 93: tna’im klaliyim lehazmanat misrad habitachon” (Annex 93: General terms of the Ministry of Defense’s order), Item 4. Ministry’s Knowhow (a), 9, www.online.mod.gov.il/Online2016/Documents/General/ Nispahim/nisB09301.pdf. Interview with a high-tech company’s executive, Tel Aviv, December 7, 2018.

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complex technological demands by the buyer, and the need to develop special infrastructures and obtain special licenses, among other things. As a response, since the 2010s, the MoD has developed various tools to facilitate the participation of civilian companies in defense projects. Thus, in 2017, the DDR&D started simplifying the bureaucratic process of granting companies an MoD supplier license, ultimately reducing the time span of this bureaucratic process from approximately one year to fifty business days. In addition, it has simplified the process of a technological concept’s approval, relaxed earlier demands for IP ownership by the MoD, and developed new contracting forms between civilian firms and the MoD.104 Also, in certain cases, the MoD allows companies to avoid some of the financial and reputational costs that the status of “MoD supplier” can bring by allowing them to supply their products indirectly through a registered MoD supplier.105 Under the condition that the foreign partners do not receive any access to classified information, the MoD also permits start-ups and high-tech companies that are only partially owned by Israelis to participate in its projects.106 At another dimension, the MoD has modified the pattern of R&D budget allocation in order to encourage participation of technological players other than the traditional defense industry firms; rather than allocating an entire project to one supplier, it now breaks it down into multiple segments, each one subject to a separate bid.107 Therefore, the MoD allows the participation in defense R&D of small start-ups, which cannot undertake large-scale projects. Concurrently, it forces the traditional defense industries to become more innovative. Facing typical hindrances of large size and organizational stagnation, since the early twenty-first century, these companies have also begun to integrate stateof-the-art civilian technologies in their systems by both contracting civilian academic institutes and firms (which often hire, or have even been initiated by, defense industry veterans) and setting up start-up firms of their own.108 But perhaps the most important tool to overcome MCF hindrances in Israel, as well as a striking indication of MCF’s progress, is the refocus of

104 105 106

107 108

Interview with Brigadier-General Guy Paglin; interview with Peri Muttath. Paglin, Merutz hachidush, 70. Israel Ministry of Defense, “Tofes hatzhara: Hevra ba’alat shutafim zarim” (Declaration form: A company with foreign partners), 2020, www.online.mod.gov.il/Online2016/ documents/general/rishum_sapak/hazhara.pdf. Halamish, “Lirkov al hagal,” 36. For example, “The Next Generation of Unmanned Systems,” Israel Defense, November 25, 2011, www.israeldefense.co.il/en/content/next-generation-unmanned-systems; “Government Industries Are Not Investing.”

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the “innovation spotter” position at DDR&D in the late 2010s from tracing innovative civilian technologies for defense R&D projects to actually facilitating such involvement. By the late 2010s, it had become less necessary to convince defense bodies of the importance of CMI and the mechanisms for spotting promising civilian technologies were already working well. Rather, the main challenge became the removal of operational, bureaucratic, and legal obstacles that hindered such collaborations. This included, but was not limited to, providing adequate laboratories, test fields, and other facilities to different projects; attaining the required approvals and licenses for these companies; coordinating collaboration between these firms and different agencies; and taking legal and other measures to protect classified information that civilian firms were exposed to.109 Assigning a certain DDR&D unit to undertake such tasks reflects the growing volume of MCF in defense systems and expanding it further in order to reduce costs. Strategic Implications of Israel’s MCF: Initial Thoughts 4IR technologies potentially provide the military with longer, more accurate, and more lethal strike capabilities along all five dimensions of warfare (ground, air, sea, space, and cyber), on various fronts (the frontline, the home front, the enemy’s rear, remote enemies, etc.), and by various means. For instance, AI capabilities combined with cybersecurity allow defense forces to analyze large-scale communications traffic, identify suspicious activities, and trace them closely. The combination of remote sensing, location tracing, and precision-guided munitions, all of which require 4IR technologies, permits the armed forces to acquire the precise location of targets and hit enemies operating in populated areas with only limited collateral damage. Advanced cyber capabilities combined with reconnaissance abilities and precision-guided munitions allow countries to penetrate the enemy’s communication and information systems, obtain information about its force deployments, arms production facilities, operational plans, and the like, and launch preemptive attacks.110 However, the availability of such military means may not only permit countries to carry out such military operations but may also encourage 109 110

Interview with Peri Muttath. These are just a few examples of the impact of 4IR technologies on military affairs. For a broader review, see Peter Layton, “Mobilising Defense in the ‘Fourth Industrial Revolution,’” The Interpreter, March 27, 2019, www.lowyinstitute.org/the-interpreter/ mobilising-defense-fourth-industrial-revolution; Tuang, The Fourth Industrial Revolution’s Impact; Nien et al., “At the Leading Edge.”

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them to use force.111 For countries located in conflict-intensive regions, the validity of this claim seems particularly strong. Accordingly, one might expect that the assimilation of 4IR technologies into the IDF’s capabilities will increase Israel’s willingness to use force, both defensively and offensively. Indeed, during the 2010s, Israel executed hundreds of military operations and attacks, the great majority of which were much smaller than a full-scale campaign. This included over 200 aerial attacks against high-quality and occasionally long-distance targets – mostly in Syria but also apparently in Iraq. The operations involved cyberattacks, border defense actions (including the tracing and destruction of enemy tunnels across the border), and the interception of missiles and rockets aimed at Israel’s home front.112 From an operational viewpoint, some of these actions were responsive in nature – for instance, intercepting missiles and rockets – while others – such as the destruction of weapons transports in Syria – were initiated by Israel. Thus, in attempting to preliminarily assess the broad implications of the IDF’s assimilation of 4IR technologies, it would be fairly safe to argue that these technologies provide the state of Israel with more opportunities to use military force.113 However, the implications for local and regional stability are not straightforward. Recent studies on the strategic effect of emerging technologies show that they may strengthen stability in some ways while undermining it in others.114 One reason for this outcome is that, as with military innovation, strategic stability depends on a broader set of variables than technology alone.115 As Benjamin Fordham put it, “Even if policy choice is, in part, a function of capabilities, capabilities are also a function of policy choice. Decision makers build military (and other) capabilities based on the … international conditions they expect to face.”116 Indeed, following the Arab Spring in the early 2010s and continuing to this day, Israel’s environment has become even more 111

112

113 114 115

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Barry Buzan and Eric Herring, The Arms Dynamic in World Politics (Boulder: Lynne Rienner Publishers, 1998), 201–3; Benjamin O. Fordham, “A Very Sharp Sword: The Influence of Military Capabilities on American Decisions to Use Force,” Journal of Conflict Resolution 48, no. 5 (2004): 632–56. Krishnadev Calamur, “The Battle between Israel and Iran Is Spreading,” The Atlantic, May 10, 2018, www.theatlantic.com/international/archive/2018/05/israel-strikes-iran/ 560111; Carla E. Humud et al., “Iran and Israel: Tension over Syria,” In Focus, Congressional Research Service, June 5, 2019. Chin, “Technology,” 771. Todd S. Sechser et al., “Emerging Technologies and Strategic Stability in Peacetime, Crisis, and War,” Journal of Strategic Studies 42, no. 6 (2019): 732. Ronald F. Lehman, “Future Technology and Strategic Stability,” in Strategic Stability: Contending Interpretations, eds. Elbridge A. Colby and Michael S. Gerson (Carlisle: US Army War College Press, 2013), 147. Fordham, “A Very Sharp Sword,” 636.

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destabilized, thus providing the country with multiple motivations to exercise force.117 Indeed, the occurrence of frequent limited, accurate, and deniable military and cyberattacks can bring about various strategic outcomes in a volatile region such as the Middle East. On the one hand, and in accordance with certain balance-of-power theories, frequent limited incidents of this type help clarify the balance of power, permit countries to signal their red lines and intentions, strengthen deterrence, and allow parties to release tensions.118 For instance, the combination of accurate intelligence, precise-guided munition, and sophisticated command and control systems allows Israel to retaliate Hamas’ rocket launching by hitting unoccupied installations, thus addressing domestic political pressure for retaliation and making clear warnings to the Hamas while keeping escalation checked. Moreover, they may provide Israel with new regional collaborations. Its developing relationship with the Persian Gulf monarchies is such a case. These states are interested in Israel’s emerging technological and military capabilities – many of which are associated with 4IR technologies – and they share Israeli concerns over Iran. Consequently, these states have been willing to compromise on some of their political demands in return for technological and strategic cooperation.119 Thus, before signing a peace accord with them, Israel has already provided these countries with 4IR technologies by allowing (or even encouraging) the direct sales of relevant capabilities by Israeli companies.120 Given that these countries, particularly Saudi Arabia, have significant regional influence, such a dynamic has played an important role in improving Israel’s overall regional position. Taken together, these developments may delay the eruption of the next largescale round of violence. On the other hand, under certain conditions, Israel’s increasing use of force could inflame tensions and create crises that might escalate and spin out of control. A precision military attack

117 118

119

120

Rabinovich and Brun, Israel Facing a New Middle East, 95–102, 111–12; Freilich, Israeli National Security, 49–58. For example, see Alexander L. George, Forceful Persuasion: Coercive Diplomacy as an Alternative to War (Washington, DC: United States Institute of Peace, 1992), 5–7; Thomas C. Schelling, Arms and Influence (New Haven: Yale University Press, 2008), 2–11. Clive Jones and Yoel Guzansky, “Israel’s Relations with the Gulf States: Toward the Emergence of a Tacit Security Regime?” Contemporary Security Policy 38, no. 3 (2017): 398–419. David D. Kirkpatrick and Azam Ahmed, “Hacking a Prince, an Emir and a Journalist to Impress a Client,” New York Times, August 31, 2018, www.nytimes.com/2018/08/31/ world/middleeast/hacking-united-arab-emirates-nso-group.html.

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that misses its target and accidently causes a large number of civilian casualties can be such a case. Conclusions Revolutionary as they are, 4IR technologies have not been the driving force behind Israel’s changing military doctrine. Rather, it was the strategic and socio-political developments in Israel and its surroundings. But once Israel’s leadership assumed that a new military doctrine was needed, 4IR technologies became one of the major shaping forces to the extent that the IDF maintained officially that future R&D would contextualize its mid-term force build-up program.121 At present, and as part of the doctrinal change, emerging technologies are being distributed across all arms, services, and hierarchical levels of the IDF. A major dilemma facing the IDF when it comes to incorporating 4IR technologies concerns their sources of supply. As this chapter has shown, the relationship between Israel’s defense and high-tech sectors is close and technology spin-offs and spin-ons are increasingly intertwined. This in itself stimulates modernization since the basic features of Israel’s society, economy, and civilian–military relations have furnished its academic and high-tech sectors with the capacity and inclination to collaborate with the defense establishment. The structure of the Israeli high-tech sector and MoD regulations even permit local firms to include foreign companies in related projects when necessary. Hence, while becoming an MoD vendor can put some financial and commercial liabilities on companies, few are likely to forfeit the idea of working with and selling to the military. The impact of these technologies on the country’s possibilities and strategic position seems significant, even groundbreaking, in some areas. Nevertheless, the ultimate strategic impact is still unclear. On the one hand, allowing, or even pushing, countries to make more frequent and precise use of force may clarify the actual balance of power, indicate intentions while keeping escalation checked, and make way for new regional collaborations. On the other hand, tensions may be heightened, creating crises that spiral out of control.

121

IDF, Estrategiat Tzahal, Chapter D.

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To say that technological innovation significantly impacts armaments production and the arms industry is no great revelation. The evolution of warfare is inexorably intertwined with military-technical advances, and it is just as true today as it was fifty, 100, or 500 years ago. In addition, for most of history, arms manufacturing was largely rooted in the overall economy, at least up until the Cold War, when the civilian and defenseindustrial sectors began to diverge. Up until quite recently, therefore, the defense and civilian sectors drew from a common pool of technologies and innovations. Now, it appears that the civilian high-technology sector is once again becoming the “well of choice” for militaries when it comes to R&D, technologies, and production processes. The main factor that brings the defense and civilian sectors together again is the 4IR, which is responsible for a new fashion of collaboration between the sectors, that is, MCF. MCF is a particularly twenty-firstcentury phenomenon, quite different from CMI strategies of the twentieth century, which concerned the combining of defense and civilian industrial bases so that common technologies and production capabilities could be used to meet both defense and commercial needs. Instead, it focuses on defense establishments’ efforts to adapt innovative solutions that were initially sourced in the civilian economy for military use while often harnessing, and collaborating with, the civilian bodies to do so. In other words, countries that wish to exploit the 4IR for military gain and advantage are more or less compelled to go down the route of MCF. This is not simply because it makes little economic sense for militaries to duplicate R&D in the 4IR. Rather, it is an acknowledgement that the civilian high-tech sector has already taken a distinct lead in critical technology areas like AI, man–machine-learning, and quantum computing and that the smartest thing militaries can do is to piggyback on these advances. The increasing assimilation of 4IR technologies in the armed forces and MCF go hand in hand. As 4IR technologies become one of the central paths to military modernization, the ability of states to implement MCF will likely factor 208

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more and more in how militaries gain comparative advantages over their rivals. Indeed, the major powers (that is, the United States, Russia, and China), countries that aspire to be great powers or leading regional powers (such as India, Iran, or Turkey), and nations that see technology as a critical force multiplier (such as Israel and Singapore) are increasingly interested in assimilating 4IR technologies into their armed forces. Concurrently, since the early twenty-first century, some of these countries have adopted various measures to promote MCF, which they increasingly regard an essential means to achieve this goal. This is certainly the case for the four nations examined in this book. The United States is driven by its strategic competition with China (and, to a lesser extent, with Russia) to embrace 4IR, particularly AI. According to the 2021 report by the US National Security Council on Artificial Intelligence (NSCAI), “China is a competitor possessing the might, talent, and ambition to challenge America’s technological leadership, military superiority, and its broader position in the world,” adding that “AI is deepening the threat posed by cyber-attacks and disinformation campaigns that Russia, China, and other state and non-state actors are using to infiltrate our society, steal our data, and interfere in our democracy. The limited uses of AI-enabled attacks to date are the tip of the iceberg.”1 The Council goes on to argue that “if China’s firms win these competitions, it will not only disadvantage U.S. commercial firms, it will also create the digital foundation for a geopolitical challenge to the United States and its allies.”2 Highly disturbed by these near apocalyptic visions, it is evident that Washington sees MCF as an essential element in its competition with China and other rivals. The United States possesses an advanced civilian science and technology sector pursuing 4IR breakthroughs as well as a relatively holistic national innovation system embracing government, industry, and academia. For certain, civil–military collaboration on R&D is not a new thing for the US, as its academia and advanced technology firms have been involved in military projects already in the 1950s and 1960s. Therefore, assimilation of 4IR technologies into the military through MCF is more a matter of the country implementing adequate policies rather than revising its military procurement system. As noted in the chapter on the United States, the most important difference between past efforts at CMI and the current phase of MCF is that most contemporary MCF is occurring at the level of basic and applied research, especially in areas where the commercial high-tech sector

1

NSCAI, Final Report, 19.

2

Ibid., 26.

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clearly leads, particularly when it comes to AI, machine-learning, automation, quantum computing, and the like. As a result, the DoD is cooperating closely with commercial high-tech firms at the level of basic and applied research to explore opportunities for innovative technology exploitation. In this regard, the United States has already demonstrated its intention and willingness to rise to the occasion; as the NSCAI noted: “The government has a long history of mobilizing industry and academia and making huge investments when the United States is challenged. Against the backdrop of a declared and committed competitor like China, and given AI’s transformative potential, the United States is confronting such a moment.”3 In fact, dual-use efforts supported by such organizations as the Defense Innovation Unit (DIU) and the Joint Artificial Intelligence Center (JAIC) are showing that the United States is increasingly committed to using MCF as a military-technological innovation initiative. In the case of China, meanwhile, MCF has been raised to the status of national strategy and, similar to the United States, its efforts to advance this policy are closely associated with the state’s broad interests in exploiting the 4IR in order to make China both an advanced technology state and a formidable great power. When it comes to AI and other 4IR technologies, therefore, China is pursuing a comprehensive technology leadership strategy that embraces MCF. As previously noted in the chapter on China, MCF is part of a long-term and sweeping strategic effort by Beijing to position China as a “technological superpower” and China’s leaders are using MCF to position the country “to compete militarily and economically in an emerging technological revolution.”4 Consequently, in 2015, President Xi Jinping made the “aligning of civil and defense technology development” a national priority; during the 2017 Party Congress, Xi further declared that “we will … deepen reform of defense-related science, technology, and industry, achieve greater military–civilian integration, and build integrated national strategies and strategic capabilities.”5 Beijing is particularly determined to make the country a world leader in AI and sees its strategies to lead in AI and these other technologies as mutually reinforcing. Accordingly, it is investing heavily (for example, through its MLP and the “Made in China 2025” initiative) in associate technologies, companies (both domestic and foreign), and human capital in order to realize those ambitions of global superiority.6 China’s New 3 5 6

4 Ibid., 163–4. Levesque, “Military–Civil Fusion.” Quoted in Béraud-Sudreau and Nouwens, “Weighing Giants,” 162. NSCAI, Final Report, 256.

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Generation Artificial Intelligence Development Plan, together with other strategic investments in key technology sectors, are intricately tied to the modernization of the PLA and its eventual mastery of intelligentized warfare. AI in particular is explicitly linked to “national defense construction, security assessment, and control capabilities.”7 Ultimately, the aim is to “inject AI” into nearly every aspect of the PLA table of equipment and inventory of operational systems.8 Similar to the other case studies in this book, India has also recognized both the potential of 4IR technologies for its military modernization and the subsequent importance of MCF for their development and assimilation in the armed forces. Thus, India’s military planners recognize that advanced technologies have become a major factor behind the shape and evolution of conflicts including stand-off precision munitions with satellite control systems, C4ISR systems, cybersecurity and network-centric operations, as well as AI, quantum computing, nanotechnology, directed-energy weapons, and the like.9 Accordingly, India intends to incorporate these technologies into its military strategy and as a first step to develop the means to engage in information warfare, cyber warfare, and to integrate AI and robotics into warfighting systems, among other things. The realization of such plans cannot take place without a close collaboration between India’s private and public industries including private industrial conglomerates such as Tata and L&T as well as SMEs in the country’s rapidly emerging IT sector. As various official, semi-official, and unofficial Indian sources admit, the public defense industry, as well as nondefense state-owned enterprises, lack the technological know-how, innovation capacity, and efficiency that the development of such means requires. In fact, despite India’s decades-long efforts to establish a firsttier defense industry that can supply the Indian armed forces with the entire range of state-of-the-art weapons and military equipment they need, it still depends heavily on arms imports and many of its locally produced weapons still include considerable amounts of imported technologies. As India’s intention to deploy 4IR technology-based weapons has not reduced its military self-sufficiency aspiration, since the 2010s, it has made growing efforts to involve the private industry and civilian S&T 7 8

9

Frank Slijper et al., Don’t Be Evil? A Survey of the Tech Sector’s Stance on Lethal Autonomous Weapons (Utrecht: Pax for Peace, April, 2019), 12. Robert O. Work and Greg Grant, Beating the Americans at Their Own Game: An Offset Strategy with Chinese Characteristics (Washington, DC: Center for a New American Security, 2019), 14. India Ministry of Defence, Joint Doctrine Indian Armed Forces, 10, 49; Indian Army, Land Warfare Doctrine, 11.

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institutions in military R&D – an effort that it first initiated in the early twenty-first century with the general aim of streamlining its inefficient military procurement. Finally, a clear correlation between the quest for 4IR technologies for military use and MCF exists as well in Israel. The emphasis on advanced technology has been an inseparable part of Israel’s strategic thinking since its early years and it has only intensified over the years as the country has faced an ever more complex security and political environment. On the one hand, Israel is confronted by increasingly unconventional and asymmetrical challenges. On the other, the Israeli public expects the government to provide it with a safe environment while being unwilling to accept long wars and the cost associated with the long-term seizure of enemy territory. Against this backdrop, in the early 2000s, Israel revised its military doctrine, providing advanced technological means an even greater role than they had before. Intending to penetrate the enemy’s territory swiftly in order to destroy critical military capabilities and to thwart the enemy’s capability to hit the Israeli home front, the new doctrine emphasizes precise and intense firepower of various types; the ability to swiftly penetrate the enemy’s strongholds to pursue and destroy its forces; and the ability to protect the civilian front including sensitive communication infrastructures and cybernetic space.10 The elements that play a major role in implementing this strategy are the Israeli Air Force, highly trained and equipped special units, highly realtime accurate and efficiently disseminated intelligence information, and all sorts of active defense systems, which make increasing use of 4IR technologies such as robots, multi-sensor autonomous vehicles, nanotechnology and nanomaterials, sensors and sensing technology, the networking of people and things, and AI, among other things.11 At first glance, Israel’s defense industry appears well equipped to develop such technologies. Undergoing a conceptual and structural change since the late 1980s, it has increasingly focused on the development of indigenous, technology-intensive force multipliers to be installed largely on imported platforms. By the end of the twentieth century, therefore, key areas for the Israeli defense industry included drones and UAVs, precision-guided munitions, C4ISR systems, electro-optics systems, systems for cyber warfare, and the like – all of which include 4IR technologies. Still, similar to other defense industry complexes, the Israeli arms industry lacks the S&T capacity to provide the military with 10 11

IDF, Estrategiat Tzahal, Chapters B, E. “Technologia besde hakrav ha’atidi,” 48–53; Halevy, “‘Elionut modi’init,” 26–31; “Hauniversita haivrit tivne”; Technion R&D Foundation Ltd., “IMOD DDR&D.”

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the entire range of 4IR technology-related weapons and equipment that it requires. Aware of this weakness, since the early twenty-first century, Israel’s MoD has accelerated the participation of the already involved high-tech companies (and, in some cases, academia) in defense procurement projects as R&D partners and as suppliers of COTS technologies. While the adoption of MCF is likely to become an inseparable part of any attempt to assimilate 4IR technologies into national defense forces, its implementation will likely be highly challenging. First, militaries and defense establishments have to set clear parameters as to the optimal participation of civilian entities and products in defense projects: whether, how, and in what stages and areas civilian firms and S&T institutions should participate in military R&D processes, whether and what type of COTS products should be assimilated in weapons and military equipment, and the like. In addition, the participation of civilian organizations and firms in military procurement projects will demand that they overcome unavoidably high entrance barriers that, in turn, could undercut the profitability of such efforts. These hurdles include: the tedious and costly process of bidding for defense contracts; long sales cycles; costly security standards that civilian companies would have to meet; limited commercial rights for those technologies and products designed under MoD contracts; costly infrastructure investments; and the need to adjust to a non-commercial business environment, to name just a few. In some cases – such as in China and India, where the stateowned defense industry has for decades enjoyed exclusive access to military acquisition – the defense industry and parts of the defense establishment could take deliberate measures to preserve that monopoly. They could, for example, use their immense political power to keep military acquisition regulations excessive and unclear, maintain the traditional defense industry’s favorable conditions, limit the access of private companies to various acquisition projects, and so on. While these and other restrictions put civilian companies in a position of disadvantage compared with the traditional defense industries, and, in many cases, discourage them from taking part in defense projects, governments could take various measures to reduce these hurdles and make it easier for nondefense firms to participate in defense R&D and to subsequently facilitate the process of MCF. Such efforts, however, have so far brought uneven results. As our case studies analysis shows, in some countries – like the United States and Israel, where the civilian sector has been involved in military R&D and production for decades – it is possible to overcome these barriers and develop new collaborative pathways and initiatives that allow already existing CMI activities to evolve into more sophisticated forms of MCF. These countries have also begun

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consolidating some criteria for the optimal incorporation of civilian entities and products into military projects – criteria that mostly concern the prospects for future civilian R&D in the technological area in question, the civilian product’s maturity and the extent of modification that it requires to be incorporated into a military system, the civilian product’s expected life cycle, and the security implications that involve the incorporation of civilian products into the concerned military system. It helps that these countries also enjoy strategic cultures that emphasize technological superiority, efficiency, risk-taking, and innovation in general. This is all the more apropos in the case of Israel, which faces an ever uncertain security environment combined with tighter defense budgets. To be sure, these countries still confront considerable challenges when it comes to harnessing MCF for exploiting 4IR technologies. For instance, some civilian companies that could contribute significantly to military projects – as well as their scientists, engineers, and other key personnel – might, for ideological reasons, choose to opt out of such efforts. However, free-market mechanisms and a broad supply of adequate firms and scientists in these countries will likely make it probable that others could take their place. As a result, the United States and Israel have been successful in innovating and assimilating emerging critical technologies – including commercially based advanced technologies – into their armed forces since the 1990s and they will likely continue to do so. The situation in China and India is somewhat different. China clearly recognizes the military significance of 4IR technologies as well as the huge potential of its burgeoning civilian high-tech sector when it comes to delivering 4IR innovations to the PLA. At the same time, the persistent isolation of its defense industry, along with its enduring political clout, has made it difficult for China’s civilian industry to overcome the high political, administrative, and commercial barriers that have for so long prevented it from competing for major military contracts on an equal footing. Beijing’s efforts, starting in the late 2010s, to tackle this problem of access have certainly improved the situation, in part because the technologies embedded in the 4IR are increasingly seen as instrumental to Chinese efforts to acquire the status of a “world power” by the middle of the twenty-first century. In addition, MCF has benefitted considerably from the personal commitment of the powerful state leader Xi Jinping to the idea of MCF and his readiness to use his considerable control of the country’s centralized state apparatus to grease the wheels. Nevertheless, these motivations and efforts have so far not been enough to overcome the nation’s inefficient military procurement structure and the contribution of China’s high-tech civilian sector is mostly limited to a

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narrow range of military R&D activities (and to the importation of sensitive dual-use technologies in particular). As a result, unlike the United States and Israel where emerging technology-related means are being assimilated across their armed forces, the deployment of such technologies in China will probably be confined for the time being to only the more highly prioritized parts of the military. That said, China remains a wild card with respect to MCF. As noted in the China chapter, Xi has invested a lot of political capital in MCF and this has translated into China putting considerable amounts of political commitment, money, and manpower into the MCF effort. As Lorand Laskai has put it, “Since Xi Jinping ascended to power in 2012, civil– military fusion has been part of nearly every major strategic initiative.”12 If China fails at MCF, therefore, it will not be for a lack of trying. Finally, at the far end of the continuum, there is India, where the emergence of a private IT industry, a free-market economy, and a democratic regime places it in a potentially good position to assimilate 4IR technologies throughout its military through MCF. However, while these factors arguably serve as preconditions for successful MCF implementation, they are insufficient. Just as important are the nation’s military procurement structure, considerable R&D investments, and defense strategy, areas where the Indian defense acquisition model faces enormous challenges. In the first place, notwithstanding India’s free-market economy, the country’s state-owned defense industry has for decades enjoyed a virtually indestructible monopoly over military development and production. Secondly, India lacks a centralized, coherent defense strategy that can guide its military procurement while injecting a sense of urgency, or at least a clear order of priorities. Finally, both India’s civilian and defense R&D expenditures are low by any standard. As a result, Indian decision-making regarding weapons development and production has tended to be impulsive, ill-considered, and even occasionally selfcontradicting. Alongside its intention to equip its military forces with state-of-the-art weapons, India assigns equal importance to the idea of military self-reliance (and, ideally, self-sufficiency), the strengthening of the nation’s industrial base as a whole, and the expansion of arms exports. Such a diversity of objectives, which is supported by insufficient financial investments, makes it difficult to effectively overcome the institutional and organizational barriers to MCF and, subsequently, advance innovation and the assimilation of 4IR technologies into the military.

12

Laskai, “Civil–Military Fusion: The Missing Link.”

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These case studies of national MCF efforts also require us to drastically revise our concept of what constitutes the “defense-industrial base.” To be sure, traditional arms industries, that is, large (and often, stateowned) corporations focused mainly on the development and production of weapons systems and military equipment, will continue to exist for the manufacture of militarily unique items for which there is no civilian equivalents, such as artillery systems, fighter jets, submarines, precision-guided weapons and tactical missile systems, and nuclear weapons. At the same time, it is also likely that more and more MCF will take place within these industries at the firm or facility level. For example, a company that produces both defense and nondefense goods (e.g., a Boeing, Airbus, and Tata) might share strategic corporate resources, such as management, planning, labor, R&D, and the like, between its military and civilian divisions. Moreover, such companies might also share personnel, machine tools, and materiel within a single manufacturing facility.13 It is also likely that second- or third-tier suppliers – that is, producers of military subsystems, components, and parts as well as providers of such services as maintenance, repair, and overhaul (MRO) – could more closely integrate their defense and commercial businesses. Finally, given the growing sophistication of commercial cutting-edge technologies, defense contractors could find it more expedient, more reliable, and less costly to expand their use of COTS systems and technologies. However, where contemporary approaches to MCF mark a distinct departure from past attempts to bridge the divide between the military and commercial spheres lies in their emphasis on integrated and joint development of military–civil technologies at the furthest most “upstream” aspects of military R&D and production. These models of innovation include sharing basic research in labs, universities, and technology incubators, developing joint, integrated civil–military strategies when it comes to technology exploration and exploitation, and, in general, encouraging the commercial and military sectors to think about the potential military uses of advanced civilian technologies at the early stages of S&T and development. In fact, most of our case studies used similar approaches and tools (i.e., start-ups, incubators, private-sector competitions, etc.) to promote MCF, albeit with often wildly differing results. Again, the United States and Israel – perhaps due to the relatively open and risk-taking natures of their societies and economies – have performed better in this regard. China, on the other hand, is still

13

OTA, Assessing the Potential, 10.

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experimenting with engaging the non-state or nonmilitary sectors in MCF and recent efforts by Xi to exert greater state control over the economy (including reigning in the private sector) do not bode well for innovation or risk-taking.14 India appears to be even less inclined, ultimately, to rely very much on nontraditional innovators to support MCF and military modernization given its prevailing penchant for the staterun sector. Traditionally, the defense sector used to focus primarily on the development and manufacture of products that would be used mainly by the military for military purposes; any “spin-off” to the commercial sector was almost always incidental (if often fortuitous). This division between the military and civilian spheres is now no longer as clear and the deciding factor in determining just how much civilian technologies are able to diffuse to the military sector could depend heavily on how intimately the private sector is engaged in arms development and manufacturing. In the United States and Israel, for example, there are longstanding and close relations between the public sector – comprising universities and think tanks, national labs, and state-owned (or staterun) arms industries – and the private sector – which includes not only defense companies but also their in-house R&D centers (e.g., Lockheed’s Skunk Works), boutique R&D firms, start-ups, and the like. In such a defense ecosystem, the framework for civil–military collaboration, dual-use R&D, and MCF is either already present or else could be more easily constructed. China and India, on the other hand, appear to face a much harder time when it comes to exploiting MCF. These two countries possess very different political systems – one democratic, the other authoritarian – and yet they are quite similar in their approach toward arms acquisition and production. Both have historically relied on a system of state-owned laboratories, R&D institutes, and factories to design, develop, and manufacture indigenous weapons systems. A rigid, monopolistic, and heavily protected state-centric configuration has permeated the armaments production process, resulting in a “statist” defense ecosystem in which government, R&D institutes, and weapons factories operate in a cozy, sealed environment. These structural and bureaucratic conditions have, in turn, made it more difficult for these countries to reach out to their domestic high-tech commercial sectors for MCF-worthy innovations. Another possible difference between the United States and Israel on the one hand and China and India on the other is strategic culture and a 14

Lingling Wei, “China’s XI Ramps up Control of the Private Sector: We Have No Choice but to Follow the Party,” Wall Street Journal, December 10, 2020.

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basic approach to innovation. In the cases of the United States and Israel, the national strategic culture emphasizes entrepreneurism, experimentation, and risk-taking when it comes to innovation; this is much less the case in China and India. Moreover, budgetary limits in the United States and Israel are probably the only constraints put on military modernization while in both India and China, internal civil–military tensions may limit MCF as they affect any military buildup. Finally, we should consider the relationship between national defense-industrial bases and the market economy. In both the United States and China, the defense industries during the Cold War largely operated outside the market forces as highly protected industrial sectors. And yet the US defense industry was highly innovative compared to China, which was the epitome of inefficiency. Was it because of the effect of the Soviet threat on the United States during this period or because of the United States’ cultural proclivity for technological innovation and efficiency? As China perceived the existence of severe military threats too, the explanatory power of this factor cannot be decisive by itself. In the case of Israel, meanwhile, the aggregative conditions of strategic circumstances, the limitations on arms imports, and financial constraints provided strong incentives for efficiency and military-technological progress. MCF as a Competitive Strategy While largely entrenched in MCF’s political-bureaucratic aspects, this study has also unveiled some important strategic attributes of this evolving procurement pathway. Most importantly, MCF is rapidly becoming a critical if not the key approach to next generation military-technological innovation and development. If 4IR technologies are the basis for future military capabilities and advantage, then MCF is the crucial course of action for militaries seeking to exploit these technologies. Consequently, MCF is not only a critical military-technological innovation strategy but also increasingly part of many countries’ strategic efforts to remain militarily competitive with likely adversaries and rivals. The essence of such competitive strategies, according to Thomas Mahnken, is all about imposing costs upon a competitor in order to influence his decisionmaking calculus and, thus, to affect his strategic behavior.15 Such a strategy has become increasingly critical in the Sino–American strategic competition. China’s growing military-technological capabilities in the 15

Thomas G. Mahnken, “Thinking About Competitive Strategies,” in Competitive Strategies for the 21st Century: Theory, History, and Practice ed. Thomas G. Mahnken (Stanford: Stanford University Press, 2012), 7–8.

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areas of precision-strike weaponry and C4ISR have been sapping the US margin of superiority for years. Such capabilities increasingly favor a strategy of denial, undermining US military power where it must travel long distances before it can project such force.16 These efforts have been dubbed “anti-access/area denial” (A2/AD). Capabilities for A2/AD include (but are not limited to) ballistic and cruise missile strikes (both land-attack and antiship), artillery and rocket barrages, submarine operations (antiship and antisubmarine), long-range air strikes, cyberattacks, and anti-satellite warfare. By employing A2/AD capacities and strategies, China is attempting to prevent US forces (and, by extension, its regional allies and partners) from entering or operating with impunity within the East and South China Seas. Dan Gouré calls A2/AD a “dialectical response” to the IT-driven “reconnaissance-strike RMA” of the 1990s. As such, while A2/AD capabilities may comprise “weapons systems such as sophisticated air defenses, longrange precision fires and unmanned vehicles,” more significantly, “the A2/AD counterrevolution seeks to exploit new means of combat – electronic and cyber warfare, in particular, and operations in domains such as outer space – to attack the sensors, networks, and command and control systems on which the precision-strike revolution was based.”17 In the face of this growing Chinese A2/AD challenge, the United States is itself dialectically intent on neutralizing these capabilities and preserving its military-technological lead. This “counter-counterrevolution” was first designated as AirSea Battle (ASB), subsequently renamed the “Joint Concept for Access and Maneuver in the Global Commons” (JAMGC). For its part, the US army’s counter-A2/AD strategy is called Multi-Domain Battle (MDB). ASB/JAM-GC is intended to preserve and sustain US power projection capabilities and freedom of action and to offset current and anticipated asymmetric threats through the novel integration of US Air Force and Navy concepts, assets, and capabilities. It is particularly designed to counterbalance China’s growing military strength and influence in the western Pacific.18 ASB/JAM-GC calls for a “networked, integrated attack-in-depth” that includes striking the enemy’s C4ISR assets from afar (i.e., a “blinding campaign”); carrying out a “missile suppression campaign” with stealthy long-range attack weapons in order to disrupt the enemy’s air-defense

16 17 18

Ibid., 4. See also Mahnken, “Frameworks for Examining.” Dan Gouré, “The Next Revolution in Military Affairs: How America’s Military Will Dominate,” The National Interest, December 28, 2017. Andrew F. Krepinevich, Why AirSea Battle? (Washington, DC: Center for Strategic and Budgetary Assessments, 2010).

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and offensive-strike capabilities; and conducting diverse follow-on operations, such as “distant blockades,” in order to seize the operational initiative and to ensure protracted US freedom of action in the region. In this regard, ASB/JAM-GC “envisions a seamless application of combat power between the domains” and future joint US forces “will leverage cross-domain synergy [i.e., air, sea, land, and cyberspace] to establish superiority in some combinations of domains that will provide the freedom of action required by the mission.”19 MDB similarly stresses cross-domain, networked operations.20 In 2014, the US Defense Department launched its “Third Offset Strategy” as part of a national effort to ensure that the United States and its allies will be able to maintain their military-technological superiority against any potential opponent over the next several decades. This initiative includes unmanned systems and automation, long-range strikes, extended-range and low-observable air operations, hypersonic propulsion, undersea warfare, cyber operations, and directed-energy weapons.21 Obviously, 4IR technologies will increasingly factor into the technological strategic competition between the United States and China. Given that most cutting-edge 4IR technologies are firmly anchored in the commercial sector, MCF is increasingly a necessity, not a luxury. The US military is particularly and increasingly cognizant of the potential of such 4IR technologies and is particularly keen on exploiting AI, autonomous systems, and advanced networking and communications as means for maintaining its military edge. These aspirations will, in all likelihood, draw the US military-industrial complex closer to 4IR innovators in the commercial high-tech sector and drive MCF strategies in the US defense-industrial and technology base. In the case of China, MCF has also become a core militarytechnological development strategy. Chinese military modernization has become entwined with civilian technological innovation in a number of critical dual-use technology sectors including aerospace, advanced equipment manufacturing, AI, and alternative sources of energy. In this regard, MCF “involves greater integration of military and civilian administration at all levels of government: in national defense mobilization, airspace management and civil air defense, reserve and militia forces, and border and coastal defense.”22 More importantly, Beijing is using MCF

19 20 21 22

US Department of Defense, “Joint Operational Access Concept,” 17, 38–9. Gouré, “The Next Revolution.” See Dombrowski, America’s Third Offset Strategy, 5–6; Martinage, Toward a New Offset Strategy, vi–vii. Levesque, “Military–Civil Fusion.”

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as part of a long-term and broad-based strategic effort to make China a “technological superpower.” By having the civilian and military sectors mutually support each other, MCF is positioning China “to compete militarily and economically in an emerging technological revolution.”23 MCF as a competitive strategy applies to other states as well, both large and small, especially in terms of regional military competitions. India, as an aspiring world power, has long harbored the goal of possessing a technologically advanced arms industry capable of meeting most, if not all, of its requirements for self-sufficient national defense – and, therefore, great world status. This quest for self-reliance and stature, therefore, has long been intertwined in Indian politics. As India’s economic power has expanded, and as its technological prowess in certain areas (such as IT) has grown, it has become more determined than ever to create a world-class, globally competitive defense industry. Not surprisingly, New Delhi has begun to search for ways to exploit its advanced technology sectors to support indigenous armaments production. Finally, small and mid-size countries are also increasingly appreciative of the potential power of harnessing 4IR technologies for military use through MCF. A striking example is Israel, which relies heavily on regional military-technological superiority to secure its national defense. Since the 1990s, it has viewed 4IR technologies as potentially providing its defense forces with longer, more accurate, and more lethal strike capabilities in all six dimensions of warfare (ground, air, sea, space, cyber, and subterranean), on various fronts (the frontline, the home front, the enemy’s rear, remote enemies), and by various means. More specifically, AI capabilities combined with cybersecurity allow its defense forces to analyze large-scale communication traffic, identify suspicious activities, and trace them closely. The combination of remote sensing, location tracing, and precision-guided munitions, all of which require 4IR technologies, allows them to acquire the precise location of targets and hit enemies operating in populated areas with only limited collateral damage. In addition, advanced cyber capabilities, combined with reconnaissance capabilities and precision-guided munitions, allow the country to penetrate the enemy’s communication and information systems, obtain information about its force deployment, arms production facilities, operational plans, and the like, and launch preemptive attacks.24 The development of these and other similar capabilities is carried out through significant participation of civilian organizations. Possessing an advanced high-tech 23 24

Ibid. These are just a few examples of the impact of 4IR technologies on military affairs. For a broader review, see Introduction, Note 3.

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industry and enjoying longstanding tight relations between its society and the defense establishment, its defense establishment harnesses local technology companies, academia, and even foreign companies to develop 4IRrelated military means. These means have permitted Israel to implement an evolving military strategy while simultaneously advancing additional strategic and doctrinal developments and to achieve its dynamic military objectives at a bearable cost. However, it is yet to be seen whether such a reality encourages Israel to use greater military force than before and how it impacts its – and the surrounding region’s – stability.25 But MCF developments in Israel and India, as well as the US–China experience, do not pertain solely to these countries. It is likely, too, that, with or without those lessons, other great powers or aspiring regional powers – such as Russia, Iran, or Brazil – will increasingly view the assimilation of 4IR technologies into their armed forces as a critical next step in the modernization of their militaries and, consequently, regard MCF as a crucial enabling technological and competitive strategy. If these and other countries can demonstrate how MCF has helped their militaries successfully exploit 4IR technologies, this “proof of concept” will both inspire even more nations and provide them with a usable roadmap for exploiting advanced commercial technologies for military power. To be sure, such a development is likely to have far-reaching implications for both strategic and nonstrategic areas. A striking example, which exceeds the scope of this research but still deserves considerable scholarly attention, is the tension between the global nature of technology, and 4IR technologies in particular, and the anti-globalist economic tendencies of MCF. Somewhat surprisingly, the past few decades have witnessed a pushback against economic and technological globalization. Countries such as China and India (along with many others) have increasingly pursued technonationalist development strategies that stress self-sufficiency, particularly in such sectors as IT (particularly telecommunications, microelectronics, and computing), aerospace, and defense. These techno-nationalist tendencies have influenced national innovation policies regarding 4IR technologies, particularly AI (where all of the case studies presented in this volume have emphasized various government-supported AI development plans). Concurrently, as the China case shows, states use MCF to import sensitive technologies through civilian channels and ultimately incorporate them into military systems. As exporting states are becoming increasingly aware of this, they are imposing higher barriers on emerging technologies’ export while advancing decoupling of technological supply chains with rival 25

On the relations between these variables, see Buzan and Herring, The Arms Dynamic, 201–3; Fordham, “A Very Sharp Sword,” 632–56.

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states. Interestingly, the developed states’ response to the developing countries’ techno-nationalism is a stronger S&T cooperation among themselves rather than pure nationalism. A 2022 US Department of Commerce and Department of Homeland Security report of supply chain vulnerabilities across six key industries demonstrates this. Among other things, the report emphasizes a “friend-shoring” approach to supply chains while stressing the need to reduce dependence on China. The report also recommends financial support for “friend- and near-shoring manufacturing” of critical ICT components unlikely to be produced domestically in the near future.26 There is, therefore, a natural complementarity to global balance of power, techno-nationalist self-sufficiency policies and the pursuit of MCF, and a causal connection between MCF implementation and export limitations. At the same time, near total autarky as well as cutoff of sensitive technologies’ exports have proved elusive. China’s semiconductor manufacturing industry has been unable to design very small chips (the so-called 7-nanometer wall27) and it must, therefore, import wafer fab technology and machinery, mostly from Japan.28 Even Russia, which possesses one of the most self-sufficient defense-industrial bases, is not immune to foreign dependencies; a Russian drone shot down over Ukraine in early 2022 was revealed to use components from a half-dozen Western companies including US-made computer chips and a German engine.29 On the other hand, while MCF is becoming one of the main reasons behind emerging technologies’ decoupling between the world’s main rival blocs, globalization is still much in evidence. Overall, the successful exploitation of MCF can be seen as the outcome of national security circumstances, strategic culture, bureaucratic structure, market forces, and civil–military trust at the leadership level, that is, domestic politics. The existence of the right blend of these qualities, whether they exist already or are somewhat engineered by states’ leadership, will condition countries’ ability to develop an arsenal of 4IR technology-based weapons and other military equipment. This, in turn, is expected to impact significantly on their military power and world position as arms producers.

26

27 28 29

US Department of Commerce and US Department of Homeland Security, Assessment of the Critical Supply Chains Supporting the US Information and Communications Technology Industry (Washington, DC: February 23, 2022), www.dhs.gov/sites/default/files/202202/ICT%20Supply%20Chain%20Report_0.pdf. Falletti, “US Chip Ban.” Anjani Trivedi, “Why China Can’t Fix the Global Microchip Shortage,” The Economic Times, March 2, 2021. Jeanne Whalen, “Russian Drones Shot Down Over Ukraine Were Full of Western Parts. Can The US Cut Them Off?,” Washington Post, February 11, 2022.

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Index

3D printing, 23, 45 81 Unit, 186 8200 Unit, 186 863 Program, 47, 103, 107, 122 Adamsky, Dima, 175 Advanced Light Helicopter (ALH), 131 Advanced Technology Centres (ATC), 163, 165 Advanced Technology Program (ATP), 70 aeronautics, 53, 57, 59, 141 Aeronautics Ltd., 175 Aerospace Corporation, 76 Afghanistan, 78 Airbus, 41, 45, 102 aircraft, 38, 133, see also individual aircraft and advanced technology, 18 and arms imports, 136 and civilian firms, 7, 26, 49, 54, 188 and conversion, 41–2, 59, 63–5, 73–4, 102, 191 combat, 51 conversion, 103 and dual-use technology, 45, 108–9 and J/V, 102–3 industry, 53 rising cost of, 35 aircraft carrier, 29, 51, 54, 59, 124, 134 Airmap, 81 AirSea Battle (ASB), 79, 219 Akash missile, 132 Alibaba, 1, 12 Alic, John, 65 Alouette III helicopter, 131 Amazon, 1, 82 American Civil War and arms manufacturing, 26–7, 29, 51–2 American system of manufacturing, 52 AMRAAM, 18 anti-access/area denial (A2/AD), 79, 219 antiship cruise missile (ASCM), 172, 174 Apollo rocket, 66

Apple, 65, 193 application-specific integrated circuits (ASIC), 67 Arazi, Efi, 191 ARJ-21, 108 Arjun tank, 131, 136 Arleigh Burke-class destroyer, 58 arms acquisition, 129, 149–55 and China, 94 and civilian firms, 168 and India, 146–55, 168 and military threat, 156, 166 and state-centric configuration, 217 arms development and China, 96, 112 and India, 131, 143, 168–9 and Israel, 174 and MCF, 116, 127 and private sector, 144, 146, 180 arms exports and India, 143, 168, 215 and Israel, 171, 176 and United States, 58 arms imports, 129, 218 and China, 92–3 and India, 143, 211 and United States, 58 arms production, 26, 204, 221 and China, 90, 100, 104 and civilian sector, 7, 115–16, 187 and India, 134, 137, 143 and Israel, 171–2, 176 arms race, 11, 32 ARPANET, 74 Art of War (Sun Zi), 98 artificial intelligence (AI) and 4IR, 1–2, 18, 22 and China, 12, 128 and China’s military modernization, 111 and civilian sector, 7, 208 and globalization, 222 and India, 168

250

https://doi.org/10.1017/9781009333290.009 Published online by Cambridge University Press

Index and India’s military modernization, 158–60, 167 and Israel, 183–5, 193–5 and MCF, 46–7, 85, 88, 113, 125 and Russia, 5–6, 9 strategic implications of, 204, 209–12, 220–1 and United States, 80–4 Ashok Leyland, 132 Atomic Energy Commission, 60 atuda academit (academic reserve), 190 Australia, 32, 144, 179 autonomous systems, 1, 18 and Indian army, 159 and US military, 80–1, 84 and US–China military competition, 222 dual-use technologies, 46 autonomous vehicles, 12 and China military, 113 and Israel military, 5, 183 and Israel’s MCF, 193 AV-8B Harrier, 35 B-10 bomber, 53 B-17 bomber, 64 B-2 bomber, 57 B-21 bomber, 57 B-29 bomber, 64 B-47 bomber, 64 B-52 bomber, 64 Barak missile, 137 Bath Iron Works, 28, 57 battlefield management system (BMS), 164 Bedi, Rahul, 139 Beidou navigation satellite system, 108 Belarus, 144 Béraud-Sudreau, Lucie, 111 Bharat Dynamics Ltd. (BDL), 133 Bharat Earth Movers Ltd. (BEML), 133, 153 Bharat Electronics Ltd. (BEL), 131, 133, 162 Bharat Forge, 132, 154, 165 Biden, Joseph, 83 big data, 1–2, 18 and Chinese military, 113 dual-use technologies, 46 and Indian armed forces, 158 and Israel’s MCF, 193 and MCF, 36 and US military, 80, 86 biotechnology, 47, 84, 106, 190 block-chains, 22, 81 and MCF, 36

251 Boeing, 64 and CMI, 66, 73–4 and defense industry conversion, 39 J/V in China, 102 and MCF, 64, 216 Boeing 377 Stratocruiser, 64 Boeing 707, 41, 64 Boeing 747, 64 Boeing Vertol, 69 Bombardier, 102 Brazil, 28, 32, 222 Britain, 2, 32, 136 Brzoska, Michael, 44, 71 Bush, George H. W., 70 Bush, George W., 73, 76–7 Buy and Make, 146–7, 149 C-130J aircraft, 137 C-135 aircraft, 64 C-137 aircraft, 64 C-17 aircraft, 41, 73, 137 C-919 aircraft, 108 C-939 aircraft, 108 C-97 Stratofreighter, 64 Carl Gustaf rifle, 131 cellular communication, 36 Central Commission for Integrated Military and Civilian Development, 37, 47, 89, 111 Central Military Commission (CMC), 96 Equipment Development Department (EDD), 96 CH-46 helicopter, 69 CH-47 helicopter, 69 Check Point Software Technologies, 192 Cheung, Tai Ming, 17, 110 Chin, Warren, 27, 31, 50 China and 4IR, 2 high-tech industry and CMI, 103–5, 110 military doctrine and CMI, 98–100 military doctrine and technology, 90 military expenditures, 91–3 S&T CMI, 122 S&T weakness, 109 China Electronics Technology Group Corporation (CETC), 97, 107 Chinese Communist Party (CCP), 19, 108 Chinese Academy of Sciences (CAS), 37 Civilian Participation in Military Technology and Products Catalogue (min canjun jishu yu chanpin tuijian mulu), 117 civil–military integration (CMI), 19–21, 25, 37–40, 47

https://doi.org/10.1017/9781009333290.009 Published online by Cambridge University Press

252

Index

civil–military integration (CMI) (cont.) and China, 88–9, 107–12, 126–7 and China defense industry reform, 94, 104 and conversion, 76 and India, 129–45, 151–3, 166, 168 and Israel, 186–7, 190, 200 and People’s War doctrine, 98–9 in post-Mao China, 101 and United States, 69–78, 84 Clemens, Morgan, 110 Clinton, Bill, 70, 73, 76 cloud computing, 81, 158 Cochin Shipyard, 134 Cold War and CMI, 7, 63–7 arms manufacturing before, 208 arms sales after, 174 civilian technology after, 4 military development after, 32–3 and military R&D, 38–9, 52, 60–1 technological development during, 1, 35–6, 49–50 combat information center, 72 command and control 4IR’s military implications, 23 and China’s MCF, 47, 124 and China’s military strategy, 219 and Israel’s MCF, 160, 184, 206 and MCF, 113 command, control, communications, computing, intelligence, surveillance, and reconnaissance (C4ISR) and IDF’s quest for 4IR technologies, 183–4 and Israel’s defense industry, 175, 212 and Israel’s MCF, 160 and military transformation since the 1990s, 18 and US’ military transformation, 77 and US–China rivalry, 79, 219 commercial off-the-shelf (COTS), 196–7, 216 and China’s military, 42–3 and CMI, 19, 37, 75 and India’s military, 159–60 and Israel’s military, 197, 213 and MCF, 25, 82, 213 and military threats, 182 and military-technological innovation, 78 and spin-on, 41 Commission for Science, Technology, and Industry for National Defense (COSTIND), 94 competitive strategy, 8, 21, 218, 221–2

composite materials, 7, 113, 116, 190 computer numerically controlled (CNC), 105 computer-aided design/computer-aided manufacturing (CAD/CAM), 30, 42, 54, 104–5 computer-integrated manufacturing systems (CIMS), 105 Confederation of Indian Industry (CII), 146 Convair, 66 Cooperative Research and Development Agreements (CRADA), 45, 70 Counter-rocket, artillery, and mortar (C-RAM), 175 CR-929 aircraft, 108 Crimean War, 27 cyber, 79, 204, 206, 209 and 4IR military technologies, 5, 22–4, 221 and China’s military modernization, 114, 157 cybersecurity, 57, 197, 204 domain, 79, 86 and India’s military modernization, 158–61 and Israel, 175, 182–4, 194, 200, 205 and US military development, 80–1, 84, 219–20 warfare, 212 weapons, 79 Dassault, 28, 174 Defence Acquisition Procedure 2020 (DAP 2020), 151, 154, 160 Defence India Start-up Challenges (DISC), 162 Defence Investor Cell (DIC), 153 Defense Advanced Research Projects Agency (DARPA), 57 ARPA, 71, 73 and 4IR, 83 and CMI, 71 development of the Internet, 74 and dual-use technologies, 45 and national S&T development, 57, 60, 63 and US semiconductor industry, 67 role in national innovation system, 37 defense contracts barriers, 75 challenges, 43 and civilian firms, 7, 203 and CMI, 36, 61, 69, 75 and defense industry conversion, 66

https://doi.org/10.1017/9781009333290.009 Published online by Cambridge University Press

Index and India’s CMI, 153, 164 and iron-triangle, 30, 54 and Israel’s MCF, 203 and MCF barriers, 213 and spin-off technology in the US, 30 and US defense industry, 57–8 and US economy, 54 and US high-tech industry, 31 defense industrialization, 31 defense industry, 216 of China, 90, 94–7 of India, 130–4, 137, 139, 141 of Israel, 171–6, 179, 212 challenges to, 32–5 conversion of, 102 development of, 7, 25–30, 188, 190 during the Cold War, 29–30 India protection of, 152 isolation of, 38, 214 monopoly of, 154–5, 213 and buyer–seller relationship, 95 and market forces, 67, 218 and monopoly in India, 152 and R&D hierarchy, 7 and technological development, 30–1 and the state, 32 and US protection of, 57–8 of the United States, 51–5, 67–8, 78 Defense Innovation Initiative (DII), 80–1 Defense Innovation Unit (DIU), 81, 86, 210 Defense Procurement Procedures (DPP) private industry’s participation in military procurement, 146–52 Defense Public Sector Undertakings (DPSU), 131, 153 advantage of, 152, 154 and CMI, 145–6 and competition, 134, 148–9, 151 and J/V, 141 and MCF, 162 and monopoly, 132–3 deficiency of, 137–9 Defense Research and Development Organization (DRDO), 132, 134, 138 and arms production inefficiency, 139–40 and CMI, 148–9, 151, 153 and defense indigenization, 131 and MCF, 161–6 and relationship with DPSUs, 134 defense technology and industrial base (DTIB) and dual-use technology, 36 and MCF, 37, 39–40 MCF success conditions, 8

253 and national S&T, 35 and spin-on technology, 40 United States’ MCF, 46 Deng Xiaoping, 101 Department of Defense (DoD) and 4IR technologies, 50 and China’s MCF, 125 and CMI, 67, 70–1, 75 and CMI barriers, 76 and defense conversion, 72 and MCF, 78, 82–7, 210 and national R&D, 50, 60, 63 and RMA, 77 Department of Homeland Security, 223 Digital Ground Army (DGA), 184 digital revolution, 21 Directorate of Defense Research and Development (DDR&D, MAFA’T), 194, 198 MAFA’T Challenge, 198 Directorate of Industry Interface & Technology Management (DIITM), 153 Dual-Use Science and Technology Program (DUS&T), 73 dual-use technology, 44 DuPont, 53 Dynamic random-access memory (DRAM), 65, 67 E-3 Sentry, 64 E-8 JSTARS, 64, 79 East China Sea, 79, 219 Elbit Systems, 172, 175, 177–8 electronic warfare, 31, 63, 133, 158, 164 Electronics Resurgence Initiative, 83, 86 Elfassy, Guy, 175 Elron Electronic Industries, 172, 191 Engelbrecht, H. C., 53 F/A-18 Hornet fighter, 35, 57, 136 F-15 Eagle fighter, 35, 57 F-16 fighter, 35, 57, 136 F-22 Raptor, 35 F-35 combat aircraft, 35, 57 Facebook, 193 Fairchild, 31, 62 federally funded research and development center (FFRDC), 57 flat-panel display (FPD), 72 Flat-Panel Display Initiative (FPDI), 45, 72 Ford Aerospace, 31, 62 Ford Motors, 45, 193 Ford, Christopher Ashley, 125 Fordham, Benjamin, 205

https://doi.org/10.1017/9781009333290.009 Published online by Cambridge University Press

254

Index

fourth industrial revolution (4IR), 1–2, 21–4 and dual-use technology, 46 and India’s high-tech industry, 13 and MCF, 6–8, 21–2, 48, 208, 212–15 and states’ competitive strategy, 208–9 China’s quest for, 112–13 India’s quest for, 159 Israel’s quest for, 180, 183 military relevance of, 22–4 strategic implications of, 205–6, 220–2 and US–China rivalry, 209, 220 France and CMI, 45 arms embargo on Israel, 173 arms exports to India, 131, 136 defense industry of, 32 military expenditure, 33 Franco–Prussian War, 27 Gabriel missile, 172, 174 Galil, Uzia, 191 Galram, 191 Garden Reach Shipbuilders Engineers Ltd. (GRSE), 133 Gemini rocket, 66 General Armaments Department (GAD), 94, 96 General Dynamics, 30, 54, 66 General Motors (GM), 45, 84, 193 Germany, 33, 107, 109 Gilat Satellites, 192 Global Innovation Index, 11, 13 Global Positioning System (GPS), 38, 74, 79, 162 global value chain, 144 GM Defense, 84 Goa Shipyard Ltd. (GSL), 133 Google, 1, 7, 85, 193 Gore, Al, 70 Gouré, Dan, 58, 219 government laboratories, 37 government-owned and -operated (GOGO), 76 GPS-guided bombs, 18 Grumman, 39, 69, see also Northrop Grumman Gulf War, 75 Hagel, Chuck, 80 Halamish, Nir, 195 Hamas, 206 Hanighen, FC, 53 Hanwha Techwin, 153, 165 Harpy attack drone, 174

Heinrich, Thomas, 30–1, 61 HF-24 Marut, 131 Hindustan Aeronautics Ltd. (HAL), 28, 131–2, 136, 162 Hindustan Shipyard Ltd. (HSL), 133 Hooda, Deependra Singh, 159, 167 Howitzer, 52, 137, 153, 165 HP, 193 HS-601, 73 Hu Jintao, 19, 110 Huawei, 12, 126, 193 Hughes Space and Communications, 73 Hummer, 73 IBM, 193 IdeaForge, 165 IDF Strategy (estrategiat Tzahal), see Israel military doctrine Imaging Ltd. (Medtronic), 191 India involvement of high-tech industry in military R&D, 162, 168 military doctrine and assimilation of advanced technological means, 167 military doctrine and MCF, 157 military expenditures, 134–5, 137 pursuit of MCF, 156, 211 Indian army acquisition from civilian firms, 153, 164 and Land Warfare Doctrine, 158 arms acquisition, 136 Indian Institute of Technology (IIT), Bombay, 163 Indian Institute of Technology (IIT), Delhi, 163 indigenously designed, developed, and manufactured (IDDM), 150 Indonesia, 28, 32 industrial demonstration zones (junmin ronghe chanye jidi), 118 information warfare, 24, 158–9 informationization, 88 information-technologies revolution in military affairs (IT-RMA), 77–8 Ingalls Shipbuilding, 57 Innovation for Defence Excellence (iDEX), 162 INS Vikrant, 134 Integrated Guided Missile Development Program (IGMDP), 131 Intel, 193 intellectual property (IP), 109–10, 119–21, 203 intellectual property rights (IPR), 43, 161 Internet, 21, 24, 81

https://doi.org/10.1017/9781009333290.009 Published online by Cambridge University Press

Index and MCF, 36 and military R&D, 30, 74 spin-off technology, 38 internet of things (IoT), 7, 22, 81 and China’s pursuit of MCF, 113 and IDF’s quest for 4IR, 184 and Israel’s MCF, 193 and United States’ MCF, 84 Iran, 17 Iraq, 78, 205 Iron Dome, 175 IROV Technologies, 165 Israel air force (IAF), 186, 191, 212 high-tech industry and MCF, 202–3 high-tech industry: defense establishment connections, 190–3, 200–1 Industry Center for R&D, see Israel Innovation Authority military doctrine and 4IR, 5, 170 military doctrine and technology, 182, 207 National Cyber Bureau, 194 Space Agency, 200 Israel Aerospace Industries (IAI), 172, 175, 179, 190 Israel Defense Forces (IDF) and 4IR, 170, 207 and CMI, 187–9 focus on indigenous technology-intensive force multipliers, 174 preference for imported arms, 173 reliance on advanced technology solutions, 175, 183–4 and self-sufficiency, 173 Israel Innovation Authority (MATIMOP), 192, 199 Meimad, 200 Israel military doctrine (IDF Strategy), 182, 186 Israel Military Industries (IMI), 28, 172 Israel Shipyards, 175 Israeli High-Tech Association, 194 Jaguar aircraft, 131 Japan arms production and the state, 32 export of semiconductors to China, 223 J/Vs in China, 107 private sector’s R&D expenditure, 10 R&D expenditure, 109 semiconductor exports to United States, 67 technological relations with United States, 72 Jayal, B. D., 141

255 Joint Artificial Intelligence Center (JAIC), 82, 86, 210 Joint Concept for Access and Maneuver in the Global Commons (JAM-GC), 79, 219 Joint Enterprise Defense Infrastructure, 82 Joint venture (J/V) and Israel’s MCF, 200 India’s military technology transfer and, 147–8 Kamorta-class corvette, 134 Kargil War and India’s defense procurement, 140, 146 Katzir, Ephraim, 192 Kaushik, Chandrika, 145 KC-135 refueling plane, 64 Kelkar Committee, 148 Kfir fighter, 174 Kirchberger, Sarah, 22 Kolkata-class destroyer, 133 Konkurs-M missile, 136 Krepinevich, Andrew, 77 Krivak III frigate, 134 Krupp, 53 Kudu Dynamics, 81 Kumar, Vendana, 156 L-1011 airliner, 66 L3Harris, 81 Lafferty, Brian, 110 Langlois, Richard N., 63 Larsen & Toubro (L&T), 132, 153, 164, 211 Laskai, Lorand, 110, 215 Lavi fighter, 174 Lawrence Livermore, 57, 76 Leander class frigate, 131 Lebanon War (2006), 185 Lebel, Udi, 187 Lethal autonomous weapons systems (LAWS), 158 Light Combat Aircraft (LCA), see Tejas fighter Lockheed, 28, 30, 54, 66 Skunk Works, 57, 217 Lockheed Missiles and Space Company (LMSC), 31, 62 Logic Hub, 82 Long March space-launch vehicles, 102 Long-Range Research and Development Program Plan (LRRDPP), 81 Long-Term Integrated Perspective Plan (LTIPP), 145 Los Alamos, 57, 76

https://doi.org/10.1017/9781009333290.009 Published online by Cambridge University Press

256

Index

Lotem (cyber defense directorate), 184 Luz guided missile, 173 M1 tank, 58 M1A2, 58 machine-learning, 22, 46, 80–1, 125, 210 Made in China 2025 Program, 113, 210 MAFA’T, see Directorate of Defense Research and Development Mahindra, 132 Mahmood, Ishtiaq P., 9 Mahnken, Thomas G., 17, 218 maintenance, repair, and operations/ overhaul (MRO), 142, 145, 216 man–machine interface, 22–3 Manned Orbiting Laboratory (MOL), 66 Manos, Ronny, 175 Mao Zedong, 98–101 market economy, 7, 9, 94, 121, 215, 218 Martin Marietta Corp., 39 Mastiff, 174 MATIMOP, see Israel Innovation Authority Maxim, 53 Mazagon Dock Ltd. (MDL), 133 McDonnell Douglas, 39, 42, 66, 102–3 Medium and Long-Term Defense Science and Technology Development Plan (MLDP), 42, 105 Medium and Long-Term Science and Technology Development Plan (MLP), 42, 105, 113, 210 Medium Multi-Role Combat Aircraft (MMRCA), 136 Merchants of Death, 53 Merkava tank, 173, 197 micro-, small- and medium-sized enterprises (MSME) and India’s CMI, 132, 140–50 and India’s MCF, 162–4 microprocessor and 4IR, 83 and civilian industry’s technological leadership, 66 and spin-off technology, 65 and spin-on limitations, 67 Microsoft, 7, 82, 193 microwave and CMI, 70 and spin-off technology, 30–1, 61 MiG-21, 131 MiG-27, 131 MiG-35, 136 Milan antitank guided missile, 131 Milan-2T missile, 136 military

4IR and effectiveness of, 2, 4 impact of technology on, 3 innovation and technology, 17, 170, 181–2 military contracting, see defense contracts military contracts, see defense contracts military–civil fusion (MCF) success conditions of, 8, 213 mil-spec, 66–7, 75 miniaturization, 22, 46, 62, 67 Ministry of Electronic Industries (MEI), see Ministry of Industry and Information Technology (MIIT) Ministry of Industry and Information Technology (MIIT), 107, 117, 119 Ministry of Machine Building (MMB), 90 Mirage-5 fighter, 174 missile defense, 18, 80, 175, 185 Mossad, 186 Motorola, 75 Mowery, David C., 63 multi-domain battle (MDB), 219 multinational corporations (MNC) and civil–military technological hierarchy, 7 and Israel’s MCF, 193 Mulvenon, James, 42, 100 Nag missile, 132, 136 Naik, Pradeep Vasant, 142 nanotechnology, 183, 212 Naravane, Manoj Mukund, 158 National Aeronautics and Space Administration (NASA), 59–60, 66, 71 National Automotive Center, 45 National Defense Science and Technology Commission (NDSTC), 101 national innovation system, 9 and defense intustry’s role in, 37 and in United States, 209 and private sector’s role in, 9–10 National Institute of Standards and Technology, 70–1 National Military–Civilian Integration Public Service Platform (guojia junmin ronghe gonggong fuwu pingtai), 117 National Plan on the Prospect of the Development of Science and Technology, 101 National Science Foundation (NSF), 37, 55, 60, 63, 71 National Security Commission on Artificial Intelligence (NSCAI), 51, 85, 209–10 Navigation, 113–14 Netanyahu, Benjamin, 194 network-centric warfare (NCW), 77, 159

https://doi.org/10.1017/9781009333290.009 Published online by Cambridge University Press

Index New Generation Artificial Intelligence Development Plan, 111, 211 New Generation Artificial Intelligence Plan, 211 Newport News Shipbuilding, 30, 54 Nie Rongzhen, 101 night-vision system, 72 North American Aviation, 30, 54 Northrop, see Northrop Grumman Northrop Grumman, 30, 57 Nouwens, Meia, 111 nuclear energy, 30, 54, 101 Oak Ridge, 57 Ofek 324 Unit, 186 Office of Technology Assessment (OTA), 19, 37, 46, 74–6 Office of the Under Secretary of Defense for Industrial Policy, 78 Online military procurement system (quanjun wuqi zhuangbei caigou xinxi wang), 117, 120 Opto-electronics, 47, 103 Ordnance Factory (OF), 132, 136, 139, 154 original equipment manufacturer (OEM), 145, 149 P-8 maritime patrol aircraft, 137 Paglin, Guy, 197 Pakistan, 5, 28, 135, 157 Panwar, Ravindra Singh, 158 peace dividend, 33, 39, 68, 70 Pentagon, 63, 83 People’s Liberation Army (PLA) as a client, 91, 96, 118–23, 127 civilian production, 100 and MCF, 88, 124 pursuit of advanced technology, 90 People’s War, 90, 98 Persian Gulf, 79, 206 Phalcon system, 137 Philco., see Ford Aerospace Phillips, 193 Pinaka rocket launcher, 153 Popeye missile, 174 Prakash, Arun, 141–2, 159 Pratt & Whitney, 41, 74 Project Maven, 82, 85–6 Putin, Vladimir, 5–6 Python missile, 174 quantum computing, 82 4IR, 1, 22, 210 and civil–military technological hierarchy, 7 and dual-use technology, 46

257 and India’s military doctrine, 158 and Israel’s pursuit of 4IR technologies, 194 and MCF, 36 and United States’ MCF, 86 and US military transformation, 81, 83 R-77 missile, 18 Rabin, Yitzhak, 174 RAD-Bynet, 191 Rafael, 172, 175, 177–8, 189, 191 Rafale, 136, 169 Raksha Udyog Ratnas (Champions of Industry) (RUR), 148 RAND Corporation, 76 Ray, Christopher, 40, 75 Reagan National Defense Forum, 80 research, development, testing, and evaluation (RDT&E), 56–7, 60, 92, 138 robotics and 4IR, 22 and China’s pursuit of MCF, 88, 113 and India’s military doctrine, 158 and Israel’s MCF, 193 and MCF, 36, 86 Roosevelt, Theodore, 53 Ross, Andrew L., 17 Rubin, Uzi, 185 Rufin, Carlos, 9 Rumsfeld, Donald, 77 Russia defense conversion, 39 foreign technological dependency, 223 high-tech industry, 9 and MCF, 9, 222 national strategy and 4IR, 5–6 Sa’ar-4/4.5 attack vessel, 173 Saab, 28, 40 Sagar Defence Engineering, 165 Samsung, 193 Sandia, 76 Saudi Arabia, 143, 206 Schwab, Klaus, 22 science and technology dual-use, 45, 47 private firms, 55, 65, 83 US investments in, 60 Scitex, 191 Scorpène-class submarine, 133 Scout UAV, 174 SEMATECH, 45, 70 semi-automatic ground environment, 63 Shafrir-1 missile, 172 Shaked warfare system, 184

https://doi.org/10.1017/9781009333290.009 Published online by Cambridge University Press

258

Index

Sherlock Biosciences, 81 Shin-Bet, 186 Shivalik-class frigate, 133 Shraberg, Aaron, 110 Sikorsky, 102 Silicon Valley and 3IR, 1 and CMI, 61–2 and MCF, 81 and spin-off technology, 30–1 Singh, J. P., 159 small- and medium-sized enterprises (SME), 7, 211 smartphone, 41, 184 solid-state electronics, 62 South China Sea, 79, 219 South Korea arms production and the state, 32 J/Vs in China, 107 private Sector’s R&D expenditure, 10 pursuit of advanced military technology, 17 technological relations with United States, 72 Soviet Union, 28, 32, 90, 131 space launch vehicle, 107 Spanish–American War, 29, 51 spin-off technology, 38–40, 217 during the Cold War, 63 and conversion, 103, 190 and Israel high-tech industry, 191 and nuclear sector, 114 spin-on technology, 41 and armament sector, 114 and China’s military modernization, 41–3, 94, 104, 107–8 before World War II, 59 during the 1990s, 72 in Israel, 199–201 spin-together technology, 20, 44 State Administration for Science, Technology and Industry for National Defense (SASTIND), 117–19 state capitalism, 11, 13 state-owned enterprise (SOE) and China’s defense industry, 90, 95–6 and India’s defense industry, 137 Stockholm International Peace Research Institute (SIPRI), 92–3, 134, 137 Strategic Partnership (Model), 151 Su-30MKI fighter, 136 Suman, Marinal, 141, 144 Sun Zi, see Art of War supply chain civilian companies’ participation in China’s defense production, 123

civilian companies’ participation in defense production, 7 Israel defense industry, 176, 180, 190 MCF and foreign infiltration to, 126 MCF and global technology decoupling, 222 Sweden, 26, 32, 40, 136 Switzerland, 10 Syria, 205 system-of-systems, 179, 197 T-55 tank, 131 T-72 tank, 131 T-80 tank, 169 Taiwan, 28, 32 Tarantul Corvette, 131, 134 Tata Group, 132, 153, 164, 211, 216 Technion, 194 Technology and Social Forecast Unit, 190 technology incubators, 1, 57, 107, 109, 216 Technology Reinvestment Project (TRP), 45, 71–2 Tejas fighter, 131, 136 telecommunication and 3IR, 21 and China’s MCF, 117 and CMI, 70 and spin-off technology, 30 Tencent, 12 terrorism, 5, 157 third offset strategy, 80–1, 220 Thirteenth Five-Year Special Plan for Science and Technology MCF Development, 47, 111 Tishler, Asher, 175 Tomer, 175 Toshiba, 193 Transforming the Defense Industrial Base: A Roadmap, 78 Trishul missile, 132 Tyroler-Cooper, Rebecca Samm, 42 unicorn (start-ups), 12–13 United Aircraft Corporation, 108 United States defense expenditures, 51, 60–2 foreign military sale (FMS), 174, 179 high-tech industry’s contribution to military R&D, 72 military challenge to, 79 military implications of 4IR, 86, 219–20 military technology and high-tech industry, 64–6 military-technological innovation strategy, 60

https://doi.org/10.1017/9781009333290.009 Published online by Cambridge University Press

Index unmanned aerial vehicle (UAV) 4IR, 24 and India’s CMI, 163 India’s arms imports, 137 Israel defense industry, 175 Israel’s arms production, 174 and United States’ MCF, 82 unmanned vehicles, 219 US Steel, 53 Uzi submachine gun, 172 Verma, Nirmal, 142 Vickers, 53 VideoRay, 81 Vietnam War, 69 Virtual Battle Space Mk.2 (VBS2), 82 virtual reality, 30, 82, 165 Visakhapatnam, 134 VizExperts, 165 Voss, Anthony, 38 Walsh, Kathleen A., 60 War of 1812, 51 Warsaw Pact, 33 warship and early RMA, 27 China defense industry’s reform and, 108 China defense industry’s weakness and, 103 and India’s CMI, 142 and modern defense industry, 26

259 and premodern CMI, 26 and United States’ CMI, 49 Washington Naval Treaty, 53 Westinghouse, 31, 62 wireless communication, 20, 30, 59, 65 Work, Bob, 81 World War I, 26–7, 29, 51, 53, 65 World War II, 65 and early CMI, 59 expansion of defense industry, 7, 27 and US defense industry, 29, 54 and US military development, 52 and US military-aircraft sector, 53 X-20 Dyna-Soar, 66 Xi Jinping initiation of MCF strategy, 19, 110, 210 personal commitment to MCF, 127, 214 prioritization of MCF strategy, 89, 210 XP-9 fighter, 53 Y1B-9 bomber, 53 Yaakov, Yitzhak, 192 Yaogan satellite, 108 yujun yumin (locate military potential in civilian capabilities), 41, 105 Zisapel, Yehuda, 191 Zisapel, Zohar, 191 Ziyuan satellite, 108 ZTE, 12

https://doi.org/10.1017/9781009333290.009 Published online by Cambridge University Press

https://doi.org/10.1017/9781009333290.009 Published online by Cambridge University Press