Decades after Bofors, Sweden-India look to revive defence ties

Almost 34 years after the Bofors scandal hit India and Sweden, the Scandinavian country is looking to revive the past ties as the country’s defense industry looks to tap into the world’s largest military spender-India. Leading this initiative is Saab -- Sweden’s largest weapons manufacturer that is offering Make in India, tech transfer and partnership with local companies.

“Saab is looking at the Indian Industry as our potential partner in product development for the world market. Our plans in India are based not just on selling products but on creating a defense eco-system, which would involve hundreds of Tier-1, 2 and 3 partners, vendors and suppliers”, said Jan Widerstrom, Chairman SAAB India in an email to ET.

"Saab would incubate partnerships between its global supply chain and Indian suppliers, besides fostering R&D partnerships for next-generation platform, system and sub-system design and development across the industry,"Widerstrom said.

In April this year, when Indian Prime Minister Narendra Modi visited Stockholm, it was a first visit by an Indian head of state in 30 years. The Bofors scandal in 1984 hit the then Indian Prime Minister Rajiv Gandhi and his Congress party for allegedly receiving kickbacks over the sale of 410 field howitzer guns. This scandal had created a dent in the diplomatic relations between both the countries. However, the two-day trip by PM Modi was seen as an indication that both the countries have perhaps put the ghosts of the Bofors behind and looking at new beginnings in trade, specifically in areas of defense.

With the emergence of a new global world order, the alliances post the cold war have also seen a shift. For India that traditionally relied on Russia for its defense procurement, the cozying up of the former soviet country to China has meant that India scouts for new partner in the West. For Swedish defense industries, which is chained by the export policies that limits the countries where it can trade with, India, being the largest democracy in the world, becomes a convenient partner.

Saab is wooing India by offering to share technology to manufacture its latest range of its jets, the JAS 39 Gripen in partnership with India’s Adani Group.

SAAB plans to bid for the Indian Air Force’s recent Request For Information (RFI) for jet fighters. The IAF is looking to buy 110 fighter jets that will be made in India.

“A collaboration between Saab and Adani will combine the technical and product excellence of Saab and mega project execution capabilities of Adani with the intention to manufacture defence systems locally in India”, said Saab's Widerstrom . When asked about the investments, Saab said that the size of investments would depend on the nature of the fighter aircraft procurement order and the requirements of the government.

In search of new partners ::

Sweden, through Saab, has been looking to sell its jets in emerging markets like Brazil and South Africa where it offered attractive trade benefits and price. In Brazil, Saab has promised a fixed price, irrespective of any eventuality during the course of production. In South Africa, it has promised to buy as much or more than the price of the jets from the country, analysts say.

Siemon Wezeman, Senior Researcher from Stockholm International Peace Research Institute (SIPRI), said this renewed eagerness towards trade relations with India is also due to its own domestic compulsions. “Sweden’s arms industry can no longer rely on the domestic market because it has decreased its defense budget since cold war, and hence exports has become a way to keep its defense industry alive”, Wezeman told ET. The combined size of Swedish defense companies is estimated to be around $10 billion, though much smaller than the US or other European counterparts, yet these companies are one of the largest providers of employment and revenue for the country with a 10 million population.

As development of large and sophisticated weapons becomes expensive, finding partners for future projects and future development is very important for Sweden, according to Wezeman. He adds that for such future projects Sweden has to have clear indications on where they can sell and needs preferably to know about the partners before they start developing or co develop the equipment, this is why India has emerged as important ally for Sweden.

In 2015 Sweden’s Inspectorate of Strategic products the government body that controls defense exports approved eight applications from Swedish companies to enter into agreements involving the granting or transfer of manufacturing rights outside Sweden. India, Brazil and United States were only three countries who received the transfer.

“Given the size of Indian defense market and being a democracy, India is a very important country to trade with for countries from Europe”, said Rajeswari Pillai, Senior Fellow at the Observer Research Foundation, a think tank.

Between 2013-2017 SIPRI data shows that India was the world’s largest importer of major arms this accounted for 12 per cent of the global deal. Of these total imports, Russia accounted for 62 per cent of the country's arms imports. However, arms imports from the USA to India rose by 557 per cent between 2008–12 and 2013–17, making it India’s second largest arms supplier.

Pillai who specializes in Nuclear and Military studies said India’s attractiveness for global defense companies is also because the country has been diversifying on who it partners with for its defense procurement. Though Indian has traditionally relied on Russia for its military purchases, that relationship has gone through a significant change post 90s. According to Pillai this is because sensitivity from the Russian side towards India is waning. “India deployed MKI 230 jet from Russia in its borders surrounding China, but at the same time Russians have given out MKI 235 a better version of the jet to Chinese. So India has realized that it needs other countries whom it should rely on,” Pillai adds.

The other defense partners who are softening to India are companies like Lockheed Martin, the world's largest defense corporation that in 2017 announced a JV with India's Tata to make their F16 jets in India specifically for the government need. This JV materialized despite the reluctance of American arms manufacturer to share their technology outside the country.

Robin Sukia who heads the Sweden India Business Council in Stockholm thinks that Swedish defense companies are not sharing their technology just because they are desperate to sell their aircrafts, but it is a strategy to co-develop products for future markets. “So something like this Saab started even before he government started talking about it. To co-develop in India, the technology transfer, understanding local engineering which can be used in other market”. Saab this year celebrated 40 years of partnership with India’s Armed Forces and Industry, through a technology partnership with the Ordnance Factory Board on the Carl Gustaf System- the company’s notable shoulder-launch weapon’s system.


Great incentives, but will the deal ever take off?

The desperation of companies like Saab to look for new markets, and Sweden’s own foreign policy of doing business with democracy such as India perhaps has a bigger roadblock than its past affairs like the Bofors scandal, experts feel.

The biggest deterrent in doing business in Indian defense experts say is the extremely slow decision-making process by the government officials that often drags for 10-15 years. Sukia of SIBC says that besides the large defense players, there many SMEs in Swedish defense space who are interested in India, but it is extremely expensive for them to enter because of the long-time frame.

“The main feedback from Sweden is that it takes too long to sell in India and that means if you look at from my perspective, if you look at other markets these companies who have great technologies they have to make a call on should I look at India in a 10-15 year period or shall I look at other market which has a 3-5 year period”, Sukhia said.

Airtarget AG, a Swedish SME that specializes in the Scoring technology that helps in precision shooting during combat said that it has learnt over the years that it takes patience to do business in India. “I am trying to convince my Board to set aside a separate budget only for India”, said Babak Hashemi who heads the sales for India and Middle East region.

Pillai from ORF however has a much more alarming view. She says irrespective of the country that we are dealing with, India’s Ministry of Defense (MOD) over the years has been extremely slow in procuring equipment’s. Once must look at the Rafale purchase to understand the tedious process, the agreement was officially announced in 2000 by the then Vajpayee government which was later signed in 2012 by the Congress government and the final agreement to acquire them came only in 2014 when Prime Minister Modi visited France.

“The red tape in defense procurement is high and folks in MOD have no clue on the urgency. This is a serious issue as it leaves India in a vulnerable position compared to countries like China or Pakistan," Pillai concludes.

 economictimes