Analysis of Pakistan-Indonesia Defense Deal and Global Defense Market Landscape

Based on the collected information, I will provide you with a systematic and comprehensive analysis report.

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According to an exclusive Reuters report dated January 12, 2026, Indonesia’s Minister of Defense met with the Chief of the Pakistan Air Staff in Islamabad, where the two sides held in-depth discussions on a potential deal involving

[1]. According to three informed security officials, the negotiations have entered an and involve the procurement of more than [1]. Indonesia has also expressed strong interest in Pakistan’s .

The JF-17 Thunder (codenamed “Xiaolong” by China) is a multi-purpose combat aircraft jointly developed by Pakistan and China. This deal marks the first time Pakistan’s defense industry has become the primary exporter of a large-scale weapons system of this magnitude. Pakistan signed defense agreements

in the 2024-25 fiscal year, and is rapidly emerging as a regional defense equipment supplier[2].

: Indonesia’s Air Force fleet faces severe aging issues and is in urgent need of modernization. In recent years, the Indonesian government has actively pursued a “defense autonomy” policy, hoping to reduce its reliance on traditional Western weapons suppliers. The JF-17 has emerged as an ideal choice due to its cost-effectiveness[1].

: Pakistan views defense exports as a key catalyst for long-term economic stability. Previously, Pakistan signed a weapons deal with Sudan (including 10 Karakoram-8 light attack aircraft and over 200 UAVs), a agreement with the Libyan National Army, and has marketed Super Mushshak trainer aircraft and JF-17 fighter jets to Bangladesh[2].

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The global defense market is in a period of historic expansion, with all major segments showing strong growth momentum:

Market Segment	2025 Size	2030 Size	Compound Annual Growth Rate (CAGR)
Global Military UAVs	$26.12 Billion	$40.56 Billion	9.2%
Asia-Pacific Missile Market	$3.69 Billion	$6.26 Billion	11.1%
Integrated Air Defense Systems	$37.94 Billion	$68.38 Billion	12.5%

Data Source: MarketsandMarkets industry research report[3]

This deal reflects

in the competitive landscape of the global defense market:

: For a long time, the global defense market has been dominated by the United States (Lockheed Martin, Boeing, Raytheon), Europe (BAE Systems, Airbus, MBDA), and Russia (Rosoboronexport). The rise of Pakistan as an emerging supplier means .

: The JF-17 fighter jet is a joint development by Aviation Industry Corporation of China (AVIC) and Pakistan. Its successful export means Chinese defense technology is being indirectly exported through the “Pakistan channel”. The U.S. Department of Defense’s 2025 China Military Power Report states that Beijing is laying the groundwork for new export orders for at least 3 fighter jet models (FC-31, J-10C, JF-17)[4].

: Pakistan has adopted a model of “technology licensing + joint production + independent export”. Not only has it obtained technology transfer from China, but it has also established a complete defense industrial system. This model may be emulated by other emerging countries.

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Arms procurement by emerging market countries is accelerating, driven primarily by the following factors:

Driver	Specific Manifestations
Geopolitical Tensions	Escalating military standoffs in the Indo-Pacific region; Southeast Asian countries accelerating military modernization
Demand for Defense Autonomy	Reducing reliance on Western suppliers; pursuing technological autonomy
Cost-Effectiveness Considerations	Weapons systems provided by China and Pakistan have significant price advantages
Diversified Procurement Strategy	Diversifying procurement sources to avoid over-reliance on a single supplier

shows significant growth momentum:

• Indonesia: Planning to procure next-generation fighter jets and UAVs
• Vietnam: Actively advancing naval and air force modernization
• Philippines: Strengthening maritime defense capabilities
• Thailand: Upgrading army equipment levels

remains active:

• Pakistan: Significant growth in defense export volume
• India: Annual defense investment growth expected to reach 20%
• Bangladesh: Deepening defense cooperation with Pakistan

According to data from Global Market Insights,

, with a regional CAGR of 5.58% for the small arms market[5].

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:

• Lockheed Martin (NYSE: LMT)
  : Delivered a record 191 aircraft in 2025 and secured Lot 18 and 19 orders valued at $24.3 billion[6]
• Northrop Grumman (NYSE: NOC)
  : Saw its stock price rise nearly 37% over the past year; the B-21 Raider program has entered an accelerated production phase[6]
• Raytheon Technologies (NYSE: RTX)
  : Maintains a leading position in missile and air defense systems

:

• Aviation Industry Corporation of China: Indirectly expands market influence through the JF-17 program
• Pakistani defense enterprises: Becoming large-scale weapons system exporters for the first time
• Turkish Aerospace Industries: Bayraktar UAV series continues to sell well

:

1. Asia-Pacific Defense Modernization
   : Arms procurement by India, Indonesia, Vietnam and other countries provides continuous orders for defense enterprises
2. UAV Market Expansion
   : The global military UAV market has a CAGR of 9.2%, which is higher than the growth rate of the overall defense market
3. Integrated Air Defense Systems
   : Boasts a CAGR of 12.5%, making it one of the most promising segments
4. Supply Chain Localization
   : Countries such as Japan and Australia are promoting local assembly, driving growth for related supply chain enterprises

:

1. Geopolitical Uncertainty
   : Great power competition may affect export licenses and market access
2. Supply Chain Bottlenecks
   : The industry faced issues such as delayed TR-3 upgrade deliveries in 2025
3. Technology Transfer Restrictions
   : Exports of advanced weapons systems are subject to national control policies
4. Customer Credit Risk
   : Some emerging market countries face insufficient payment capacity

Catalyst	Impact Analysis
NATO’s 3% GDP Defense Spending Target	Will significantly expand demand in the European market
Indo-Pacific Arms Race	Accelerated procurement by Indonesia, the Philippines, Vietnam and other countries
Proliferation of UAV Tactics	More countries seeking to acquire armed UAV capabilities
Demand for Air Defense System Upgrades	Large-scale replacement of aging air defense systems is needed

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1. The Pakistan-Indonesia Defense Deal
   is a landmark event marking the rise of defense industries in emerging market countries, signifying profound changes in the global defense market landscape.
2. The Asia-Pacific region
   will become the fastest-growing defense market in the world over the next decade, with compound annual growth rates generally exceeding 10%.
3. UAVs and air defense systems
   are the two segments with the highest investment value, benefiting from tactical proliferation and modernization demand respectively.
4. A
   diversified supplier landscape
   is taking shape; China is achieving technology export through channels such as Pakistan, and traditional defense giants are facing more intense competition.

For investors focused on the defense sector, the following investment themes are recommended:

• U.S. Defense Leaders
  : Lockheed Martin, Northrop Grumman, Raytheon Technologies, etc., which have technological and scale advantages
• Asia-Pacific Defense Suppliers
  : Local enterprises such as Mitsubishi Heavy Industries (Japan) and Hanwha Defense (South Korea) benefit from regional procurement
• Specialized UAV Manufacturers
  : General Atomics, AeroVironment, etc.
• Demand for Technological Upgrades
  : Modernization opportunities brought by the replacement of aging equipment

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[1] Reuters - “Exclusive-Pakistan and Indonesia closing in on jets and drones defence deal” (https://www.internazionale.it/ultime-notizie-reuters/2026/01/12/exclusive-pakistan-and-indonesia-closing-in-on-jets-and-drones-defence-deal-sources-say)

[2] The Straits Times - “Pakistan nears $1.5 billion deal to supply weapons, jets to Sudan” (https://www.straitstimes.com/asia/pakistan-nears-15-billion-deal-to-supply-weapons-jets-to-sudan-sources-say)

[3] MarketsandMarkets - “Aerospace and Defence Market Research Reports” (https://www.marketsandmarkets.com/aerospace-defence-148.html)

[4] Storm Media Group - “China’s 3 Fighter Jet Models Expected to See Surge in Exports; U.S. DoD Reveals ‘Clients Not Limited to Pakistan’” (https://www.storm.mg/article/11091246)

[5] Mordor Intelligence - “Small Arms Market - Industry Research & Share | 2025 - 2031” (https://www.mordorintelligence.com/industry-reports/small-arms-market)

[6] FinancialContent Markets - “The Trillion-Dollar Era: Defense Giants Surge as Global Rearmament Hits Overdrive” (https://markets.financialcontent.com/wral/article/marketminute-2026-1-12-the-trillion-dollar-era-defense-giants-surge-as-global-rearmament-hits-overdrive)