They do not have most of the know how etc. Mostly it is KDs. Same goes for vehicles as well.
I suspect ToT would depend on the end-user and the commercial terms.
So, for example, assume the Pakistan Army said it wants 1,000 MRAPs built in Pakistan with local content making up 75%+ of the value, and an ironclad commitment to buy them over 10 years.
In this case, Denel Land Systems or Paramount Group can talk to Pakistani investors to set-up a jointly-owned firm in Pakistan to take lead on the MRAP.
The two sides can survey Pakistan to see how much localization can happen right away. The companies supplying inputs to Toyota, Honda, etc, may make up 25% of the value right away. So, the issue would be the remaining 50% of the value. In some cases, it's out of the OEM's control so to speak because the engine comes from a third-party, like Germany or the UK.
But a 1,000 MRAP requirement may trigger enough interest to invest in manufacturing the engine in Pakistan, and who knows, the 3rd party engine OEM may invest to set it up in Pakistan itself. If not, someone will invest money in setting up capacity -- one way or another, we would manufacture engines and transmissions.
Basically, the key here is to (1) set-up a massive requirement over many years and (2) to invite the private sector to take lead and benefit from the economic benefits. In addition to the work (from Army orders), the private sector will want to own the IP and have the freedom to use it for other purposes (e.g., trucks, exports, etc).
Unfortunately, Pakistan's procurement processes are too rigid and half-hearted. There is no commitment to offsets nor an interest -- much less facility -- to tie-in the private sector. Instead, we're only fattening up HIT, POF, etc.
The issue with fattening up HIT, POF, et. al is that (1) it costs money that comes from the acquisition budget, (2) it costs money to maintain/support, and (3) it's usually not used to capacity. So, we end up spending money on jobs and capacity that we're not using, and this money comes from the defence budget (stated or hidden).
However, what we should be doing is offloading the defence industry capacity (or at least non-critical parts) to the private sector. HIT can focus on MBTs, but all wheeled LAVs, AFVs, MRAPs, etc, can go to the private sector.
These entities will spend on maintaining the capacity, and being profit-driven, they will use that capacity. So, if the domestic orders don't fill that capacity, they'll export (this is, of course, contingent on a proper export policy on the MoD's part). In effect, the private sector is (1) saving GHQ fiscal resources by up-keeping the production capacity and (2) earning Pakistan ForEx via exports.
Ideally, you'd pair the private sector production base with R&D. So, in its tenders the Pak Army can say, "10% of the contract value must go into Pakistani R&D." Going back to the engine example above, the investors could look to developing an engine in Pakistan by investing in R&D. In this case, not only are you on track to an engine, but massive IP generation (there are many parts to an engine), which you can license out for ForEx.
This is all from 1 hypothetical MRAP requirement. It's doable. Unfortunately, the decision makers in the MoD, MoDP, GHQ, etc, all lack the foresight and interest in nation-building to pull this off. As a result, we Pakistanis are routinely taken for a ride by big powers.
