Low oil prices help Asian nations top up their defence budgets

(MENAFN- Gulf Times) With record-low oil prices, oil-importing countries in East and Southeast Asia are not only expecting positive net effects on their economy, but are now also able to top up their military and defence budgets at a faster pace than originally planned. In particular, key markets in the region such as China, Indonesia, Malaysia and South Korea are all seen to positively adjust their defence spending to the windfall of saved money from hydrocarbon imports, according to US-based industry data analyst firm IHS.

This development comes on top of already strong defence expenses over the past years. In April 2014, the Stockholm International Peace Research Institute (SIPRI) said in its annual global military spending report that military expenditures in Southeast Asia (with the exception of Cambodia. Laos, Myanmar and Brunei) have climbed steadily, from $14.4bn in 2004 to $35.5bn in 2013, a 147% increase within a decade, and between 2012 and 2013 alone, regional military expenditures increased by 10%. SIPRI estimated that expenditures are likely to surpass $40bn by 2016. As for China, military expenditure has increased from $40bn in 2004 to $188bn in 2013, a five-fold increase in a decade.

Drivers of the spending spree are, one the one hand, the region's aim to decrease their dependence on foreign military support from the US or Europe and to modernise outdated military equipment. But the enhancement of military capacity is also rooted in increasing regional tensions such as the South China Sea conflict, as well as combined security goals of the Association of Southeast Asian Nations (Asean). Conflict potential is also inherent in the frequent Thai-Cambodian border clashes and in the occasional intrusions of southern Philippine insurgents in eastern Malaysia.

Lately, the region has seen a number of large-scale military equipment purchases as defence manufacturers from the US, Europe and Russia are eager to sell to the region while other markets such as the Middle East or Latin America are turning sluggish. Vietnam just bought a couple of brand new submarines from Russia, Indonesia purchased German tanks and Boeing Apache attack helicopters, and Thailand's government has just approved a plan to acquire new light attack aircraft to replace its aging Czech-made Albatros fighter jet fleet, just to quote a few examples. The countries are also increasingly turning to Asian-made weaponry and army equipment, such as Japanese attack helicopters, South Korean-made aircraft carriers and various equipment from China, a country which just earlier in December has impressively shown that it is already at a technological level to manufacture stealth fighters that could even be sold to Iran and Pakistan.

Consultancy McKinsey & Company in its Southeast Asia Defence Report 2014 released earlier this year shows that Southeast Asia already makes up the second largest defence import market behind India, with Singapore, Malaysia, Vietnam and Indonesia being the top buyers. "Warships, maritime patrol aircraft, radar systems and combat planes, along with submarines and naval defence systems, were high on procurement lists," the study says.

Up until 2020, Southeast Asia and the wider Asia-Pacific region "is expected to solidify its role as the key driver of growth in the defence sector," says Fenella McGerty, senior defence budgets analyst at IHS Aerospace & Defence, while she asserts that oil-exporting Middle Eastern countries will have to trim their military expenditure - after a period of strong growth - in accordance with their constrained budgets that are impacted by declining returns from the hydrocarbon sector.