Asia-Pacific spending up on defence

Asia-Pacific is the only region in the world that has seen a steady rise in defence spending over the past five years and the trend is likely to continue at the Singapore Airshow, which gets under way this week.

Singapore Airshow: Asia-Pacific spending up on defence

By Puneet Pal Singh

Business reporter, BBC News, Singapore

Throughout history, a region or country’s economic growth has often been followed by a rise in defence spending.

Asia-Pacific as a region is witnessing this phenomenon currently.

In fact, it is the only region in the world that has seen a steady rise in defence spending over the past five years and the trend is likely to continue at the Singapore Airshow, which gets under way this week.

“The centre of gravity of defence expenditure is expected to continue to shift towards Asia-Pacific in 2014, following the trend of economic expansion,” says Paul Burton, a director at IHS Defence.

The company expects Asia-Pacific to account for nearly 28% of global defence spending by 2020, up from 24% last year.

And most of this is being driven by two factors: fulfilling ambitions of global dominance and fears of heightened threats to their security.

‘Real power’

The surge is being led by China – its defence budget has risen each year for two decades and it is now the world’s second-biggest spender, behind the US.

Its spending is forecast to increase even further – hitting nearly $160bn (£98bn) in 2015 from $139bn in 2013, according to IHS Defence.

That would be more than Germany, France and the UK put together.

Observers say China’s spending is fuelled by its desire to have the status of being a “powerful” country.

“The idea is that real power for a country comes from having a strong military along with a growing economy,” says Richard Bitzinger, a senior fellow at S Rajaratnam School of International Studies.

“And China wants to be a leading geopolitical player.”

The rapid expansion in China’s economy has given the government enough resources to boost its defence expenditure without putting a strain on its finances.

Regional tensions

Beijing’s growing military might has triggered concerns among many of its neighbours, not least because of territorial disputes.

Tensions between China and Japan have escalated recently over a group of islands to which both lay claim.

Last month, Japanese Prime Minister Shinzo Abe said the two countries were “in a similar situation” to Germany and Britain just before the outbreak of World War One.

In response, China’s state-owned Xinhua news agency referred to Mr Abe as the “disgraced Japanese prime minister”.

There are also other territorial disputes in the South China Sea, with several countries including China, the Philippines, Brunei, Malaysia, Vietnam and Taiwan claiming competing sovereignty over islands, reefs and shoals.

Mr Bitzinger says these disputes, together with China’s growing strength, were prompting countries in the region to boost defence spending.

“A rising China changes the dynamics of security in the region and many countries think it will be detrimental to them,” he says.

“Over the past few years China has shown a tendency to become very aggressive, even belligerent on some fronts, when it comes to regional disputes.

“So countries are shoring up their defence budgets. They may not be able to match China’s might but they want to be equipped enough to deal with the uncertainty that China is causing.”

A survey conducted by Pew Research last year showed that the majority of respondents in countries such as Japan, South Korea, Australia and the Philippines thought that China’s growing military power was bad for their country.

‘Lucrative market’

With leading Asia-Pacific countries increasing their defence spending, the region has become a key market for firms specialising in the sector, not least because they face slowing demand in the US and Europe.

Even if China’s spending is taken out, the region’s defence expenditure is expected to overtake that of Western Europe by 2015.

“The portion of global defence represented by the West has and will continue to decrease over the near term,” says Guy Eastman, a senior analyst at IHS Defence.

There are likely to be many opportunities for firms – from supplying new equipment, technologies and aircraft to upgrading and maintaining the ones currently in use.

Japan has already announced plans to buy anti-missile destroyers, submarines, amphibious vehicles, surveillance drones and US fighter planes.

In the past few months, South Korea has agreed a multi-billion-dollar contract to buy 40 F-35 fighter aircraft from Lockheed Martin, and is looking to buy an additional 20 jets in the near future.

Seoul has also awarded a $1bn contract to BAE Systems to upgrade its current fleet of F-16 fighter jets. Meanwhile, Singapore and Taiwan are also looking to upgrade their fleet of F-16s.

As a result, there is a big contingent of defence contractors showcasing their technology to prospective buyers at the Singapore Airshow this week.

Analysts say that, given the growth in the region’s spending, it is an investment that is likely to pay off.

“Asia is a big, lucrative market,” says Mr Bitzinger. “They are in for a windfall.”

Source: BBC.