Global defense contractors are circling for business in Asia, with countries from Australia to Vietnam upgrading and adding everything from submarines to fighter jets as China expands its military reach.
Defense budgets will keep rising, according to IHS Jane’s, which forecasts spending in the Asia-Pacific region will climb 23 percent to US$533 billion annually by 2020.
That would put it on par with North America, which is expected to account for one-third of global defense spending by then, from almost half now.
The figures reflect a shifting strategic dynamic, as China pushes for greater influence and the US seeks to preserve decades of dominance in the western Pacific. While military spending in Asia is coming off a low base — especially in Southeast Asia — and remains a relatively small proportion of GDP, nations that for years relied on old and at-times outdated ships and planes are starting to renovate their fleets.
“There is a wide-ranging need for modernization across most of the armed forces in the region,” said Dan Enstedt, chief executive officer of Saab Asia Pacific, whose products include submarines, missiles, radars and fighter jets. “There are many examples of old and increasingly obsolete equipment fleets that are unable to keep pace with changing national security needs.”
Military outlays in Asia and Oceania — which includes Australia and New Zealand — grew 5.4 percent last year, outpacing a 1 percent rise in global spending, according to the Stockholm International Peace Research Institute.
Indonesia boosted spending last year by 16 percent, the Philippines by 25 percent and Vietnam by 7.6 percent.
“The unusual thing about Asia is that it is bucking the global trends,” said Richard Bitzinger, who studies military modernization as a senior fellow at the S. Rajaratnam School of International Studies in Singapore. “The trend is generally upward, though a lot of countries are erratic.”
Much of the spending is on air and naval capacity amid China’s assertiveness in the East China Sea, where it claims islets contested by Japan, and the South China Sea, where its land reclamation program has spooked other claimants, which include Taiwan.
“The growth of China’s national power, including its military modernization, means China’s policies and actions will have a major impact on the stability of the Indo-Pacific,” according to Australia’s Defence White Paper, published in February.
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