ASEAN Defence Procurement
ASEAN countries are increasing their Defence spending in-line with their economic growth. This market insight focuses on procurement trends by armed forces in five key ASEAN countries, namely; Malaysia, Singapore, Indonesia, Thailand and Philippines. With increasing economic development and geopolitical instability in the region, certain countries have been engaging in procurement programs to better equip their forces. Increasing military modernization programs undertaken by developing countries is one of the main trends driving Defence spending in the region. Acquisition of UAVs, armored vehicles, ships and aircrafts by many nations will continue to be the focus of procurement within the region and is expected to contribute to a majority of Defence procurement spending till 2020. Figure 1 shows Defence budgets from 2012 to 2020 by 5 key countries in the ASEAN region.
As of 2012, Singapore and Indonesia collectively contributed close to 57% of the total ASEAN Defence spending. Defence spending for the five ASEAN countries is expected to reach US$61.6 billion by 2020 from US$29.3 billion in 2012, growing at a CAGR of 9.8% during the forecast period. Much of this spending is expected to be driven by Indonesia, whose Defence spending will increase at 17% CAGR during the period. By 2020, Indonesia will contribute close to 40% (US$24.62 billion) of ASEAN Defence spending followed by Singapore and Thailand having 23% and 17% of Defence spending respectively.
Details on procurement programs being entered into by some countries are as follows:
Indonesia: Indonesia has a Defence budget of US$7.01 billion in 2012 of which procurement spending is expected to be 34%. The country is currently in plans to obtain over 100 Leopard 2A6 Main Battle Tanks for the army, replace 2 of its Cakra class submarines for the navy and acquire 8 Embraer EMB 314 Super Tucano aircraft from Brazil among some its major procurement plans. Indonesia’s Defence spending is expected to reach US$24.62 billion by 2020.
Singapore: The country has a Defence budget of US$9.73 billion in 2012 of which procurement spending is expected to be 10%. The country is planning to acquire light armored vehicles such as the Bionix Armored Fighting Vehicle (AFV) and the M113 Armored Personnel Carrier for their army, stealth frigates and landing platform dock ships for their navy and technologically advanced aircraft and ordnance such as UAVs, aerial re-fuelling tankers, strategic airlifters, precision-guided air-to-air munitions, and other stealth aircraft for their air force. Singapore’s Defence spending is expected to reach US$13.94 billion by 2020.
Malaysia: Defence spending in the Malaysian armed forces is expected to be driven by the procurement of 257 8x8 wheeled APC vehicles for the army between 2012 to 2018, multi-purpose support ships for the navy, and replacement of MiG-29 aircraft by about 18 MRCA aircraft along with other helicopter purchases for the air force.
With increasing Defence budgets regionally and Defence modernization programs being undertaken by surrounding Asian countries such China and South Korea, ASEAN countries are acknowledging the need to increase their Defence capabilities to strengthen their security in the regional conflicts taking place. Overall, the ASEAN region is poised for high growth in Defence spending and military procurements from 2012 to 2020. With the increasing technological advancement and economic developments in the region as well as the rising need to replace obsolete technology, Defence spending in the ASEAN region is expected to grow steadily throughout the decade.
