2012 ASEAN Defense Procurement Asia Pacific Market InsightsFrost & Sullivan’s commentary on the Aerospace & Defense market addressing opportunities, best practices, and major events “We accelerate growth”
ASEAN Defense ProcurementASEAN countries are increasing their defense spending in-line with their economic growth. This marketinsight focuses on procurement trends by armed forces in five key ASEAN countries, namely; Malaysia,Singapore, Indonesia, Thailand and Philippines. With increasing economic development and geo-political instability in the region, certain countries have been engaging in procurement programs to betterequip their forces. Increasing military modernization programs undertaken by developing countries isone of the main trends driving defense 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 isexpected to contribute to a majority of defense procurement spending till 2020. Figure 1 shows defensebudgets from 2012 to 2020 by 5 key countries in the ASEAN region. Figure 1: Defense Spending by ASEAN countries (2012 - 2020) As of 2012, Singapore and Indonesia 70 12% collectively contributed close to 57% of the total ASEAN defense spending. Defense Defense Spending ($ billions) 60 10% spending for the five ASEAN countries is 50 expected to reach US$61.6 billion by 2020 8% Philippines from US$29.3 billion in 2012, growing at a 40 CAGR of 9.8% during the forecast period. 6% Malaysia 30 Much of this spending is expected to be Indonesia 4% driven by Indonesia, whose defense 20 Thailand spending will increase at 17% CAGR during Singapore 10 2% the period. By 2020, Indonesia will Growth contribute close to 40% (US$24.62 billion) 0 0% of ASEAN defense spending followed by 2016 2012 2013 2014 2015 2017 2018 2019 2020 Singapore and Thailand having 23% and Source: Frost & Sullivan 17% of defense spending respectively.Details on procurement programs being entered into by some countries are as follows: Indonesia: Indonesia has a defense 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 defense spending is expected to reach US$24.62 billion by 2020. Singapore: The country has a defense 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 defense spending is expected to reach US$13.94 billion by 2020. Malaysia: Defense 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 defense budgets regionally and defense modernization programs being undertaken bysurrounding Asian countries such China and South Korea, ASEAN countries are acknowledging the needto increase their defense capabilities to strengthen their security in the regional conflicts taking place. Overall,the ASEAN region is poised for high growth in defense spending and military procurements from 2012 to2020. With the increasing technological advancement and economic developments in the region as well asthe rising need to replace obsolete technology, defense spending in the ASEAN region is expected to growsteadily throughout the decade.