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Home | Update | LATEST ISSUE | Gallery | FR Profile | Datafiles | FR 5/98 FINANCIAL CRISIS FORCES ARMS SPENDING CUTS IN ASIA by Karl Schwarz Since the end of the Cold War in Europe the Asian Pacific region has developed into one of the most important markets for arms. According to the International Institute for Strategic Studies (IISS) the countries in this area have doubled their arms purchases in the last ten years. In 1995 and 1996 alone they spent over 28 billion US dollars. Their share in world wide arms imports was around 25 per cent and was only surpassed by the Middle East. Business is booming especially for American and European firms with a market share of 40 per cent each, but the Russians were also very successful. According to the US Arms Control and Disarmament Agency about 560 fighter jets, (among these 220 supersonic ones), and 250 helicopters were exported to East Asia between 1990 and 1995. Over 3000 guided weapons of various types were supplied as well. However, this boom is over for now. The financial crisis of the last few months has caused the buying power of some important target countries to collapse very suddenly. Currency de-valuations like the Philippines' 38 per cent to the US dollar, 50 per cent in Thailand, 54 per cent in South Korea or even 68 per cent in Indonesia, (these numbers applied in January 1998), cannot be compensated for. In addition there is pressure from the Word Bank and international currency funds, to curb arms spending as a precondition for billions of dollars worth of financial bailout. Whether governments will actually keep to these recommendations is doubtful, because the military are very influential in many countries. Also, spending on armaments is not always shown as part of the defence budget, but very often spread over other budgets and difficult to trace. However, it cannot be denied that decisive measures have to be taken. According to local press reports in Thailand, the air force has grounded 100 of its pilots in order to be able to supply the remainder with enough training hours. USAF General Eugene Santarelli stated that exercises planned for this year with countries in the region have to be cancelled, re-scheduled or carried out in a smaller framework. The Americans are trying to find a solution to a problem which has occurred regarding Thailand's order for eight Boeing F-18C/D Hornets. The country cannot afford the required 392 billion US dollars. At the moment it looks like the Americans will just buy the aircraft back for use in the Marine Corps. These circumstances make it impossible to even think of the planned purchase of transport and SAR helicopters or turboprop transports. In neighbouring Indonesia planned purchases have had to be cancelled as well. The purchase of twelve Suchoi Su-30MK and eight Mi-17V has been postponed indefinitely. However, business currently in progress like the handing over of further BAe Hawk Mk.209 or the modernisation of a dozen F-5E/F, will be completed. In Malaysia the Defence Secretary Syed Albar is acting according to the motto that everyone has "to cook on a low heat" for the next two or three years. In concrete terms this means that CSH-2-Rooivalk attack helicopters by Denel will not be purchased in the immediate future. A substitute for the S-61 is also not on the cards. The introduction of the Westland Lynx might, however, be possible. At least the country has already completed big purchases like those of the MiG-29 and F-18 fighter jets. On the other hand the Philippines are just about to look for a new fighter jet. At the end of March an invitation to tender will go out, and a decision is expected for the summer. However, there will be presidential elections in June, which will make this plan seem very optimistic. Claims that South Korea's KTX-2 trainer program will not be affected should be treated with caution. At least the development by Samsung and Lockheed is seen as a national priority. Other plans like the acquisition of an early warning system have been postponed. Luckily, there is not doom and gloom everywhere. Singapur for example has weathered the crisis well and has during the last few months purchased a further dozen F-16C/D as well as Russian Igla air defence rockets. Furthermore the air force's F-5E/F are being modernised. At the moment the acquisition of a new fighter helicopter is being looked into. Taiwan is economically comparatively stable and is continuing its purchasing program, (F-16, Mirage 2000 and US helicopters). Some plans like the purchase of further P-3 Orions have been postponed. On the whole we are faced with mixed prospects. During Asian Aerospace the manufacturers of military aircraft were putting a brave face on the situation. Gordon Page, President of the British SBAC stated that the region "is and will be a growth market if you take a long term view. All our member firms are convinced of this." His French colleague Edmond Marchegay of GIFAS thinks that the crisis will be overcome "in three years at the latest". Optimists only see a "very small slump" in the growth curve. If they are right or not, or whether there will have to be basic changes in defence planning of South East Asian countries, will be obvious in two years at the next Asian Aerospace. From page 24 of FLUG REVUE 5/98 Home | Update | LATEST ISSUE | Gallery | FR Profile | Datafiles | FR 5/98 Copyright 1998 by Motor-Presse Stuttgart. All rights reserved. Last updated April 7, 1998 FLUG REVUE, Ubierstr. 83, 53173 Bonn, Germany