Defence spending trends in Maritime Southeast Asia and Greater Asia are summarised on the following two pages and examined in depth overleaf.
Maritime Southeast Asia
Defence spending for 2012 in the seven largest Southeast Asian states plus Australia is plotted in Figure 5.8 and further detailed in Table 5.3. Two points are worth making.
(1) Australia outspends any of its neighbours by a comfortable margin. (2) Only Singapore shows any real sign of strategic angst, with a GDP share of 3.44%. Note that changes to reporting make New Zealand defence spending data difficult to track.
Figure 5.8: Defence spending 2013 in Maritime Southeast Asia
Source: IISS, The Military Balance 2014.
Table 5.3: Defence spending 1990 to 2013; Maritime Southeast Asia
New Zealand Vietnam Philippines Malaysia Indonesia Thailand Singapore Australia
2013 defence spending as
a share of GDP 1.48% 2.44% 0.78% 1.52% 0.89% 1.46% 3.44% 1.63%
Average annual defence spending growth 2000 to 2013
- -3.7% 3.6% 4.8% 6.5% 3.8% 2.1% 2.8%
Average annual defence spending growth 1990 to 2000
-3.4% - -1.4% 3.5% 2.6% -1.4% 6.0% 1.6%
Sources: GDP share taken from IISS, The Military Balance 2014, defence spending growth is measured in own currency.
0 5 10 15 20 25 30
Philippines New
Zealand Vietnam Malaysia Thailand Indonesia Singapore Australia
billion 2013 US$
169 Greater Asia
Defence spending for 2012 in the six largest Greater Asian states plus Australia is plotted in Figure 5.9 and further detailed in Table 5.4 (Note: US figures have been scaled to fit). Several points are worth making. (1) Australia is a minnow in the tank of North Asian security.
(2) Only India and South Korea shows any real sign of strategic concern with GDP shares of around 2.0% and 2.5% respectively. (3) Taiwan and Japan are allowing their defence capabilities to atrophy, notwithstanding that Taiwan’s GDP share remains above 2%.
(4) Although China devotes less than 1.3 % of GDP to Defence, it has been increasing its defence spending at an impressive rate over the past two decades.
On the basis of defence spending, it is clear that the balance of military power in the region is slowly shifting from the United States and its allies to China.
Figure 5.9: Defence spending 2013 in Greater Asia
Source: IISS The Military Balance 2014
Table 5.4: Defence spending 1990 to 2012; Greater Asia
Taiwan Australia South Korea India Japan China United States
2013 defence spending as
a share of GDP 2.08% 1.63% 2.53% 1.84% 0.99% 1.24% 3.70%
Average annual defence spending growth 2000-2012
-1.8% 2.8% 3.4% 3.4% -0.1% 12.6% 4.4%
Average annual defence spending growth 1990-2000
1.4% 1.6% 2.6% 4.6% 0.9% 7.6% -2.7%
Sources: GDP share taken from IISS, The Military Balance 2014, defence spending growth is measured in own currency.
0 20 40 60 80 100 120 140
Taiwan Australia South Korea India China United States x
1/5
billion 2013 US$
170
Regional economic and defence spending trends – the details
The least ambiguous way to track relative changes in the size of a country’s economy is to adjust its GDP in local currency to a single base year using its GDP-deflator. Similarly, the least ambiguous way to track relative changes in defence spending is to adjust spending in local currency to a single base year using its CPI index.
With ‘real’ GDP and defence spending so calculated, the relative growth between countries can be compared by normalising the initial values in the base year. This has been done for a selection of countries in Maritime Southeast Asia and Greater Asia in Figures 5.10 and 5.11.
Data sources for these and subsequent graphs are listed at the end of this section.
Figure 5.10: Relative economic and defence spending growth, Maritime Southeast Asia
0 100 200 300 400 500 600 700 800 900 1000
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Relative increase in real GDP - local currency
Australia Indonesia
Malaysia New Zealand
Philippines Singapore
Thailand Vietnam
2008 Global Financial Crisis
1997 Asian Financial Crisis
0 100 200 300 400 500 600
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Relative increase in real defence spending - local currency Australia Indonesia
Malaysia New Zealand
Philippines Singapore
Thailand Vietnam
171
It’s clear that developing countries have achieved faster economic growth than their more-developed counterparts. China in particular has achieved spectacular economic growth since the early 1990s—though its military spending did not take off until around a decade later.
Among the countries of Maritime Southeast Asia, Singapore has managed steady economic growth which has been reflected in a similar trend in their defence spending. In comparison, our closest neighbour, Indonesia, has achieved healthy economic growth but has not seen the need to increase its defence spending.
The impact of the 1997 Asian Financial Crisis is apparent in Figure 5.10 and to a lesser extent in Figure 5.11.
Figure 5.11: Relative economic and defence spending growth in Greater Asia
0 500 1,000 1,500 2,000 2,500
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Relative increase in real GDP - local currency
Australia China India Japan South Korea Taiwan
United States 1997 Asian
Financial Crisis
2008 Global Financial Crisis
0 100 200 300 400 500 600 700 800
1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Relative increase in real defence spending - local currency Australia
China India Japan South Korea Taiwan United States
172 Comparative economic performance
Comparing the relative size of economies (as opposed to the relative rate of growth in size) requires converting the domestic currencies involved to a common currency. In practice, this is performed in one of two ways; either by converting to US dollars at prevailing market exchange rates, or by using the World Bank’s Purchasing Power Parity (PPP) exchange rates which attempt to capture the buying power of the currency within the country it is used.
Typically, PPP exchange rates yield a significantly larger figure for developing countries than market exchange rates. By construction, PPP exchange rates are normalised relative to the US dollar. Figures 5.12 and 5.13 plot national GDP at market exchange rates and PPP for Maritime Southeast Asia and Greater Asia respectively.
Figure 5.12: Comparative economic performance, Maritime Southeast Asia
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Real GDP (billion 2000 US$)
Australia
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Real GDP (billion 2000 PPP$)
Australia Indonesia
173
Whether market exchange rates or PPP exchange rates present a more accurate picture of comparative economic performance is debatable. In some sense, they provide
complementary views of what is occurring. That said; the substantial volatility of international exchange rates (which are driven more by near-term financial factors than long-term economic fundamentals) introduces large transient vagaries into time-series. For example, the rapid rise of Australian GDP in terms of US$ in Figure 5.11 and the oscillation of Japanese GDP in terms of US$ in Figure 5.13 are both artefacts of exchange rate fluctuations rather than any reflection of actual changes in economic performance. Note that in Figure 5.13 the size of the United States economy has been scaled by a factor of ten to
accommodate it on the chart without compressing the data for other countries.
Figure 5.13: Comparative economic performance in Greater Asia
0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Real (GDP 2000 US$)
Australia China India Japan South Korea Taiwan
United States x 20%
2008 Global Financial Crisis
1997 Asian Financial Crisis
0 2,000 4,000 6,000 8,000 10,000 12,000
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Real GDP (billion 2000 PPP$)
Australia China India Japan South Korea Taiwan
United States x 10%
174
Comparative defence spending—Maritime Southeast Asia
Just as was the case with GDP, comparing the level of defence spending between countries requires conversion to a common basis, usually either US$ or PPP$. In terms of maintaining modern high-tech military capabilities, spending expressed in US$ is probably a better comparative measure. Conversely, the cost of maintaining a large low-tech defence force is probably better compared using PPP exchange rates. Figures 5.15 and 5.16 plot defence spending in Maritime Southeast Asia from 1980 to the present in terms of US$ and PPP$
respectively.
The only countries to consistently and significantly increase their defence spending post-Cold War are Australia, Singapore and Vietnam. All the others have either decreased their spending or are still working to recover ground lost in the 1997 Asian Financial Crisis. An equally sanguine picture emerges from the trends in the share of GDP devoted to defence.
The long-term trend for all the countries of Maritime Southeast Asia is one of declining defence burden, see Figure 5.14. Even for those countries with the fastest growth—
Singapore and Australia—GDP share has not been growing by an appreciable amount in recent years.
In contradicting those who discern a ‘regional arms race’, there is little in the defence spending patterns of Maritime Southeast Asia to support such a conclusion. Given that the cost of high-tech military equipment is increasing by around 4% above inflation every year, it is hard to see how anyone other than Australia and Singapore can afford to modernise or significantly expand their air and naval assets on present spending trends.
Figure 5.14: Defence burden, Maritime Southeast Asia
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Australia Indonesia Malaysia New Zealand Philippines Singapore Thailand Vietnam
175
Figure 5.15: Real defence spending (2000 US$), Maritime Southeast Asia
Figure 5.16: Real defence spending (2000 PPP$), Maritime Southeast Asia
0 5 10 15 20 25
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Real defence spending (2000 US$)
Australia Indonesia
Malaysia New Zealand
Philippines Singapore
Thailand Vietnam
1997 Asian Financial Crisis
0 2 4 6 8 10 12 14 16
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Real defence spending (2000 PPP$)
Australia Indonesia
Malaysia New Zealand
Philippines Singapore
Thailand Vietnam
176 Comparative defence spending—Greater Asia
A somewhat more interesting picture emerges of defence spending in Greater Asia and the United States. The strongest and clearest trend has been the steady and substantial decline in the defence burden carried by countries since 1980, see Figure 5.17. The only countries to exhibit a significant rise in defence burden in the nearer term (albeit limited compared with historical levels) are China from the late 1990s and the United States from 2001 onwards.
In terms of absolute spending levels (see Figures 5.18 and 5.19) several points are worth making. China’s defence spending has grown appreciably by any measure. The United States remains far ahead of any other country but spending is set to slow. India’s defence spending continues to rise as does South Korea’s. Taiwan has given up.
Unlike Maritime Southeast Asia, it is clear that the military balance of power is slowly but surely shifting among Greater Asia and the United States—at least to the extent that defence spending translates into military capability. China has comfortably overtaken Taiwan, South Korea and India, and recently Japan. Critically, the Chinese spending figures presented here are taken from official sources and are deemed by many observers to understate the true picture. The US Pentagon report to Congress on Chinese military power has argued that defence spending by the People’s Republic is appreciably larger than disclosed.
Figure 5.17: Defence burden, Greater Asia
0%
1%
2%
3%
4%
5%
6%
7%
8%
1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Australia China India Japan South Korea Taiwan United States
177
Figure 5.18: Real defence spending (2000 US$), Greater Asia
Figure 5.19: Real defence spending (2000 PPP$), Greater Asia
0 10 20 30 40 50 60 70 80 90 100
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Real defence spending (2000 US$)
Australia China India Japan South Korea Taiwan
United States x 10%
0 20 40 60 80 100 120 140
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Real defence spending (2000 PPP$)
Australia China India Japan South Korea Taiwan
United States x 10%
178