Asian monetary crisis halts arms buying binge

Asian monetary crisis halts arms buying binge

The financial crunch crippling parts of Asia has put a crimp
on governments' military spending, writes Thalif Deenof Inter
Press Service.

UNITED NATIONS (IPS): The spreading economic crisis in
Southeast Asia threatens to torpedo the once vibrant multi
billion dollar arms market in the region.

South Korea, Thailand, Indonesia and Malaysia all caught up
in a cash crisis are either cutting down on arms purchases or
postponing plans to buy major weapons systems, mostly from the
United States, Britain, Russia and Germany. If the crisis affects
Japan, Taiwan and Singapore, the impact on Western arms suppliers
could be even more devastating.

"We are going to see a steep drop in arms sales to the region
in the short term because most of these countries do not have the
cash," says Tom Cardamone, editor of the Arms Trade Newsletter.

Cardamome said for most Western arms suppliers and
specifically those from the U.S. the Southeast Asian market was
one of the world's most lucrative.

"Now they are going to buy only what they can afford to buy
mostly spares and inexpensive equipment," Cardamome told IPS,
"It will put a crimp on their ability to spend on high tech
weapons systems."

He said the crisis comes at a time when some of these
countries were on the verge of buying expensive state of the art
weapons systems as part of an ongoing military modernization
program triggered by one time booming economies.

As its national currency struggles to keep afloat, Thailand
has already decided to defer plans to buy eight sophisticated,
U.S. built F/A 18 Hornet fighter planes at a cost of more than
US$390 million.

"The government of Thailand must make fiscal decisions that
are in their best interest," Pentagon spokesman Bryan Salas said.
"We are consulting with the Thai government on this issue."

Originally, the Thai government wanted to terminate the
contract, but was put off by a $250-million penalty clause for
any cancellation. As part of the terms of a $17 billion rescue
package from the International Monetary Fund (IMF), Thailand has
also been forced to slash its 1998 military budget by 23 percent
from its original $2.2 billion allocation.

Until recently, the Thai shopping list included a proposed
$1.0 billion spy and communications satellite system from the
U.S., Advanced Medium Range Air to Air Missiles, diesel powered
submarines, helicopters and anti tank weapons.

Malaysia, which recently completed the purchase of 18 MiG 29
fighter planes from Russia and eight F/A 18 Hornets from the
U.S., earmarked more than $2.8 billion for arms purchases under
its seventh Five Year Plan which runs through the year 2000. The
Russian combat aircraft cost about $550 million while the U.S.
fighters about $700 million.

In an attempt to bolster its armed forces, Malaysia has been
evaluating the purchase of attack helicopters, battle tanks,
offshore patrol vessels, corvettes and even a submarine.

In October, however, Malaysian Defense Minister Syed Hamid
Albar said his country had "suspended" several major military
purchases because of uncertainties caused by the ongoing
financial crisis. In December, Malaysia announced plans for a
severe austerity drive with sharp cuts in state spending.

As part of this drive, the Malaysian government has shelved
plans to acquire up to 27 offshore patrol vessels, several
helicopters and a low level air defense system. "The delays will
not jeopardize our defense as those project (remain) part of our
plans to upgrade the system. The country's defense system is not
affected by the austerity drive," Hamid Albar asserted.

The biggest casualty could be South Korea, a significant U.S.
arms market in the region. In 1996, the Koreans purchased about
$1.0 billion worth of U.S. arms while the projected figures for
1997 and 1998 were $725 million and $692 million respectively.
Since there are 37,000 U.S. troops in Korean soil, Washington
would try, however, to stall any attempts by Seoul to reduce its
military effectiveness notwithstanding the cash crisis.

The cuts come at a time when the Washington based Arms Control
and Disarmament Agency (ACDA) has ranked Southeast Asia as the
second largest regional arms market, after the Middle East. In
1995, the region collectively purchased about $6.4 billion in
arms: about 20 percent of the world total and eight percentage
points more than the 12 percent share recorded in 1985.

The 1995 total marked the second straight rise for the region
after having fallen continuously from a peak of $10 billion in
1987 to less than half that amount in 1993, to $4.3 billion.

The United States continued to be the number one arms supplier
to the region accounting for roughly half of all the military
purchases. According to the latest figures released by ACDA last
year, the Southeast Asian nations purchased $15.9 billion worth
of arms during 1993-1995.

Of this, $8.1 billion went to the United States followed by
$2.2 billion to Russia, $1.7 billion to British weapons
suppliers, $1.6 billion to those in Germany and $535 million to
China.

The largest single arms purchaser was South Korea accounting
for $3.5 billion followed by Taiwan $3.2 billion, Japan $2.0
billion, Malaysia $1.9 billion, China $1.6 billion and Thailand
$1.5 billion.

Last year, there were predictions that Asia's military
spending was expected to outstrip Western Europe and the North
Atlantic Treaty Organization (NATO) by the end of the next
decade. Francois Heisbourg, senior vice president of Matra, one
of France's leading arms manufacturers, said that military
spending by South Korea, Taiwan and Singapore already were
matching those of European countries.

"Going by this trend, East Asia's military expenditure will
match that of Europe in 10 to 15 years," he predicted.

The Pentagon also singled out Asia as one of the potentially
big regional arms markets through the turn of the century. In its
Worldwide Conventional Arms Trade released in 1994, the
Pentagon said that a dynamic, growing economy in East Asia had
provided several governments with resources to increase
investments in state of the art military capabilities.

The arms imports projections for Southeast Asia were virtually
the same as those for the Middle East which has historically been
the world's largest arms market. Pentagon estimates, projected
through the year 2000, range from $54 billion to $60 billion in
arms sales to East Asia compared with $54.2 billion to $64
billion to the Middle East.