Asia's monetary woes scuttle weapons sales

Asia's monetary woes scuttle weapons sales

KUALA LUMPUR (AFP): The financial crisis sweeping Asian economies may reduce regional arms purchases as prices of military hardware escalates, military analysts say.

The crisis has also led to the withdrawal of seven companies from the Langkawi International Maritime Aerospace Exhibition (LIMA) '97 starting Tuesday in Malaysia's northern resort island of Langkawi.

They include five foreign companies including two from the United States and one each from Belgium, Russia and Australia, said organizer Le Proton's senior manager Megat Nawawi Megat Hamid.

Seven other companies have also reduced their exhibition spaces while two Russian companies have reduced the number of aircraft for the show.

But Megat Nawawi said the "currency crisis has not affected the exhibition proper."

Some 800 exhibitors from around the world will participate in LIMA '97 which will focus on the maritime sector. It will see a massive gathering of naval flotilla for public display with 42 surface ships and four submarines, including the French Agosta class submarine manufactured by French-based Naval Dockyard.

Megat Nawawi said there may not be any "real deal" for aircraft purchases although "many Asian defense officials would shop to see what latest equipments are available."

Deals worth 2.5 billion ringgit were signed during the 1995 LIMA exhibition and "I am optimistic we can hit a similar figure," he said, adding that 16 civilian aircraft purchase agreements would be signed this time.

A defense analyst, however, ruled out any outright purchases of military hardware at the LIMA exhibition and said "sales of military, executive and leisure aircraft will suffer."

"The economic crisis will influence a lot countries to put off their plans for new arms purchases," said Razak Baginda, executive director of the Malaysian Strategic Research Center.

"The region may take stock of what military hardware it has and probably will emphasize maintenance and upgrading of existing hardware only," he said.

A naval analyst close to the Malaysian defense ministry said the decline in regional currencies was a definite blow to new arms purchases.

"All military purchases are done through hard cash. Some regional economies are at the brink of bankruptcy. When countries do not have money, they won't have ambition," he said.

Citing Malaysia's intention to acquire eight British-made Lynx helicopters, he said the total cost had surged 75 percent to about 140 million ringgit (US$40 million) because of declines in the ringgit's value against foreign currencies.

"Malaysia now has to say: hold on," he said, adding, however, that small purchases of military equipments would not be affected.

The currency and stock market turbulence has clobbered the Thai, Indonesian, Philippines, Malaysian, South Korean and Japanese economies.

Since July 2, when Thailand effectively devalued its currency and triggered the crisis, the U.S. dollar has gained an average of 38 percent against five key Southeast Asian currencies.

It has risen some 60 percent against the Thai baht, 50 percent against the Indonesian rupiah, 39 percent against the Malaysian ringgit, 31 percent against the Philippine peso and 12 percent against the Singapore dollar.