Future brightens for Southeast Asian arms makers

Future brightens for Southeast Asian arms makers

Dan Eaton
Reuters
Bangkok

Economic recovery and a reluctance to rely on traditional
suppliers is breathing new life into Southeast Asia's flagging
small arms industry, according to a new report.

Malaysia's decision last month to reopen the arms production
operation of state-run Syarikat Malaysian Explosive (SME) marked
the start of a trend toward boosting defense capabilities and
autonomy in determining national security affairs.

The future of Southeast Asia's mainly loss-making state arms
makers hung under a dark cloud as economically struggling
countries sought to rationalize spending, according to "Small
Arms Production and Transfers in Southeast Asia", published by
the Australian National University this week.

But analysts say the Sept. 11 attacks and the subsequent U.S.-
led "war on terror" are boosting regional defense budgets and
rekindling stalled military spending programs.

"There are not many economically rational reasons for
production of weapons by Association of Southeast Asian Nations
(ASEAN) members, but there are other reasons why people would
produce them," David Capie, the study's author, told Reuters in
an interview in Bangkok.

"There is a tension between economic rationality and other
motivations, like maintaining national autonomy or pork-barrel
politics," said Capie, an expert on the small arms trade at the
University of British Columbia in Canada.

"The thing since Sept. 11 is that those other motivations are
now trumping economic rationality and breathing new life into
what was really an industry in decline."

While details of the economics of small arms production are
closely guarded secrets in most states in the region, the report
says production is costly and not usually economically viable.

"The flood of former-Soviet and eastern bloc small arms into
the market and the need to import raw materials for ammunition
production makes it extremely difficult for Southeast Asian
products to compete internationally on price," the report says.

SME ammunition costs between five and 20 percent more per unit
than similar products on the market, the report says.

"But regional governments are going to spend money on
maintaining their production lines, even if they have to pay more
than they would on the open market," said Capie.

"It shows that they want to maintain a production capability
and reduce dependence on outside suppliers."

The study tracks the production of weapons in Southeast Asia
over the past three decades. Previously, the region was dependent
on guns and ammunition from Europe, China and the United States.

Today at least six ASEAN members -- Malaysia, Myanmar, the
Philippines, Singapore, Indonesia and Thailand -- make small arms
and are self-sufficient in small-caliber ammunition and ordnance.

But only Singapore Technologies, another government-owned
company, has been able to tap into lucrative export markets in
any significant way and join the ranks of internationally
competitive defense industries.

Singapore has exported ordnance, machine guns and assault
rifles to a host of global troublespots including Fiji, Papua New
Guinea, the Solomon Islands, Myanmar, Zimbabwe and Croatia.

Other manufacturers have struggled. Indonesia's PT Pindad,
suffered the indignity of seeing the Indonesian Army go to China
to buy mortar ordnance recently, and Malaysia's SME closed its
arms production operation in February 2001.

But in April, Malaysia announced a defense shopping spree,
including a reported 84.5 million ringgit (US$22.2 million) of
Steyr assault rifles from SME.

"Malaysia was very unsuccessful with its export programs and
now they are basically reopening this industry for domestic
consumption," said Capie.

"Pindad is also pushing the Indonesian government to buy a new
infantry weapon. Jakarta, with the current military embargo by
the U.S., has had plenty of experience in the need for a degree
of self-sufficiency."