Article No. 003/2018
Courtesy: Thayer Consultancy Background Brief, January 19, 2018
We are preparing a report regarding military procurement in Southeast Asia. We request your input on military procurements in the Philippines and Thailand. Our key concerns are listed as a series of questions and we would appreciate your response.
Q1. What is the five-year defense budget outlook? What are the problems affecting military purchases? Some like to point out there is an arms race in the region, is this the case?
ANSWER: In 2018, the Philippines entered the second phase of the fifteen-year Horizon military modernisation program that commenced in 2013.
In March 2016, Thailand announced a ten-year Modernisation Plan: Vision 2026.
In 2016, the Australian Defence Intelligence Organisation noted that in the previous year “all Southeast Asian countries experienced real increases in defence spending – with Thailand and the Philippines experiencing strong defence spending growth after low figures in 2014.”
In 2015, the Philippines allocated 144.5 billion pesos ($3.2 billion) for defence, a 16.3% real increase on the 2014 defence budget. In 2016, the defence budget declined to 117.5 billion pesos. In 2017, however, the defence budget was hiked to 137.2 billion pesos, a 17% increase, the second highest defence budget over the last decade. The defence budget for 2018 is Pesos 145 billion.
Since 2010, government spending on defence has averaged 5.2% of total government spending, ranging from a low of 3.6% to a high of 6%. Since the global financial crisis of 2008-09, with the exception of 2010 and 2014, the annual growth in defence spending has exceeded the annual growth of GDP, particularly in 2015. For the Philippines, military spending as a per cent of GDP was 1.1% in 2014, 0.8% in 2015 and 1.3% in 2016. The Constitution mandates that military spending not exceed spending on education.
In 2018, the Philippines entered the second phase of the fifteen-year Horizon program that commenced in 2013. Although the Secretary of National Defense Delfin Lorenzana would like to see the defence budget increased to between 2.4 and 2.5 per cent of GDP this is most unlikely. During phase two, the Philippines will spend U.S.$1.7 billion; its wish list includes UAVs, remote bomb disposal machinery, fast boats, drones and attack helicopters.
In 2015, Thailand allocated 206.5bn baht for defence, a 12.8% real increase on the 2014 defence budget. Thailand’s defence budget rose to 210.5 billion baht in 2016 and increased by 2% in 2017 to 210.7 billion baht, the highest defence budget over the last decade.
Since 2010, government spending on defence has averaged 6.5% of total government spending, ranging from a low of 6.3% to a high of 7%. Since the global financial crisis of 2008-09, with the exception of 2010 and 2012, the annual growth in defence spending has exceeded the annual growth of GDP, particularly in 2015 in parallel with the Philippines.
In 2016, Thailand’s military expenditure was 1.2% of GDP. In March 2016, Thailand announced a ten-year Modernisation Plan: Vision 2026 with three goals: to improve readiness of the Thai military, to enhance capabilities, and to modernise related structures. This plan includes a hike in defence spending from 1.4% of GDP at present to 2% of GDP by 2026.
Is there as arms race?
An arms race is defined in the international relations/strategic studies literature as two or more countries who view each other as adversaries and who continually purchase weapons to offset the perceived advantages of the other and strain their resources to be the dominant power. Using this as a definition, there is no classical arms race in the Indo-Pacific Region but an arms build up. Both the Philippines and Thailand spend under 2 per cent of the GDP on defence, less than regional average of around 2 per cent.
In terms of total defence spending in Southeast Asia in 2015, the Philippines accounted for 8% and Thailand for 15% (Singapore 25%, Indonesia 19%, Malaysia 13%, Vietnam 12%, and Myanmar 6%).
Key problems affecting military acquisitions are cost, inter-service rivalry, legislative resistance to fund bigger defence budgets, political restrictions on arms sales placed by exporting countries (in response to a military coup, for example) and economic growth rates.
Q2. Is there a procurement trend favouring a particular armed service or are procurements balanced among the armed services?
Procurements by the Philippines favour the army over the navy and the air force. In terms of the defence budget, the allocation by service expressed as a percentage of the total defence budget is: Army 57%, Navy 21%, Air Force 19% and Coast Guard 3%.
Since 2006, major Army procurements have included 187 Armored Personnel Carriers, and 38 helicopters (mostly second hand). In this same period, the Navy received three ex-US Coast Guard Hamilton-class cutters. The Air Force received two C-130H Hercules transport aircraft and 22 JDAM guided bombs. The United States is the sole source of these procurements.
The Philippines is expected to receive twelve FA-50 combat aircraft from South Korea.
The United States and China are the main providers of arms to Thailand.
Between 2006-2014, the U.S. sold an assortment of 31 helicopters (H-1F COBRA, S- 70/UH-60L, BELL-214, TH-28/480), one Aeros-40 Sky Dragon airship, and one secondhand Saab-340 transport aircraft. In addition, the U.S. also sold a variety of radar systems (TPS-70 and TPS-77 air search, and APG-68 for F-16 combat aircraft), nine RIM-162 ESSM surface to air missiles, and fifty AIM-120C AMRAAM BVRAAM air-toair missiles. The U.S. supplied the Thai Army with fifty-four M-198 155mm towed guns.
U.S. arms sales were halted following the military coup in May 2014. The single exception was the sale of Mk-54 MAHO anti-submarine warfare torpedos to the Thai Navy in 2016.
China made two arms sales to Thailand during the period 2002-07. The first sale was two Pattani-class frigates to the Thai Navy, the second was the sale of sixty C- 802/CSS-N-8 anti-ship missiles.
During 2011-16, China supplied the Thai Army with eighteen WS-11 302mm, four SR- 5 self-propelled MRLs or multiple rocket launchers, two RA-3 artillery locating radar, WS-3A 300mm guided rockets for the WS-1 MRL system and fifty-one KA-1A surface to air missile systems. There were no recorded sales to the Thai Navy or Thai Air Force during this period.
Q3. Are arms procurements related to China’s rise?
President Duterte has pursued a China friendly policy since his election in May 2016. Duterte set aside the unanimous Arbitral Tribunal award in favour of the Philippines regarding territorial disputes in the South China Sea. Duterte has repeatedly stated that the Philippines cannot win a war with China as an explanation for his quiescent behaviour. China’s continued militarization of its artificial features in the Spratly archipelago recently has raised concern especially among defence officials.
Duterte has been critical of the Obama Administration and ordered the diversification of procurements, with a view to acquiring weaponry from China and Russia.
Thai leaders have consistently sought good relations with China. The two worked hand in glove to oppose Vietnam’s intervention in Cambodia from late 1978 to the end of the conflict in October 1991. The current military regime, that seized power in 2014, has maintained good relations with Beijing, especially as the Obama Administration imposed restrictions on the Thai military. Recently a senior Chinese military officer made this observation, “For China, an ideal Australia would be like Thailand, an American ally that is always friendly towards China…”
Q4. Any growth area for spending? Is ISR [Intelligence, Surveillance and Reconnaissance] a priority?
If the Philippines’ GDP growth rate averages 6.5% per annum to 2020 this should be sufficient to support continued growth of the defence budget. President Duterte supports an increase in defence spending.
The past pattern of acquisitions by the Philippines does not reveal any special priority on acquiring ISR systems. In 2009, the Philippines acquired two second-hand Hunter UAVs from the United States and in 2011 the Philippines acquired one air search radar from the U.S.
In 2018, the Philippines will set aside Peso 25 billion for the modernisation of the Armed Forces of the Philippines in four areas: armaments, surveillance, mobility and communications.
Over the past decade, Thailand’s GDP growth rate has averaged 2.5%. It is forecast to average 3.5% real growth to 2020. So far Thai purchases have been for platforms and missiles. The only ISR related purchases from the U.S. have been air search radars. There is no record of any sale of ISR related systems by China to Thailand.
Q5. Does cooperation with the U.S. influence procurement decisions?
Yes, most definitely. The top three Southeast Asian markets for U.S. military equipment and weapons are Singapore, the Philippines and Thailand.
Q6. The Philippines has been moving towards amore conventional arms purchases as revealed by their Horizon plans. However, counter-insurgency equipment seemed to be on the table again after the Marawi siege. Will this influence procurement plans?
ANSWER: The three-phase modernization of the Armed Forces of the Philippines began before President Duterte was elected president. As a result of the siege of Marawi it appears that procurements in Horizon phase two, 2018-2022, could be altered. The Philippine Navy wants to acquire two new corvettes/frigates most likely from South Korea. Also on the initial wish list were more coastal fast craft and drones. Since Marawi the Army has requested twenty-four helicopter gunships, multiple rockets and new firearms (sniper rifles, round corner rifles, close quarter weapons) and night vision goggles.
[Carlyle A. Thayer is an Emeritus Professor at the University of New South Wales, Australian Defence Force Academy, Canberra. The views expressed are his own. All his background briefs are posted on Scribd.com (search for Thayer). Thayer Consultancy provides political analysis of current regional security issues and other research support to selected clients. The views expressed in this article are of the author. ]