Asian Defense Spending Reaching Record Levels


2012-11-01 by Richard Weitz

According to a new study by the Center for Strategic and International Studies (CSIS), by the end of 2012 Asian defense spending will exceed that of all European countries for the first time in decades, perhaps centuries.

Due to a combination of the rise of China, the deepening of territorial conflicts, and the vigorous growth of most of the regional economies, Asia has seen a surge in defense spending during the past decade, with the five top spending countries (China, India, Japan, South Korea and Taiwan).on average almost doubling their military budgets. The growth rate of these five countries aggregate defense spending has been accelerating, running at almost twice as fast during the 2005-2011 period (8 percent) than from 2000-2005 (4.5 percent).

The authors deny that we are seeing a regional arms race in which the country’s military buildups are reinforcing one another in lockstep fashion. They instead attribute the rising defense spending primarily to the growing national economies of the Asian countries, which provides them more means to buy weapons.

But they also acknowledge the rising military power of China, combined with Beijing’s new assertiveness on territorial disputes, is contributing to the desire of other Asian countries to increase their own military capabilities.

As long as these underlying conditions continue, so will the Asian military buildup, especially since several countries are in the midst of procuring expensive new weapons systems. Lockheed Martin and Boeing’s defense division anticipate that some 40 percent of their foreign revenues now come from the Asia-Pacific region.

China is leading the pack in Asian defense spending.

According to official PRC figures, between 2000 and 2011, PRC defense spending grew at an annual rate of 13.4 percent, way ahead of South Korea (4.8 percent), India (3.6), and Japan (3.5 percent). Taiwan’s defense spending has lagged behind, at 1.8 percent. China’s shares of the total defense spending of the group of five countries doubled, from less than 20 percent in 2000 to more than 40 percent.

By the end of 2012 Asian defense spending will exceed that of all European countries for the first time in decades, perhaps centuries. Credit Image: Bigstock 

Spending per soldier has also risen for almost all European countries during the past decade, but the primary reason was that the reductions in force structure were more rapid and extensive than the defense budget cuts.

Whereas Beijing claims to have spent only $22.5 billion on national defense in 2000, China declared its official spending to be $90 billion in 2011.

Foreign analysts note that the official Chinese budget figure excludes spending on nuclear weapons, military space activities, purchases of foreign weapons, and military research and development. The Stockholm International Peace Research Institute (SIPRI) estimates that China’s 2011 defense budget amounted to $142 billion. Other experts double or even triple the official Chinese government figures, which would yield a defense budget approaching what the United States might be calculated to spend on Asia-Pacific security, especially if the “fiscal cliff” budget cuts take effect. Fortunately, while the PRC official and the SIPRI data differ in their aggregate numbers, they do move in parallel over time, reinforcing the confidence in perceived trends in Chinese defense spending.

PRC authors have ascribed their country’s surging defense spending to the explosive growth of China’s national economy, which has allowed the authorities to raise the salaries, benefits, and living conditions of military personnel to levels found in other countries.

They also maintain that expenditures on food, fuel, and other military essentials have climbed steeply. Yet, China has vastly increased its spending on equipping the PLA with advanced information technologies and other sophisticated weapons. In 2000, China spent $7.3 billion on new weapons and related R&D, but in 2011 the equivalent figure was $25.8 billion. As a result, the PRC has at least two new fifth-generation fighter programs (the J-20 Black Eagle and the J-31 Falcon), is building more and better missiles, and is developing a fleet of aircraft carriers for which the new J-15 Flying Shark might serve as the main carrier-borne fighter.  To pay for all these new systems, the PRC has announced a 13 percent increase in its defense budget for this year, to a declared $106.4 billion in 2012. The PRC has announced an 11.2 percent increase for 2013.

Japanese angst about “China passing” certainly applies in the defense field.

As late as 2005, Japan had the highest aggregate defense budget in Asia, but since then China has moved far ahead. On an individual level, Japanese soldiers probably remain the best in Asia, since Japan spent $238,000 to recruit, compensate, train, equip and support each soldier in 2011, much more than any of the other four countries. Personnel spending absorbs almost half of Japan’s defense budget.

Conversely, Japan has the lowest share of defense investment (a category that combines defense R&D and procurement) as a percentage of its total defense budget, with that level falling to around 18-20 percent in recent years. These trends could soon worsen since Japan’s defense budget is currently falling by 1.7 percent, to $58 billion in budget appropriations for the 2013 fiscal year.

Japan is very much an outlier in terms of its very high defense spending per individual soldier, derived by dividing the country’s national defense spending by the number of its active duty troops. At $240,000 per soldier, Japanese defense spending per soldier approximates that found in some European militaries. The other Asian countries’ spending per soldier is much lower.

India is noteworthy for its emergence as a leading buyer of military equipment and services.

India now purchases some $12-$14 billion worth of material and services each year, an impressive sum except when one notes that Chinese statistics indicate the corresponding PRC figure is now twice as high. The percentage of India’s defense budget going to cover personnel costs is rising even faster. If this trend continues, then it could sharply constrain India’s defense investment. Thus far, India has been able to keep increasing the share of its military budget going to defense investment and personnel by being the only one of the five countries under review to reduce the share of its defense budget used for operations and maintenance (O&M).

South Korea is noteworthy for its rapidly rising research & development spending, which has been growing much faster than the overall increase in the ROK’s military budget.

This growing R&D spending results from the country’s expanding indigenous defense industry and defense exports. Another interesting feature is that, in recent years, South Korea has shifted procurement funds from the Army to the Air Force and Navy, probably in response both to its contested maritime claims and the ROK’s effort to contribute more to global security missions outside the Korean Peninsula.

Although Taiwan’s defense spending during the 2000-11 period grew the slowest, less than 2 percent annually, Taiwan is transitioning to a smaller but higher quality force.

Its defense investment is growing in almost twice as fast as its overall defense spending, a trend that should continue for a while since Taiwan needs to replace its aging Mirage 2000 and F-5 fighters within the next decade, perhaps with U.S. F-16C/D fighters or even F-35s.  Similarly, Taiwan’s spending per soldier has increased by about 4 percent every year due to the significant reductions in the size of its active-duty force (from 370,000 to 290,000) during the past decade, rising in absolute terms from $22,500 in 2000 to $34,800 in 2011. The rapid and large increase in per-soldier defense spending reflects Taiwan’s transition from a conscript system to one based on voluntary professional soldiers who serve sufficiently long that it becomes worthwhile to invest in them.

Although not covered by the CSIS report, military spending among the smaller Southeast Asian countries is also generally on the rise now that they have largely overcome their internal security challenges.

Spending is also being driven by uncertainty about the extent and duration of the U.S. military presence in their region, and concomitant concern about Beijing’s newly assertive stance on contested territorial issues as well as other challenges to their maritime transportation, energy, and fishing assets.

According to SIPRI’s data, Southeast Asian defense spending rose by 42 percent in constant 2011 dollars between 2002 and 2011.

Most spending increases have gone to increasing countries’ naval and coastal capabilities, including warships but also coastal patrol boats, submarines, and anti-ship missiles and warplanes capable of projecting power offshore. Meanwhile, spending on land forces changed little. That Vietnam, Cambodia and Thailand—all neighbors of the PRC had some of the greatest defense budget increases in the last decade suggests the impact of Beijing’s buildup in driving their defense spending upwards. But even more distant Indonesia has announced massive defense budget increase sin coming years—by 28 percent to $7.01 billion in 2012; $9.6 billion in 2013, and $11.52 billion in 2014.

Despite the general rise in Asian defense spending, the sheer size and dynamism of the Chinese economy means that the People’s Liberation Army will continue to extend its advantages over potential adversary militaries.

Only an external balancer, the United States, can balance the PLA sufficiently to help deter Beijing from doing something foolish with its new military capabilities.

Yet, the U.S. strategy designed to negate China’s growing capabilities, the air-sea battle concept, is under threat due to stagnating U.S. defense budget and the rising costs of the main tools needed to implement the strategy– stealthy attack submarines, the long-range precision-strike capabilities of the F-35, and enhanced and secure C4ISR (command, control, communications, computers, intelligence, surveillance, and reconnaissance) capabilities.

The CSIS study has several methodological weaknesses.

First, as the authors note, Asian military spending is more difficult to analyze than the defense budgets of NATO countries due to the absence of common data standards or data definitions as well as greater Asian secrecy regarding the military activities of its governments and defense industries.

Second, the study excludes defense spending by Australia, Russia, and the United States—which are clearly affecting the calculations and defense budgets of the five countries being studied.

Third, for some countries, the value of the dollar is very important since they purchase many American-made defense items, whereas for other countries such as China, the local currency unit is the best measure of spending. But even in the former category of countries, spending on defense personnel should be measured in local currency units, while dollars are the best currency for assessing changes in military equipment purchases.

Finally, as is the case with all such studies, the CSIS project measures only defense inputs–excluding others that are harder to measure (morale)—rather than outputs, which are what really matters.

History shows there is often an enormous gap between the two, inputs and outputs.

Many of these countries are radically restructuring their armed forces, transitioning to all-volunteer professionals and moving away from their historically army-dominant force structure to one that increasingly allocates resources to acquiring air- and sea-based capabilities.

These countries have not fought a war in decades, and how their lack of experience will manifest itself in actual combat is anyone’s guess.