Asia Takes The Slow Road

October 2001
By Henry S. Kenyon

As economies improve, Pacific states resume purchasing military equipment.

Arms sales in Southeast Asia are returning to levels that existed prior to the region’s 1997 financial crash. Procurement plans that had been frozen because of the economic turmoil have been reactivated as area nations seek to acquire items such as military aircraft, communications systems and warships. Although these purchases reflect steady improvement in a number of national economies, some countries remain gripped by fiscal and political crises.

U.S. military sales often represent a balancing act between supporting allies and maintaining regional stability. In many parts of the world, the United States has been careful to follow a policy of providing systems that do not give any single nation an overwhelming technological advantage over its neighbors, experts say. This policy is especially important in Southeast Asia, an area encompassing some of the world’s most populous nations and busiest trade routes. The region’s principal political and economic organization is the Association of Southeast Asian Nations (ASEAN), consisting of Burma, Cambodia, Laos, Thailand, Vietnam, the Philippines, Indonesia, Malaysia, Brunei and Singapore. The United States currently provides military aid to the Philippines, Malaysia, Singapore, Thailand and, to a very limited extent, Indonesia.

The effects of the crisis are still being felt in Indonesia, which continues to experience economic and political instability. The United States suspended military equipment orders in 1999 because of mass violence following East Timor’s referendum for independence. However, some exceptions exist, explains a U.S. State Department official speaking on condition of anonymity. The carve-outs were for year 2000-related computer systems support and aid for maintaining and operating Indonesia’s communications satellites. The nonmilitary satellites fall under arms sales controls, the official says. The remaining exceptions cover spare parts for Indonesia’s fleet of C-130 transports. The official notes that before the events in East Timor and the financial upheaval in 1997, Indonesia also had considered buying U.S. F-16 fighters.

Malaysia pursued an ambitious procurement program before its financial problems as well. It was seeking to purchase coastal patrol vessels and attack helicopters, but these plans were put on hold as the Malaysian government tried unsuccessfully to insulate its economy from the regional meltdown. “All their orders stopped. The modernization plans just got stuck in the mud,” the official says.

The Malaysian economy has rebounded in recent years, freeing funds for new arms purchases. Its government is especially interested in updating the air force with aircraft such as the F/A-18E/F Super Hornet fighter and C-130 and C-135 cargo lifters. “It looks like they are slowly recovering, and they are getting into a position where they want to buy some new stuff. That’s the general trend for all the [ASEAN] countries right now—at least the ones we do business with,” the official explains.

Economic difficulties continue to plague the Philippines. The country’s military had been underfunded prior to the financial distress, which only exacerbated the problem. The extreme budget constraints grounded the Philippine air force, prompting the United States to offer a security assistance aid package to maintain certain core military capabilities such as a minimum number of mission-ready aircraft. The aid allows the Philippines to keep at least five of its F-5 fighters and three C-130 transports operational.

These difficulties stem from a combination of economic and management problems, explains Derek Mitchell, a senior fellow for Asian affairs with the Center for Strategic and International Studies in Washington, D.C. Unlike its neighbors, the Philippines has experienced economic weakness for almost a decade. In the past, the Philippine military had been used to getting what it needed from the national budget. Mitchell notes that the Pentagon is assisting the  Philippine military as it works with the civilian government for limited resources; however, this process is still at a very early stage.

The Philippine government also has discussed modernization plans, but the U.S. State Department remains skeptical. “We still don’t see a penny of it dedicated in their national budget,” the official says. Because of the incoming U.S. assistance package, he doubts that the Philippines will be in a position to make any acquisitions before its military’s core capabilities are back online.

Thailand was another epicenter of the 1997 financial emergency. Its economy has since regained enough health to make limited arms purchases. Although it bought some older model F-16s, the Thai military cannot yet resume a full-scale modernization program. Instead, the nation is focusing its spending priorities on equipment to help fight narcotics trafficking along the Burmese border. The bulk of those procurements have been items such as helicopters, night vision equipment and other materiel suited for counter-drug missions. “I think they’re realistic about the way ahead, and they know they’re not ready to buy anything big,” the official notes.

Compared to its neighbors, Singapore weathered the financial storm with little or no hardship and has continued to purchase equipment steadily. Although its economy has recently slipped into recession due to weak exports resulting from the U.S. economic slowdown, Mitchell believes Singapore will rebound quickly.

The acumen that keeps this economy resilient also extends to Singapore’s military spending policies. The State Department official notes that Singapore is one of the few nations in the region whose military follows the right procurement policies. “They spend their money on maintenance, training and logistics—all that good stuff,” he explains. Singapore has purchased Apache attack helicopters, F-16 fighters and European-manufactured patrol craft.

However, some caution must be applied to the steady acquisition of new equipment, the official says. Because it is a small country, Singapore’s defense policy is based on overwhelming deterrence, a stand that could cause friction with its neighbors. “Sometimes, too much security can actually degrade your security if it makes your neighbors too edgy. Knowing full well that Malaysia and Indonesia can’t afford anything—to arm yourself to the teeth is kind of a slap in the face,” the official says.

These sensitivities continue to make regional arms sales a balancing act. The State Department official notes that the U.S. government adheres to an evolutionary policy that avoids introducing new capabilities that may give a single nation an overwhelming advantage over its neighbors. “Obviously, things are improving all the time, but we try to avoid leaps in capability and technology. We want to make it gradual,” he says.

Balance is a major concern for the region because the ASEAN countries were never unified under a single military-economic alliance such as NATO, which is structured to facilitate consultation among alliance members. For lack of such a framework, U.S. military equipment sales in Southeast Asia are done on a bilateral basis. With the exception of Singapore, most of the region’s nations had been poor for so long that U.S. policy makers viewed those nations’ arms purchases during the pre-1997 economic boom and the subsequent recovery period as attempts to catch up with the rest of the world, the official says.

Mitchell agrees that the United States has managed the arms sales process fairly well in the region. “I don’t think any nation has been bent out of shape by anything we have or haven’t sold out there. And if we introduce something like a medium range air-to-air missile capability, which was done recently, it’s pretty limited and not very sensitive. So as long as the situation is stable, then the market for arms is open,” he says.

Although many ASEAN governments such as Indonesia, Malaysia and the Philippines worry about potential Chinese expansion into areas such as the South China Sea and Spratley Islands, their primary concerns are local. “They are watching each other more than they’re watching China,” notes the State Department official. These nations know they do not pose a threat to China and that their military capabilities are not likely to seriously challenge the Chinese military should a confrontation occur. The concern is more about existing historical animosities such as those between Singapore and Malaysia, Burma and Thailand or Vietnam and China, he adds.

Many of these issues often only are expressed behind closed doors and rarely discussed openly. According to the State Department official, one recent incident involved Indonesia’s reaction to Singapore’s purchase of European-made diesel submarines. Indonesia’s former president Abdurrahman Wahid warned that he would sink the vessels if they entered Indonesian waters. While most of these concerns remain unstated, the official notes that it is hard to believe that one nation’s procurements do not affect its neighbor’s arms purchases.

Two major U.S. allies in the region, the non-ASEAN states of Australia and New Zealand, escaped the financial tumult and are in good economic health. Both of these nations benefit from a good relationship with the United States and are potential partners for coalition operations.

However, New Zealand recently turned down what the official described as “the deal of the century” when its government declined to buy 28 F-16 fighters that had been slated for Pakistan. That sale had been canceled when Pakistan detonated five nuclear devices in underground tests in 1998—an action that forced the United States to impose sanctions on all aid to that nation. The terms of the sale would have allowed New Zealand to purchase the aircraft for a substantial discount, the official says.

New Zealand’s current labor government reversed a decision its previous conservative administration made to purchase the aircraft. Instead, it chose to focus resources on peacekeeping operations by modernizing the army with upgraded communications equipment and armored personnel carriers. The U.S. government was concerned by the action because it wanted New Zealand to have a more robust air capability to replace its aging fleet of Skyhawk attack aircraft. “Who can blame them for it [their choice], but we weren’t very happy,” the official says.

A major U.S. coalition partner, Australia has helped the thinly-stretched U.S. military in the region by spearheading the United Nations relief forces in East Timor. Conversely, the East Timor operation is also a sensitive subject with Australia, Mitchell explains, because the Indonesian government objected to Australia’s leadership role in that operation. “It rubbed Indonesia the wrong way,” he says, noting that the coalition-building process, with its responsibilities and frictions, was a very difficult experience for Australia, making it more cautious about claiming the title of the region’s leader in these issues.

Australia plans to increase its defense budget during the next 10 years with the goal of purchasing a variety of equipment such as fighter jets, early warning and battle management aircraft, and new destroyers for its navy. It also is considering the Joint Strike Fighter when it becomes available.

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