Asia-Pacific nations to increase defense spending

China’s assertiveness in the South China Sea and the Indo-Pacific region has heightened tensions with Australia, prompting increases in Australian defense spending.

Australia will increase its defense budget annually by an average of 3.8% over the next five years, according to GlobalData, with the increase aimed at achieving program modernizations and maintaining security and stability in the surrounding Indo-Pacific region and the South China Sea.

Australia’s defense spending will grow at a CAGR of 3.8% between 2022 and 2027

Between 2018 and 2022, Australian spending on defense acquisition and research and design increased from $8.2 billion to $12.2 billion, registering a compound annual growth rate (CAGR) of 10.3%. GlobalData’s latest report, ‘Australia Defense Market Size and Trends, Budget Allocation, Regulations, Key Acquisitions, Competitive Landscape and Forecast, 2022-27’, notes that the increase is largely attributed to a large number of defense acquisitions and R&D investments in warships and submarine sectors.

Australia’s defense acquisition budget and growth rate, 2018-27. Credit: Ministry of Finance, Australia and GlobalData Intelligence.

Australia is acquiring Hunter-class frigates and Arafura-class patrol boats to replace aging Anzac-class frigates and Armidale- and Cape-class patrol boats. It also plans to acquire nuclear-powered submarines to modernize its naval capabilities and replace the aging fleet.

“Rapid military modernization and technological developments in countries such as Russia, China and North Korea are expected to create strategic challenges for Australia,” said Akash Pratim Debbarma, analyst at GlobalData Aerospace & Defense. “As an island nation, modernizing its naval prowess is a must for Australia.”

China’s artificial islands

The South China Sea is one of the world’s most important shipping lanes for Australia’s exports of iron ore, LNG and coal. Australia views China’s construction of artificial islands as one of its most pressing security threats and the desire to keep trade routes open has increased tensions between the two countries.

“With Chinese military assertiveness over the South China Sea and the Indo-Pacific region, the Hunter-class frigates will prove to be an asset,” Debbarma added. “Future acquisition of nuclear-powered submarines is certainly a necessary strategic move to replace their Collin-class diesel-electric submarines.

“However, for Australia, increasing its defense budget… also enhances its national defense industry and positions itself as a global export leader. The desire to increase its acquisition budget will not only result in the security of its borders, but will also create opportunities for the shipbuilding industry,” said Debbarma.

Ambitious modernization programs

Elsewhere in the Asia-Pacific region, the Singapore Armed Forces (SAF) is committed to an ambitious defense programme. It will boost Singapore’s defense spending to $15.8 billion in 2027, modernizing military equipment, national security and cyber security.

According to GlobalData’s report, ‘Singapore Defense Market Size and Trends, Budget Allocation, Regulations, Key Acquisitions, Competitive Landscape and Forecast, 2022-27’, Singapore has allocated a defense budget of $12.3 billion for 2022, an increase of 7.4% over the allocation in 2021; and reflects a CAGR of 3.7% during 2018-2022.

GlobalData forecasts a defense budget CAGR increase of 5% from $13 billion in 2023 to $15.8 billion in 2027. This will overcome the challenges posed by the country’s small armed forces and limited training area, with effective training of personnel abroad.

Singapore’s total defense budget and growth rate, 2022-27. Credit: Ministry of National Defense, Singapore and GlobalData Intelligence.

Singapore is acquiring advanced military technologies and platforms. These include the F-35 Joint Strike Fighter, the CH-47F Chinook and the H225M helicopter, and the Invincible-class (Type 218SG) submarines. The country is also acquiring infantry technology to improve the security and mobility of the army. SAF upgrades improve the force posture of the country’s defense forces and provide an asymmetric advantage.

In line with the ‘SAF 2040’ next-generation initiative, Singapore aims to develop a modernized military to maximize its capabilities.

Singapore strength stance

Singapore plans to expand its capabilities with the creation of a Digital and Intelligence Service to add to its traditional services. The government has also allocated a substantial amount of spending to the acquisition of advanced unmanned aerial vehicles. This includes Orbiter 4, which operates with minimal manpower, overcoming the constraints of Singapore’s small population.

Upgrading command, control, communication and intelligence systems will further increase the country’s regional coordination, and the government’s continued efforts to use technology as a force multiplier will increase the country’s overall defense spending.

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