* Asia, Gulf to drive global defence growth in 2014
* Western arms firms suffer as US, Europe cut
* Emerging Asian, Russian firms claw more market share
By Peter Apps
LONDON, Feb 12 Fuelled by growing strains in
Middle East and Asia, global defence spending looks set to rise
in 2014 for the first time since the 2008 financial crisis.
A study of the world's top 100 arms companies by the
Stockholm International Peace Research Institute (SIPRI) this
month showed their total arms sales for 2012 falling 4.2 percent
from the previous year to $395 billion, their second annual
The global defence market remains dominated by western
firms, with Lockheed Martin, Boeing, BAE Systems
, Raytheon, General Dynamics and Northrop
Grumman top in terms of sales. Emerging competitors,
however, are clawing their way up the list, particularly in Asia
and the former Soviet Union.
Chinese firms are excluded from the SIPRI table because of a
lack of truly reliable data. If they were included, SIPRI
researchers believe 4 to 6 of China's largest state-owned
defence conglomerates would be in the top 20 global arms firms
and one - aviation firm AVIC - would be in the top 10.
China's dramatic military growth and growing tensions over
assorted maritime disputes have caused spending elsewhere in the
region to be ramped up.
"There's no doubt Asia is where it is happening and it shows
no sign of stopping," says Mike McDevitt, researcher at the
Center for Naval Analyses, a U.S. government-funded body that
advises the military. "Other countries in the region are alarmed
by China's naval expansion in particular and that is really
driving their procurement."
According to IHS Jane's, a defence publisher, the
Asia-Pacific region is the only part of the world to see
military spending grow steadily since 2008. It is expected to be
spending some $474 billion annually by the end of the decade, 28
percent of global military spending, up from 24 percent in 2013.
China is believed to have more than quadrupled its military
spending since 2000 and by 2015 is expected to be outspending
Britain, France and Germany combined. Even with Chinese spending
stripped out, however, the rest of the Asia-Pacific region is
seen overtaking the whole of Western Europe by the same date.
In the last two years, Middle East military spending has
been rising even faster as Gulf Arab states worry about Iran and
their own domestic stability.
Last week, International Institute for Strategic Studies, a
London think-tank, said it believed Saudi Arabia's defence
spending had now reached $59.6 billion, just overtaking Britain
to become the world's fourth-largest military spender. Most of
the top 15 defence and security budgets as a percentage of GDP
are in the Middle East, including Oman, Saudi Arabia, Iraq,
Bahrain, Israel, Libya, Algeria, Yemen, Jordan and Iran.
GULF, ASIAN FIGHTER COMPETITIONS
Other areas of the world are also seeing growth. Russia's
defence budget has increased 30 percent since 2008 and is set to
rise another 43 percent in the next three years. Military
spending in sub-Saharan Africa rose 18 percent in 2013 alone.
All that, IHS believes, will push total global spending to
$1.547 trillion in 2014 from $1.538 trillion last year, a 0.6
percent increase. By 2021, total spending by NATO nations will
fall below non-NATO spending for the first time in decades - a
major challenge for Western firms.
Most Gulf states seem happy to split their purchases between
their major Western allies - often buying the Eurofighter, the
French Rafale and U.S. aircraft such as the F-15 simultaneously
in an apparent attempt to secure multiple alliances.
Asian buyers, however, appear much more likely to buy
American - perhaps unsurprising given Washington's importance as
an ally. But they also seem keen to strike deals and make sure
their own industry also benefits, often through joint ventures.
Most of the shipbuilding goes to local yards, although some
western firms have won contracts for design work and to supply
specialist equipment such as radar. For foreign firms, the most
lucrative market remains aircraft.
Singapore is upgrading its F-15s and is looking to buy the
Lockheed Martin F-35 joint strike fighter. Japan has already
placed an order for F-35s and South Korea is expected to
finalise an order this month. Singapore and Japan are also
considering the V-22 Osprey built by Boeing and Bell
Helicopters, a unit of Textron.
In a closely watched competition, Malaysia is currently
choosing between Boeing's F/A-18, Dassault's Rafale,
the Eurofighter Typhoon, and Saab's Gripen.
ASIAN, RUSSIAN FIRMS RISE
Pentagon officials say they also expect interest in missile
defence systems by Lockheed and Raytheon, Boeing's maritime P-8
patrol aircraft and the Boeing KC-46A airborne tanker. South
Korea is expected to begin a tanker competition shortly.
With its $600 billion defence budget still outstripping the
next dozen nations combined, the United States remains the
largest market. Even with recent cuts, it still makes up 38
percent of global defence spending, almost twice the total share
of the whole of Asia and Australasia.
U.S.-based companies still make up 58 percent of total arms
and military sales featured in the SIPRI top 100 survey, with
those in Western Europe making up another 28 percent. The share
of sales going to firms from outside those regions, however, has
been rising since 2005, growing 14 percent in 2012 alone.
With China's firms discarded, only one other Asian firm made
the top 30, Japan's Mitsubishi Heavy Industries. Other
smaller companies, however, grew fast in 2012 and are believed
to have accelerated further in 2013.
Outside Asia, the biggest winners from growing defence
spending were Russian companies, their sales growing by 28
percent in 2012 on the back of resurgent domestic military
spending as well as exports to a mix of other states.
Vietnam has tended to buy Russian as it squares off against
China. Russian and Ukrainian firms have also exported large
quantities of rifles and ammunition to a host of countries.
"The centre of gravity of defence expenditure is expected to
continue to shift south and east," said Paul Burton, director of
IHS Jane's Aerospace, Defence and Security. "Russia, Asia and
the Middle East will provide the impetus for the growth in
global military spending."