By Sergey Kandaurov,
senior research officer,
Russian Strategic Research Institute

Being the third largest arms market in the world East and South East Asia traditionally attract the biggest AME producers from different countries. China, Taiwan and South Korea have the highest military expense volume in the region and so they are capable to purchase the most advanced and accordingly the most expensive armaments.

In 1997 the financial and economic crisis substantially deteriorated financial situation in some countries of the region. Indonesia, Thailand and South Korea were the most affected. The most governments except China and Taiwan responded to the crisis by the similar way - either by cutting the military budgets or by freezing them. In 1997-1998 North Korea, Vietnam, Malaysia and especially Thailand and South Korea reduced their military expenses. The crisis affected the Armed Forces' modernization programs and armaments purchases from abroad. This fact in its turn negatively affected the demand on the regional arms market. Devaluation of the local currencies during 1997-1998 reduced the purchasing power of the military budgets in dollar calculation. As the result such major arms suppliers as the USA, the United Kingdom, France and Russia had to correct their export strategies, change the approaches used to promote their armaments on the regional markets. By now the development of the situation shows that the South East Asian countries go out of the crisis. According to the results of 1999 the economic growth is expected to resume in the most states except Indonesia that was the most seriously affected by the crisis.

The United States is the biggest armaments supplier to the region. Only China, Vietnam and North Korea aren't among its clients. Among the four major purchasers of the American armaments that are South Korea, Taiwan, Singapore and Thailand the former two are the leaders on volume of the American AME purchase in the last years. While the USA is reducing the offer of the used military equipment the contracts on lease of particular equipment items such as landing ships, transport aircraft, fighters and helicopters have become more widespread. But in general the Americans refrain to transfer modern attack armaments to the region preferring to supply defense arms or support equipment. The USA is the only exporter that can widely use geopolitical and financial factors to influence onto its customers. In this connection a number of the South East Asian states seek to preserve their independence to choose MTC partners. Thus, the list of the American military supplies has been decreasing lately. That's why such armaments suppliers as Russia, France, Israel that have no political restrictions for their military and technical cooperation become more attractive for the regional AME importers.

Taiwan and Brunei became the major customers for France in the region. The participation in the Brunei Armed Forces modernization program was the undoubted success for the French armaments exporters. Besides since the beginning of the 90's France managed to conclude rather large contracts with many countries of the region such as China, South Korea, Malaysia, Singapore and New Zealand. It's evident that the French side seeks to strengthen its positions first of all on the markets of the solvent regional countries.

A long Indonesia, Brunei and Australia that remain the main importers of the British armaments in the recent years comparatively large supplies have been carried out to South Korea, Malaysia and Philippines. Hawk-100/200 bought by Australia, Brunei and Indonesia is the most popular armament item supplied by the UK to the region.

Germany has the leading position on the regional market of the navy armaments. It supplies its AME first of all to Indonesia, South Korea and Malaysia. The German export policy includes sales of the used armaments and license transfers for the armament production on the importer's industrial base.

(To be continued)