IScann in Conversation with Senior Advisor, Dzirhan Mahadzir 

The COVID-19 pandemic has battered economies worldwide resulting in global recessions and actioning governments to carefully evaluate where best to prioritise spending. According to the Stockholm International Peace Research Institute, in 2019 Southeast Asia spent $34.5 billion on defence, an increase of 4.2% from 2018. Over the years, it has become evident that governments in this region have long since tied defence spending and resources to economic growth. So it is understandable that with the pandemic in 2020, defence spending was dramatically reduced. However, the question now is, what will happen to the defence budget post-COVID?

Anne David, Director of Solutions, talks with Iscann Group’s Senior Advisor, Dzirhan Mahadzir, who has extensive knowledge in military defence and tactical strategy in the ASEAN region. He is here today to share with us his predictions on what Southeast Asian countries, specifically Singapore, Malaysia and Indonesia, and what we should be expecting for defence spending in 2021.

Q: Dzirhan, What specific sectors do you think defence spending will go into? 

The spending post-COVID will impact every big-ticket industry from the navy and on-the-ground military services to cybersecurity. Although that being said, cybersecurity sometimes isn’t that expensive to carry out, so it’s not always as significantly affected by budget planning as other defence sectors. 

Often each country has different requirements. For instance, Malaysia has more requirements for fighter aircrafts, for instance, the Light Combat Aircraft is needed to replace its Hawk and MB-339CM fleet plus there is the long-standing requirement for the Multi-Role Aircraft to replace the phased out MiG-29. Whereas, Singapore has more requirements for navy ships such as the Joint Multi-Mission Ship and the Multi-Role Combat Vessel (see the included official SAF chart). 

Indonesia has requirements for both, and Thailand and the Philippines are focusing their budget spending more specifically on submarine programmes. As of now, Thailand has scaled down its plan to buy just one submarine from China instead of three, and the Philippines has been in talks with France

Additionally, off the back of the pandemic and tighter spending budgets, Southeast Asian governments will most likely be forced to align their security spending with actual threats, not merely ones that would advance institutional and political interests.

Q: What are some of the biggest threats you see in 2021 and beyond? 

Well, each country has its own requirements or perceptions of defence really. For instance, with Vietnam, it’s the South China Sea, particularly in the context of claims with China – and it’s the same with Malaysia. Vietnam, Malaysia and the Philippines are all concerned about China’s claims on the Spratly Islands and with Vietnam, there is also the disputed claims with China on the Paracel Islands. Additionally, the countries have concerns about China’s claims on their EEZ, particularly in relation to oil exploration and fisheries activities.

Indonesia is, of course, always concerned about threats to national security, again mainly from China. And Singapore generally wants to ensure that they are ahead of the military curve in the region. 

So it varies greatly and often comes down to political alliances and influence. 

Q: So, if we focus on Malaysia specifically, what do you expect to see happen?  

At the moment I actually believe that everything is up in the air because we’re not even sure if the government will actually last. There are a few legacy issues that need to be sorted out, such as a shipbuilding programme. Specifically, Malaysia still needs to figure out the issue of the troubled six-ship Maharaja Lela Class Littoral Combat Ship programme and the additional funding requirement of MYR1.4 billion that is over the contract ceiling of MYR9.12 billion. This funding is needed to complete the programme. As a result, the delivery of the first ship has been delayed until 2023 and further delays are to be expected.  

Also, the air force has a requirement for light combat aircrafts for ground attacks and to lead in fighter training roles. They’re talking as if they are going to get it done this year, but that seems highly unlikely.  

 Q: Do you think these building programmes will be affected by COVID?  

Oh, definitely! Especially because money has always been tight in the region.

Take Malaysia for a moment, the problem is that the COVID situation has been spiralling a bit out of control, and the government has had to focus on compensating people for a loss of income and pushing to keep the economy going. Obviously, that’s going to affect government spending in all sectors, but especially in defence.

Q: And how does that compare to Singapore for instance? 

Singapore has been cautious and spacing its programmes slowly. They have yet to announce when the Joint Multi-Mission Ship program will begin, while the Multi-Role Combat vessel is expected to be delivered in 2025. Singapore inaugurated its Maritime and Security Response Flotilla (MSRF) in January this year using refurbished and lease ships and stated that these will be eventually be replaced by new ships which are currently in the concept design phase. No date has been given for it but presumably, it’s because the government wants to see how the finances are before setting a date. 

Overall, I think everybody in the region is going to be very cautious because they’re not sure how much the economy and revenue is going to be affected long-term. So defence will, of course, always be the first to be cut or scaled-down in light of that.

Q: Post-COVID, governments will place a greater emphasis on replacing obsolete equipment. What are we looking at around the ASEAN?

Ships. Normally all of the abandoned equipment will be ships because as they age, the combat systems and the weapons systems become obsolete. 

A lot of the budget requirement, particularly in Malaysia and Indonesia, where the fleets are ageing, would need to go on replacing the ships with new ones. And the same also goes for aircrafts. I mean, some of it is pushed by the technological curve, when this equipment was purchased, they were state of the art. But years later it becomes a problem. 

For example, Malaysia bought two ships from the United Kingdom in the 1990s, but the problem is that now other people are using fibre optic cables, but in Malaysia, they’re still using the old type of wiring. So they basically need to do a massive technological shift. 

They’d have to rip out all the old wiring to keep up with modern technology. So that’s some of the issues that are being faced by the country. And that definitely would cost a lot, you know, it’s not cheap! That was not a cheap thing to do. But also, buying a new ship also costs a lot. 

And of course, the issue is that everybody is spending very cautiously. Especially considering how much it is costing to inoculate almost everybody in the population, and particularly for small countries, it’s bound to drastically affect finances and budgets.  

Q: Lastly, despite the tightening, what new weaponry are you expecting to see rolled out and where?

I don’t expect any new weaponry or capabilities to really roll out in the SE-Asia region in the next two years given the budget constraints and the time is taken for contract signing to delivery. Existing delivery orders will be carried out though, such as the third Indonesian Nagapasa class submarine which should be delivered this year, and the second Philippine Navy Jose Rizal class frigate which has just arrived in the Philippines. 

Thank you Dzirhan! 

If you would like more information, contact Andrew Vasko at andrewvasko@iscanngroup.com

Image Source: Image of Next Gen SAF is from Singapore Ministry of Defence 

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