Although the growth of Southeast Asian economies offer great opportunities to defence companies, no new major procurement programmes are expected for Malaysia in the short-term.
A number of programmes are expected to be postponed until the 11th Malaysia Plan covering government spending for 2016-2020 as the government addresses an increasing public deficit, said John Siddhart, senior aerospace and defence analyst of MarketsandMarkets.
According to government statistics, the defence budget for 2014 is set at RRM16.1 billion ($5 billion) representing a RM900 million increase from the previous year.
‘The key procurement during the 2014 budget includes six Second Generation Patrol Vessel-Littoral Combat Ships, four cargo aircraft and support equipment and armoured vehicles at a cost of about RM2.4 billion,’ said Siddhart.
He added that the government is expected to procure Multi-Purpose Support Ships beyond 2016, for which the Royal Malaysian Navy has had a requirement since 2008. He added that the existing AV8 8X8 AFV programme is anticipated to generate an order of 500 vehicles under the new government spending plan.
In addition, four AWAC systems, trainer aircraft and MANPADS are expected to be procured after 2015.
‘The other priority list includes utility and attack helicopters wherein attack helicopters top the list,’ said Siddhart.
‘The other priority list includes utility and attack helicopters wherein attack helicopters top the list,’ said Siddhart.
To date, no RfP has been released regarding the urgent attack helicopter requirement, for which Boeing, Airbus Helicopters and Bell have been promoting the AH-64D, Tiger and AH-1Z, respectively.
With regard to the wider Southeast Asian region, the outlook looks promising with nations building up their military capabilities with enhanced maritime security being on the list of priorities.
While total defence spending is growing in the region, scale and pace varies significantly across nations. According to a McKinsey report, released in February 2014, Indonesia has more than doubled its spending in the past five years whereas the budgets of Cambodia and Laos are growing more slowly.
Although the defence markets of Southeast Asian nations are small compared to markets such as China and India, collectively they are in the top of defence importers globally.
Following SIPRI figures, Southeast Asia made up the second largest military import market worldwide between 2007 and 2013 with Singapore accounting for 38% of the total. Malaysia encompassed 19% of the regional market followed by Vietnam and Indonesia at 13% and 12% respectively.
The ASEAN market appears to be highly competitive as its procurement patterns demonstrate with countries sourcing equipment from all over the globe.
‘Singapore, Indonesia, Thailand and Malaysia have balanced their supplies across multiple sources including the US, Europe, Russia and South Korea. Vietnam, by contrast, has traditionally had a strong defence procurement relationship with Russia, while the Philippines has tended to import largely from the US,’ the McKinsey report said.
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