defence economic trends in the asia-pacific 2002 · asean-5 and australia’s percentage of ... and...

DDEEFFEENNCCEE EECCOONNOOMMIICC TTRREENNDDSSIINN TTHHEE AASSIIAA––PPAACCIIFFIICC 22000022

© Commonwealth of Australia 2003

This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without prior written permission from the Commonwealth. Requests and enquires concerning reproduction and rights should be addressed to:

Commonwealth Copyright Administration, Department of Communications, Information Technology and the Arts, GPO Box 2154, Canberra ACT 2601or email [email protected]

mailto:[email protected]

iii

Table of Contents

Page

Preface v

South-East Asia — Analysis Regional Overview 1Regional Trends 2Indonesia 4Malaysia 6The Philippines 8Singapore 10Thailand 12 Vietnam 14Cambodia 16East Timor 17

South Pacific — Analysis Regional Overview 22Fiji 24New Zealand 26Papua New Guinea 28

North Asia — Analysis Regional Overview 29Regional Trends 30China 32Japan 34Republic of Korea 36Taiwan 38Democratic People’s Republic of Korea 39

South Asia — Analysis Regional Overview 40India 42Pakistan 44

Appendices A: Methodology 50B: Notes on sources 52

iv

Table of Contents

Tables

PageSouth-East Asia

Indonesia 3 Malaysia 5 The Philippines 7 Singapore 9 Thailand 11 Vietnam 13 Cambodia 15 Brunei Darussalam 19 Laos 20 Myanmar 21

South Pacific Fiji 23 New Zealand 25 Papua New Guinea 27

North Asia China 31 Japan 33 Republic of Korea 35 Taiwan 37

South Asia India 41 Pakistan 43

Australia 46

North America Canada 48 United States of America 49

Major Graphs (Each country table also has GDP vs. Defence Growth and Government Defence Outlays charts. In addition, country

assessment pages have graphs depicting official real spending levels.)

Figure 1. Real GDP Growth (%) for Australia and Selected South-East Asia Countries 1 Figure 2. ASEAN-5 and Australian Defence Budgets 1992–2002 (1995 US$) 2 Figure 3. ASEAN-5 and Australia’s Percentage of GDP Spent on Defence 2 Figure 4. ASEAN-5 and Australia’s Percentage of Government Outlays Spent on Defence 2 Figure 5. Contribution to South-East Asian Defence Spending in 2002 (%) 2 Figure 6. South Pacific Real GDP Growth (%) 22 Figure 7. South Pacific Real Defence Spending Growth (%) 22Figure 8. North Asian Real GDP Growth (%) 29 Figure 9. North Asian Real Growth in Defence Spending (%) 29Figure 10. North Asian Defence Budgets 1992–2002 (1995 US$) 30 Figure 11. North Asia Percentage of GDP Spent on Defence 30 Figure 12. North Asia Percentage of Government Outlays Spent on Defence 30 Figure 13. Contribution to North Asian Defence Spending in 2002 (%) 30

Preface

v

Aims

This publication analyses significant trends in defence funding in the Asia–Pacific region. Itdraws together official defence budgets and national economic data to enable comparisonsbetween countries, and over time.

Additions since 2001

The 2002 edition includes information on East Timor for the first time. The section onCambodia has been expanded to include a narrative on both its economy and defencespending, as well as tables of key time series information.

Methodology

This edition of the Defence Economic Trends in the Asia–Pacific continues to use themethodology introduced in 2000 to compare defence funding trends in the region.Underpinning much of the analysis in this publication is a series of defence deflators that areused to convert nominal official defence budgets into constant 1995 terms. While there aresome limitations to undertaking expenditure comparisons our estimates aim to give readersthe best available guide to the overall trend for spending on regional armed forces in realterms. For an explanation of the model and notes on comparing expenditure over time andbetween countries please refer to Appendix A.

Statistical Notes

All defence expenditure figures relate to official defence budget estimates unless otherwisestated.

Gross domestic product and government expenditure are provided in both nominal and realterms and in both local and US dollars, to enable comparisons to be made over time andbetween countries.

Online Version

This publication is available online at the Department of Defence’s website:www.defence.gov.au/dio/index.htm

Feedback

We encourage readers to comment on this publication so we can improve next year's edition.

If you wish to comment or have any questions in relation to Defence Economic Trends 2002please contact us direct by phone or fax at:

Defence Economic Analysis Section Defence Intelligence Organisation Telephone: (02) 6265 2689 Facsimile: (02) 6265 6086

http://www.defence.gov.au/dio/

1

South-East Asia – Regional Overview

Regional Economy

In 2002, most regional nations achieved stronger economic growth than in 2001. Thisperformance was generally supported by expansionary fiscal policies, increased domesticdemand and improved global activity. Increased demand from the region's principal exportmarkets, including the US, Japan, China and Taiwan, assisted many regional nations. This wasclearly evident in the improvement in the global electronics trade in the latter part of 2002.Moreover, intra-regional trade also played an important role in boosting economic activityamong South-East Asian nations. The notable exception to the region's upward trend was EastTimor, which contracted in 2002. This was primarily due to the ongoing United Nationswithdrawal. Unlike the established economies of South-East Asia, East Timor's nascent economy remains reliant on government spending and international donor aid. That said, other regionaleconomies continue to face ongoing challenges from high levels of public debt, incomplete finance sector restructuring and investor caution. Regional business investment was generallysubdued, due in part to the threat of terrorism as experienced by Indonesia and the Philippines.

Defence Spending

Defence spending levels within the region were varied, but increased overall in 2002. Somebudgets neared or surpassed their ten-year high points (eg Malaysia and Singapore). Realincreases were recorded by Thailand, Indonesia and Philippines. Local political and economicconditions, as well as defence policies, affected the size of individual defence budgets andannual funding changes. Among selected South-East Asian nations in 2002, the relativeproportions of regional defence spending remained about the same as in 2001. Singapore increased its proportion from 36% to 39%, Malaysia, Thailand, Indonesia remained steady at18%, 18% and 15% respectively while the Philippines fell from 14% to 10%. Clear differencesremain between the capacity of regional nations to pursue procurement programs and to maintain operational capabilities. Consequently, some countries continued to adopt orinvestigate alternative approaches to defence funding including counter-trade, commercial leasearrangements and greater utilisation of defence assets for economic purposes.

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

%

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

Figure 1: Real GDP Growth (%) for Australia and Selected South-East Asia Countries

Australia Malaysia Indonesia Singapore Thailand Philippines

2

South-East Asia – Regional Trends

Figure 2: ASEAN-5 and Australian Defence Budgets 1992-2002 (1995 US$)

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

1995 U

S$ B

illion

Australia Malaysia Indonesia SingaporeThailand Philippines ASEAN -5

Figure 3: ASEAN-5 and Australia's Percentage of GDP Spent on Defence

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

Australia Malaysia Indonesia

Singapore Thailand Philippines

Figure 4: ASEAN-5 and Australia's Percentage of Government Outlays Spent on Defence

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

Australia Malaysia Indonesia

Singapore Thailand Philippines

Figure 5: Contribution to South-East Asian Defence Spending in 2002 (%)

Malaysia18%

Philippines10%

Indonesia15%

Singapore39%

Thailand18%

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

Official Defence Budget:Current Rupiah bn 3,742.0 4,239.0 5,008.1 5,904.2 7,031.6 8,005.3 9,741.0 12,187.1 13,636.9 14,300.0 16,015.81995 Rupiah bn 4,909.4 5,116.9 5,514.0 5,904.2 6,494.1 6,564.0 5,120.7 5,383.3 5,239.7 4,904.9 4,996.41995 US$ bn 2.2 2.3 2.5 2.6 2.9 2.9 2.3 2.4 2.3 2.2 2.2

Real Growth (%) 5.3 4.2 7.8 7.1 10.0 1.1 (22.0) 5.1 (2.7) (6.4) 1.9

Percentage of Real GDP 1.4 1.4 1.3 1.3 1.4 1.3 1.2 1.2 1.1 1.0 1.0Percentage of Nominal Government Spending 7.2 7.7 8.1 8.8 9.0 7.1 5.6 5.6 5.6 4.2 4.8Per Capita (1995 US$) 11.7 12.0 12.8 13.5 14.6 14.6 11.2 11.6 11.1 10.2 10.3

GDP:Current Rupiah bn 269,852.5 317,223.1 371,971.3 441,148.0 518,295.8 627,695.0 948,439.0 1,109,980.0 1,280,217.6 1,490,974.2 1,697,474.11995 US$ bn (Real GDP) 155.9 167.2 181.8 196.2 212.1 228.2 196.7 198.5 208.0 215.3 222.2Real Growth (%) 6.4 7.2 8.8 7.9 8.1 7.6 (13.8) 0.9 4.8 3.5 3.2Per Capita (1995 US$) 837.8 883.7 945.7 1,011.4 1,075.5 1,139.0 965.9 958.9 990.6 1,008.0 1,025.4

Government Spending (current Rupiah bn) 52,200.0 54,983.0 61,866.0 66,723.0 77,964.0 112,893.0 173,919.0 215,926.0 244,133.3 340,325.7 332,464.5Population (m) 186.0 189.1 192.2 194.0 197.2 200.4 203.7 207.0 210.0 213.6 216.7Inflation (Annual % Change) 7.5 9.7 8.5 9.4 7.9 6.6 58.0 20.8 9.1 11.5 10.3Statistical Note: Indonesia's fiscal year changed in 2000. As a result the 2000 budget only covers 9 months and has been annualised to produce the figure for 2000.

Growth in Defence Spending vs Growth in GDP (Annual % Change)

(25.0)

(20.0)

(15.0)

(10.0)

(5.0)

0.0

5.0

10.0

15.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%

Real Growth in Defence Spending Real Growth in GDP

Percentage of Nominal Government Spending on Defence

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%

Indonesia — Defence and Economic Trends 1992—2002

3

4

Indonesia

EEccoonnoommyy

Indonesia’s economy fell short of the government’s 4-5% growth target posting 3.2% real growth in 2002. The lower growth was attributable to slower than anticipated post-September 11 global economic recovery, the affect of the Bali bombings and a strongerRupiah, which reduced external sector growth. The economy remains largely reliant uponconsumer demand, which grew by 4.7%, driven by rapid increases in real wages,predominantly in small to medium enterprises, and a 42% expansion in consumer credit. Othernotable growth sectors include transport and communications, which grew by 7.8%, and publicutilities, which grew by 6.1%. However the investment climate was subdued in 2002 withinvestment falling by about 4.5%. The Bali bombings exacerbating the downward trend incapital formation. Inflation fell from around 11.5% in 2001 to 10.3%, due to Bank Indonesia’ssuccesses in growing the money base. Indonesia’s non-oil and gas external sector was characterised by a sharp fall in export volumes due to real wages increases, which reduced thecompetitiveness of labour intensive export industries, and currency appreciation that aided theincrease in imports during 2002. However Indonesia’s 2002 trade balance remained in surplus.

DDeeffeennccee SSppeennddiinngg

TNI’s 2002 defence budget was approximately 16 trillion Rupiah, or around 1% of GDP. This isa 1.9% real increase over 2001’s allocation. This increase reverses the trend of real declinesover the past two years. Indonesia did not purchase any major platforms during 2002 andcontinued to remain focused on the maintenance of internal security and Indonesia’s territorialintegrity. However TNI-AU took delivery of 19 Marchetti trainers donated by Singapore and wasgiven a decommissioned patrol boat from Australia.

Formal Name Republik Indonesia Capital City Jakarta Population 216.7 million Land Size 1,904,570 sq.km Currency Indonesian Rupiah Fiscal Year Calendar Year Economy Less developed country with a market economy Industries Petroleum and natural gas, mining, cement, chemical fertilisers, plywood,

rubber, food, tourism, textiles, apparel, and footwear

Indonesia's Official Defence Funding – Real Dollars

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

US

$ 1

995 B

illion

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

Official Defence Budget:Current Ringgits bn 4.5 5.0 5.4 6.0 6.5 6.1 5.3 5.9 6.0 7.3 8.31995 Ringgits bn 5.1 5.4 5.6 6.0 6.2 5.5 4.6 5.0 4.7 5.8 6.61995 US$ bn 2.0 2.2 2.2 2.4 2.5 2.2 1.8 2.0 1.9 2.3 2.6

Real Growth (%) 1.0 7.4 3.5 6.8 3.9 (12.5) (16.2) 9.1 (6.4) 24.8 13.1

Percentage of Real GDP 3.0 2.9 2.8 2.7 2.5 2.1 1.9 1.9 1.7 2.1 2.2Percentage of Nominal Government Spending 10.8 11.8 11.7 11.9 11.1 10.1 8.5 8.5 7.7 8.0 8.1Per capita (1995 US$) 110.3 115.9 117.4 122.2 124.4 106.3 87.4 93.1 85.6 104.9 116.0

GDP:Current Ringgits bn 150.7 172.2 193.5 222.5 253.7 281.8 284.5 299.6 342.2 334.6 353.21995 US$ bn (Real GDP) 67.4 74.1 80.1 88.8 97.7 104.9 97.2 102.8 112.4 112.9 117.6Real growth (%) 8.9 9.9 8.1 10.9 10.0 7.3 (7.3) 5.8 9.4 0.4 4.2Per capita (1995 US$) 3,682.7 3,962.2 4,192.8 4,532.8 4,885.8 5,115.4 4,649.6 4,802.5 5,158.1 5,087.1 5,182.1

Government spending (current Ringgits bn) 41.7 42.3 46.3 50.6 58.4 60.4 62.6 69.3 78.0 91.1 102.0Population (m) 18.3 18.7 19.1 19.6 20.0 20.5 20.9 21.4 21.8 22.2 22.7Inflation (Annual % Change) 4.7 3.5 3.7 3.4 3.5 2.7 5.2 2.8 1.6 1.4 1.8

Growth in Defence vs Growth in GDP (Annual % Change)

(20.0)

(15.0)

(10.0)

(5.0)

0.0

5.0

10.0

15.0

20.0

25.0

30.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%



0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%

Malaysia — Defence and Economic Trends 1992—2002

5

6

Malaysia

EEccoonnoommyy

Malaysia's export-oriented economy recovered from 2001’s low growth and grew by 4.2% in2002. Expansionary fiscal measures and favourable monetary settings were key pillars ofMalaysian economic growth. The recovery was also assisted by increased demand fromMalaysia's principal export markets − the US, Singapore, Japan and Taiwan. Renewed growth inthe manufacturing sector, including electrical and electronics products, was evident. Risingcrude and palm oil prices helped Malaysia to record a trade surplus in 2002. Malaysia'sfundamentals remained sound. In August, credit rating agency Standard and Poors raised itsrating for Malaysia to BBB+. The currency remained pegged to the US dollar.


Malaysia allocated RM 8.3bn to the defence budget in 2002, a figure greater than at any timeduring the past ten years. This represented a 13.1% real increase over 2001. The allocationalso increased as a percentage of both real GDP and nominal government spending, reflectingMalaysia's restored plans to upgrade platforms and purchase new military equipment.Moreover, the Malaysian Government introduced a counter-trade system to pay for majorweapons purchases with commodities such as palm oil. In 2002, the Malaysian Armed Forces(MAF) took delivery of Superlynx helicopters from the UK and the Astros multiple-launch-rocket-systems from Brazil. The MAF ordered two SCORPENE-class conventional submarinesfrom France and 48 PT-91 tanks and 14 support vehicles from Poland. Malaysia continued toevaluate offers for its multi-role combat aircraft requirement.

Formal Name Persekutuan Malaysia Capital City Kuala Lumpur Population 22.7 million Land Size 329,750 sq. km Currency Malaysian Ringgit Fiscal Year Calendar Year Economy Less developed country with a market economy Industries Rubber and oil palm processing and manufacturing, light manufacturing industry,

electronics, tin mining and smelting, logging and processing timber, agriculture processing, petroleum production and refining

Malaysia's Official Defence Funding – Real Dollars

0.0

0.5

1.0

1.5

2.0

2.5

3.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

US

$ 1

995 B

illion

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

Official Defence Budget:Current Peso bn 17.3 20.0 23.1 27.4 30.9 29.2 29.3 30.1 43.8 46.8 57.31995 Peso bn 21.9 23.6 24.8 27.4 28.7 25.2 23.4 22.5 29.7 29.8 36.71995 US$ bn 0.8 0.9 1.0 1.1 1.1 1.0 0.9 0.9 1.2 1.2 1.4

Real Growth (%) 1.7 8.0 5.1 10.4 4.8 (12.2) (7.0) (3.9) 32.1 0.3 23.0


GDP:Current Peso bn 1,351.6 1,474.5 1,692.9 1,906.3 2,171.9 2,460.7 2,578.2 2,976.9 3,302.6 3,642.8 3,788.51995 US$ bn (Real GDP) 66.4 67.9 70.8 74.1 78.5 82.9 79.2 85.7 88.2 91.2 95.4Real Growth (%) 0.4 2.1 4.4 4.7 5.8 5.7 (4.5) 8.2 2.9 3.4 4.6Per Capita (1995 US$) 988.5 989.1 1,010.2 1,034.0 1,068.9 1,104.2 1,033.9 1,095.8 1,106.8 1,123.4 1,151.0

Government Spending (current Peso bn) 291.6 313.7 327.7 372.1 416.1 491.7 528.0 593.0 650.0 725.0 780.8Population (m) 67.2 68.6 70.1 71.7 73.4 75.1 76.6 78.2 79.7 81.2 82.9Inflation (Annual % Change) 8.6 6.9 8.4 8.0 9.0 5.9 9.7 6.7 5.0 6.0 7.0


(15.0)

(10.0)

(5.0)

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%



0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%

The Philippines — Defence and Economic Trends 1992—2002

7

8

The Philippines

Economy

Despite the economy being dampened by the threat of conflict in the Middle East and aheightened terrorism concern, the Philippines’ economy achieved strong growth of 4.6%, led bythe services sector, domestic consumption and external trade. Inflation and interest rates werelow for the year. The economy also saw strong growth in industry and agriculture. Personalconsumption remained the main driver of GDP, increasing 3.9% in 2002, with strong demandfor household goods, transport and communication, and food expenditure. Increasedelectronics demand provided a boost for Philippines exports–accounting for 54% of exports. Anincrease in overseas remittances helped improve the 2002 balance of payments. Inflationdropped to 4.0% from 6.1% in 2001. Despite being a positive year for the Philippines, anumber of problems were evident, including a growing budget deficit, which for 2002 wasUS$4.4bn or 5.5% of GDP, 17.9% of loans being non performing, 2.3% population growth,many stalled legislation reforms as well as falling tourist numbers due to concern aboutterrorism.

Defence Spending

The Philippines’ defence spending increased in real terms during 2002. Increases in spendinghave been absorbed by increased personnel costs and counter-insurgency operations. As aconsequence, there were insufficient funds for the Armed Forces of the Philippines'modernisation program to proceed. This is the seventh year the program has failed toeventuate. Supplementary funding in the form of US military finance assistance, thoughincreased in 2002, did not alleviate the need for more government defence spending.

Formal Name Republika ng Pilipinas Capital City Manila Population 82.9 million Land Size 300,000 sq. km Currency Philippine Peso Fiscal Year Calendar Year Economy Less developed country with a market economy Industries Textiles, pharmaceuticals, chemicals, wood products, food processing, electronic

assembly, petroleum refining and fishing

The Philippines' Official Defence Spending - Real Dollars

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

US

$ 1

995 B

illion

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

Official Defence Budget:Current S$ bn 4.1 4.3 4.7 5.6 5.7 6.3 7.2 7.3 7.4 7.8 8.21995 S$ bn 4.8 4.8 4.9 5.6 5.6 6.1 7.0 7.4 7.2 7.7 8.11995 US$ bn 3.4 3.4 3.5 4.0 3.9 4.3 5.0 5.3 5.1 5.4 5.7

Real Growth (%) 1.3 (1.0) 3.3 13.7 (0.1) 8.4 15.8 6.1 (3.1) 6.4 5.6

Percentage of Real GDP 5.5 4.9 4.5 4.7 4.4 4.4 5.1 5.1 4.4 4.8 5.0Percentage of Nominal Government Spending 27.7 30.1 29.9 32.2 27.5 21.6 28.1 27.3 25.6 27.9 28.9Per Capita (1995 US$) 1,061.3 1,019.4 1,022.0 1,128.8 1,096.3 1,156.0 1,269.8 1,330.1 1,226.1 1,258.7 1,284.6

GDP:Current S$ bn 80.0 93.1 106.6 118.2 128.2 140.3 137.6 140.1 159.9 158.1 159.01995 US$ bn (Real GDP) 61.3 69.1 76.9 83.4 89.4 97.1 97.0 103.7 114.4 112.0 115.1Real Growth (%) 7.2 12.7 11.3 8.4 7.2 8.7 (0.2) 6.9 10.3 (2.1) 2.8Per Capita (1995 US$) 19,150.8 20,929.7 22,617.6 23,826.3 24,826.3 26,253.6 24,867.2 26,257.6 27,569.6 26,049.1 25,875.9

Government Spending (current S$ bn) 14.8 14.3 15.7 17.4 20.7 29.2 25.6 26.7 29.0 28.1 28.4Population (m) 3.2 3.3 3.4 3.5 3.6 3.7 3.9 4.0 4.2 4.3 4.5Inflation (Annual % Change) 6.5 12.7 11.4 8.0 7.5 8.4 0.4 5.4 1.4 1.0 0.0


(5.0)

0.0

5.0

10.0

15.0

20.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%



0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%

Singapore — Defence and Economic Trends 1992—2002

9

10

Singapore

Economy

Singapore's economy expanded by 2.8% in 2002, compared to a 2.1% contraction in 2001. Thebest sector was manufacturing which grew by 8.3% in 2002 – a sharp contrast to the 12% fall in2001. The construction sector remained in a weak state, contracting 10.8% for the year.External demand rose 4% in 2002 and external trade grew 1.5%, reversing the decline of 9.4%in 2001. Singapore's export manufacturing sector saw steady improvement over the last fewmonths of 2002. A recovery in the US economy and global electronics demand have beencredited for the improved performance. But, following on from 2001, the labour marketcontinued to weaken as total employment fell, especially in manufacturing – despite the sectorsgrowth and in the services and construction sectors. Subsequently, unemployment rose to a newhigh of 4.8%. Singapore posted a balance of payments surplus of US$1.3bn in 2002, comparedto a deficit of US$0.9bn in 2001. The current account had a US$19.1bn surplus in 2002. This, aswell as government measures to strengthen the economy through creating attractive investmentconditions, meant that 2002 ended with healthier economic fundamentals.

Defence Spending

Singapore's defence budget grew 5.6% in real terms in 2002. Defence spending represented 5%of GDP, a small increase on 2001. Singapore began construction of two of six LA FAYETTE-classderived frigates during 2002. Eight Longbow radar-equipped AH-64D Apache helicopters wereacquired in 2002. Singapore also signed up to cooperate on the design and development of theJoint Strike Fighter with an US$50m investment spread over six years. Singapore is also lookingto replace its A4SU Super Skyhawk fighters, with the Boeing F-15, Lockheed Martin F-16 Block60 and Dassault Rafale under consideration as replacements.

Formal Name Republic of Singapore Capital City Singapore Population 4.5 million Land Size 620 sq.km Currency Singapore Dollar Fiscal Year 1 April–31 MarchEconomy Newly industrialised country with a market economy Industries Electronics, financial services, oil drilling equipment, petroleum refining, rubber

processing and rubber products, processed food and beverages, ship repair, entrepot trade, biotechnology, engineering and pharmaceuticals

Singapore's Official Defence Funding – Real Dollars

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

US

$ 1

995 B

illion

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

Official Defence Budget:Current Baht bn 74.1 75.6 86.2 94.7 100.2 98.2 86.1 74.7 77.1 77.2 78.21995 Baht bn 84.9 84.0 91.1 94.7 96.4 90.7 72.9 65.9 67.2 65.9 66.31995 US$ bn 3.4 3.4 3.7 3.8 3.9 3.6 2.9 2.6 2.7 2.6 2.7

Real Growth (%) 2.3 (1.1) 8.4 4.0 1.8 (5.8) (19.7) (9.6) 2.0 (2.0) 0.7


GDP:Current Baht bn 2,830.9 3,195.8 3,598.6 4,094.5 4,610.3 4,752.7 4,626.4 4,632.1 4,904.7 5,100.7 5,352.91995 US$ bn (Real GDP) 130.3 142.5 152.5 164.3 177.9 176.3 157.1 163.9 171.6 174.7 182.2Real growth (%) 8.6 9.4 7.0 7.8 8.3 (0.9) (10.9) 4.4 4.7 1.8 4.3Per capita (1995 US$) 2,274.4 2,456.8 2,597.8 2,766.6 2,965.4 2,909.2 2,566.9 2,663.2 2,754.0 2,772.7 2,864.6

Government spending (current Baht bn) 425.4 504.6 591.5 660.7 758.0 957.7 1,051.7 1,160.2 884.4 910.0 1,023.0Population (m) 57.3 58.0 58.7 59.4 60.0 60.6 61.2 61.6 62.3 63.0 63.6Inflation (Annual % Change) 4.1 3.4 5.1 5.8 5.9 5.6 8.1 0.3 1.6 1.7 0.7


(25.0)

(20.0)

(15.0)

(10.0)

(5.0)

0.0

5.0

10.0

15.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%



0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%

Thailand — Defence and Economic Trends 1992—2002

11

12

Thailand

Economy

Thailand's economy grew by 4.3% in 2002, exceeding most international forecasts. Thisperformance was led by expansionary fiscal policy, including direct cash injections into the ruralsector that lifted domestic demand. Thailand's export performance improved and industrialproduction increased, as private consumption increased and demand from Thailand's principalexport markets – the US, Japan, Singapore and China – improved. Inflation remained undercontrol at 0.7%. As noted by the World Bank, progress was made in improving the flexibility ofthe economy and restoring macroeconomic stability, positioning Thailand well for future growthand poverty reduction.

Defence Spending

Thailand allocated Baht78.2bn to the defence budget in 2002. This represented a 0.7% realincrease over 2001. As a percentage of real GDP, the allocation was on par with 2001, but itdropped as a proportion of nominal government spending from 8.5% to 7.6%. AlthoughThailand paid for 18 used US F-16 fighters and continued its F-5 upgrades in 2002, its forceimprovement programs remained generally limited. Thailand expressed interest in cheaperRussian arms sales, and the Royal Thai Navy sought to purchase two Chinese-made offshorepatrol vessels. Thai forces concluded regular exercises including COBRA GOLD with the US andTHAI BOOMERANG with Australia. The Royal Thai Armed Forces supported the UN mission inEast Timor, as well as sending a contingent of engineers to Afghanistan.

Formal Name Prathes Thai Capital Bangkok Population 63.6 million Land Size 513,120 sq. km Currency Thai Baht Fiscal Year 1 October–30 September Economy Less developed country with a market economy Industries Tourism, textiles and garments, agricultural processing, beverages, tobacco,

cement, light manufacturing, electrical appliances and components, computers and parts, integrated circuits, furniture, plastics, tungsten and tin production

Thailand's Official Defence Funding - Real Dollars

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

US$ 1

995 B

illion

1992 1993 1994 1995 1996 1997 1998 1999e 2000e 2001e 2002e

Defence Budget Estimate:Current Dông bn 8,020.0 7,812.0 15,000.0 16,000.0 22,600.0 26,000.0 22,450.0 25,445.1 30,945.3 32,688.3 40,409.41995 Dông bn 12,893.9 10,686.7 17,543.9 16,000.0 20,791.2 22,433.1 17,789.2 19,074.3 23,496.8 24,670.4 29,230.61995 US$ bn 1.2 1.0 1.6 1.4 1.9 2.0 1.6 1.7 2.1 2.2 2.6

Real Growth (%) … (17.1) 64.2 (8.8) 29.9 7.9 (20.7) 7.2 23.2 5.0 18.5


GDP:Current Dông bn 110,535.0 136,571.0 170,258.0 228,000.0 259,861.6 308,475.0 366,000.0 397,278.2 429,924.8 457,591.0 507,503.31995 US$ bn (Real GDP) 16.1 16.9 18.0 20.7 21.7 24.1 26.3 27.0 29.6 31.3 33.3Real growth (%) 8.7 5.1 6.6 14.5 4.9 11.3 9.0 2.7 9.6 5.8 6.3Per capita (1995 US$) 232.3 239.7 250.9 282.2 291.5 319.8 343.4 348.1 376.7 393.5 412.6

Government spending (current Dông bn) 23,711.0 38,080.0 48,270.0 62,000.0 62,368.0 70,749.0 74,761.0 84,817.0 103,151.0 108,961.0 120,484.0Population (m) 69.3 70.6 71.9 73.2 74.3 75.4 76.5 77.5 78.5 79.5 80.6Inflation (Annual % Change) … … … 17.4 5.7 3.2 7.3 4.2 (1.7) 0.8 4.1Statistical Note: As Vietnam does not publish an official defence budget, the figures for 1999, 2000, 2001 and 2002 are estimates.


(30.0)

(20.0)

(10.0)

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

1993 1994 1995 1996 1997 1998 1999e 2000e 2001e 2002e

%



0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

1992 1993 1994 1995 1996 1997 1998 1999e 2000e 2001e 2002e

%

Vietnam — Defence and Economic Trends 1992—2002

13

14

Vietnam

Economy

Economic reforms, consumer spending and private sector development contributed to animprovement in the Vietnamese economy and GDP growth increased from 5.8% in 2001 to6.3% in 2002. The industrial and construction sector contributed 3.5% to the GDP growth.Agriculture also grew compared to last year by 5.4%. Tourism grew with foreign visitorsincreasing by 12.8% on last year. The bilateral trade agreement with the US, which came intoeffect in December 2001, has produced export growth, especially in the footwear sector, whichgrew by 20% during 2002. The US-Vietnam trade agreement also encouraged investment fromthird parties, particularly from Korea and Taiwan. But many constraints on foreign investmentremain. Increases in food prices pushed inflation to 4.1%, a fivefold increase on the yearbefore. Liberalisation of financial markets commenced in 2001 continued in 2002 and helped toimprove confidence among the business sectors. Remittances from overseas relatives reachedUS$2.06bn for 2002, up 17% on 2001.

Defence Spending

Vietnam does not release an official defence budget, however military funding increases areconsidered to be in line with the growth of government revenues. No major acquisitions wereundertaken in 2002.

Formal Name Công Hòa Xã Hôi Chu Nghia Viêt Nam Capital City Hanoi Population 80.6 million Land Size 331,690 sq.km Currency Dông Fiscal Year Calendar Year Economy Less developed country with a centrally planned economy Industries Food processing, garments, shoes, machine building, mining, cement,

fertiliser, glass, tires, oil, coal, steel, paper, coffee, rice

Vietnam's Official Defence Funding - Real Dollars

0.0

0.5

1.0

1.5

2.0

2.5

3.0

1992 1993 1994 1995 1996 1997 1998 1999e 2000e 2001e 2002e

US$ 1

995 B

illion

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

Official Defence Budget:Current Riels bn 185.0 164.0 220.0 298.0 281.6 281.0 330.0 311.2 277.5 255.01995 Riels bn 204.4 185.9 220.0 281.4 250.9 220.4 236.0 305.1 274.8 256.81995 US$ bn 0.08 0.08 0.09 0.11 0.10 0.09 0.10 0.12 0.11 0.10

Real Growth (%) (9.1) 18.4 27.9 (10.8) (12.2) 7.1 29.3 (9.9) (6.5)

Percentage of Real GDP 3.0 2.6 2.9 3.6 3.1 2.7 2.9 2.5 2.1 1.9Percentage of Nominal Govt. Spending 30.4 16.4 17.6 20.5 18.8 19.4 22.1 13.2 11.8 10.4Per capita (1995 US$) 7.9 7.0 8.0 10.0 8.8 7.6 7.9 10.0 8.9 8.2

GDP:Current Riels bn 6,084.5 6,201.0 7,542.7 8,324.8 9,149.2 10,531.4 11,470.5 12,406.5 13,000.0 13,357.01995 US$ bn (Real GDP) 2.7 2.9 3.1 3.2 3.3 3.4 3.3 5.0 5.3 5.5Real growth (%) 4.5 7.3 4.2 3.7 1.3 (0.7) 48.3 5.8 4.5Per capita (1995 US$) 258.8 263.1 274.8 279.0 284.3 283.2 274.4 400.2 416.8 428.8

Government spending (current Riels bn) 608.0 997.7 1,247.9 1,452.3 1,495.0 1,445.0 1,495.0 2,355.0 2,344.0 2,441.8Population (m) 10.6 10.9 11.2 11.5 11.7 11.9 12.2 12.4 12.6 12.8Inflation (Annual % Change) 114.3 (0.5) 7.7 6.8 8.0 14.8 8.0 (0.8) 0.2 1.8


(15.0)

(10.0)

(5.0)

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

1994 1995 1996 1997 1998 1999 2000 2001 2002e

%



0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%

Cambodia — Defence and Economic Trends 1993—2002

15

16

Cambodia

EEccoonnoommyy

Cambodia’s economy continued to experience moderately strong growth and low inflation in2002. Reforms in the financial sector assisted in improving the investment climate and led toa gradual increase in savings and investment rates. Agriculture, which accounts for 32% ofthe economy, expanded by 7% and industrial growth, dominated by garment production forexport, mainly to the United States, grew over 14%. Tourism arrivals increased by 25% andthe services sector by 7%. However, high foreign debt and poor revenue collection continuedto inhibit poverty alleviation. A third of the population continues to live in poverty.


Cambodian defence spending declined in 2002 despite the economy's steady growth. This isdue to the continuing normalisation process after years of conflict. It is also ahead of a majormilitary restructure program scheduled for 2003, which should see a cut in overall defencepersonnel numbers.

Formal Name Kingdom of Cambodia Capital City Phnom Penh Population 12.8 Million Land Size 181,040 sq. Km Currency Riel Fiscal Year Calendar Year Economy Less developed country with a market economy Industries Gem mining, cement, forestry rubber, food, tourism, textiles, apparel, and

footwear

Cambodia's Official Defence Funding - Real Dollars

0.00

0.02

0.04

0.06

0.08

0.10

0.12

0.14

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

US$ 1

995 B

illion

17

East Timor

EEccoonnoommyy

East Timor’s economy contracted by around 0.5-1%, in real terms during 2002. This follows the18% real growth in 2001. The contraction is the first since East Timor’s transition toindependence and was primarily due to the ongoing withdrawal of United Nations’ (UN)personnel. The withdrawal of UN personnel and its attendant reduction in business activity alsocontributed to the deflationary pressures during 2002, with the general price level declining byaround 3%. The nascent economy remains reliant on government spending as the well as donoraid as the main economic drivers. East Timor’s GDP is approximately US$400m and the FY2001–02 government budget was US$55.5m. UN estimates for 2002 show that 80% of the populationare engaged in the agricultural sector, mostly based around subsistence farming. In urban EastTimor, unemployment remains high at around 17%.


The East Timor Defence Force (F-FDTL) received US$8.6m for FY2001—02, US$2.9m from directbudget and US$5.6m from bilateral contributions. The F-FDTL is geared towards defeating small-scale incursions by hostile groups and being capable of delaying a larger force until externalassistance arrives. The defence force comprises of two battalions and two ALABATROZ-class(renamed OECUSSI-class) patrol boats donated by Portugal.

Formal Name Republica Democratica Timor Leste Capital City Dili Population 953,000 Land Size 15,000 sq Km Currency US Dollar Fiscal Year 31 July-1 August Economy Less developed country with a semi-market economy Industries Coffee, fishing, cottage industries, rice, subsistence farming

18

Other South–East Asian Nations

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

Official Defence Budget:Current B$ bn 0.4 0.4 0.5 0.4 0.4 0.5 0.6 0.6 0.5 0.6 0.51995 B$ bn 0.4 0.4 0.5 0.4 0.4 0.5 0.6 0.6 0.4 0.6 0.41995 US$ bn 0.3 0.3 0.4 0.3 0.3 0.3 0.4 0.4 0.3 0.4 0.3

Real Growth (%) (7.8) 0.2 31.7 (26.9) 2.2 19.4 16.2 3.4 (22.1) 29.2 (33.9)

Percentage of Real GDP 5.8 5.7 7.6 5.5 5.3 6.3 7.9 7.8 5.9 7.4 4.8Percentage of Nominal Govt. Spending 11.1 11.1 14.7 8.3 8.0 9.0 10.0 10.9 14.6 15.3 10.6Per capita (1995 US$) 1,064.1 1,033.5 1,321.4 940.6 935.3 1,088.6 1,232.9 1,342.1 951.0 1,351.0 765.2

GDP:Current B$ bn 6.6 6.6 6.5 7.1 7.5 7.6 7.0 7.7 7.9 8.2 9.61995 US$ bn (Real GDP) 5.0 5.0 4.9 5.0 5.3 5.4 5.0 5.2 5.3 5.5 5.6Real growth (%) (0.8) 0.7 (1.2) 1.5 5.2 1.9 (7.5) 4.2 3.0 2.7 2.7Per capita (1995 US$) 18,495.3 18,045.6 17,313.9 17,123.3 17,537.7 17,418.3 15,691.0 17,224.2 16,121.5 18,205.7 16,026.1

Government spending (current B$ bn) 3.4 3.4 3.4 4.7 5.0 5.3 5.5 5.5 3.2 4.0 4.3Population (m) 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.4Inflation (Annual % Change) 1.3 4.3 2.4 6.0 2.0 1.7 (0.4) (0.1) 1.0 0.0 2.7


(40.0)

(30.0)

(20.0)

(10.0)

0.0

10.0

20.0

30.0

40.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%



0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%

Brunei Darussalam — Defence and Economic Trends 1992—2002

19

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

Official Defence Budget:Current Kip bn 72.5 75.5 81.9 87.6 71.0 76.0 110.0 110.0 107.0 111.8 113.41995 Kip bn 99.4 97.3 98.0 87.6 62.4 56.5 43.6 18.8 14.8 14.3 14.51995 US$ bn 0.12 0.12 0.12 0.11 0.08 0.07 0.05 0.02 0.02 0.02 0.02

Real Growth (%) … (2.1) 0.7 (10.6) (28.8) (9.4) (22.8) (56.8) (21.4) (3.1) 1.1

Percentage of Real GDP 8.6 7.9 7.4 6.1 4.1 3.4 2.6 1.1 0.8 0.7 0.7Percentage of Nominal Govt. Spending … … … … … … … 4.1 3.0 3.2 3.0Per capita (1995 US$) 28.3 27.1 26.5 23.7 16.5 14.5 10.8 4.5 3.5 3.3 3.2

GDP:Current Kip bn 844.0 951.0 1,108.0 1,430.0 1,726.0 2,203.0 4,240.0 10,303.0 13,495.8 15,334.0 16,223.81995 US$ bn (Real GDP) 1.4 1.5 1.6 1.8 1.9 2.0 2.1 2.2 2.3 2.4 2.6Real growth (%) 7.0 5.9 8.1 7.9 6.1 8.0 2.6 5.0 5.8 5.3 5.5Per capita (1995 US$) 329.9 340.9 359.0 386.3 400.2 421.4 415.2 424.9 439.3 457.1 452.2

Government spending (current Kip bn) … … … … … … … 2,704.9 3,531.4 3,526.8 3,731.5Population (m) 4.4 4.5 4.6 4.6 4.7 4.8 5.0 5.2 5.3 5.3 5.7Inflation (Annual % Change) 9.8 6.3 6.8 19.4 13.0 19.3 81.0 36.0 27.1 8.0 7.2


(70.0)

(60.0)

(50.0)

(40.0)

(30.0)

(20.0)

(10.0)

0.0

10.0

20.0

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%



0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%

Laos — Defence and Economic Trends 1992—2002

20

1992 1993 1994 1995 1996 1997 1998 1999 2000e 2001e 2002e

Official Defence Budget:Current Kyats bn 7.3 8.6 11.3 15.4 17.2 19.4 24.4 31.8 29.8 33.3 37.01995 Kyats bn 13.6 12.1 8.1 7.3 7.0 6.9 6.9 6.3 6.4 7.0 7.31995 US$ bn 2.4 2.1 1.4 1.3 1.2 1.2 1.2 1.1 1.1 1.2 1.3

Real Growth (%) 0.3 (11.4) (33.0) (9.7) (4.5) (1.7) 0.3 (9.0) 2.0 9.6 4.1

Percentage of Real GDP 2.9 2.4 1.5 1.3 1.2 1.0 1.0 0.8 0.8 0.8 0.8Percentage of Nominal Govt. Spending 26.2 24.1 23.5 23.7 27.3 29.4 36.5 44.8 36.2 37.6 43.5Per capita (1995 US$) 56.8 49.4 32.5 29.0 27.3 26.4 26.1 23.4 23.6 25.5 26.2

GDP:Current Kyats bn 249.4 351.3 436.4 564.5 737.1 1,119.5 1,609.7 2,190.3 2,547.7 3,071.5 4,006.01995 US$ bn (Real GDP) 82.1 87.0 92.9 99.6 105.5 119.9 126.8 140.6 148.3 155.4 162.0Real growth (%) (0.6) 5.9 6.8 7.2 5.9 13.6 5.8 10.9 5.5 4.8 4.2Per capita (1995 US$) 1,939.6 2,016.5 2,115.1 2,246.2 2,340.7 2,618.4 2,730.0 2,985.5 3,106.2 3,214.1 3,300.0

Government spending (current Kyats bn) 27.9 35.7 48.0 64.9 63.0 65.9 66.9 71.0 82.3 88.7 85.0Population (m) 42.3 43.1 43.9 44.4 45.1 45.8 46.5 47.1 47.8 48.4 49.1Inflation (Annual % Change) 22.3 33.6 22.4 28.9 20.0 10.0 10.0 10.0 10.3 15.0 15.0


(40.0)

(30.0)

(20.0)

(10.0)

0.0

10.0

20.0

1992 1993 1994 1995 1996 1997 1998 1999 2000e 2001e 2002e

%



0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

1992 1993 1994 1995 1996 1997 1998 1999 2000e 2001e 2002e

%

Myanmar — Defence and Economic Trends 1992—2002

21

22

South Pacific – Regional Overview

Regional Economy

Fiji and New Zealand performed strongly in 2002, achieving 3.7% and 3.3% real GDP growthrespectively. Both economies benefited from increased tourist numbers and favourable investorviews, which in Fiji's case, was aided by external perceptions of improved political stability andinternal security. This was not the case in Papua New Guinea (PNG), where election violencecontributed to the poor law and order situation, and consequently to unfavourable investorperceptions. Moreover, the PNG economy's weak performance exposed its vulnerability to globaleconomic developments. This experience was shared by many regional economies. In 2002,international aid to the South Pacific was at extant levels and defence spending remained arelatively low priority for regional countries.

(5.0)

0.0

5.0

10.0

15.0

20.0

%

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

Figure 6: South Pacific Real GDP Growth (%)

New Zealand Fiji PNG

(50.0)

(40.0)

(30.0)

(20.0)

(10.0)

0.0

10.0

20.0

30.0

40.0

%

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

Figure 7: South Pacific Real Defence Spending Growth (%)

New Zealand Fiji PNG

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

Official Defence Budget:Current F$ m 32.9 36.3 45.0 44.8 46.0 44.7 48.1 49.6 67.0 60.0 63.21995 F$ m 36.2 37.4 46.0 44.8 44.8 41.8 42.5 43.1 59.1 49.9 50.61995 US$ m 25.7 26.6 32.7 31.9 31.9 29.7 30.2 30.6 42.1 35.5 36.0

Real Growth (%) (0.5) 3.4 23.0 (2.6) 0.1 (6.8) 1.8 1.3 37.2 (15.7) 1.5


GDP:Current F$ m 2,298.2 2,517.2 2,674.4 2,799.9 2,962.3 3,060.0 3,282.0 3,665.0 3,505.0 3,724.0 4,008.91995 US$ m (Real GDP) 1,797.8 1,845.3 1,944.5 1,991.0 2,053.1 2,033.6 2,063.5 2,264.2 2,199.8 2,201.2 2,282.7Real growth (%) 6.1 2.6 5.4 2.4 3.1 (0.9) 1.5 9.7 (2.8) 0.1 3.7Per capita (1995 US$) 2,413.2 2,453.9 2,561.9 2,592.4 2,652.5 2,597.2 2,602.1 2,823.2 2,712.4 2,608.1 2,666.7

Government spending (current F$ m) 646.2 754.4 786.2 801.1 949.3 1,081.8 1,231.5 1,075.0 1,022.0 1,096.8 1,155.9Population (m) 0.75 0.75 0.76 0.77 0.77 0.78 0.79 0.80 0.81 0.84 0.86Inflation (Annual % Change) 2.3 2.5 2.7 2.8 3.0 3.1 3.3 3.7 3.5 4.3 2.5


(20.0)

(10.0)

0.0

10.0

20.0

30.0

40.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%



0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%

Fiji – Defence and Economic Trends 1992–2002

23

24

Fiji

Economy

Fiji's economy grew by 3.7% in 2002. Tourism - the country's key economic driver - performed very strongly with a 20% increase in visitor arrivals during the first half of 2002. The IMF noted the pick-up in tourism after it held consultations with Fiji in May - the first such mandatory discussions since 1998. Usually held every two years, the consultation schedule was postponed due to Fiji's 2000 coup. The IMF recommended Fiji implement a strategy to raise the country's sustainable economic growth rate. Fiji's 2003 budget was passed in November, marking the start of a three-year Strategic Development Plan, including an adjustment allocation to its sugar industry. However, wholesale reform of the sugar industry and the linked land lease issue continues to remain elusive given the ongoing political deadlock between the indigenous Fijian government and the largely Indo-Fijian cane growers.

Defence Spending

Fiji allocated FJ$63.2m (US$36m) to the defence budget in 2002. This represented a 1.5% real increase over 2001. As a percentage of real GDP the allocation was on par with 2001 at 1.6%. The Republic of Fiji Military Forces (RFMF) continued to support UN missions in East Timor and Sinai, with around 600 personnel deployed. However, the RFMF suffered a major reduction in UN remittances with the end of the UNIFIL deployment in Lebanon, having to reassign the 700 returning soldiers. In 2002, the Fiji Government announced its intention to review the role of the RFMF and commenced drafting a new Defence White Paper (the extant White Paper dates from 1997).

Formal Name Fiji Capital City Suva Population 856,000 Land Size 18,270 sq. km Currency Fijian Dollar Fiscal Year Calendar Year Economy Less developed country with a market economy Industries Tourism, sugar, clothing, copra, gold and silver mining, timber and small cottage

industries

Fiji's Official Defence Funding – Real Dollars

0.0

10.0

20.0

30.0

40.0

50.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

US$ 1

995 M

illion

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

Official Defence Budget:Current NZ$ bn 1.13 1.05 1.03 1.01 1.00 1.00 1.04 1.05 1.09 1.12 1.161995 NZ$ bn 1.19 1.09 1.05 1.01 0.99 0.96 1.00 0.99 1.01 1.02 1.031995 US$ bn 0.78 0.71 0.69 0.66 0.65 0.63 0.66 0.65 0.66 0.67 0.67

Real Growth (%) 2.5 (8.2) (3.3) (3.8) (2.7) (2.1) 3.5 (1.0) 1.9 1.4 0.6


GDP:Current NZ$ bn 73.4 79.1 85.2 90.5 94.6 97.3 98.4 104.7 110.6 117.9 122.61995 US$ bn (Real GDP) 51.4 54.3 57.5 59.4 60.7 61.7 61.6 65.6 67.6 70.2 72.5Real growth (%) (0.2) 5.6 6.0 3.4 2.1 1.7 (0.1) 6.5 3.0 3.8 3.3Per capita (1995 US$) 15,111.3 15,503.2 16,427.8 16,978.3 16,860.9 16,238.9 16,218.8 17,228.3 17,649.0 17,891.1 18,175.0

Government spending (current NZ$ bn) 28.6 28.4 29.7 30.0 30.6 31.4 33.0 33.9 35.9 37.5 39.6Population (m) 3.4 3.5 3.5 3.5 3.6 3.8 3.8 3.8 3.8 3.9 4.0Inflation (Annual % Change) 2.1 1.7 1.8 2.4 2.3 1.8 1.6 1.1 2.3 3.3 4.3Statistical Note: New Zealand defence budget is taken as the sum of the personnel, operating and depreciation allocations


(10.0)

(8.0)

(6.0)

(4.0)

(2.0)

0.0

2.0

4.0

6.0

8.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%



0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%

New Zealand – Defence and Economic Trends 1992–2002

25

26

New Zealand

Economy

The New Zealand economy remained robust and grew by 3.3% in 2002. While growth wasbroad-based, the economy continued to benefit from a strong export performance andincreased tourism. Australia was New Zealand's principal export destination and import source.Inflation was a full percentage point higher than in 2001 at 4.3%. Consumer confidence andspending was buoyed by low unemployment and increased wages. New Zealand's fiscal positionremained sound. New Zealand government spending has been limited by the Government'sself-imposed spending cap.

Defence Spending

The combined allocation for the New Zealand Defence Force (NZDF) and Ministry of Defencewas NZ$1.16bn in 2002. This represented a 0.6% real increase over 2001. As a percentage ofreal GDP the allocation was slightly lower at 0.9%. In May, the New Zealand Governmentreleased the Long Term Development Plan (LTDP) for the NZDF. The LTDP lists plannedequipment purchases for the next ten years including light operational vehicles, offshore patroland multi-role vessels, and airlift improvement projects. The estimated cost of the LTDPprograms and previously committed procurement expenditure is NZ$3.75bn. In 2002, theNZDF supported both the UN mission in East Timor and Peace Monitoring Group in Bougainville.

Formal Name New Zealand Capital City Wellington Population 4.0 million Land Size 270,990 sq. km Currency New Zealand Dollar Fiscal Year 1 July–30 June Economy Advanced country with a market economy Industries Food processing, wood and paper products, textiles, machinery, transportation

equipment, banking and insurance, tourism and mining

New Zealand's Official Defence Funding – Real Dollars

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

US$ 1

995 B

illion

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

Official Defence Budget:Current Kina m 56.5 54.4 54.3 60.0 68.0 92.6 86.0 80.0 85.0 97.6 53.71995 Kina m 65.1 64.2 61.4 60.0 62.7 80.0 64.8 57.5 56.5 59.7 30.11995 US$ m 48.9 48.3 46.2 45.1 47.1 60.2 48.7 43.2 42.5 44.9 22.6

Real Growth (%) 8.1 (1.3) (4.4) (2.3) 4.5 27.7 (19.1) (11.3) (1.7) 5.7 (49.6)


GDP:Current Kina m 4,223.0 4,922.0 5,297.0 5,888.3 6,881.3 7,063.7 7,863.4 9,089.6 10,306.9 10,758.6 11,425.61995 US$ m (Real GDP) 4,865.2 5,811.1 5,992.1 5,888.3 6,342.2 6,105.2 5,921.2 6,529.9 6,853.0 6,584.2 6,406.4Real growth (%) 9.6 19.4 3.1 (1.7) 7.7 (3.7) (3.0) 10.3 4.9 (3.9) (2.7)Per capita (1995 US$) 1,267.0 1,482.4 1,498.0 1,443.2 1,524.6 1,439.9 1,370.7 1,497.7 1,535.9 1,291.0 1,232.0

Government spending (current Kina m) 1,338.0 1,588.7 1,630.2 1,613.4 1,837.3 2,203.9 2,296.1 2,581.4 3,816.6 3,958.7 4,270.8Population (m) 3.8 3.9 4.0 4.1 4.2 4.2 4.3 4.4 4.5 5.1 5.2Inflation (Annual % Change) 4.3 5.0 2.9 17.3 11.6 3.9 13.6 14.9 15.6 10.2 7.5


(60.0)

(50.0)

(40.0)

(30.0)

(20.0)

(10.0)

0.0

10.0

20.0

30.0

40.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%



0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%

Papua New Guinea – Defence and Economic Trends 1992–2002

27

28

Papua New Guinea

Economy

Preliminary data suggests PNG's economy contracted by 2.7% in 2002 – greater than the 0.5%decline estimated in the 2003 Budget. The contraction was greatly affected by the falls in oilproduction and mining output – the later due to the dry-season that reduced exports from theOk Tedi copper mine, and landowner unrest that led to reduced power supplies to the Porgeragold mine. Moreover, the agriculture sector did not grow as strongly as estimated. In August2002, the newly elected Somare Government released a Supplementary Budget aimed atstabilising the macroeconomy, restoring the 2002 Budget's integrity and reviving publicconfidence in its economic management. Its key measure was to reduce government spendingby limiting expenditure warrants to National Government Departments.

Defence Spending

PNG allocated K$53.7m to the defence budget in 2002. This represented a 49.6% real decreaseover 2001. Detail of actual Defence expenditure for 2002 is not yet available, but historically,actual expenditure can vary significantly from budget allocation. The almost halving of PNGDefence Force (PNGDF) funding reflected, in part, the removal of utility payments from thedefence budget (to be paid for by the PNG Department of Finance and Treasury) and thereduction to PNGDF salaries and allowances. This coincided with the start of PNG's reforminitiatives that are aimed at reducing personnel numbers via redundancy, retrenchment andretirement. Although salaries and allowances remain the largest single budget item, somereform progress was made with Australia's assistance. In 2002, Australia contributed A$20m tosupport PNGDF reform. During the year, the PNGDF reduced its personnel numbers onBougainville and participated in Exercises PARADISE and PUK PUK with the ADF.

Formal Name Independent State of Papua New Guinea Capital City Port Moresby Population 5.2 million Land Size 462,840 sq. km Currency Kina Fiscal Year Calendar Year Economy Less developed country with a market economy Industries Copra crushing, palm oil processing, plywood production, woodchip production,

crude oil production, construction, gold, silver and copper mining

Papua New Guinea's Official Defence Funding – Real Dollars

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

US$ 1

995 M

illio

n

29

NORTH ASIA – REGIONAL OVERVIEW

Regional Economy

Despite encouraging signs of economic recovery, especially in Taiwan and South Korea, theuncertain global climate contributed to economic caution throughout the region. Prolongedstagnation in Japan, for so long the engine of growth in North Asia, continued to cause concernin regional markets because of Tokyo's inability to address the structural issues. Recovery,where it has occurred, has been over-dependent on consumer borrowing. With lenders unable to sustain these levels of credit, and the inability of highly indebted governments to providegreater fiscal stimulus, the regional economic recovery has been limited.

Defence Spending

Economic uncertainty and fiscal constraints did not deter most regional governments frommaintaining current levels of defence spending. With the exception of Taiwan, defence budgetsincreased throughout the region. Security concerns and strategic considerations ensured thatthe prevailing commitment to defence spending, military modernisation and the acquisition ofcapital equipment remains unchanged.

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

%

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

Figure 8: North Asian Real GDP Growth (%)

China Japan South Korea Taiwan

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

%

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

Figure 9: North Asian Real Growth in Defence Spending (%)


30

North Asia – Regional Trends

Figure 13: Contribution to North Asian Defence Spending in 2002 (%)

Taiwan

9%South Korea

16%

Japan

55%

China

20%

Figure 10: North Asian Defence Budgets 1992-2002 (1995 US$)

0.0

10.0

20.0

30.0

40.0

50.0

60.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

1995 U

S$ B

illio

n


Figure 11: North Asia Percentage of GDP

Spent on Defence

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%


Figure 12: North Asia Percentage of

Government Outlays Spent on Defence

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%


1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

Official Defence Budget:Current Yuan bn 37.8 42.6 55.1 63.7 72.0 81.3 93.5 104.6 120.4 141.0 166.01995 Yuan bn 58.8 57.8 62.3 63.7 68.0 76.1 89.7 102.6 117.1 137.2 161.51995 US$ bn 7.0 6.9 7.5 7.6 8.1 9.1 10.7 12.3 14.0 16.4 19.3

Real Growth (%) 6.0 (1.7) 7.8 2.2 6.8 11.9 17.9 14.4 14.1 17.2 17.7


GDP:Current Yuan bn 2,402.0 3,450.1 4,669.1 5,851.1 6,833.0 7,489.5 7,985.3 8,205.4 8,940.4 9,593.3 10,271.01995 US$ bn 447.3 560.5 632.4 700.6 772.6 839.7 917.6 964.2 1,041.4 1,117.4 1,196.4Real growth (%) 10.3 25.3 12.8 10.8 10.3 8.7 9.3 5.1 8.0 7.3 7.1Per capita (1995 US$) 384.0 475.7 530.7 581.5 634.5 682.6 738.7 768.5 825.3 877.7 935.4

Government spending (current Yuan bn) 439.0 528.7 582.0 675.8 748.8 896.8 1,409.0 1,313.7 1,587.9 1,735.8 1,861.0Population (m) 1,165.0 1,178.4 1,191.8 1,204.9 1,217.6 1,230.1 1,242.2 1,254.6 1,261.8 1,273.1 1,279.0Inflation (Annual % Change) 6.4 14.7 24.1 17.1 8.3 2.8 (0.8) (1.4) 0.5 0.5 1.5


(5.0)

0.0

5.0

10.0

15.0

20.0

25.0

30.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%



0.0

2.0

4.0

6.0

8.0

10.0

12.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%

China – Defence and Economic Trends 1992 – 2002

31

32

China

Economy

China has succeeded in maintaining its high GDP growth rates, with 7.1% recorded in 2002. Apolicy of increasing government spending and low interest rates, as well as growing exportmarkets and high levels of direct foreign investment, has made this possible. Althoughgovernment policies have contributed to domestic demand, particularly in the coastal cities,they did not succeed in stimulating adequate domestic private investment to overcome the twin problems of unemployment and deflation. China continues to experience a growth indisparities; between the developing east and the stagnant west, and between affluent citiesand depressed villages. Beijing’s membership of WTO in December 2001, brought China formally into the community of trading nations, but it will be some time before the benefits ofWTO accession are realised.

Defence Spending

The People's Liberation Army (PLA) has benefited from Beijing's policy of fiscal expansion. In 2002 the PLA received Yuan 166 billion, a 17.7 % increase compared to the previous year. A rising level of defence spending enables the PLA to maintain its current pace of military modernisation and capital equipment acquisition especially with regard to its air and maritime capabilities.

Formal Name Zhonghua Renmin Gongheguo Capital City Beijing Population 1,279 million Land Size 9,596,960 sq.km Currency Yuan Fiscal Year Calendar YearIndustries Iron and steel, coal, machine building, armaments, textiles and apparel, petroleum, cement, chemical fertilisers, footwear, toys, food processing, automobiles, consumer electronics, telecommunications

China's Official Defence Funding — Real Dollars

0.0

5.0

10.0

15.0

20.0

25.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

US$ 1

995 B

illion

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

Official Defence Budget:

Current Yen bn 4,551.8 4,640.6 4,683.5 4,723.6 4,845.0 4,941.4 4,929.0 4,919.8 4,921.8 4,938.8 4,939.5

1995 Yen bn 4,685.2 4,774.3 4,764.3 4,733.1 4,799.3 4,815.8 4,884.1 4,882.3 4,834.3 4,890.6 5,032.7

1995 US$ bn 49.8 50.8 50.7 50.3 51.0 51.2 51.9 51.9 51.4 52.0 53.5

Real Growth (%) 3.5 1.9 (0.2) (0.7) 1.4 0.3 1.4 (0.0) (1.0) 1.2 2.9

Percentage of Real GDP 1.0 1.0 1.0 1.0 1.0 0.9 1.0 1.0 0.9 1.0 1.0

Percentage of Nominal Government Spending 6.3 6.4 6.4 6.7 6.5 6.4 6.3 5.9 5.8 6.0 6.1

Per Capita (1995 US$) 400.4 406.7 404.6 401.0 405.6 407.6 412.1 410.7 406.3 410.4 421.6

GDP:

Current Yen bn 471,064.0 475,381.0 479,260.0 482,930.0 499,861.0 509,645.0 498,499.0 495,375.0 493,500.0 506,161.3 496,371.5

1995 US$ bn 5,013.1 5,038.9 5,080.0 5,134.3 5,357.1 5,445.5 5,331.8 5,368.6 5,453.9 5,437.5 5,437.5

Real Growth (%) 0.7 0.5 0.8 1.1 4.3 1.6 (2.1) 0.7 1.6 (0.3) 0.0

Per Capita (1995 US$) 40,298.5 40,375.8 40,575.2 40,910.6 42,584.5 43,356.1 42,315.8 42,473.0 43,113.8 42,916.6 42,849.0

Government Spending (current Yen bn) 72,218.0 72,354.8 73,081.7 70,987.1 75,105.0 77,390.0 77,670.0 82,770.0 84,952.0 82,652.0 81,230.0

Population (m) 124.4 124.8 125.2 125.5 125.8 125.6 126.0 126.4 126.5 126.7 126.9

Inflation (Annual % Change) 1.7 1.2 0.7 (0.1) 0.1 1.7 0.6 (0.3) (0.8) (0.7) (0.1)


(3.0)

(2.0)

(1.0)

0.0

1.0

2.0

3.0

4.0

5.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%



5.2

5.4

5.6

5.8

6.0

6.2

6.4

6.6

6.8

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%

Japan – Defence and Economic Trends 1992–2002

33

34

JAPAN

Economy

Japan's economic stagnation continued throughout 2002, due to its now persistent problems ofnon-performing bank loans, deflation, high unemployment, weak domestic demand and under-utilised supply capacity. These economic problems remain persistent and interconnected, withthe Japanese government now recognising that they will require long-term solutions. Despiteimprovements in the latter half of 2002, business investment within Japan remained subdued due to world economic weakness, banking sector problems and export uncertainty. As in 2001,the government introduced a supplementary budget in 2002 to facilitate expansionary fiscalpolicy and to help reduce the negative affect of non-performing loan disposals.

Defence Spending

Japan allocated ¥4939.5bn to the defence budget in 2002, a 2.9% real increase over 2001. Thisallocation remained capped at the notional limit of 1.0% of GDP. In 2002, Japan entered into thesecond year of its 2001-2005 Mid-Term Defence Program (MTDP) – which outlines fundingpriorities for the Japanese Self Defence Force (JSDF). The JSDF’s procurement focus hasremained consistent with the MTDP program, allocating money to areas facilitating informationtechnology, and improving weapons systems. Programs in 2002 included, Japan’s first air-to-air refuelling aircraft, Aegis-equipped destroyers, patrol helicopters, an OYASHIO-class submarine, and continued acquisition of the F-2 fighter.

Formal Name Nihon Koku Capital City Tokyo Population 126.9 million Land Size 377,800 sq. km Currency Yen Fiscal Year 1 April–31 March Economy Advanced country with market economy Industries Motor vehicles, electronic equipment, machine tools, steel and nonferrous metals, ships, chemicals, textiles, processed foods

Japan's Official Defence Funding - Real Dollars

47.0

48.0

49.0

50.0

51.0

52.0

53.0

54.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

US$ 1

995 B

illion

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

Official Defence Budget:Current Won bn 8,856.9 9,787.0 10,390.0 11,074.0 12,700.0 13,776.0 13,989.6 13,749.0 14,438.0 15,370.0 16,300.01995 Won bn 11,115.9 11,568.8 11,300.4 11,074.0 12,046.4 12,533.7 12,683.8 11,695.8 11,489.4 12,186.0 12,434.11995 US$ bn 14.4 15.0 14.7 14.4 15.6 16.3 16.4 15.2 14.9 15.8 16.1

Real Growth (%) 7.2 4.1 (2.3) (2.0) 8.8 4.0 1.2 (7.8) (1.8) 6.1 2.0


GDP:Current Won bn 240,392.0 267,146.0 305,970.0 351,975.0 389,813.0 453,267.0 444,367.0 482,744.0 521,959.2 546,088.8 587,335.81995 US$ bn (Real GDP) 384.8 399.5 425.2 456.4 486.4 548.2 511.7 567.5 620.3 640.8 681.1Real Growth (%) 8.5 3.8 6.4 7.3 6.6 12.7 (6.7) 10.9 9.3 3.3 6.3Per Capita (1995 US$) 8,797.3 9,040.6 9,525.0 10,121.0 10,681.7 11,920.4 11,020.4 12,112.3 13,086.6 13,377.0 14,102.0

Government Spending (current Won bn) 44,993.3 49,046.7 60,125.4 65,361.1 76,763.8 92,473.2 105,387.5 85,790.0 94,906.2 100,220.0 100,224.6Population (m) 43.7 44.2 44.6 45.1 45.5 46.0 46.4 46.9 47.4 47.9 48.3Inflation (Annual % Change) 6.2 4.8 6.3 4.5 4.9 4.4 7.5 0.8 2.2 4.3 2.9


(10.0)

(5.0)

0.0

5.0

10.0

15.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%



0.0

5.0

10.0

15.0

20.0

25.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%

Republic of Korea — Defence and Economic Trends 1992—2002

35

36

Republic of Korea

Economy

The South Korean economy continued to show positive macroeconomic indicators throughout2002. Unemployment remained around 3% due to strong domestic confidence, healthy productionlevels and high export growth. Despite a robust growth rate of approximately 6%, domesticconfidence dampened in the latter stages of 2002 due to fears of a likely forthcoming war in Iraq,and a weaker US economy. Inflation remained within the target range of 2–4%, which assistedgrowth, and the Won has continued to appreciate against the US dollar. This illustrates growingeconomic-trade links with Japan compared to that of the US.

Defence Spending

South Korea allocated Won 16,300bn to the defence budget in 2002. This funding allocationrepresents a 2% real increase over 2001 and constitutes the second consecutive year of increaseddefence spending. South Korea remains committed to its F-15K next generation fighter program,delaying other possible projects in order to finance it. South Korea has also continued to procuremultiple launch rocket systems throughout 2002.

Formal Name Taehan-min’guk Capital City Seoul Population 48.3 millionLand Size 99,020 sq. km Currency Won Fiscal Year Calendar Year Economy Newly industrialised country with a market economy Industries Electronics, automobile production, chemicals, shipbuilding, steel, textiles,

clothing, footwear and food processing

South Korea's Official Defence Funding - Real Dollars

0.0

5.0

10.0

15.0

20.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

US$ 1

995 B

illion

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

Official Defence Budget:Current NT$ bn 250.5 318.0 298.4 287.4 307.8 312.3 321.4 357.0 315.3 270.3 271.01995 NT$ bn 262.7 326.3 308.8 287.4 297.5 293.1 293.7 323.5 283.9 246.0 247.01995 US$ bn 9.9 12.3 11.7 10.9 11.2 11.1 11.1 12.2 10.7 9.3 9.3

Real Growth (%) 3.3 24.2 (5.4) (6.9) 3.5 (1.5) 0.2 10.1 (12.3) (13.4) 0.4


GDP:Current NT$ bn 5,337.7 5,874.5 6,376.5 6,892.0 7,510.7 8,223.4 8,867.8 9,444.0 9,663.0 9,542.0 9,814.01995 US$ bn (Real GDP) 217.2 230.8 245.6 260.2 275.0 296.0 311.1 336.1 349.5 347.7 359.2Real growth (%) 7.5 6.3 6.4 6.0 5.7 7.6 5.1 8.0 4.0 (0.5) 3.3Per capita (1995 US$) 10,513.2 11,071.4 11,671.1 12,262.6 12,858.6 13,715.4 14,282.8 15,310.5 15,748.4 15,545.2 16,001.0

Government spending (current NT$ bn) 893.4 924.8 941.5 999.1 1,097.7 1,197.6 1,279.7 1,222.0 1,259.2 1,431.3 1,595.0Population (m) 20.7 20.9 21.0 21.2 21.4 21.6 21.8 22.0 22.2 22.4 22.5Inflation (Annual % Change) 4.5 2.9 4.1 3.7 3.1 0.9 1.7 0.2 1.6 2.6 0.4


(20.0)

(15.0)

(10.0)

(5.0)

0.0

5.0

10.0

15.0

20.0

25.0

30.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%



0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%

Taiwan — Defence and Economic Trends 1992—2002

37

38

Taiwan

Capital City Taipei Population 22.5 millionLand Size 35,740 sq. km Currency New Taiwan Dollar Fiscal Year 1 July–30 JuneEconomy Newly industrialised market economy Industries Electronics, petroleum refining, chemicals, textiles, iron and steel, machinery,

cement, food processing

Economy

Taiwan came out of recession, recorded strong export growth in the last quarter of the year,and registered 3.3% economic growth for 2002. With most other major economiesexperiencing low growth, China has been crucial to Taiwan's recovery. In 2002, the mainlanddrew around US$4bn in Taiwanese investment, and continued export growth is increasinglydependent on Chinese markets. The political opposition has blocked reforms to the financesector and this, along with uncertainties in the global market has slowed Taiwan's economicrecovery. Consequently unemployment remains at 5%, which is domestically consideredunacceptable.

Defence Spending

Defence spending had its first real increase since 1999. However, over the past decade realdefence spending has declined from around 30% of government expenditure to 17% in 2002.Although personnel cutbacks are proceeding, these costs accounted for almost 50% of the2002 budget. With only 21% of defence spending allocated for procurement, Taiwan's militarymodernisation program remains a casualty of current fiscal policy.

Taiwan's Official Defence Funding - Real Dollars

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

US$ 1

995 B

illion

39

Democratic People’s Republic of Korea

Formal Name Choson-minjujuui-inmin-konghwaguk Capital City Pyongyang Population 23.8 millionLand Size 120,540 sq. km Currency Won Fiscal Year Calendar Year Economy Less developed country with centrally planned economy Industries Military products, machine building, electric power, chemicals, coal, iron ore,

magnesite, graphite, copper, zinc, lead, and precious metals mining, metallurgy, textiles, food processing and tourism

Economy

The Democratic People's Republic of Korea (DPRK) remains one of the world's most closedeconomies. Consequently, information gaps have continued to inhibit economic analysis. ItsGDP is estimated at approximately US$21bn, slightly lower than in 2001. In 2002 the DPRKimplemented several economic reforms including changes to the pricing system (effectivelyproducing parity with the black market), increased wages and a currency re-evaluation. However, with reports of rising inflation due to poor reform implementation and an inability tostimulate the supply side of the economy, reform has probably not met governmentobjectives. International aid levels were subdued in 2002, largely due to increasing globaldemands for aid and the affect of the Japanese abduction issue. The Special Economic Zoneshave remained unsuccessful.

Defence Spending

In 2002, Pyongyang has continued to follow its "military first policy". Defence expenditure isexpected to equate to approximately US$5bn or 25% of GDP. Pyongyang also continues toexport ballistic missile technology for profit.

40

South Asia – Regional Overview

Regional Economy

Pakistan and India both recorded growth, albeit less than generally forecasted, in 2002 despitea continuing drought, regional instability and global economic uncertainty. The drought hasaffected both countries, which rely heavily on agriculture. However, a recovery in the servicessector has boosted growth in both countries. India and Pakistan continue to implementeconomic reforms to increase revenue collection and attract foreign investment to reducepoverty rates and budget deficits.

Defence Spending

India continued to outspend Pakistan in 2002. Pakistan's defence budget remained less thanone quarter of the Indian defence budget. The relative proportion of defence spending betweenIndia and Pakistan remained about the same as in 2001. Pakistan slightly increased itsproportion from 17% to 18%. This was due to Pakistan’s 12.2% real funding increase relativeto India’s 2.1% real increase. This is the first time since 1999 that Islamabad’s defence budgethas grown more than New Delhi’s. Pakistan’s defence spending as a percentage of GDPremained higher than India.

(2.0)

(1.0)

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

Figure 14: South Asian Real GDP Growth (%)

India Pakistan

Figure 15: Contribution to South Asian Defence Spending 2002 (%)

Pakistan18%

India

82%

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

Official Defence Budget:Current Rupee bn 175.0 191.8 230.0 255.0 278.0 356.2 454.4 455.3 585.2 620.0 650.01995 Rupee bn 234.7 230.7 252.7 255.0 257.5 310.7 372.7 356.7 436.3 450.1 459.41995 US$ bn 7.2 7.1 7.8 7.9 7.9 9.6 11.5 11.0 13.5 13.9 14.2

Real Growth (%) (2.6) (1.7) 9.5 0.9 1.0 20.7 20.0 (4.3) 22.3 3.2 2.1


GDP:Current Rupee bn 7,059.2 8,769.5 10,378.4 11,819.6 13,619.5 15,156.5 17,626.1 19,570.0 21,150.2 22,750.0 24,627.61995 US$ bn (Real GDP) 300.7 322.0 347.9 364.5 390.0 407.5 440.5 472.2 490.4 512.5 536.0Real Growth (%) 5.4 7.1 8.1 4.8 7.0 4.5 8.1 7.2 3.8 4.5 4.6Per Capita (1995 US$) 346.1 363.3 384.9 395.3 415.1 426.6 453.7 478.6 489.4 502.1 512.5

Government Spending (current Rupee bn) 1,019.4 1,195.4 1,336.3 1,528.9 1,730.6 1,964.8 2,358.6 2,838.8 3,384.9 3,752.2 3,867.3Population (m) 868.9 886.3 903.9 922.0 939.5 955.2 970.9 986.6 1,002.1 1,020.7 1,045.8Inflation (Annual % Change) 11.8 6.4 10.2 10.2 9.0 7.2 13.2 4.7 4.0 3.8 4.5


(10.0)

(5.0)

0.0

5.0

10.0

15.0

20.0

25.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%



0.0

5.0

10.0

15.0

20.0

25.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%

India — Defence and Economic Trends 1992—2002

41

42

India

Economy

In 2002, India's growth rate was slightly higher than expected at 4.6% due to strong growth inthe services sector. Growth would have been higher if not for the drought, which reducedagricultural output. Inflation was also lower than anticipated due to the large stocks of rice andwheat, which kept the cost of basic food down. India's debt continued to climb in 2002, theresult of poorer revenue collection and increased spending. However the new and simpler taxcollection process introduced in 2002, and further economic reforms, should improve thesituation.

Defence Spending

India allocated Rs650bn towards defence in 2002, representing a 2.1% real increase on 2001levels. This was 2.6% of GDP, despite the Government's ambitions to increase spending to 3%of GDP. India's attempts at creating indigenous defence platforms and systems remain largelyunrealised and as a result, India continued to import most equipment in 2002. Imports aremainly from Russia, but Western suppliers have been increasingly marketing products to India.

Formal Name Bharat Capital City New Delhi Population 1,045.8 million Land Size 3,287,590 sq. km Currency Indian Rupee Fiscal Year 1 April–31 March Economy Less developed country with a market economy Industries Textiles, chemicals, food processing, steel, transportation equipment, cement,

mining, petroleum and machinery

India's Official Defence Funding - Real Dollars

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

US$ 1

995 B

illion

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

Official Defence Budget:Current Rupee bn 87.4 91.7 104.5 119.6 127.4 136.1 143.4 150.3 133.5 131.6 146.01995 Rupee bn 122.0 115.3 115.9 119.6 117.7 109.7 107.5 106.4 91.1 85.1 95.51995 US$ bn 3.9 3.6 3.7 3.8 3.7 3.5 3.4 3.4 2.9 2.7 3.0

Real Growth (%) (0.1) (5.4) 0.4 3.2 (1.6) (6.9) (2.0) (1.0) (14.4) (6.6) 12.2


GDP:Current Rupee bn 1,269.1 1,447.1 1,713.5 1,865.9 2,120.2 2,428.3 2,677.7 2,938.4 3,182.2 3,472.1 3,592.21995 US$ bn (Real GDP) 56.0 57.6 60.1 59.0 62.0 61.9 63.5 65.8 68.7 71.0 74.3Real growth (%) 5.5 2.8 4.4 (1.8) 5.0 (0.1) 2.6 3.7 4.4 3.4 4.6Per capita (1995 US$) 493.2 494.4 503.4 482.4 494.4 482.0 482.8 489.4 499.7 506.1 518.1

Government spending (current Rupee bn) 348.6 364.9 428.2 518.0 540.9 634.0 647.7 743.6 756.3 751.7 742.0Population (m) 113.6 116.5 119.4 122.4 125.4 128.4 131.5 134.5 137.5 140.4 143.4Inflation (Annual % Change) 9.4 9.8 11.3 13.0 10.8 11.8 7.8 5.7 3.6 3.6 3.4Statistical Note: Pakistan's defence budget is taken as the 'Defence Services' allocation for Army, Navy and Air Force. It excludes funding for Ministry of Defence, military pensions (from 2000), Rangers and Coast Guard.


(20.0)

(15.0)

(10.0)

(5.0)

0.0

5.0

10.0

15.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%



0.0

5.0

10.0

15.0

20.0

25.0

30.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%

Pakistan — Defence and Economic Trends 1992—2002

43

44

Pakistan

Formal Name Islamic Republic of Pakistan Capital City Islamabad Population 143.4 million Land Size 796,100 sq. km Currency Pakistani Rupee Fiscal Year 1 July–30 June Economy Less developed country with a market economy Industries Textiles, food processing, beverages, construction materials, clothing, paper

products and shrimp

Economy

Pakistan's economy grew by 4.6% in 2002, a significant improvement on 2001’s 3.4%,despite the third successive year of water shortages, regional instability and global economicuncertainty. The Paris Club debt rescheduling and economic structural reform has contributedto the greater resilience of Pakistan's economy. Inflation appears to have stabilised in the pastthree years at about 3.5%. The challenge of structural economic reform remained.

Defence Spending

Pakistan increased its defence spending in 2002 by 12.2% in real terms to US$3bn. This is thefirst real increase to defence spending since 1995. As a result, the defence budget increasedfrom 3.8% of GDP in 2001 to 4.1% in 2002. Islamabad continued to acquire new militaryplatforms, receiving F-7PG fighter aircraft from China. Although the 8 May Karachi bombingdelayed work, Pakistan continued construction, with French assistance, on two AGOSSTA-90Bconventional submarines.

Pakistan's Official Defence Funding - Real Dollars

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

US$ 1

995 B

illion

45

Australia

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

Official Defence Budget:Current A$ bn 8.6 9.1 9.7 9.6 10.0 10.1 10.3 10.6 11.0 11.6 12.51995 A$ bn 8.8 9.2 9.7 9.6 9.7 9.7 9.8 10.0 10.1 10.3 10.91995 US$ bn 6.4 6.8 7.1 7.0 7.1 7.1 7.2 7.3 7.4 7.5 7.9

Real Growth (%) 6.9 5.5 5.2 (1.3) 1.4 (0.7) 1.4 2.4 0.6 2.2 5.4

Percentage of GDP 2.0 2.1 2.1 2.0 1.9 1.8 1.8 1.7 1.7 1.7 1.7Percentage of Nominal Government Spending 8.2 8.1 8.2 7.8 7.6 7.4 7.5 7.5 7.3 7.2 7.6Per Capita (1995 US$) 366.0 381.8 397.2 387.9 388.8 381.8 380.9 385.9 384.1 389.6 405.4

GDP:Current A$ bn 414.8 437.1 462.9 489.3 517.4 545.6 576.7 608.1 652.0 691.5 734.11995 US$ bn 316.6 328.5 345.8 357.8 369.7 383.5 404.3 423.0 434.8 447.5 462.5Real Growth (%) (0.5) 3.8 5.3 3.5 3.3 3.7 5.4 4.6 2.8 2.9 3.4Per Capita (1995 US$) 18,093.8 18,560.5 19,317.3 19,769.3 20,200.5 20,728.3 21,504.6 22,265.7 22,644.0 23,125.3 23,597.5

Government Spending (current A$ bn) 105.0 112.1 117.8 123.6 132.0 135.9 136.6 141.0 150.0 161.5 163.2Population (m) 17.5 17.7 17.9 18.1 18.3 18.5 18.8 19.0 19.2 19.4 19.6Inflation (Annual % Change) 1.0 1.8 1.9 4.6 2.6 0.3 0.9 1.5 4.5 4.4 3.1Statistical Note: Readers may note that the current A$ budget figures differ from the 1999 Defence Economic Trends and official accounts. These figures represent the base level of funding for Australia without any additionalappropriations and supplementation which do not represent ongoing funding. This allows for a more accurate comparison between Australia and other countries.


(2.0)

(1.0)

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%



6.6

6.8

7.0

7.2

7.4

7.6

7.8

8.0

8.2

8.4

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%

Australia — Defence and Economic Trends 1992—2002

46

47

North America

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

Official Defence Budget:Current C$ bn 10.9 10.9 11.3 10.7 9.9 8.6 8.9 8.8 10.2 9.7 10.51995 C$ bn 11.6 11.4 11.6 10.7 9.7 8.3 8.4 8.2 9.0 8.5 9.01995 US$ bn 8.4 8.3 8.4 7.8 7.1 6.0 6.1 6.0 6.6 6.2 6.5

Real Growth (%) (7.5) (1.4) 1.4 (7.6) (9.5) (14.6) 2.0 (2.9) 10.3 (5.4) 5.3


GDP:Current C$ bn 690.1 712.9 747.3 788.0 824.7 866.3 888.4 967.5 1052.0 1086.2 1142.01995 US$ bn 527.3 536.8 556.9 573.8 591.0 612.4 628.0 671.6 698.3 713.8 738.1Real Growth (%) -0.5 1.8 3.8 3.0 3.0 3.6 2.6 6.9 4.0 2.2 3.4Per Capita (1995 US$) 18,565.4 18,703.5 19,204.6 19,515.6 19,700.8 20,211.2 20,726.8 21,874.6 22,418.2 22,917.2 23,696.4

Government Spending (current C$ bn) 174.1 178.9 182.0 156.3 156.8 151.8 148.0 156.7 170.0 170.0 170.0Population (m) 28.4 28.7 29.0 29.4 30.0 30.3 30.3 30.7 31.1 31.1 31.1Inflation (Annual % Change) 1.5 1.8 0.2 1.9 1.6 1.6 1.0 1.8 2.7 2.5 1.8

Growth in Defence Spending vs. Growth in GDP (Annual % Change)

(20.0)

(15.0)

(10.0)

(5.0)

0

5.0

10.0

15.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%



0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%

Canada — Defence and Economic Trends 1992—2002

48

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

Official Defence Budget:Current US$ bn 295.1 267.2 251.4 255.7 254.4 258.0 258.6 278.6 290.5 309.9 329.91995 US$ bn 314.5 279.8 262.8 255.7 246.6 240.9 234.6 248.0 249.0 264.9 277.0

Real Growth (%) (0.0) (11.0) (6.1) (2.7) (3.6) (2.3) (2.6) 5.7 0.4 6.4 4.5

Percentage of GDP 4.8 4.1 3.6 3.5 3.3 3.1 2.9 2.9 2.8 2.9 3.0Percentage of Government Spending 21.4 19.0 17.2 16.9 16.3 16.1 15.6 16.4 16.3 16.3 16.7Per capita (1995 US$) 1,231.5 1,084.3 1,007.9 971.6 925.0 894.2 861.7 901.0 896.5 952.6 995.9

GDP:Current USD$ bn 6,221.7 6,560.9 6,948.8 7,322.6 7,700.1 8,182.8 8,636.3 9,268.6 9,824.7 10,082.2 10,427.41995 US$ bn 6,583.8 6,834.3 7,283.9 7,322.6 7,556.5 7,875.6 8,209.4 8,686.6 9,046.6 9,157.3 9,340.4Real growth (%) 1.6 3.8 6.6 0.5 3.2 4.2 4.2 5.8 4.1 1.2 2.0Per capita (1995 US$) 25,778.4 26,479.2 27,939.6 27,821.4 28,344.1 29,234.0 30,148.4 31,564.7 32,566.1 32,928.0 33,586.5

Government spending (current US$ bn) 1,381.7 1,409.5 1,461.9 1,515.8 1,560.6 1,601.3 1,652.6 1,703.0 1,781.4 1,896.8 1,981.1Population (m) 255.4 258.1 260.7 263.2 266.6 269.4 272.3 275.2 277.8 278.1 278.1Inflation (Annual % Change) 3.1 2.7 4.0 2.7 3.6 4.4 4.4 4.2 3.4 2.8 1.5Statistical Note: Official Defence Budget figures include defence related expenditures by the US Department of Energy.


(12.0)

(10.0)

(8.0)

(6.0)

(4.0)

(2.0)

0.0

2.0

4.0

6.0

8.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%



0.0

5.0

10.0

15.0

20.0

25.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002e

%

United States of America — Defence and Economic Trends 1992—2002

49

50

Appendix A: Methodology

Current Methodology – The Proxy Defence Deflator

This is the third consecutive year DIO has used a proxy defence deflator to calculate nominaldefence budget figures into a constant or real basis in 1995 US dollars, in its Defence Economic Trends 2002. Using historical budgetary data and macroeconomic statistics, thedeflator is modelled on defence expenditure factors across several key cost components.These cost components are:

Capital Procurement – referring to all military capital equipment budgeted by a given countryin the fiscal year under review. This also includes investment in research and developmentprograms.

Personnel – expenditure on personnel as defined by the country. So while for some countriesthis may include pensions and superannuation costs, others may not include these items intheir personnel budgets.

Operating costs – the ongoing upkeep costs incurred in running a defence force.

The model developed by the Defence Intelligence Organisation is part of an ongoing process of refinement to calculate and compare, on a common basis, defence budgets acrosscountries and time periods.

Historical Methodology

Previously a broad-based implicit gross domestic product (GDP) price deflator was used todeflate nominal currency amounts into a constant 1995 local currency basis. This was thenconverted to US dollars using the average market exchange rate for 1995. However, theimplicit GDP price deflator is an index that captures price behavior over time in the entire economy. Hence, any within-country differences in relative price movements betweendefence expenditure and the rest of the economy is not taken into account. Consequently,any event in the non-defence sectors of the economy, such as a sharp rise in the price ofconsumer goods, tends to distort defence spending figures when deflated into constantdollars.

One possible solution to this problem is the use of the defence deflator index. This type ofindex is tailored to defence consumption only and thus free of distortions caused elsewhere in the economy. Unfortunately defence deflators are rarely published and often the magnitudeand behaviour of price movements in sectors of the economy which feed into defenceexpenditure are not known until many years later.

However, as more economic data has become readily available to the general public over thepast few years, primarily through online publications, it is now possible to model a proxydefence deflator based on historical budgetary data and macroeconomic trends. The Defence Intelligence Organisation has developed and continued to use such a model.

51

Appendix A: Methodology

Using 1995 as the base year, appropriate price sub-deflators are applied to each of these costcomponent amounts. From this, the model is able to generate a weighted composite indexbased on the percentage spent on personnel, capital procurement and operating expenses ineach year. This index is then used as the proxy defence deflator and is used to deflate thenominal local currency amount into constant 1995 local currency terms. Using the 1995market US dollars to local currency exchange rate obtained from the IMF’s InternationalFinancial Statistics periodical for 1995, these deflated amounts are then converted into USdollars.

Limitations of the Model

While the model allows for analysis to be tailored to each country more closely, there aresome countries in which there is insufficient transparency of data to determine the historicalrelative weights of each cost component. For these countries the GDP price deflator is usedinstead.

In addition, the model still uses market exchange rates to convert to US dollars. This approachdoes not adequately reflect the relative purchasing power of currencies. A more accuratemethod may be to incorporate estimates of Purchasing Power Parity (PPP). However, PPP datais not available for all countries covered in this publication and tailored military PPPs aredifficult to estimate given the lack of transparency in price data. As data transparencyincreases, the model will be further refined to take advantage of new information.

In comparing defence budgets between countries there is an inherent problem of inconsistenttreatment. Different countries have different compositions of items in the defence budget. Forexample some countries include military pensions while others place this amount into adifferent appropriation such as social security. The lack of a uniform definition of whatconstitutes a defence budget makes a fair comparison between two countries difficult. Whilethe model allows some control over what is included, it is limited by the degree of datatransparency and the consistency of official reporting of some of the countries examined inthis report.

Ongoing Refinement

The integrity of this model has been discussed with and approved by representatives of theDepartment of Defence, Australian Bureau of Statistics, the Australian Department of theTreasury and the School of Economics and Management at the Australian Defence ForceAcademy.

While some may contend that inconsistencies in the data may impair statistical cogency, theapproach undertaken represents a more accurate reflection of trends in comparison to theprevious methodology and the degree of error in producing comparable trends is considered tobe small. However, the Defence Intelligence Organisation will continually seek to refine itsapproach as new and more reliable data becomes available. This will explain the changes tosome figures from year-to-year.

52

Appendix B: Notes on Sources

Data Sources

The table below shows the sources from which the majority of data in this publication is drawn.

Data Source

Official defence budget (local currency)

Official budget sources from national governments

GDP

IMF publications

Asian Development Bank Publications

Government expenditure

Official budget sources from national governments

IMF publications


General financial data

(e.g. exchange rates, deflators)

IMF publications


Population

United Nations Monthly Bulletin of Statistics

United States Bureau of Census

Where data for a series was missing, the model was used to forecast using a least-squares regression.

Other Publishers of Similar Data

Other organisations that publish data similar to that provided in this publication include:

· International Monetary Fund (IMF);

· International Institute for Strategic Studies (IISS);

· US Arms Control and Development Agency (ACDA); and

· Stockholm International Peace Research Institute (SIPRI).

The following notes briefly describe the way these different sources compile their data:

IMF — Government Finance Statistics (GFS) Yearbook

Information for this publication is obtained primarily by means of a detailed questionnaire distributed by the IMF to government correspondents, who are usually located in each country's respective Ministry of Finance or Central Bank.

53

Appendix B: Notes on Sources

IISS — The Military Balance

The IISS method is to cite official defence budgets and to adjust, where necessary, military expenditure to include all other military-related spending. The only exception occurs in the case of NATO countries, where the IISS uses the figures released by governments and, for comparison, also cites the NATO-defined expenditure. Some countries include internal and border security force expenditure in their defence budgets. Where separate budgets exist, the IISS generally indicates this in footnotes. IISS figures may vary from previous years, often because of updates made by the governments themselves.

Wherever possible, the IISS uses exchange rates taken from IMF publications, though these may not be applicable to commercial transactions. In some cases, in an effort to make US dollar figures more relevant for international comparisons, the IISS uses a different set of exchange rates to calculate defence spending (that is, to reflect the differences in purchasing power parity terms between the civilian and military sectors).

ACDA

ACDA generally provides expenditures of the Ministry of Defence (where available). When these are known to include the costs of internal security, an attempt is made to remove these expenditures. A wide variety of data sources are used for these countries, including the publications and data resources of other US Government agencies, standardised reporting of countries to the UN, and other international sources.

Other published sources used by ACDA include the GFS Yearbook, the CIA World Factbook,the SIPRI Yearbook and The Military Balance.

SIPRI

Where possible, SIPRI includes the following items in its definition of military expenditure:

· all current and capital expenditure on the armed forces in the running of defence departments and other government agencies engaged in defence projects and space activities;

· the cost of paramilitary forces, border guards and police when judged to be trained and equipped for military operations;

· military research and development, testing and evaluation costs; and

· costs of retirement pensions of Service personnel and civilian employees.

For the majority of countries, SIPRI derives military expenditure estimates primarily from the GFS Yearbook.

defence economic trends in the asia-pacific 2002 · asean-5 and australia’s percentage of ... and...

Documents