DEFENCE ECONOMIC TRENDSIN THE ASIA-PACIFIC2010
DEFENC
E INTELLIGENCEORG
ANISATION
DEFENC
E INTELLIGENCEORG
ANISATION
1
CONTENTSPREFACE........................................................................................................................................................... 3
SOUTH EAST ASIA – REGIONAL OVERVIEW ...................................................................................................4
BRUNEI............................................................................................................................................................. 7
BURMA.............................................................................................................................................................9
CAMBODIA ...................................................................................................................................................... 11
EAST TIMOR ....................................................................................................................................................13
INDONESIA......................................................................................................................................................15
LAOS ................................................................................................................................................................17
MALAYSIA ...................................................................................................................................................... 19
PHILIPPINES ....................................................................................................................................................21
SINGAPORE .................................................................................................................................................... 23
THAILAND....................................................................................................................................................... 25
VIETNAM ........................................................................................................................................................ 27
SOUTH PACIFIC–REGIONAL OVERVIEW........................................................................................................28
FIJI ...................................................................................................................................................................31
NEW ZEALAND ............................................................................................................................................... 33
PAPUA NEW GUINEA..................................................................................................................................... 35
TONGA............................................................................................................................................................ 37
NORTH ASIA–REGIONAL OVERVIEW ............................................................................................................38
CHINA ............................................................................................................................................................. 41
JAPAN.............................................................................................................................................................43
NORTH KOREA...............................................................................................................................................45
RUSSIA............................................................................................................................................................47
SOUTH KOREA ...............................................................................................................................................49
TAIWAN...........................................................................................................................................................51
SOUTH ASIA–REGIONAL OVERVIEW............................................................................................................. 52
INDIA .............................................................................................................................................................. 55
PAKISTAN....................................................................................................................................................... 57
AUSTRALIA.....................................................................................................................................................59
CANADA..........................................................................................................................................................60
FRANCE........................................................................................................................................................... 61
UNITED KINGDOM.........................................................................................................................................62
UNITED STATES..............................................................................................................................................63
APPENDIX A: METHODOLOGY ......................................................................................................................64
APPENDIX B: NOTES ON SOURCES ...............................................................................................................66
2
PREF
ACE
INTENTIONALLY BLANK
3
PREFACE
Aim
The Defence Economic Trends analyses significant trends in defence funding in theAsia Pacific region. It draws together official defence budgets and national economicdata to enable comparisons between countries and over time.
Methodology
Underpinning much of the analysis in this publication are a series of defence spendingdeflators that are used to convert nominal official defence budgets into constant 2005terms. While there are some limitations to undertaking expenditure comparisons, ourestimates aim to give readers the best available guide to the overall trend for spendingon regional armed forces in real terms. For an explanation of the model, and notes oncomparing expenditure over time and between countries, please refer to Appendix A.
GDP and defence budgets are provided both in nominal terms and in constant US dollarterms, to enable comparisons to be made over time and between countries.
Abbreviations
bn Billion
EIU Economist Intelligence Unit
GDP Gross Domestic Product
GEC Global Economic Crisis
IMF International Monetary Fund
IISS International Institute for Strategic Studies
m Million
tr Trillion
Online version
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Feedback
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If you have any questions in relation to Defence Economic Trends 2010 please contact usdirectly by phone or fax at:
Defence Intelligence Organisation
Telephone: +61 2 6127 5262
Facsimile: +61 2 6127 5086PREFACE
4
SOUTH
EAST
ASIA–RE
GIO
NALOVE
RVIEW
SOUTH EAST ASIA – REGIONAL OVERVIEW
Regional economy
South East Asia is recovering well fromthe GEC as the export dependentcountries – Malaysia, Singapore andThailand – benefit from the pick up inthe global economy, and as the othercountries in the region that are lessintegrated in the global economycontinue solid economic growth.Singapore has had the strongestrecovery with economic growth of15 per cent in 2010. Improvements intourism, low cost exports and the risingvalue of commodity exports,particularly oil and gas, will driveeconomic growth for many South EastAsian countries.
Defence spending
Defence spending acrossSouth East Asia was affected by theGEC with many countries decreasingdefence expenditure in real terms,particularly Malaysia. Someprocurement projects were delayed,but military modernisation programsaimed at consolidating existingcapabilities, upgrading professionalstandards and addressingcounterterrorism requirements werelargely unaffected. Significant capitalacquisition programs are occurring inmany regional armed forces, such asSingapore, Thailand, Malaysia andVietnam. In some cases, theseprograms are introducing advancedplatforms into the region, rather thanjust replacing obsolescent hardware.
Average GDP growth compared to 2010 growthand South East Asia average
0
2
4
6
8
10
12
14
16
Australia Malaysia Indonesia Singapore Thailand Philippines Vietnam SEA Average
%
average growth rate 2000 09
2010 growth rate
Contribution to South East Asiandefence spending in 2010 (2005 US$)
Other
Indonesia16%
Malaysia15%
Vietnam 11%
Philippines 5%
Thailand17%
Singapore35%
5
SOUTH
EAST
ASIA
–REG
IONALOVERVIEW
South East Asian defence budgets 2000 2010
0
1
2
3
4
5
6
7
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
2005
US$
bn
Malaysia Indonesia Singapore Thailand Philippines Vietnam
Proportion of GDP spent on defence
0
1
2
3
4
5
6
7
8
9
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
%
Australia Malaysia Indonesia SingaporeThailand Philippines Vietnam
Proportion of government outlays spent on defence
0
5
10
15
20
25
30
35
40
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
%
Australia Malaysia Indonesia SingaporeThailand Philippines Vietnam
6
BRUNEI
7
BRUNEI
BRUNEI
Economy
Brunei’s economy over the last 10 yearshad annual real economic growth of1.5 per cent. The economy grew by0.5 per cent in 2010, reversing theeconomic decline in 2008 and 2009,according to the IMF. Brunei isdiversifying away from oil and gastowards a non energy based economy,but progress is slow. The economy isprojected to grow by 1 per cent in 2011and to average 1.4 percent growthannually to 2015.
Defence spending
Brunei’s 2010 defence budget wasB$512m, US$376.5m in current terms,and was a 3.9 per cent real decrease onthe 2009 defence budget. Brunei hasreceived all four of the 41 metreIJHTIHAD class patrol boats fromGerman ship manufacturer LurssenWerft. Brunei has also ordered two 80metre offshore patrol class vessels fromthe same company. The second vesselwas launched in September anddelivery is expected in 2011.
Brunei's Defence Budget
240
260
280
300
320
340
360
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
US$
m(200
5)
Country Name BruneiCapital City Bandar Seri
Begawan
Population 422 000Land Size 6 000 sq kmCurrency Brunei DollarFiscal Year 1 April–31 MarchEconomy Market economyIndustries Oil, natural gas and tourism
8
BURM
A
INTENTIONALLY BLANK
9
BURM
A
BURMA
Economy
Over the last 10 years, Burma hasrecorded real annual economic growthof just over 11 per cent, according to theIMF. The Burmese economy increasedfrom 4.9 per cent growth in 2009 to5.3 per cent growth in 2010. Largeprojects in power, petroleum andinfrastructure, funded by investors fromChina, South Korea and Thailand, havebeen approved and are forecast tosupport annual economic growth of5 per cent over the next five years.Other sectors in the domestic economyare expected to remain sluggish due tolack of investment and infrastructure.
Defence spending
Reliable data on Burma’s defencespending is not available. Burma’smilitary acquisitions focus oncapabilities to defend against externalthreats and also to ensure the militaryjunta’s security from internal threats. In2009, Burma signed a contract topurchase and assemble 20 MiG 29fighter aircraft. Burma has also ordered50 K 8 jet trainer aircraft from China.
1.2.3.4.5.6.7.8.9.10.11.12.13.14.15.16.17.18.
Country Name Burma(Myanmar)
Capital City Nay Pyi DawPopulation 61.2 million
Land Size 677 000 sq kmCurrency KyatFiscal Year 1 April–31 MarchEconomy Less developed countryIndustries Timber, gems, oil, natural gas
and rice
10
CAMBO
DIA
11
CAMBO
DIA
Economy
Cambodia has been one ofSouth East Asia’s fastest growingeconomies, averaging about 8 per centannual real growth over the last10 years. The economy grew by around5 per cent in 2010, according to the IMF.The garment sector remains exposed tothe US economy – its main exportmarket. However, the tourism sector ispredicted to attract more visitors in2011–2012 and economic growth isforecast at 6.8 per cent in 2011. Annualgrowth is forecast to average6.6 per cent over the next 5 years.
Defence spending
Cambodia’s 2010 defence budget wasestimated by the International Institutefor Strategic Studies to be 1 15tr Riel,US$274.8m in current terms,representing a 20.1 per cent realincrease on the 2009 defence budget.In September, Cambodia received50 second hand T 55 main battle tanksand 44 used BTR armouredpersonnel carriers from Eastern Europe.
CAMBODIA
Cambodia's Defence Budget
40
80
120
160
200
240
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
US$
m(200
5)
Country Name CambodiaCapital City Phnom PenhPopulation 14.3 millionLand Size 181 035 sq km
Currency RielFiscal Year 1 January–31 DecemberEconomy Less developed country with a
market economyIndustries Gemmining, cement, forestry,
rubber, food, tourism, textiles,apparel and footwear
12
EAST
TIMOR
13
EAST
TIMOR
EAST TIMOR
Economy
East Timor has averaged 5 per centannual real economic growth since2000. But economic growth rates havebeen highly variable, ranging fromabout 21 per cent real growth in timesof rebuilding (2001) to almost 6 per centcontraction during periods of unrest(2006). The GEC had little impact onEast Timor due to its limited connectionto global trade, investment andfinance – in 2009 and 2010 economicgrowth was 11.6 and 7.9 per centrespectively. East Timor’s economy isforecast to grow at an average annualrate of 7.2 per cent from 2011 to 2015.
Defence spending
The 2010 defence budget was US$23.2min current terms and represented a40.9 per cent real decrease on the 2009defence budget. Foreign forces providetraining and equipment assistance tothe East Timor Defence Force. In June2010, East Timor commissioned twoSHANGHAI class patrol boats purchasedfrom China. East Timor is also planningto acquire two navy patrol boats fromSouth Korea and additional boats fromIndonesia.
East Timor's Defence Budget
0
10
20
30
2003 2004 2005 2006 2007 2008 2009 2010
US$
m(200
5)
Country Name East TimorCapital City DiliPopulation 1.2 millionLand Size 14 874 sq km
Currency US dollarFiscal Year 1 January–31 DecemberEconomy Less developed country with a
market economyIndustries Oil, coffee, fishing,
cottage industries, rice andsubsistence farming
14
INDONES
IA
15
INDONESIA
INDONESIA
Economy
Over the last 10 years, the Indonesian economy has maintained modest average annual growth of 5.1 per cent. Indonesia has been one of the best performers in South‐East Asia during the GEC, due to a relatively low dependence on exports – in 2010, economic growth was 6 per cent, according to the IMF. Private consumption is predicted to remain the major driver behind economic growth in 2011–2015, rather than external demand. Economic growth is forecast to be 6.2 per cent in 2011 and to average 6.7 per cent annually to 2015.
Defence spending
Indonesia’s 2010 defence budget was IDR40.7 tr, US$4.5bn in current terms, and represented a 14.8 per cent real increase on the 2009 defence budget. In May, Brunei and Indonesia signed an agreement for Brunei to transfer two WASPADA‐class fast attack craft to the Indonesian Navy. In December, Indonesia considered procuring six additional Sukhoi Su‐27 and Su‐30 fighter aircraft and is also considering procuring used F‐16s. The Army took delivery of three Mil Mi‐35M HIND attack helicopters in September 2010 and 17 BMP‐3F infantry fighting vehicles were delivered to the Indonesian Marines from Russia in November 2010.
Country Name Indonesia Capital City Jakarta Population 234.6 million Land Size 1 905 000 sq km
Currency Rupiah Fiscal Year 1 January–31 December Economy Less developed country with a
market economy Industries Petroleum, natural gas,
mining, cement, chemical fertilisers, plywood, rubber, tourism, textiles and apparel
16
LAOS
17
LAOS
LAOS
Economy
Despite a decade of good economicgrowth (recording an average annualgrowth rate of 7 per cent in the lastdecade), living standards in Laos remainamong the region’s lowest and thecountry is heavily dependent onforeign aid. In 2010, Laos enjoyed7.7 per cent economic growth andgrowth for 2011 is forecast at7.5 per cent, according to the IMF. Theoutlook is healthy with key industriessuch as forest plantations, mining andgarment industries, continuing toexpand the Laos economy, which isforecast to grow, on average, at7.6 per cent annually over the next 5years.
Defence spending
Laos’ 2010 defence budget wasestimated to be 134bn Kip, aboutUS$19.4m in current terms,representing a 7.4 per cent real increaseon the 2009 defence budget. The LaoPeople’s Army is equipped with Sovietera weapons, some of which are nolonger serviceable. Laos lacks themeans to independently acquire newequipment and its armed forces arelimited to an internal security capability.The Lao People’s Army has a force of29 000 troops and Lao youth are liablefor 18 months of conscripted service.
Laos' Defence Budget
0
2
4
6
8
10
12
14
16
18
20
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
US$m
(200
5)
Country Name LaosCapital City VientianePopulation 6.4 millionLand Size 237 000 sq km
Currency KipFiscal Year 1 October–30 SeptemberEconomy Less developed country with a
centrally planned economyIndustries Copper, tin, timber,
hydroelectricity, tourism,apparel, rice and cement
18
MALA
YSIA
19
MALA
YSIA
MALAYSIA
Economy
Over the last 10 years, Malaysia hasexperienced modest average annualeconomic growth of 4.8 per cent. Afterthe Malaysian economy contracted by1.7 per cent in 2009, it achieved6.7 per cent growth in 2010, accordingto the IMF. Private consumption andinvestment will remain the primarydriving forces of economic growth inthe 2011–2015 period. Economic growthis forecast to be 5.3 per cent in 2011 andto average 5.1 per cent annually to 2015.
Defence spending
Malaysia’s 2010 defence budget wasabout MYR11.7bn, US$3.6bn in currentterms, and represented a 17 per centreal decrease on the 2009 defencebudget. The Navy received its secondSCORPENE class attack submarine inJuly 2010. The Malaysian governmenthas signalled its intent to procure threemultipurpose support ships. The Army isplanning to receive 257 8x8 wheeledarmoured personnel carriers from alocal Malaysian company with the firstprototype to be delivered in 2011.Delivery of the Air Force’s 12 EurocopterEC725 helicopters is scheduled to beginin 2012.
Malaysia's Defence Budget
1.5
2.0
2.5
3.0
3.5
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
US$
bn(200
5)
Country Name MalaysiaCapital City Kuala LumpurPopulation 28.2 million
Land Size 330 000 sq kmCurrency RinggitFiscal Year 1 January–31 DecemberEconomy Less developed country with a market
economyIndustries Rubber, palm oil, electronics, tin,
timber, agriculture and oil
20
PHILIPPINES
21
PHILIPPIN
ES
PHILIPPINES
Economy
Over the last 10 years, the Philippinesaveraged annual real economic growthof 4.6 per cent. After slowing in 2009,to just 1 per cent economic growth, theeconomy grew by 7 per cent in 2010.The EIU forecast that growth inremittances will strengthen theeconomy and personal disposableincome will be supported by a gradualfall in unemployment and increasedcash handouts. The Philippineseconomy is forecast to achieve4.5 per cent growth annually for thenext five years.
Defence spending
The Armed Forces of the Philippines2010 budget was 62.7bn Peso,US$1.4 bn in current terms,representing a 1.8 per cent realdecrease on the 2009 defence budget.In 2010, the Armed Forces of thePhilippines again received 5bn Peso(US$110.8m) as part of a modernisationfund to invest in new capability. ThePhilippines placed an order from Polandfor 7 W 3 Sokol helicopters, but theacquisition was cancelled in December.The Air Force took delivery of the first 4of 18 Alenia Aermacchi SF 260 trainingaircraft. The remaining 14 are scheduledfor delivery in 2011. The Air Force is alsoplanning to receive a second hand C130H Hercules transport aircraft.
Philippines' Defence Budget
0.8
0.9
1.0
1.1
1.2
1.3
1.4
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
US$
bn(200
5)
Country Name PhilippinesCapital City ManilaPopulation 94.0 millionLand Size 300 000 sq km
Currency Philippines PesoFiscal Year 1 January–31 DecemberEconomy Less developed country with a market
economyIndustries Textiles, pharmaceuticals, chemicals,
wood products, electronics, petroleumrefining and fishing
22
SINGAPO
RE
23
SINGAPO
RE
SINGAPORE
Economy
Over the last 10 years, Singapore has averaged real annual economic growth of just over 5 per cent. The export‐dependent economy was vulnerable to the GEC and contracted by 1.3 per cent in 2009 before dramatically growing by 15 per cent in 2010 due to the rapid rebounding of the manufacturing and service sectors. The economy is expected to grow by 4.5 per cent in 2011 and to average 4.2 per cent annually for the next five years.
Defence spending
Singapore’s 2010 defence budget was S$11.5bn, US$8.4bn in current terms, representing a 1.1 per cent real decrease on the 2009 defence budget. Both of Singapore’s two ARCHER‐class submarines have been launched, with the second scheduled for delivery in 2011. The first five from an order of 24 Boeing F‐15SG fighter aircraft have arrived in Singapore after being used for pilot training in the United States. The remaining aircraft are scheduled to be delivered by 2012. In September 2010, the Air Force received its first C‐130B/H Hercules transport aircraft after being upgraded in country. A further nine C‐130 aircraft are to be upgraded.
Singapore's Defence Budget
4.5
5.0
5.5
6.0
6.5
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
US$
bn (2
005)
Country Name Singapore Population 5.1 million Land Size 1 000 sq km
Currency Singapore Dollar Fiscal Year 1 April–31 March Economy Newly industrialised country with a
market economy Industries Electronics, financial services,
petroleum refining, rubber, ship repair and biopharmaceuticals
24
THAILAND
25
THAILA
ND
THAILAND
Economy
Over the last 10 years, Thailand’seconomy has grown at an annualaverage rate of 4 per cent. Theeconomy rebounded from the GEC in2010, despite large protests in Bangkok.In 2010, the economic growth was7.5 per cent according to the IMF –rebounding strongly after contracting2.2 per cent in 2009. Thailand’seconomy will remain dependent on thepace of a wider global recovery due tothe importance of its export sector.Economic growth is forecast to be4 per cent for 2011, and to average4.5 per cent annually to 2015.
Defence spending
Thailand’s 2010 defence budgetdecreased to 151.6bn Baht or US$4.8bnin current terms, and represented a14.4 per cent real decrease on the 2009defence budget. The Army has ordered96 BTR 3E1 armoured personnelcarriers. The first two were delivered inSeptember 2010, and 94 are scheduledfor delivery by 2011. The Air Force isreceiving 12 Saab JAS39 Gripen fighteraircraft, with deliveries of the first batchof six beginning in 2011, along with twoSaab 340 turboprop aircraft. One of theSaab 340s will be fitted with an airborneearly warning system. The Air Force isalso planning to extend the life of 18 ofits F I6A/B 15 fighter aircraft. The Navy isexpecting delivery of a landing platformdock in the second half of 2012.
Thailand's Defence Budget
1.5
2.0
2.5
3.0
3.5
4.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
US$
bn(200
5)
Country Name ThailandCapital City BangkokPopulation 67.7 million
Land Size 513 000 sq kmCurrency BahtFiscal Year 1 October–30 SeptemberEconomy Less developed country with a market
economyIndustries Tourism, apparel, agriculture, cement,
electronics, furniture, plastics and tin
26
VIET
NAM
27
VIETNAM
VIETNAM
Economy
Over the last 10 years, Vietnam had oneof the fastest growing economies inAsia, averaging real annual economicgrowth of 7.3 per cent. In 2010,economic growth – 6.5 per cent,according to the IMF – was spurred byforeign direct investment. The economyis forecast to grow by 6.8 per cent in2011 and to achieve an annual averagerate of 7.2 per cent to 2015. But risks tofuture economic growth include furtherdepreciation of the Dong, high inflation,the trade deficit and high fiscalexpenditure.
Defence spending
Vietnam’s 2010 defence budget wasestimated by the IISS to be 44.4tr Dong,about US$2.3bn in current terms,representing an 18.4 per cent realdecrease on the 2009 defence budget.Vietnam is planning to buy sixKILO class submarines from Russia.Vietnam will also receive twoGEPARD class frigates built in Russia. InSeptember 2010, Vietnam signeddefence cooperation agreements withGermany, Poland and the UK. The dealslargely covered defence science andtechnology areas to bolster defencedevelopment.
Vietnam's Defence Budget
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
US$
bn(200
5)
Country Name VietnamCapital City HanoiPopulation 88.3 millionLand Size 332 000 sq km
Currency DongFiscal Year 1 January–31 DecemberEconomy Less developed country with a centrally
planned economyIndustries Food processing, garments, shoes,
mining, cement, fertiliser, glass, tyres,oil, coal, steel, paper, coffee and rice
28
SOUTH
PACIFIC–RE
GIO
NALOVE
RVIEW SOUTH PACIFIC–REGIONAL OVERVIEW
Regional economy
The South Pacific has many small,narrowly based economies that arereliant on tourism, remittances andcommodity exports, which arerecovering slowly after being subduedduring the GEC. For many countries,large budget deficits are expected toplace government finances at risk, andpolitical challenges have had a negativeimpact on economic growth. Theeconomic environment is expected toimprove in 2011 as the global economyrecovers and rejuvenates key sectors.
Defence spending
Economic growth is the key priority formost governments in the region.Defence spending remains a secondarypriority. The regional averagepercentage of GDP spent on defenceover the last 10 years is equivalent toabout 1.1 per cent per year. For manycountries, the armed forces gainoperational experience by deploying aspart of United Nations led missions oralongside partner countries.
Average GDP growth compared to 2010 growth andSouth Pacific regional average
0
1
2
3
4
5
6
7
8
9
New Zealand Fiji PNG Tonga Regional Average
%
average growth rate 2000 09
2010 growth rate
Figure 2: Contribution to South Pacific defence spendingin 2010 (2005 US$) (excluding NZ)
Tonga 4%
PNG 41%
Fiji 55%
29
SOUTH
PACIFIC
–REG
IONALOVERVIEW
South Pacific defence budgets 2000 2010 (excluding NZ)
0
10
20
30
40
50
60
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
2005
US$m
Fiji PNG Tonga
Proportion of GDP spent on defence
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
%
NZ Fiji PNG Tonga
Proportion of government outlays spent on defence
0
1
2
3
4
5
6
7
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
%
NZ Fiji PNG Tonga
30
FIJI
31
FIJI
FIJI
Economy
Over the last 10 years, Fiji’s economyhas experienced poor average annualeconomic growth of less than1 per cent. Fiji’s economy struggledduring the GEC. In 2009, the economycontracted by 2.2 per cent, due to itslargest industries – tourism and sugar –underperforming. Fiji’s economicgrowth was just 0.1 per cent in 2010,according to the IMF. Although thetourism industry is expected to improveas the world economy recovers,economic growth is forecast to remainlow due to poor investor confidence.Economic growth is forecast to be2 per cent in 2011 and to average2.3 per cent annually to 2015, accordingto the IMF.
Defence spending
Fiji’s 2010 defence budget was FJ$108m,US$56.3m in current terms,representing a 1.7 per cent real increaseon the 2009 defence budget. Since theDecember 2006 military coup, someforeign military assistance to Fiji hasbeen withheld. This has limited theprospects for the Republic of FijiMilitary Forces to acquire newequipment from traditional sources.
Fiji's Defence Budget
35
40
45
50
55
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
US$
m(2
005)
Country Name FijiCapital City SuvaPopulation 890 000Land Size 18 333 sq km
Currency Fiji DollarFiscal Year 1 January–31 DecemberEconomy Less developed country with a market
economyIndustries Tourism, sugar, clothing, copra, gold
and silver mining, timber and smallcottage industries
32
NEW
ZEALA
ND
33
NEW
ZEALA
ND
NEW ZEALAND
Economy
Over the last 10 years, New Zealand hasexperienced average annual economicgrowth of 2.5 per cent. The economycontracted by 1.6 per cent in 2009 dueto the GEC but recovered well in 2010with economic growth of 3 per cent,according to the IMF. Strong demandfrom Asia for New Zealand’s exportsand improving private consumption ispredicted to stimulate economicactivity. Economic growth is forecast tobe 3.2 per cent in 2011 and to average2.9 per cent annually to 2015.
Defence spending
The 2010 New Zealand defence budgetwas NZ$3.1bn, US$2.2bn in currentterms, representing a 6.8 per cent realincrease on the 2009 defence budget.In November 2010, New Zealandreleased its DefenceWhite Paper. Thereport outlines plans to reprioritisemilitary funding due to economicpressures. Over the next five years, theNew Zealand Defence Force plans toacquire short range maritime patrolaircraft, a tanker vessel and a littoralwarfare support ship, and to find areplacement for the Beech B200 KingAir training aircraft.
New Zealand's Defence Budget
1.2
1.4
1.6
1.8
2.0
2.2
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
US$
bn(200
5)
Country Name New ZealandCapital City WellingtonPopulation 4.4 millionLand Size 271 000 sq km
Currency New Zealand DollarFiscal Year 1 July–30 JuneEconomy Advanced country with a market
economyIndustries Wood products, textiles, machinery,
transportation equipment, financialservices, tourism and mining
34
PAPU
ANEW
GUIN
EA
35
PAPU
ANEW
GUIN
EA
PAPUA NEW GUINEA
Economy
Over the last 10 years,Papua New Guinea (PNG) has recordedaverage annual economic growth of2.9 per cent. PNG is recovering verystrongly from the GEC, with theeconomy driven by high prices for thecountry’s principal commodityexports – copper, gold and crude oil.Economic growth in 2010 was8 per cent, according to the IMF.Growth is forecast to slow as theeconomy settles from its post GECsurge. Economic growth is forecast tobe 5.5 per cent in 2011, and to average4.7 per cent annually to 2015.
Defence spending
PNG’s 2010 defence budget wasK115.6m, US$42.5m in current terms,representing a 18.6 per cent realdecrease on the 2009 defence budget.The PNG Defence Force (PNGDF) hashalved in size since 2001, with PNGDFregular personnel numbers capped at2000 – at least until 2011, according tothe PNGDF Corporate Plan 2008–2012.Additionally, Department of Defencecivilian personnel will remain capped at166 until 2011.
PNG's Defence Budget
20
25
30
35
40
45
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
US$
m(200
5)
Country Name Papua NewGuinea
Capital City Port MoresbyPopulation 6.5 million
Land Size 462 840 sq kmCurrency KinaFiscal Year 1 January–31 DecemberEconomy Less developed country with a market
economyIndustries Copra crushing, palm oil, timber, crude
oil production, construction, gold,silver and copper mining
36
TONGA
37
TONGA
TONGA
Economy
Over the last 10 years, Tonga’s economygrew at a real annual average rate of1.2 per cent. The GEC is continuing toaffect Tonga through lower touristarrivals and reduced remittances.Economic growth in 2010 was0.6 per cent, according to the IMF.Tonga will depend on remittances and arecovery in tourism, particularly fromAustralia, New Zealand and the UnitedStates, to stimulate economic activity.Economic growth is forecast to be1.7 per cent in 2011, and to average1.8 per cent annually to 2015.
Defence spending
Tonga’s 2010 defence budget wasTOP6.6m, US$3.4m in current terms,representing a 23.2 per cent realdecrease on the 2009 defence budget.The Tonga Defence Services operatethree patrol boats provided underAustralia’s Pacific Patrol Boat Program.In December 2010, Tonga deployedtroops to Afghanistan for the first time.A contingent of 55 Tongan troopsdeployed after conductingpre deployment training with theUnited Kingdom’s Royal Air Force(RAF). Tonga will conduct foursix month rotations in Afghanistan aswell as maintaining its commitments tothe Regional Assistance Mission toSolomon Islands.
Tonga's Defence Budget
1.5
2.0
2.5
3.0
3.5
4.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
US$
m(200
5)
Country Name TongaCapital City Nuku‘alofaPopulation 103 000
Land Size 748 sq kmCurrency Pa‘angaFiscal Year 1 July–30 JuneEconomy Less developed country with a market
economyIndustries Tourism, fish, squash, vanilla
38
NORT
HASIA–RE
GIO
NALOVE
RVIEW NORTH ASIA–REGIONAL OVERVIEW
Regional economy
Throughout 2010, economic activity inNorth Asia continued to rebound fromthe GEC. The speed of the recovery, aswell as its composition, has been quitedifferent across North Asia.Export dependent economies such asJapan generally experienced morepronounced cycles than largereconomies with sizable domesticdemand such as China, according to theIMF. Prospects for a sustained recoverylook positive but risks remain ifrenewed volatility in global financialmarkets undermines consumer andbusiness confidence.
Defence spending
Strong economic growth over the lastdecade has supported growth indefence spending, enabling militarymodernisation and acquisitionprograms among most countries in theregion. The impact of the GEC resultedin many of the countries in the regionconstraining growth in 2010 defencebudgets and delaying someprocurement plans. Despite theseconstraints, military modernisationremains a priority. North Korea isexcluded from the regional comparisoncharts below, due to a lack of reliabledata.
Average GDPGrowth compared to 2010 Growth andNorth Asia Average
0
2
4
6
8
10
12
China Japan South Korea Russia Taiwan NA average
%
average growth rate 2000 09
2010 growth rate
Contribution to North Asian defence spending in 2010 (2005 US$)
China32%
Taiwan6%
Russia17%
South Korea16%Japan
29%
39
NORTH
ASIA
–REG
IONALOVERVIEW
North Asian defence budgets 2000 2010
0
10
20
30
40
50
60
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
2005
US$bn
China Japan South Korea Russia Taiwan
Proportion of GDP spent on defence
0
0.5
1
1.5
2
2.5
3
3.5
4
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
%
China Japan South Korea Russia Taiwan
Proportion of government outlays spent on defence
0
5
10
15
20
25
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
%
China Japan South Korea Russia Taiwan
40
CHIN
A
41
CHIN
A
CHINA
Economy
Since 2000, China has experiencedannual average economic growth ofabout 10 per cent. Real GDP growthincreased to 10.3 per cent in 2010, upfrom 9.2 per cent in 2009, according tothe EIU. This strong growth has beenenabled by increasing activity in all partsof the economy, due to loose creditconditions and a government backedstimulus package that boostedinvestment. Economic expansion willslightly slow to 9 per cent in 2011 asstimulus spending ends and policytightening leads to a reduction inproperty investment growth. The2011 2015 average GDP growth rate isforecast to be about 9 per cent.
Defence spending
China’s economic growth continues tosupport a rapidly increasing budget forthe People’s Liberation Army. Thedefence budget has averaged growthof over 10 per cent over the last 10years, and currently stands at 519 bnYuan, US$76.7 bn in current terms, andrepresents a 4.4 per cent real increaseon the 2009 defence budget. But somecommentators put China’s real defencespending at a much higher figure. Highlevels of defence spending aresustaining a comprehensive militarymodernisation program, with capableplatforms being produced domestically,as well as being acquired fromarms exporting countries such asRussia.
China's Defence Budget
10
20
30
40
50
60
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
US$
bn(200
5)
Country Name ChinaCapital City BeijingPopulation 1.3 billionLand Size 9 561 000 sq km
Currency YuanFiscal Year 1 January–31 DecemberEconomy Socialist market economyIndustries Iron, steel, petroleum, cement,
chemical fertilisers, automobiles,electronics and telecommunications
42
JAPA
N
43
JAPA
N
JAPAN
Economy
Following average annual economicgrowth of about 0.7 per cent over thepast 10 years, Japan’s economy grew by4 per cent in 2010, and will averageabout 1.4 per cent per year for2011–2015, according to the EIU. Theshrinking labour force and increasinglylimited fiscal flexibility are constraintsto economic growth. Privateconsumption is predicted to slow asfiscal stimulus measures expire, beforepicking up later in 2011 as labour marketconditions gradually improve.
Defence spending
Japan’s 2010 defence budget grew by1.7 per cent. The defence budgetcurrently stands at ¥4.8tr, US$54.6bn incurrent terms, and represents 1 per centof GDP. Japan launched its fourthSORYU class submarine and its first19DD escort destroyer the JS Akizuki inlate 2010. The Ministry of Defencerequested ¥15.7 bn to procure 16 newTK X main battle tanks.
Japan's Defence Budget
30
35
40
45
50
55
60
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
US$
bn(2
005)
Country Name JapanCapital City TokyoPopulation 127.4 millionLand Size 378 000 sq km
Currency YenFiscal Year 1 April–31 MarchEconomy Advanced country with market
economyIndustries Automobiles, electronics, machine
tools, steel and non ferrous metals,ships, chemicals and textiles
44
NORT
HKO
REA
INTENTIONALLY BLANK
45
NORTH
KOREA
NORTH KOREA
Economy
North Korea’s economy has shown some improvement from the free fall of the 1990s, when the country experienced famine conditions. South Korean food aid and Chinese energy supplies have prevented total collapse. GDP growth for 2010 is unknown and North Korea’s economy continues to depend on Chinese aid.
Defence spending
Reliable data on North Korea’s defence spending is not available. Official figures released by Pyongyang point to a defence budget that would be equivalent to about US$500m. This contrasts with South Korean and other estimates of around US$5–6bn. A lack of credible and consistent data makes it difficult to compile tables and graphs of North Korean defence spending. Pyongyang follows a ‘military first’ policy, which ensures priority is given to military expenditure.
Country Name North Korea Capital City Pyongyang Population 24.0 million Land Size 121 000 sq km
Currency North Korean Won Fiscal Year 1 January–31 December Economy Less developed country with centrally
planned economy Industries Military products, machine building,
chemicals, mining, metallurgy and apparel
46
RUSS
IA
47
RUSSIA
RUSSIA
Economy
Following a deep recession, the Russianeconomy has improved, but therecovery remains fragile. In 2009, GDPfell by 7.9 per cent as domestic demandcontracted following plunging oil pricesand an abrupt reversal of capital flows.Russia’s economy grew by 4 per cent in2010, according to the IMF. A boost toconsumption from rising real wages anda gradual resumption of bank lendingwill support average GDP growth of4.2 per cent annually over the next fiveyears. Russia has undertaken anenormous fiscal stimulus – of almost10 per cent of GDP – to help mitigatethe impact of the crisis. It will now haveto reverse this fiscal stimulus.
Defence spending
Russia’s 2010 defence budgetcontracted by 3.4 per cent after realgrowth of 13.3 per cent in 2009. Thedefence budget stands at 1.3tr Rubles,US$41.8bn in current terms. Russia isnegotiating with France for fourMISTRAL class helicopter carriers, andthe first six Mi 28N Night Hunter attackhelicopters entered service in late 2010.The joint Russia India PAK FA fifthgeneration fighter aircraft programcontinued development in 2010.
Russia's Defence Budget
12
16
20
24
28
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
US$bn
(200
5)
Country Name RussiaCapital City MoscowPopulation 140.4 million
Land Size 17 098 000 sq kmCurrency RubleFiscal Year 1 January–31 DecemberEconomy Industrialised country with an
emerging market economyIndustries Oil and gas, coal, precious metals and
timber
48
SOUTH
KORE
A
49
SOUTH
KOREA
SOUTH KOREA
Economy
After recording an average annualeconomic growth rate of 4.4 per centover the last 10 years, the South Koreaneconomy expanded by 6.1 per cent in2010. South Korea’s economy continuesto perform well, private consumptiongrowth is accelerating, investment isstrong, and exports are picking up. GDPgrowth is expected to be 4.5 per cent in2011, and to average 4.1 per centannually over the next five years,according to the IMF.
Defence spending
South Korea’s 2010 defence budgetcontracted by 1 per cent, following realgrowth of 6.7 per cent in 2009. Thedefence budget currently stands atnearly 30tr Won, US$25.6bn in currentterms. South Korea’s plan to developnext generation fighter aircraft andattack helicopters was formallyapproved in January 2010 by thegovernment’s aerospace industrydevelopment committee. South Koreaintends to review its current forcedisposition following the March 2010sinking of the South Korean Navycorvette Cheonan and the November2010 artillery attack onYeonpyeong Island.
South Korea's Defence Budget
16
18
20
22
24
26
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
US$
bn(200
5)Country Name South KoreaCapital City SeoulPopulation 48.9 million
Land Size 99 000 sq kmCurrency South Korean WonFiscal Year 1 January–31 DecemberEconomy Newly industrialised country with a
market economyIndustries Electronics, automobiles, chemicals,
shipbuilding, steel, textiles and apparel
50
TAIW
AN
51
TAIW
AN
TAIWAN
Economy
Taiwan’s economy was severelyimpacted by the GEC and contracted by1.9 per cent in 2009, according to theIMF. Taiwan’s economy rebounded toaverage growth of 9.3 per cent in 2010and is expected to sustain averageannual growth of about 5 per cent overthe next five years, driven primarily byprivate consumption and exports. ButTaiwan’s economy will remain exposedto risk. The outlook for exports isuncertain, given the risks facing theworld economy.
Defence spending
Taiwan’s 2010 defence budgetcontracted by 6.2 per cent, after a realcontraction of 7.4 per cent in 2009. Thedefence budget currently stands atNT$297.4bn, US$9.4bn in current terms.Planned upgrades and refurbishmentsinclude Patriot anti missile batteries,P 3C anti submarine aircraft, HARPOONBlock II missiles and AdvancedMedium Range Air to Air Missiles. In2010, the Taiwan air force selected theEurocopter EC 225 to meet its mediumlift helicopter requirements – threehelicopters are on order with an optionfor a further 17 platforms if required.
Taiwan's Defence Budget
6
7
8
9
10
11
12
13
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
US$
bn(200
5)
Name TaiwanCapital City TaipeiPopulation 23.3 millionLand Size 36 000 sq kmCurrency New Taiwan DollarFiscal Year 1 January–31
December
Economy Newly industrialised marketeconomy
Industries Electronics, petroleum refining,chemicals, textiles, iron and steel,machinery, cement and foodprocessing
52
SOUTH
ASIA–RE
GIO
NALOVE
RVIEW
SOUTH ASIA–REGIONAL OVERVIEW
Regional economy
Economic prospects for the region arerecovering well from the GEC, althoughcontaining high inflation will remain achallenge. India is forecast to continueits strong economic growth, whereasPakistan is facing a number ofdifficulties, notably reconstruction afterwidespread flooding. Despite highgrowth rates and an increase in incomelevels, poverty and inequality remains apersistent issue in the region.
Defence spending
Key drivers contributing to continuedSouth Asian defence budget growthinclude strong economic growth,political rivalries across the China–Indiaand India–Pakistan borders andsignificant internal security challenges.The regional average percentage ofGDP spent on defence, althoughmoderately declining over the last10 years, is about 3 per cent, andaverage regional defence spending hasgrown about 4 per cent over the sameperiod.
Average GDP growth compared to 2010 growthand South Asia average
0
2
4
6
8
10
12
India Pakistan SAAverage
%average growth rate 2000 09
2010 growth rate
Contribution to South Asian defence spending in 2010 (2005 US$)
Pakistan16%
India84%
53
SOUTH
ASIA
–REG
IONALOVERVIEW
South Asian Defence Budgets 2000 2009
0
5
10
15
20
25
30
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
2005
US$bn
India Pakistan
Proportion of GDP spent on defence
1
1.5
2
2.5
3
3.5
4
4.5
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
%
India Pakistan
Proportion of Government outlays spent on Defence
10
12
14
16
18
20
22
24
26
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
%
India Pakistan
54
INDIA
55
INDIA
INDIA
Economy
Over the last 10 years, India hasexperienced high average annualeconomic growth of nearly 7 per cent.India’s performance during the GEC wasaided by high savings, privateinvestment and government spending.India is recovering well from the GEC,with economic growth in 2010expanding by 9.7 per cent, compared to5.7 per cent growth in 2009, accordingto the IMF. Risks to future growthinclude high inflation and a large budgetdeficit, but India is still forecast toundergo average annual economicgrowth of 8.2 per cent to 2015.
Defence spending
India’s 2010 defence budget stands at1.4734tr Rupees, US$32.2bn in currentterms and represents a 6 per cent realdecrease on the 2009 defence budget.In October 2010, the Indian Ministry ofDefence approved the acquisition offour landing platform docks and fouradditional Boeing P 8I Poseidonsurveillance aircraft. India will alsoacquire ten C 17 Globemaster strategiclift aircraft from the US. In 2011, theNavy will receive from Russia anAKULA class attack submarine on a10 year lease. In March 2010, Indiasigned a deal to buy 29 MiG 29 fighteraircraft from Russia with deliveries tobegin in 2012. India is co developingwith Russia the design of a fifthgeneration fighter aircraft. The Armyhas placed an order for an additional124 indigenously produced Arjun mainbattle tanks.
India's Defence Budget
16
18
20
22
24
26
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
US$
bn(200
5)
Country Name IndiaCapital City New DelhiPopulation 1.2 billionLand Size 3 287 000 sq km
Currency Indian RupeeFiscal Year 1 April–31 MarchEconomy Less developed country with a
market economyIndustries IT services, textiles, chemicals, steel,
transportation equipment, cement,mining, petroleum and machinery
56
PAKIST
AN
57
PAKISTA
N
PAKISTAN
Economy
Over the last 10 years, Pakistan hasrecorded average annual growth ratesof 4.6 per cent, according to the IMF.Pakistan’s economy has faced a numberof recent challenges. In 2008, a balanceof payments crisis was averted due toan IMF rescue package and in 2010widespread flooding displaced millionsof people and caused extensivedamage. Despite these challenges andhigh inflation, economic growth in 2010was still a modest 4.8 per cent andgrowth to 2015 is forecast to average4.7 per cent annually.
Defence spending
Pakistan’s 2010 defence budget is442.2bn Rupees, US$5.2bn in currentterms, and represents a 13.6 per centreal increase on the 2009 defencebudget. Delivery of aircraft fromPakistan’s order of 12 F 16C and 6 F 16Dfighter aircraft began in June 2010. Thefirst indigenously made JF 17 fighteraircraft was released in late 2009 andthe squadron was formally inductedinto the Air Force in February 2010.Deliveries of the Saab 2000 airbornewarning and control aircraft continued,with the second airframe delivered inApril 2010. The delivery of the third offour F 22P frigates to the Pakistan Navyoccurred in September 2010.
Pakistan's Defence Budget
2.5
3.0
3.5
4.0
4.5
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
US$
bn(200
5)
Country Name PakistanCapital City IslamabadPopulation 166.6 millionLand Size 796 000 sq km
Currency Pakistan RupeeFiscal Year 1 July–30 JuneEconomy Less developed country with a market
economyIndustries Textiles, food processing, beverages,
construction materials, clothing, paperproducts and shrimp
58
OTH
ERCO
UNTR
IES–OVE
RVIEW Average GDPGrowth compared to 2010 Growth andOther Countries Average
0
0.5
1
1.5
2
2.5
3
3.5
Australia Canada US UK France Average
%
average growth rate 2000 09
2010 growth rate
Proportion of GDP spent on defence
0
1
2
3
4
5
6
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
%
Australia Canada US UK France
Proportion of Government outlays spent on Defence
0
5
10
15
20
25
30
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
%
Australia Canada US UK France
59
AUSTRA
LIA
AUSTRALIA
60
CANADA CANADA
61
FRANCE
FRANCE
62
UNITED
KINGDOM UNITED KINGDOM
63
UNITED
STATES
UNITED STATES
64
APP
ENDIX
A–MET
HODOLO
GY
Current methodology
The Defence Economic Trends 2010 is the ninth year that theDefence Intelligence Organisation has used a proxy defence deflator to calculatenominal defence budget figures in constant (real) US Dollars. As in the 2009 edition, thispublication uses 2005 as the base year and compares countries using 2005 US dollars.
Using historical budgetary data and macroeconomic statistics, the deflator is modelledon defence expenditure factors across several key cost components.
Capital Procurement – all military capital equipment budgeted by a given country in thecurrent fiscal year. This also includes investment in research and development programs.
Personnel – expenditure on personnel as defined by the country. For some countries thismay include pensions and superannuation costs; however, others may not include theseitems in their 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 ongoingprocess of refinement to calculate and compare, on a common basis, defence budgetsacross countries and time periods.
Although new economic forecasts were released during the development of thispublication, not all data can be updated to the latest predictions. For the DefenceEconomic Trends 2010, the information is sourced from the International MonetaryFund’sWorld Economic Outlook, released in October 2010.
Historical methodology
Before the 2003 Defence Economic Trends publication, a broad based implicit GDP pricedeflator was used to deflate nominal currency amounts into constant 1995 local currencyterms. This was then converted to US Dollars using the average market exchange ratefor 1995. However, the implicit GDP price deflator is an index that captures pricebehaviour over time in the entire economy. Hence, any in country differences in relativeprice movements between defence expenditure and the rest of the economy are nottaken into account.
Consequently, any event in the non defence sectors of the economy, such as a sharp risein the price of consumer goods, tends to distort defence spending figures when deflatedinto constant dollars.
One possible solution to this problem is the use of the defence deflator index. This typeof index is tailored to defence consumption only and is free of distortions causedelsewhere in the economy. Unfortunately, defence deflators are rarely published andoften the magnitude and behaviour of price movements in sectors of the economy,which feed into defence expenditure, are not known until many years later.
As economic data has becomemore readily available over the past few years, primarilythrough online publications, the modelling of a proxy defence deflator based onhistorical budgetary data and macroeconomic trends has been made possible. TheDefence Intelligence Organisation has developed, and continues to use, such a model.
APPENDIX A: METHODOLOGY
65
APPEN
DIX
A–METH
ODOLO
GY
Using 2005 as the base year, appropriate price sub deflators are applied to each of thesecost component amounts. The model is able to generate a weighted composite indexbased on the percentage spent on personnel, capital procurement and operatingexpenses in each year. This index is used as the proxy defence deflator and is used todeflate the nominal local currency amount into constant 2005 local currency terms.Using the 2005 market US Dollars to local currency exchange rate, obtained from theIMF’s International Financial Statistics periodical, these deflated amounts are thenconverted into US Dollars.
Limitations of the model
Although the model allows for analysis to be tailored to each country more closely, somecountries have insufficient transparency of data to determine the historical relativeweights of each cost component. For these countries the GDP price deflator is usedinstead.
When comparing defence budgets between countries, there is an inherent problem ofinconsistent treatment. Different countries have different items in the defence budget.For example, some countries include military pensions, while others place this amountinto a different appropriation, such as social security. The lack of a uniform definition ofwhat constitutes a defence budget makes a fair comparison between two countriesdifficult. The model allows some control over what is included, but it is limited by thedegree of data transparency and the consistency of official reporting of some of thecountries examined in this report.
Ongoing refinement
The integrity of this model has been discussed with, and approved by, representatives ofthe Department of Defence, Australian Bureau of Statistics, the Department of theTreasury and the School of Economics and Management at the Australian Defence ForceAcademy.
Some may contend that inconsistencies in the data may impair statistical cogency;however, the approach undertaken represents an improved reflection of trends whencompared to the previous methodology and the degree of error in producingcomparable trends is considered to be small. However, the Defence IntelligenceOrganisation will continually seek to refine this approach as new and more reliable databecomes available (this accounts for changes to some figures from year to year).
Although official exchange rates are used in most cases, where there is a significantdiscrepancy between official and unofficial exchange rates in this version, a judgementhas been made as to which rate better represents the purchasing power of the budgetfor that country.
66
APP
ENDIX
B–NOTE
SONSO
URC
ES Data sources
The table below shows the sources from which the majority of data in this publication isdrawn.
Data Source
Official defence budget(local currency)
Official budget sources from nationalgovernmentsIISS The Military Balance 2010
GDP IMF publications
Government expenditureOfficial budget sources from nationalgovernmentsIMF publications
General financial data
(e.g. exchange rates, deflators)
IMF publications
EIU
Population IMF publications
Other publishers of similar data
Other organisations that publish data similar to that provided in this publication include:
IMF;
IISS; 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 the IMF GFS yearbook is obtained primarily by means of a detailedquestionnaire distributed by the IMF to government correspondents, who are usuallylocated in each country’s respective Ministry of Finance or Central Bank.APPENDIX B: NOTES ON SOURCES
67
APPEN
DIX
B–NOTES
ONSO
URCES
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 exceptionoccurs in the case of NATO countries, where the IISS uses the figures released bygovernments and, for comparison, also cites the NATO defined expenditure. Somecountries include internal and border security force expenditure in their defencebudgets; where separate budgets exist, the IISS generally indicates this in footnotes. IISSfigures may vary from previous years, often because of updates made by thegovernments themselves.
Wherever possible, the IISS uses exchange rates taken from IMF publications, althoughthese may not be applicable to commercial transactions. In some cases, in an effort tomake US Dollar figures more relevant for international comparisons, the IISS uses adifferent set of exchange rates to calculate defence spending, which reflects thedifferences in purchasing power parity terms between the civilian and military sectors.
SIPRI
Where possible, SIPRI includes the following items in its definition of militaryexpenditure:
all current and capital expenditure on the armed forces in the running ofdefence departments and other government agencies engaged in defenceprojects and space activities;
the cost of paramilitary forces, border guards and police (when judged to betrained and equipped for military operations);
military research and development, testing and evaluation costs; and
costs of retirement pensions of defence personnel and civilian employees.
68
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