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Why 95% of Traders Fail

Who Are ASEAN’s Biggest Military Spenders, Really? 

Politics / Asian Economies May 16, 2017 - 02:58 PM GMT

By: Dan_Steinbock

Politics The conventional military narratives highlight aggregate expenditures and downplay per capita spending. Realities are more nuanced, both globally and in Southeast Asia.

The conventional narrative is that China has become assertive, while the West is ignoring its defense needs. According to SIPRI research, in the past decade military spending in China and Russia increased 118% and 87%, respectively, while US spending plunged almost 5%.  


Yet, the list of top-10 military spenders includes the US ($611 billion), China ($215 billion), Russia ($69 billion), followed by Saudi Arabia, India, major EU economies, Japan and South Korea. Together, they account for three-fourths of the total. Washington spends more dollars a year on its military than the next seven biggest spenders combined - which penalizes US living standards and stability abroad.

Moreover, the US is escalating. The Trump administration is planning a huge Reagan-style rearmament and requesting $54 billion; an almost 10% increase in a single year – even as its public debt amounts to $20 trillion (105% of US GDP).

Indeed, military spending should also be assessed in per capita terms. In this view, Saudi Arabia and the US lead, with $2,000 and $1,900 per person, respectively. The two are followed by Europeans, South Korea, Russia and Japan. In contrast, China and India come last (with just 8% and 2% of the US level, respectively).

In the past decade, increases in military budget in per capita terms have soared in Saudi Arabia (40%), but been slower in China and India (less than 15% each); and even less in Russia (6%). Moreover, in the past decade, per capita incomes in China and India increased strongly (10.8% and 8%, respectively). In both, military spending has increased faster but after a very low starting point.

There is a deep gap between current realities and perceptions of military spending.  ASEAN nations are not an exception to the rule.

ASEAN’s military spenders

In Southeast Asia, the largest military spenders are the tiny Singapore ($10 billion) and Indonesia ($8.2 billion), followed by Thailand and Vietnam (about $5-6 billion), and Malaysia and Philippines (around $4 billion) (Figure 1).

The per capita picture is very different. In this view, Singapore ($1,750) and Brunei ($940) are ASEAN’s big spenders, far ahead of Malaysia ($136).  What this means is that, in per capita terms, Singaporeans spend on average 46 times more than the Filipinos in their military.  In the past, Myanmar puts almost as much money into the military as Vietnam ($53) and more than the Philippines ($38), whereas Indonesia is a more moderate player ($31) (Figure 2).

So if Singapore is ASEAN’s Uncle Sam in per capita big spending, then Brunei is comparable to France, Malaysia to China and Philippines to India.

In effect, until 2010, the Philippines’ military expenditures decreased two decades from 1.6% to 0.8% as share of GDP. During the Aquino era, Washington initiated its pivot to Asia and Manila executed its pivot toward the US. In the process, the Philippine military expenditures soared to almost 1.4% of GDP. In this view geopolitics rather than economic development motivated the Aquino priorities.

Economic development or military needs

If per capita incomes rise fast, then relative increases in military budgets are to be expected, and vice versa. In the past decade, per capita incomes rose by 4.2% in Singapore; but military expenditures even faster. In Brunei, the gap was worse as per capita incomes shrank by more than 0.4%, but military spending grew by 2.8%.

In per capita terms, such gaps between incomes and military spending are not sustainable over time. And as newly-industrialized economies are now stagnating and high prices do not favor oil exporters, policymakers must consider reassessments in the future or prepare for popular resentment.

Indeed, where gains in per capita incomes exceed those in military expenditures, economic development tends to prevail over defense. In Southeast Asia, these countries include Malaysia, Myanmar and Laos.

Conversely, where gains in per capita military spending exceed those in per capita incomes, defense needs tend to prevail over economic development.  In addition to Singapore and Brunei, these countries include Cambodia, Indonesia, and Philippines in the past decade.

With scarce resources, there are always priorities. If nations truly seek economic development, they must often make difficult choices. The more countries focus on economic growth and the less they exhaust monies in military spending, the more they may enjoy rapid economic growth - and vice versa.

If ASEAN countries that still have relatively low per capita incomes seek rapid economic development, excessive military spending is the best way not to achieve the targeted economic objectives and an even better way to undermine social goals.

Living standards seldom rise fast in countries that favor geopolitics.

Dr. Dan Steinbock is an internationally recognised expert of the nascent multipolar world. He is the CEO of Difference Group and has served as Research Director at the India, China and America Institute (USA) and visiting fellow at the Shanghai Institutes for International Studies (China) and the EU Centre (Singapore). For more, see www.differencegroup.net   

© 2017 Copyright Dan Steinbock - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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