Media Release
03 September 2008
Contact: Mandy Castle
Jane’s Information Group
Press & PR Officer
+44 (0) 208 700 3745
amanda.castle@janes.com
Jane’s Industry Quarterly – China, India and Russia In The Changing Global Defence Market
London, UK (3 September 2008) -- A study carried out by Jane’s Industry Quarterly shows that China, India and Russia collectively invested USD50.5 billion in defence in 2003, this figure almost doubled to USD99.47 billion by 2007 and Jane’s expects it to increase by a further 62% to reach USD161.44 billion by 2010.
Ranked 4th, 8th and 11th in global military expenditure by Jane’s Defence Budgets, China, Russia and India have three of the largest defence budgets in the world.
Rank Country Defence Budget
(2008) USD Billion
1 United States 696.30
2 United Kingdom 79.27
3 France 65.74
4 China 58.07
5 Japan 48.10
6 Germany 43.55
7 Saudi Arabia 38.32
8 Russian Federation 36.73
9 Italy 31.40
10 Korea, South 28.30
11 India 27.21
12 Brazil 24.62
13 Australia 19.74
14 Spain 19.37
15 Canada 16.19
This complete study of the global defence market has been carried out by Jane’s for the launch issue of Jane’s Industry Quarterly, a new supplement to Jane’s Defence Weekly.
Jane’s Industry Quarterly shows that a combination of high military expenditure and the revitalization of the three countries’ defence sectors will have far-reaching implications for Western organisations, both in terms of opportunities and potential competition in the global market.
Synopsis Of Jane’s Industry Quarterly’s First Report
- A combination of strong economic growth, rising defence expenditure and rapid industrial development suggest that the role of China, India and Russia in the global defence market will change.
- Each country is presenting huge – albeit differing – opportunities for the West.
Russia :
Jane’s Industry Quarterly argues that Russia is going to see its exports dip around 2010 as major customers India and China look elsewhere. But the outlook isn’t completely hopeless, as Russia is likely to look again at countries it sold tanks and armoured vehicles to during the Soviet days.
Russia currently offers the strongest opportunity for investors and international defence organisations – a willingness to partner for the international market, with the opportunity for direct investment dead ahead.
Jane’s believes structural reforms will potentially give investors access to Russia’s export order book.
Jane’s believes countries operating Sovietera equipment will likely look to procure Russian, or indeed Chinese, armoured vehicles in the next 25 years. A combination of the cost of Western-sourced equipment and, in a number of cases, the existence of arms embargoes will lead such countries to look East. Jane’s Defence Forecasts has identified 40 countries worldwide with main battle tank inventories composed of at least 50 per cent T-72, or armoured personnel carrier inventories made up of at least 50 per cent BMP1 ot BTR60. The operators are concentrated in Africa, Southeast Asia and Latin America.
China :
Should China’s defence budget continue to grow at the rate recorded over the past seven years, it will stand at USD360 billion by 2020.
China reported average gross domestic product growth of 10 per cent per annum over the five years, compared to an average of 8.5 per cent in India and 6.78 per cent in the case of Russia. A massive internal market is developing – and the need for investment to underpin further growth will create opportunities for both strategic and financial investors.
China “resembles the Japan of the 50s and 60s”, Jane’s report shows. Rapid technological development and a relatively low cost base will put China in a very strong position as a global exporter of defence materiel in the coming decades.
China has a well-documented interest in Africa’s resource wealth and has been vigorous in its cultivation of economic ties, considering access to energy and commodities to be an essential element of its continuing economic development. Developing a military export capability potentially provides China with an additional source of leverage when negotiating these critical access arrangements. Recent shipments of arms to Sudan and Zimbabwe have also demonstrated China’s clear willingness to business with regimes other suppliers will not.
A series of European Union and United Nations embargoes are putting a number of African states on the ‘no-go’ list of Western defence suppliers. Active EU embargoes (as of June 2008) are held against Cote d’Ivoire; DRC; Liberia; Somalia; Sudan; and Zimbabwe. Mandatory UN embargoes are operated against Cote d’Ivoire; rebels in DRC; Liberia; rebels in Rwanda; rebels in Sierra Leone; Somalia; and Sudan ( Darfur region).
Chinese arms transfers reported to the United Nations show a telling pattern of exports. According to the UN, in 2006 China exported defence equipment to Republic of Congo, Gabon, Tanzania, Niger, Namibia, and Zimbabwe. In fact, of the sixteen countries in Sub-Saharan Africa which Jane’s identifies as using Chinese military equipment, just four (Kenya, Mali, Sierra Leone and Uganda) have no oil, gas or coal reserves; an indication of where China’s priorities lie (See table).
China is therefore concentrating on those countries that can assist in its search for secure access to energy and commodities, while investing substantially in non-military infrastructure projects. However, as Chinese export capabilities improve and their need to ensure access to energy to maintain their domestic economic growth becomes more acute this will change. China already supplies aircraft to Egypt and Kenya, and Jane’s Defence Forecasts indicates there are further potential opportunities in Algeria, Botswana, Egypt, Kenya and Morocco. These are in both training / light strike aircraft such as the K-8 (also being marketed to Venezuela among others) and the JF-17 multi-role combat aircraft. The JF-17 in particular will place China firmly in the role of a competitor to both Russia and the US as it is being positioned as an alternative to Russian Sukhoi aircraft and presumably second-hand) F-16s.
India :
Jane’s Industry Quarterly discusses the fact that India won’t be a major defence exporter for at least 15-20 years, but when it does emerge it will be the private sector powerhouses that will lead the way. Strong defence spending is creating enormous opportunities for defence organizations in India.
The success of India’s private sector in the high-technology civilian and commercial fields is likely to point to the way ahead. Should the potential of this sector be harnessed, it could indicate a future in the command, control, communications, computing and intelligence and network-centric warfare arenas.
India is keen to develop indigenous capabilities – but Jane’s does not believe it will emerge as a significant defence exporter for at least 15 – 20 years.
Development of fifth generation fighter aircraft with Sukhoi will create a glimmer of hope: this could potentially emerge as the only significant competitor against the Joint Strike Fighter in the global market with the possibility of a major cost advantage.
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Editor’s notes:
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Jane’s Industry Quarterly, a new supplement to Jane’s Defence Weekly
Drawing on Jane’s world-renowned expert network, forecasts, reference material and daily news services, Industry Quarterly brings clarity and authorative analysis to the issues affecting the global defence community. These special reports are published four times a year: each one tackling a specific subject.
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