Malaysia Defence & Security Report

Providing expert analysis, independent forecasts and competitive intelligence on the defence & security industry.

Report includes: BMI Industry View, Industry SWOT Analysis, Industry Forecasts, BMI's Security Risk Reward Index, Company Profiles and Global, Regional and Country Industry Overviews.

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Malaysia Defence & Security Report
Product Price
$1,295.00

BMI View: Demand for military equipment is strong in Malaysia . T he country faces threats from Islamist extremist groups, militants in southern Philippines, organised crime, piracy, and regional tensions over maritime disputes . Meanwhile, many of its neigh bours are investing heavily in raising their own defence capabilities. Much of the armed forces' equipment is outdated and needs to be replaced, although spending is limited by budget constrain t s amid the government's fiscal consolidation efforts. This will mean that some procurement programmes will need to be postponed or cancelled, however, the current size of the budget does allow the defence ministry to carry on with acquisitions of equipment deemed critical for strengthening naval, air and counterterrorism capabilities. Such equipment will need to be sourced from abroad, due to local companies' lack of advanced technological capabilities across these segments.

Headline Defence Expenditure Forecasts (Malaysia 2015-2020)
2015e 2016f 2017f 2018f 2019f 2020f
e/f = BMI estimate/forecast. Source: BMI, US WMEAT
Defence expenditure, USDmn 4,283.6 4,678.3 4,983.8 5,404.5 5,815.4 6,257.3
Defence expenditure, USD, % y-o-y -12.0 -5.5 8.5 8.4 7.6 7.6
Defence expenditure, % of GDP 1.5 1.5 1.5 1.5 1.5 1.5

Latest Developments

  • In March 2016, it was reported that the local Boustead Naval Shipyard (BNS) had laid down the keel for the first of the Malaysian navy's six Second Generation Patrol Vessel/Littoral Combat Ships ordered under a USD2.2bn contract in 2014.

  • Prime Minister Razak confirmed that procurement programmes deemed vital to the strengthening of Malaysian air power and naval capabilities will be maintained, despite a decline in the overall defence budget. These specifically include: the six Second Generation Patrol Vessel/Littoral Combat Ships from BNS; four Airbus 1400M Atlas transport aircraft; 257 Deftech AV8 Gempita armoured vehicles; and the recently ordered Starstreak ground-based air-defence missile system from Thales.

  • In February 2016, media reported that Malaysia would purchase another 20 M134D Miniguns from Dillon Aero for its Deftech AV4 vehicles on order from Thailand-based Chaiseri.

  • Also in February, the US' MD Helicopters announced it would supply the Malaysian army air corps with six of its MD 530G light scout attack helicopters equipped with a 'custom weapons package' communications systems and electro-optic systems. The order makes Malaysia the launch customer for the product.

  • According to media in February 2016, the navy was considering AgustaWestland's AW159 maritime/utility aircraft; the Sikorsky MH-60R Seahawk and the Airbus Helicopters H225M model for the navy's short-term submarine attack helicopter requirement.

  • The recent corruption scandal involving Prime Minister Razak (which he has since been cleared of) prompted mass demonstrations in Kuala Lumpur in August 2015, with tens of thousands of protesters showing up to demand his resignation. In response, an estimated 30,000-40,000 Malaysians - predominantly ethnic Malays - took part in a pro-government rally in Kuala Lumpur the following month.

  • On November 20 2015, Malay authorities deployed 2,000 soldiers to Kuala Lumpur after reports of an 'imminent terrorist threat' ahead of US President Barack Obama's visit. A police memo leaked to media detailed that a meeting had taken place in Malaysia between two Philippine-based terrorist groups and Islamic State (IS), where the deployment of militants to launch an attack in Kuala Lumpur had been discussed.

  • In mid-January 2016, Malaysian police announced they had arrested four IS suspects, one of whom was reportedly planning a suicide attack in the country. The arrests followed Kuala Lumpur's decision to put the country on high alert for terrorism, after IS attacks in Indonesia on January 14.

  • In September 2015, the Malaysian Maritime Enforcement Agency announced plans to deploy state security personnel onboard randomly selected cargo vessels to deter pirate activities.

  • In both June and December 2015, Malaysian navy officials reported that they had strengthened their presence in the South Luconia Shoals offshore Sarawak in response to the presence of a Chinese coast guard patrol ship in the area.

  • Kuala Lumpur announced it would tighten security in Sabah in March 2016, as Sulu militants were reported to have spread from the east to the west coast of the state.

Defence Industry Risk/Reward Index

Malaysia's defence industry remains largely underdeveloped, and heavily dependent on imports. Government spending in the sector is low, and the size of the country's armed forces is small. However, efforts to develop the industry, coupled with steadily increasing defence expenditure may improve the situation over the longer term. Malaysia boasts strong levels of economic and investment openness, as well as a sizable and highly skilled workforce. The country also has a number of strategic international alliances and defence agreements, which could provide significant trade opportunities in the future. At present, however, due to Malaysia's poor performance in terms of Industry Risks and Rewards, we score the country 46 out of 100 in our overall Risk/Reward Index, ranking it fourth from last out of 14 states in the Asia Pacific region.

BMI Industry View
7
Table: Headline Defence Expenditure Forecasts (Malaysia 2015-2020)
7
SWOT
9
Defence Industry SWOT
9
Industry Forecast
11
Defence Expenditure
11
Table: Defence Expenditure (Malaysia 2014-2019)
12
Table: Defence Expenditure (Malaysia 2020-2025)
12
Defence Trade
13
Imports
13
Exports
13
Industry Risk Reward Index
15
Defence Industry Risk Reward Index
15
Table: Asia Pacific - Defence Industry Risk Reward Index
15
Rewards
16
Risks
16
Market Overview
18
Defence Market Overview
18
Domestic Defence Sector
18
Domestic Defence Market
20
Armed Forces Overview
22
Armed Forces
22
Table: Armed Forces Personnel (Malaysia 2008-2013)
23
Table: Malaysian Armed Forces - International Deployments
25
Security Overview
26
Domestic Threats
26
Regional Threats
30
International Threats
32
Company Profile
33
Airbus Group
33
AIROD
35
Composite Technology Research Malaysia (CTRM)
37
Deftech
39
Malaysia Marine And Heavy Engineering (MMHE)
41
SME Ordnance
43
Methodology
45
Risk/Reward Index Methodology
45
Sector-Specific Methodology
46
Table: Defence Risk/Reward Index Indicators
46
Weighting
47
Table: Weighting of Defence Risk Reward Index
47

The Malaysia Defence & Security Report features BMI Research's independent forecasts for national and international security, the defence industry, military expenditure, employment in arms production, and arms imports and exports, as well as examining industry trends and prospects, national and multinational arms producers and the regulatory environment.

BMI's Malaysia Defence & Security Report provides professionals, consultancies, government departments, regulatory bodies and researchers with independent forecasts and regional competitive intelligence on the Malaysian defence and security industry.

Key Benefits

  • Benchmark BMI's independent defence and security industry forecasts on Malaysia to test other views - a key input for successful budgetary and strategic business planning in the Malaysian defence and security market.
  • Target business opportunities and risks in the Asia defence and security sector through reviews of latest industry trends, regulatory changes and major deals, projects and investments in Asia.
  • Assess the activities, strategy and market position of your competitors, partners and clients via our Company Profiles (inc. KPIs and latest activity).

Coverage

Global and Regional Political Outlooks

A strategic overview of the world’s major political risks, identifying countries facing leadership successions and nations at risk of upheaval, inter-state conflict, or separatism and insurgencies, plus a summary of the world’s ‘wild card’ low-probability high-impact risks.

SWOT Analysis

Snapshot evaluation of the major issues affecting the defence and security sectors, economy and politics, with issues subdivided into strengths, weaknesses, opportunities and threats.

BMI Industry Forecast Scenario

Historic data series and forecasts to end-2019 for key industry indicators supported by explicit assumptions, plus analysis of key downside risks to the main forecast.

  • Defence Expenditure: Defence expenditure (local currency and USDbn); defence expenditure (% of total budget); defence expenditure per capita (USD); defence budget (local currency and USDbn).
  • Armed Forces (to 2012): Manpower available for military service, manpower fit for militaryservice, army personnel, navy personnel,air force personnel, total armed forces, (‘000) (% population).
  • Arms Trade: Arms and ammunition exports and imports (USDmn); bombs, grenades and missiles exports and imports (USDmn); revolver and pistol exports and imports (USDmn); weapons excluding guns and swords exports and imports (USDmn).

Political Risk Assessment

Drawing on BMI’s heritage of more than 25 years of Country Risk analysis, this comprehensively evaluates the key risks to domestic politics and foreign relations, focusing on issues most likely to affect either domestic security or the defence sector.

Security Risk Analysis

BMI’s proprietary Security Risk Indices provide investors with a reliable and country-comparable guide to conflict, terrorism and criminal risk, backed up by our analyst’s latest assessment of each component. Furthermore, drawing on our Country Risk expertise, we assess the state’s vulnerability to a serious, or prolonged, terrorist campaign.

Armed Forces Spending/ Expenditure

The reports contain a detailed breakdown of areas of expenditure by the armed forces, these include spending on international deployments, WMDs and missile defence systems as well as individual breakdowns of the cost-per-soldier.

Competitive Landscape

The domestic security overview lists the various potential internal security threats facing a country, ranging from internal security issues such as terrorism, cyber terrorism, crime and drugs, to external security issues including general defence procedures and potential threats from specific countries. The reports also provide a regional overview which details specific issues and flashpoints affecting the Americas, along with potential risks in the coming year.

Company Profiles*

Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.

Sources

The Defence & Security Market reports draw on an extensive network of primary sources, such as multilateral organisations, government departments, industry associations, chambers and company reports.

*Company profiles are not available for every country. Those reports instead contain information on the current activities of prominent companies operating in the market.