Malaysia Defence & Security Report

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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: Defence Spending in Malaysia will be ramped up in 2015, with a 10% budgetary increase announced in October 2014. We expect a slight increase in procurement activity while the majority of the development budget will be dedicated to expanding existing projects. The release of a new five year development plan and a review of Malaysia's defence offsetting programme could yield changes for the indigenous defence sector when unveiled in 2015. Malaysia enjoys peace and stability with regards to internal and external security threats. Key concerns include continued incursions by Filipino groups and rising piracy in regional waters.

We expect import volumes to grow in 2015 in line with the 10% year-on-year (y-o-y) defence budget increase, announced in October 2014, with development expenditure for 2015 set at USD1.0bn compared to USD0.8bn in 2014. The government has yet to announce the specific breakdown of development expenditure, but we expect investment in maritime and aviation assets. The navy will see construction of six Second Generation Patrol Vessel-Littoral Combat Ships begin in Q115, with the steel for the ships to be cut at a plant in Holland before being shipped (in a complete building kit) to the Boustead Naval Shipyard. While Malaysia's air force is set to take delivery of the first of four Airbus A400M Atlas transport aircraft in early 2015.

Defence spending was a low priority under the 2014 budget, which was tailored by the ruling party to secure popular support ahead of the 2014 general election. As a result, various requests for financing by the armed forces have been denied and many programmes, such as the multirole combat fighter programme, have been put on hold while the government has been working on a new five-year national development plan, which will be released in June 2015. New defence procurement strategies will therefore be announced in line with the 11th Malaysia Plan (2016-2020). Defence officials have also ordered a review of the defence offsetting programme, which has so far failed to drive meaningful development of the indigenous defence sector. Local defence firms under-invest in research and development, and rely on international joint ventures to drive innovation. The Malaysian Industry-Government Group for High Technology (MIGHT) is reviewing the offset programme and resulting recommendations could see changes in Malaysia's defence sector.

The Ministry of Defence will continue to focus on strengthening maritime and aviation capabilities in line with regional security dynamics. Following the 2013 incursion into Sabah by Filipino militants, there is a strong emphasis on strengthening surveillance and upgrading defence equipment to deter further territorial incursions. The 2014 budget included six Second Generation Patrol Vessel-Littoral Combat Ships, four cargo aircraft and support equipment and armoured vehicles. Other plans include support ships, training aircraft, utility and attack helicopters, and multirole combat fighter which are now to be procured on a lease agreement.

Malaysia's regional security situation also remains generally benign and the major threats in 2015 will be from piracy off the country's waters. Malaysia's relations with neighbours Thailand, Singapore and Indonesia are cordial, and China's territorial disputes with a number of countries in the region has so far had relatively little impact on Malaysia. A visit last year by the Chinese premier resulted in the signing of a new strategic pact between Malaysia and China. Even though Malaysia already engages in defence industry collaboration with China, especially in the area of missile technology, these joint efforts are now likely to deepen, with the Malaysian industry as the likely beneficiary.

In addition, in late May, the Association of South East Asian Nations (ASEAN) made steps towards establishing a formal arrangement for regional defence industry collaboration. Defence ministers of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam concluded the conference by agreeing to a three-year programme, addressing the region's defensive needs.

Key BMI Forecasts:

  • Defence expenditure is expected to reach USD5.4bn in 2015.

  • Imports are expected to reach USD55.8mn over 2015.

  • Exports are expected to amount to more than USD5.1mn over 2015.

BMI Industry View
7
SWOT
9
Malaysia Security SWOT
9
Malaysia Defence & Security SWOT
12
Political
14
Economic
16
Industry Forecast
18
Defence Budget
18
Table: Defence Expenditure (Malaysia 2012-2019)
18
Armed Forces
19
Table: Armed Forces Personnel (Malaysia 2004-2011)
20
Table: Manpower Available For Military Service (Malaysia 2012-2019)
21
Defence Sector Production
21
Table: Defence Trade Balance (Malaysia 2012-2019)
24
Imports
24
Table: Defence Imports (Malaysia 2012-2019)
24
Exports
25
Table: Defence Exports (Malaysia 2012-2019)
26
Key Risks To Our Forecast
27
Macroeconomic Forecasts
28
Economic Analysis
28
Risks To Outlook
30
Table: Economic Activity (Malaysia 2009-2018)
31
Industry Risk Reward Ratings
32
Asia Security Risk Index
32
Table: Asia Security Risk Index
32
Table: Asia State Vulnerability To Terrorism Index
33
Malaysia Security Risk Index
34
Market Overview
36
Malaysia Defence Market Overview
36
Armed Forces
36
Domestic Industries
37
Imports
38
Corruption Scandals
41
Malaysia Security Overview
42
Domestic Threats
42
Regional Threats
43
International Threats
45
Company Profile
47
AIROD
47
Composite Technology Research Malaysia (CTRM)
49
Deftech
51
EADS
53
Malaysia Marine and Heavy Engineering (MMHE)
54
SME Ordnance
56
Regional Overview
57
South East Asia Security Overview
57
Challenges And Threats To Stability And Security
57
Global Industry Overview
69
Global Political Outlook
69
Methodology
75
Industry Forecast Methodology
75
Sector-Specific Methodology
76
Sources
77
Security Risk Index Methodology
77
Table: Indicators And Weighting
78

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.