BMI View: Defence spending remains a top priority for the Singaporean government which is executing a prudent military procurement agenda with a long-term outlook that will transcend the Singapore Armed Forces (SAF) into a third generation fighting force. In the future, we expect to see sustained levels of weapons imports from American and European arms manufacturers, as well as continued support for domestic defence company, ST Engineering. The key downside risk Singapore's defence expenditure stems from a GDP downturn, but we forecast positive and stable economic growth through to 2018.
BMI forecasts Singaporean defence expenditure to reach USD11.6bn in 2015 as the Ministry of Defence upholds its commitment to steady and sustained spending policy, which is focused on hi-tech weaponry. This bodes well for domestic and international security and defence firms, which will see Singapore to maintain its position as a top five global arms importer. Singapore is investing in submarines, unmanned aerial vehicles (UAVs), and new fighter jets. The city-state is tipped as one of the leading customers for the Lockheed Martin F-35 fighter programme, however fresh reports indicating further F-15 acquisitions have raised question marks over Singapore's commitment.
Other important acquisitions made in the past 12 months include orders for two Type-218SG submarines, two Sikorsky S-70B Naval Helicopters, Joint Direct Attack Munitions (JDAM) kits, SPYDER and ASTER-30 Surface-to-Air Missile Systems. This array of systems are expected to improve synergy between air, sea, and land forces, and strengthen defensive and offensive capabilities as SAF operates a pre-emptive defence policy - similar to that of Israel. There have also been further investments in personnel training, including a new live-firing training facility, designed to enhance urban warfare and close-quarters combat capabilities. ST Electronics has taken delivery of a Cyber Security Simulator, which will enhance cyber security which will mitigate against the rising threat of asymmetrical warfare.
These investments will ensure Singapore retains its technological edge over neighbouring defence forces, at a time when continued tensions within the regional security climate are spurring increased militarisation of the Southeast Asia. As an ASEAN member, Singapore maintains good diplomatic relations with neighbouring states. Historic sovereignty disputes with Malaysia and Indonesia have largely subsided, and the national defence forces now cooperate to enhance regional security. Multilateral security organisations such as the Regional Cooperation Agreement on Combating Piracy and Armed Robbery against Ships in Asia (ReCAAP), provide platforms for international cooperation and dialogue, therefore reducing the chance of interstate conflict and terrorism. Meanwhile, ReCAAP is taking on increased significance after the US became the latest member to join the group in September, as piracy rates Southeast Asia spiked through 2014.
SAF has also been actively engaged in international military exercises, which enhance military capability, especially given the lack of real combat experience which may be considered a key weakness for SAF. The Republic of Singapore Air Force (RSAF) joined Australian and US forces in Australia's Northern Territory for trilateral combat exercises in Q314. The Republic of Singapore (RSN) and naval forces from Brunei, Malaysia, Indonesia, the Philippines, and Thailand, concluded the 'Southeast Asia Co-operation and Training' ('SEACAT') exercise in August.
Key BMI Forecasts
BMI forecasts defence expenditure in USD terms to increase by 8% y-o-y to USD11.6bn in 2015, before increasing 7.6% y-o-y to USD12.5bn in 2016.
BMI forecasts defence expenditure as a percentage of GDP to remain relatively stable at 3.3 - 3.4% of GDP until at least the end of the current forecasting period in 2023.
BMI expects real GDP growth to remain relatively stable at between 3% and 3.5%, at least until the end of the current forecasting period in 2023. In 2015 real GDP growth should be 3.2%.
SAF has developed a new live firing centre which will enhance urban warfare capabilities.
Singapore's 'expected' acquisition of the fifth-generation F-35 Joint Strike Fighter is in question after the RSAF reportedly ordered a further 16 F-15 fighters.
Developments in the cyber security space through 2014 will raise Singapore's resilience to asymmetric warfare tactics.
The number and sophistication of piracy attacks in the Malacca Straits and the South China Sea increased through 2014.