BMI View: Growth in Vietnam's defence expenditure over the coming years is all but assured owing to increasing tension in the South China Sea. The China challenge in these waters has and will continue to necessitate investment into strengthening the country's deterrence capabilities and its overall asymmetrical defence strategy - especially in terms of its naval and air forces. The domestic industry remains under-developed and incapable of providing for the technologically advanced requirements of its armed forces, meaning the country will remain heavily dependent on foreign defence companies for supply in the coming years . Further, a growing but still limited budget will restrain the country from making large-scale high-end purchases recently made available to it with the lifting of the decades-old US arms embargo.
|e/f = BMI estimate/forecast. Source: US Dept. Of State WMEAT, BMI|
|Defence expenditure, % of GDP||2.2||2.1||2.1||2.2||2.1||2.2|
|Defence expenditure, USDmn||4,225||4,264||4,794||5,425||6,090||6,931|
|Defence expenditure, USD, % y-o-y||-2.1||0.9||12.4||13.1||12.3||13.8|
On July 21 2016, a fleet of six Chinese fishing vessels were discovered operating within Vietnam's territorial waters and consequently stopped and removed from the area by Vietnamese authorities, reported the Border Defense Command of Quang Binh Province, Vietnam.
On July 21 2016, Cuba and Vietnam discussed the potential improvement to defence cooperation ties, working towards the signing of a cooperation plan in the near future.
On July 18 2015, local media sources reported that Vietnam had received its first Israeli-made SPYDER advanced surface-to-air missile systems.
On July 12 2016, the Permanent Court of Arbitration in The Hague, a tribunal under the United Nations Convention on the Law of the Sea (UNCLOS), ruled in favour of the Philippines in its case against China and its claim to historic rights within most of the South China Sea. Beijing has dismissed the validity of the ruling.
On July 9 2016, a Vietnamese fishing boat was allegedly sunk by two Chinese vessels near the disputed Paracel Islands in the South China Sea. China has rebutted the claims by Vietnam's Quang Ngai provincial search and rescue agency.
On June 6 2016, visiting Indian Defence Minister Manohar Parrika pledged to boost defence industry cooperation between Indian and Vietnamese defence industry firms.
In early June 2016, Vietnam received the sixth and final improved Kilo-Class diesel-electric submarine from Russian shipbuilders.
On May 23 2016, US President Barack Obama announced the lifting of a decades-old arms embargo placed on Vietnam.
On April 11 2016, Vietnam elected a new defence minister. Ngo Xuan Lich, former chief of the Vietnam People's Army's general political department, was nominated to the role and will lead the country's modernisation drive.
In January 2016, Vietnam received two Su-30MK2 fighters from Russia, bringing its total Su-30MK2 fleet to 32.
In early December 2015, local media reports revealed an indigenous high-altitude long-endurance unmanned aerial vehicle (UAV). Reports attribute the build to Vietnam's Academy of Science and Industry and Ministry of Public Security. Unconfirmed reports denote Belarus as a design partner.
Defence Industry Risk Reward Index
There is considerable demand for defence goods in Vietnam given the precarious state of its regional security environment. The Vietnamese armed forces maintain outdated Soviet-era armaments and the country's aerial and naval anti-access/area denial (A2/AD) capabilities are still lacking in the face of heightening tensions with China in the South China Sea. However, the domestic industry remains underdeveloped and incapable of meeting this demand. Further, budget limitations will continue to constrain the financing available for new procurements. A still-opaque defence budget and procurement process will also act to deter foreign involvement, not to mention the probation of private sector involvement in the domestic defence industry. With the lifting of the US arms embargo and the multilateralisation of external ties, however, there are opportunities for foreign players in the domestic industry.
Vietnam will need to modernise the system surrounding, and the makeup of, its domestic industry if it wishes to become a more attractive market for foreign players. We rank Vietnam 13th out of 14 states in our Asia Pacific Defence Industry Risk/Reward Index (RRI), with a score of 42 out of 100.
The Vietnam 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 Vietnam Defence & Security Report provides professionals, consultancies, government departments, regulatory bodies and researchers with independent forecasts and regional competitive intelligence on the Vietnamese defence and security industry.
- Benchmark BMI's independent defence and security industry forecasts on Vietnam to test other views - a key input for successful budgetary and strategic business planning in the Vietnamese defence and security market.
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- 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.
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