South China Sea dispute prompts defense spending boom

South China Sea dispute prompts defense spending boom

The unresolved status of islands, shoals and atolls combined with hints of immense hydrocarbon and fisheries wealth has prompted a race among countries bordering the South China Sea. Overlapping territorial claims has resulted in increased tensions and defense spending in the region. Despite these tensions, large-scale conflict remains unlikely while opportunities for lucrative arms contracts abound.

While the Sino-Japanese dispute over the Diaoyu/Senkaku islands to the north has garnered the most media attention as of late, a second series of disputes in the South China Sea demands greater attention. The heightened tensions in the region are in large part driven by the increased presence and capabilities of the Chinese Navy (PLAN).

Increasing Chinese assertiveness has sparked a regional arms race, as well as a global shift in American military focus, with former Secretary of Defense Leon Panetta announcing in 2012 that by 2020 Washington will have shifted the majority of its naval assets to the Pacific.

This shift – America’s so-called “Pivot to Asia” – is shown by last month’s announcement that four littoral combat ships (LCS) will be stationed in Singapore by 2018. The U.S is planning to construct 52 LCS in coming years, a clear indication of its Asian focus. LCS are at home in the shallow waters of the South China Sea and operate well close to coast lines, islands, reefs and other (littoral) waters.

Moreover, the U.S has many major allies in the Pacific, notably Japan, South Korea, Australia, New Zealand, Philippines and Thailand. All of these nations enjoy “major non-NATO ally” status – a prestigious title which denotes strategic value and concomitant sustained American engagement.

Many of these allies and other states in the region are concerned about China’s extensive claims over the South China Sea and Beijing’s attendant naval ambitions. According to National People’s Congress spokesman Fu Ying, “the recommended growth rate for national defense in the draft 2015 budget report is about ten percent.”

Such goals have led to 170% increase in Chinese defense spending between 2004 and 2013, with current military expenditure estimated at $188 billion. It is important to note that despite this increase China only spends 1.5% of GDP on its armed forces, far below the global average of 2.6% and America’s 3.8% allotment.

South-East Asia ramps up defence spending

Nevertheless, such increases pose serious threats to smaller nations, who in turn have opted to ramp up defense spending.

For instance, Indonesia has announced plans to re-organize its military command into multi-branch regional reaction forces. Jakarta stated it is focusing its military towards the west of the country (i.e. towards disputed waters), arguing that this new arrangement will allow for rapid responses to incursions. Similar plans are under way in the Philippines and Vietnam.

The increased defense outlays of said countries are primarily directed towards China, with the aim to prevent unilateral Chinese seizures of disputed territory. Smaller countries are also determined to counter Beijing not to be shut out of the region and be forced to languish within sight of their respective coasts.

While heightened international tensions are fueling military procurement, large-scale conflicts remain a distant possibility.

Whereas small skirmishes and standoffs are certainly possible (and have already occurred) no party wishes to significantly destabilize the region, since all nations in the area rely on adjacent “sea lines of communication” (SLOC). Consequently any upset that hampers shipping will greatly impede all countries, and this realization dampens potential aggression.

Regional players are increasing their spending to have the means to assert their sovereignty, secure SLOC access, and prevent the rise of an antagonistic, regional gate-keeper. While China bristles at American naval hegemony and seeks regional power to secure its own interests, it too benefits from the status quo and as such cannot afford to upend the balance.

Currently all Pacific nations free-ride off of the Pax America which polices the high seas. Smaller nations seek to maintain the status quo by supporting the United States, whose stewardship of the seas has allowed for the free movement of shipping.

In an effort to boost the capabilities of these smaller nations, the United States (alongside Japan, which has gifted three upgraded patrol ships to Vietnam) has donated various coast guard vessels to the Philippines, as well as five ships to Vietnam. These donations are part of larger efforts by the U.S to engage with both countries, both of whom are very wary of China.

Arms spending offers new business opportunities

Donations aside, the upswing in regional procurement offers many opportunities for weapon exporters to benefit from the Asia-Pacific’s economic growth and defense wants. The United States already sells existing air frames such as the F-16 to various countries in the area.

In addition Australia, Japan and South Korea have already placed orders for the F-35 platform (72, 47 and 40 respectively). Japan is planning on purchasing another 2-4 Aegis-equipped missile cruisers from the U.S, while Vietnam has recently taken delivery of its fifth of six Kilo-class submarines purchased from Russia in a $2 billion deal.

Following Prime Minister Abe’s April 2014 decision to relax arms restrictions, weapons exports could also help boost the moribund Japanese economy. Japan is already a bidder for a $1 billion dollar contract to sell anti-submarine aircraft to the UK. Australia is also in the process of negotiating a major weapons deal with Japan, with Canberra seeking to purchase 10 Soryu class submarines for over A$20 billion (USD $15 billion).

Japan is seeking to capitalize on its existing heavy industry and ship-building infrastructure to woo Canberra from competitors such as South Korea. Already Japan is emphasizing that building said submarines in Australia could see projected costs almost double, a claim refuted by Australian ship builders protesting the Japanese export deal.

A plethora of states purchasing weapons does not necessarily constitute good news, yet given the nature of the South China Sea disputes, any military fallout will be in the form of formalized clashes far out to sea. Naval skirmishes do not involve the mass formations and associated mass casualties of land wars. Furthermore naval combat occurs in a virtually civilian free environment thus reducing collateral damage, and in any case excessive violence is unlikely.

Lastly, states in the region are purchasing arsenals focused on deterrence, not aggression. The overriding concern for all players is that of free trade, shipping and equitable resource allocation, not the blood-drenched specters of imperialism or revanchist ethnic nationalism that accompanied the previous century’s naval races.

Categories: Asia Pacific, Security

About Author

Jeremy Luedi

Jeremy Luedi is the editor of Asia by Africa, a publication highlighting under reported stories in Asia and Africa, as well as special features on how the two regions interact. His writing has been featured in Business Insider, Huffington Post, Yahoo Finance, The Japan Times, FACTA Magazine, and Seeking Alpha, among others.