Thayer Consultancy Background Briefing:

ABN # 65 648 097 123

Southeast Asia: Military
Procurement in the Philippines
and Thailand
Carlyle A. Thayer
January 19, 2018
We are preparing a report regarding military procurement in Southeast Asia. We
request your input on military procurements in the Philippines and Thailand. Our key
concerns are listed as a series of questions and we would appreciate your response.
Q1. What is the five-year defense budget outlook? What are the problems affecting
military purchases? Some like to point out there is an arms race in the region, is this
the case?
AMSWER: In 2018, the Philippines entered the second phase of the fifteen-year
Horizon military modernisation program that commenced in 2013.
In March 2016, Thailand announced a ten-year Modernisation Plan: Vision 2026.
In 2016, the Australian Defence Intelligence Organisation noted that in the previous
year “all Southeast Asian countries experienced real increases in defence spending –
with Thailand and the Philippines experiencing strong defence spending growth after
low figures in 2014.”
Philippines
In 2015, the Philippines allocated 144.5 billion pesos ($3.2 billion) for defence, a
16.3% real increase on the 2014 defence budget. In 2016, the defence budget
declined to 117.5 billion pesos. In 2017, however, the defence budget was hiked to
137.2 billion pesos, a 17% increase, the second highest defence budget over the last
decade. The defence budget for 2018 is Pesos 145 billion.
Since 2010, government spending on defence has averaged 5.2% of total
government spending, ranging from a low of 3.6% to a high of 6%. Since the global
financial crisis of 2008-09, with the exception of 2010 and 2014, the annual growth
in defence spending has exceeded the annual growth of GDP, particularly in 2015.
For the Philippines, military spending as a per cent of GDP was 1.1% in 2014, 0.8% in
2015 and 1.3% in 2016. The Constitution mandates that military spending not exceed
spending on education.
In 2018, the Philippines entered the second phase of the fifteen-year Horizon
program that commenced in 2013. Although the Secretary of National Defense
Delfin Lorenzana would like to see the defence budget increased to between 2.4 and
2.5 per cent of GDP this is most unlikely. During phase two, the Philippines will spend
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U.S.$1.7 billion; its wish list includes UAVs, remote bomb disposal machinery, fast
boats, drones and attack helicopters.
Thailand
In 2015, Thailand allocated 206.5bn baht for defence, a 12.8% real increase on the
2014 defence budget. Thailand’s defence budget rose to 210.5 billion baht in 2016
and increased by 2% in 2017 to 210.7 billion baht, the highest defence budget over
the last decade.
Since 2010, government spending on defence has averaged 6.5% of total
government spending, ranging from a low of 6.3% to a high of 7%. Since the global
financial crisis of 2008-09, with the exception of 2010 and 2012, the annual growth
in defence spending has exceeded the annual growth of GDP, particularly in 2015 in
parallel with the Philippines.
In 2016, Thailand’s military expenditure was 1.2% of GDP. In March 2016, Thailand
announced a ten-year Modernisation Plan: Vision 2026 with three goals: to improve
readiness of the Thai military, to enhance capabilities, and to modernise related
structures. This plan includes a hike in defence spending from 1.4% of GDP at
present to 2% of GDP by 2026.
Is there as arms race?
An arms race is defined in the international relations/strategic studies literature as
two or more countries who view each other as adversaries and who continually
purchase weapons to offset the perceived advantages of the other and strain their
resources to be the dominant power. Using this as a definition, there is no classical
arms race in the Indo-Pacific Region but an arms build up. Both the Philippines and
Thailand spend under 2 per cent of the GDP on defence, less than regional average
of around 2 per cent.
In terms of total defence spending in Southeast Asia in 2015, the Philippines
accounted for 8% and Thailand for 15% (Singapore 25%, Indonesia 19%, Malaysia
13%, Vietnam 12%, and Myanmar 6%).
Key problems affecting military acquisitions are cost, inter-service rivalry, legislative
resistance to fund bigger defence budgets, political restrictions on arms sales placed
by exporting countries (in response to a military coup, for example) and economic
growth rates.
Q2. Is there a procurement trend favouring a particular armed service or are
procurements balanced among the armed services?
Philippines
Procurements by the Philippines favour the army over the navy and the air force. In
terms of the defence budget, the allocation by service expressed as a percentage of
the total defence budget is: Army 57%, Navy 21%, Air Force 19% and Coast Guard
3%.
Since 2006, major Army procurements have included 187 Armored Personnel
Carriers, and 38 helicopters (mostly second hand). In this same period, the Navy
received three ex-US Coast Guard Hamilton-class cutters. The Air Force received two
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C-130H Hercules transport aircraft and 22 JDAM guided bombs. The United States is
the sole source of these procurements.
The Philippines is expected to receive twelve FA-50 combat aircraft from South
Korea.
Thailand
The United States and China are the main providers of arms to Thailand.
Between 2006-2014, the U.S. sold an assortment of 31 helicopters (H-1F COBRA, S-
70/UH-60L, BELL-214, TH-28/480), one Aeros-40 Sky Dragon airship, and one second-
hand Saab-340 transport aircraft. In addition, the U.S. also sold a variety of radar
systems (TPS-70 and TPS-77 air search, and APG-68 for F-16 combat aircraft), nine
RIM-162 ESSM surface to air missiles, and fifty AIM-120C AMRAAM BVRAAM air-to-
air missiles. The U.S. supplied the Thai Army with fifty-four M-198 155mm towed
guns.
U.S. arms sales were halted following the military coup in May 2014. The single
exception was the sale of Mk-54 MAHO anti-submarine warfare torpedos to the Thai
Navy in 2016.
China made two arms sales to Thailand during the period 2002-07. The first sale was
two Pattani-class frigates to the Thai Navy, the second was the sale of sixty C-
802/CSS-N-8 anti-ship missiles.
During 2011-16, China supplied the Thai Army with eighteen WS-11 302mm, four SR-
5 self-propelled MRLs or multiple rocket launchers, two RA-3 artillery locating radar,
WS-3A 300mm guided rockets for the WS-1 MRL system and fifty-one KA-1A surface
to air missile systems. There were no recorded sales to the Thai Navy or Thai Air
Force during this period.
Q3. Are arms procurements related to China’s rise?
Philippines
President Duterte has pursued a China friendly policy since his election in May 2016.
Duterte set aside the unanimous Arbitral Tribunal award in favour of the Philippines
regarding territorial disputes in the South China Sea. Duterte has repeatedly stated
that the Philippines cannot win a war with China as an explanation for his quiescent
behaviour. China’s continued militarization of its artificial features in the Spratly
archipelago recently has raised concern especially among defence officials.
Duterte has been critical of the Obama Administration and ordered the
diversification of procurements, with a view to acquiring weaponry from China and
Russia.
Thailand
Thai leaders have consistently sought good relations with China. The two worked
hand in glove to oppose Vietnam’s intervention in Cambodia from late 1978 to the
end of the conflict in October 1991. The current military regime, that seized power in
2014, has maintained good relations with Beijing, especially as the Obama
Administration imposed restrictions on the Thai military. Recently a senior Chinese
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military officer made this observation, “For China, an ideal Australia would be like
Thailand, an American ally that is always friendly towards China…”
Q4. Any growth area for spending? Is ISR [Intelligence, Surveillance and
Reconnaissance] a priority?
Philippines
If the Philippines’ GDP growth rate averages 6.5% per annum to 2020 this should be
sufficient to support continued growth of the defence budget. President Duterte
supports an increase in defence spending.
The past pattern of acquisitions by the Philippines does not reveal any special
priority on acquiring ISR systems. In 2009, the Philippines acquired two second-hand
Hunter UAVs from the United States and in 2011 the Philippines acquired one air
search radar from the U.S.
In 2018, the Philippines will set aside Peso 25 billion for the modernisation of the
Armed Forces of the Philippines in four areas: armaments, surveillance, mobility and
communications.
Thailand
Over the past decade, Thailand’s GDP growth rate has averaged 2.5%. It is forecast
to average 3.5% real growth to 2020. So far Thai purchases have been for platforms
and missiles. The only ISR related purchases from the U.S. have been air search
radars. There is no record of any sale of ISR related systems by China to Thailand.
Q5. Does cooperation with the U.S. influence procurement decisions?
Yes, most definitely. The top three Southeast Asian markets for U.S. military
equipment and weapons are Singapore, the Philippines and Thailand.
Q6. The Philippines has been moving towards amore conventional arms purchases as
revealed by their Horizon plans. However, counter-insurgency equipment seemed to
be on the table again after the Marawi siege. Will this influence procurement plans?
ANSWER: The three-phase modernization of the Armed Forces of the Philippines
began before President Duterte was elected president. As a result of the siege of
Marawi it appears that procurements in Horizon phase two, 2018-2022, could be
altered. The Philippine Navy wants to acquire two new corvettes/frigates most likely
from South Korea. Also on the initial wish list were more coastal fast craft and
drones. Since Marawi the Army has requested twenty-four helicopter gunships,
multiple rockets and new firearms (sniper rifles, round corner rifles, close quarter
weapons) and night vision goggles.

Suggested citation: Carlyle A. Thayer, “Southeast Asia: Military Procurement in the

Philippines and Thailand,” Thayer Consultancy Background Brief, January 19, 2018.
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Thayer Consultancy provides political analysis of current regional security issues and
other research support to selected clients. Thayer Consultancy was officially
registered as a small business in Australia in 2002.