US firms up weapons markets in Asia
By Jon Land
United States defence secretary William Cohen conducted a 12-day tour of Asia in January, ostensibly to convey his government's commitment to stability and security in the region. A less openly stated reason, however, was to shore up shaky arms contracts for US weapons manufacturers dealing in a collapsed market.
This year US arms exports are projected to total US$16 billion, with one quarter destined for Asia.
The falling value of their currencies in recent months has prompted Indonesia, Thailand, Malaysia, South Korea, Japan and the Philippines to cancel or suspend significant arms purchases. An example is Thailand's request to renegotiate the US$390 million contract for eight F/A-18 jets.
Thailand is already unable to pay US$218 million for previous contracts. The F/A-18 deal represented 25% of Thailand's entire defence budget.
Cohen promised to urge US defence contractors to be flexible with the cash-strapped Asian nations. A special assistant from the Treasury accompanied Cohen to advise Asian government leaders on how their arms repayments could be extended, rolled over or paid off in some other way.
In Indonesia, Cohen claimed his discussions with President Suharto and defence minister Edi Sudradjat did not cover arms deals. Following Indonesia's withdrawal last year from a contract to buy F-16 jets due to criticism by the US State Department over human rights abuses and the possibility that the sale would be blocked by Congress, this is a lingering sore point between the US and Indonesia and highly unlikely to be left untouched.
Indonesia continues to receive significant amounts of US arms and military-related technology. Cohen's announcement, at a function hosted by the US Chamber of Commerce in Jakarta, that he will lobby Congress to restore suspended military training for Indonesian officers indicates a rapprochement.
South Korea's move to postpone 220 military projects, including the purchase of US airborne early warning systems and submarines, is of concern to US security strategists. Speaking in Seoul on January 22, Cohen stressed that any reduction in defence expenditure by South Korea would "send the wrong signal and enhance and escalate tension on the Korean peninsula".
Special teams from the US government are in South Korea and Thailand arranging for the debt to be rolled over.
For US and European weapons makers, south-east Asia has been one of the few growing markets in the last decade (aside from the weapons boom in the Middle East after the Gulf War). As an article in the February 5 Far Eastern Economic Review described it: "In 1996, the Asian customer was king. Ready cash, desperate sellers and ever-expanding defence budgets meant the region's arms markets were a weapon buyer's paradise."
To give US weapons dealers a competitive edge, a special slush fund of some US$15 billion was established in 1996. This fund provides loans for countries wishing to purchase US arms. Intensive lobbying by the weapons industry and outspoken support from Cohen were instrumental in having it established. It is likely that this will be one of the sources used to assist Asian countries to finance US weapons contracts currently in doubt.