A New Analysis of Defense Budgets in Asia

By Joachim Hofbauer, Priscilla Hermann, Sneha Raghavan & Guy Ben-Ari

Defense spending has continued to grow over the last decade in China, India, South Korea, Japan, and Taiwan. Yet CSIS analysis shows China, India, and South Korea still spend far less per solider than U.S. or European militaries, relying on a higher size of force instead. Here Chinese PLA Mechanized Infantry await review from Admiral Mullen in 2011. Source: Chairman of the Joint Chiefs of Staff's flickr photo stream, used under a creative commons license.

Despite the global financial crisis that began in 2008, many Asian countries experienced relatively less fiscal distress and continued to increase their level of involvement in global affairs during the crisis. In addition, unlike defense budgets in many other regions, including the U.S. and Europe, Asian defense spending continues to be on the rise.

The CSIS Defense-Industrial Initiatives Group (DIIG) recently completed a study on the five largest Asian defense spenders: China, India, Japan, South Korea, and Taiwan. Together, these countries account for some 90 percent of defense spending in Asia, and three of them (China, India and Japan) were amongst the top ten defense spenders in the world in 2011.

The combined defense budgets of China, India, Japan, South Korea, and Taiwan equaled some $224 billion in 2011 (in constant 2011 US dollars), nearly double the amount only a decade earlier. However, the growth rates of defense spending in these countries have not been uniform.

China’s defense spending increased at the highest rate, with an 11-year compounded annual growth rate (CAGR) of 13.4 percent and some $90 billion spent in 2011. South Korea was second with a 4.8 percent CAGR and $29 billion spent on defense. Japan and India, the second and third largest spenders, were on similar growth trajectories with 3.5 and 3.6 percent CAGRs and defense budgets of $58 billion and $37 billion, respectively. Taiwan experienced the slowest increase in defense spending of the group with a CAGR of 1.8 percent; it also had the smallest defense budget of the five, at $10 billion in 2011.

The growth in spending in the five countries analyzed did not occur in a steady manner. Rather, defense spending in the first half of the decade (2000 to 2005) grew at nearly half the pace (4.5 percent CAGR) than it did in the second half (8.0 percent CAGR in 2006-2011) for all countries except South Korea. Furthermore, growth in defense spending occurred primarily in the personnel accounts (i.e. spending on payroll and benefits), and was less rapid in the investment accounts (i.e. research, development and acquisition of military goods and services).

Another noteworthy trend derived from the budget data relates to the relatively low levels of per-soldier spending in Asia. Per-soldier spending, derived by dividing total defense spending by total number of troops, measures how much a country allocates to recruit, train, compensate, equip and sustain each soldier; it therefore serves as a proxy measure for the quality of personnel.

Three of the five Asian countries analyzed (China, India and South Korea) were in the world top ten list of number of active troops. As a result, defense spending per soldier in these countries has consistently been relatively low. For example, China, India, South Korea and Taiwan spent between $28,200 and $43,600 per service member in 2011. By comparison, European states in 2011 spent on average $140,400 per soldier, Australia spent $438,000 per soldier, and the United States spent $504,800 per soldier.  This suggests that Asian countries prioritize force size over force quality. The exception is Japan, which spent $238,100 per soldier in 2011.

The range of sizes and military capacities of the region, with countries as large as India and as small as Taiwan, as well as the complexities inherent in the region’s security environment, all necessitate careful understanding of the structure and history of the region’s military buildup. While the top five defense spenders have been increasing their defense budgets at a rapid rate, this is by no means indicative of an arms race. Defense spending in Asia continues to be driven primarily by economic growth, a need to upgrade inventories and personnel-heavy militaries than by overt security threats. It remains to be seen whether Asian states will continue to field large militaries or if they will follow the trends in Europe and the United States, where force structure is being reduced in favor of higher quality forces. Ample space for this is available in China, India, and South Korea. Yet security and other political considerations might make this course of action unviable for the foreseeable future.

To learn more you can read the report Asia Defense Spending: 2000-2011 here and watch DIIG’s recent event rolling out the report here.

Mr. Joachim Hofbauer is a Fellow with the Defense-Industrial Intiatives Group (DIIG) at CSIS. Ms. Sneha Raghavan is Research Assistant with DIIG, Ms. Priscilla Hermann is also Research Assistant with DIIG and Mr. Guy Ben-Ari is Senior Fellow and the Deputy Director of the CSIS DIIG program.

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