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Commerce in Advanced Military Technology and Weapons

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Commerce in Advanced Military Technology and Weapons Chapter 7 The Developing Defense Industrial Nations: South Korea, Brazil, India, Taiwan, Australia, Indonesia, and Singapore Contents Page COLLABORATION AND DEFENSE INDUSTRIAL PROLIFERATION . 123 Conventional Arms Trade Among Developing Nations . 126 Naval Arms Proliferation . 127 Missile Proliferation . 127 Figure Figure Page 7-1. Estimated Licensed Production of Major Conventional Weapon Systems in Selected Developing Nations, 1960-88.. 124 \ Chapter 7 The Developing Defense Industrial Nations: South Korea, Brazil, India, Taiwan, Australia, Indonesia, and Singapore COLLABORATION AND DEFENSE appears to complement its regional aspirations within Southeast Asia. INDUSTRIAL PROLIFERATION Increasingly, economic incentives play an impor- During the period 1970-90, several of the devel- tant role in motivating the newly industrialized oping nations achieved remarkable growth in their nations to undertake extensive arms production. defense production capabilities. The expansion of These countries argue that indigenous production the defense industries has been accompanied by the increasing sophistication of their military products can lead to cost reductions and potential foreign exchange earnings through exports. Additionally, —advanced fighter aircraft, tanks, armored person- defense programs are believed to contribute to the nel carriers, missiles, and naval craft. Brazil has civilian economy indirectly by providing spin-offs demonstrated its marketing capabilities by exporting intermediate-level weapon systems to many devel- to other industrial sectors, and by upgrading the skills and productivity of the industrial labor force. oping countries as well as to the United Kingdom. The production and R&D capabilities of the devel- The ability of these states to establish indigenous oping countries have been augmented by licensed defense production capacity is conditioned by sev- production agreements and other forms of military eral factors. Large amounts of capital are necessary technology transfer from U. S., Soviet, and European to establish such a technologically intensive indus- defense companies (see figure 7-l). try. Massive investments are required to build manufacturing facilities, create R&D centers, and to This chapter provides an overview of the various pay for imports. Additionally, government expendi- methods that the developing nations have used to tures, through domestic defense procurement budg- acquire defense production capabilities. Subsequent ets, are often a prerequisite, given the small size of chapters (chs. 8-11) examine the defense industries local markets. Australian defense production, for and policies of South Korea, Brazil, India, Australia, 1 instance, has been severely hampered due to its Singapore, Indonesia, and Taiwan. These chapters small domestic procurement budget. provide a comparison of the differing manufacturing and export capacities of these counties. The analysis A second component is a diversified industrial also reviews substantially increased involvement by base. Defense productiom, particularly in the aero- U.S. companies in the defense industrial bases of the space sector, is one of the most complex manufactur- developing nations. ing activities, and requires extensive industrial inputs from such sectors as steel, metallurgy, ma- Defense production in these countries stems from chinery, and electronics. The recent increase in arms an amalgam of strategic, political, and economic production among such defense industrializing coun- motivations. Strategic considerations—improved tries as Singapore and Indonesians explained in large self-reliance, ensured security of supply, regional part by their growing manufacturing capabilities. power aspirations, and local arms races—have often initiated the development of arms industries in the A third factor relating to the arms-producing newly industrializing countries. India’s extensive capabilities of developing countries is the status of military buildup has been tied to its regional arms domestic scientific and educational facilities. As race with China and Pakistan. Taiwan’s develop- evidenced in the subsequent chapters, the arms ment of an indigenous fighter airplane may have industries of India, Singapore, and Taiwan have been motivated by its desire for self-reliance in view provided the impetus for the creation of institutions of U.S. refusals to sell it sophisticated aircraft. for scientific research and applied technology. Indonesia’s recent effort to build an arms industry However, the majority of the developing countries IFor ~ ~y~is of defense pr~uction ~ tie newly ~dus~~fig ~~~es see Cwol Evms, D#ense l%duction in the NZCS: The Case Studies From Brazil andhdia (London: London School of Economics, Spring 1991), passirn. –123– 124 ● Global Arms Trade Figure 7-l—Estimated Licensed Production of Major Conventional Weapon Systems in Selected Developing Nations,* 1960-88 35 Licensed systems in production** 30 . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. Number of major 25 . systems 20 . 15 . 1I f Number of systems licensed annually 1960 1964 1968 1972 1976 1980 1984 1988 Year license granted ‘Brazil, India, South Korea, Indonesia, Taiwan, Singapore, and Australia. ● “Estimates based on the assumption that an average system is produced under license for 12 years. SOURCE: Office of Technology Assessment, from data in Stockholm International Peace Research Institute, SIPRI Yearbooks, 1970 through 1990, World Armaments and Disarmament. do not possess advanced R&D programs or institu- industries. In fact, the ability of the developing tions for educating technicians and scientists. countries to tailor defense production to external Among the developing nations, strong state involve- demand, and to compete aggressively in the interna- ment through direct ownership of the defense tional arms market distinguishes those with long- industries is frequently a means of ensuring the term production potential. viability of domestic defense firms. Governments Most nations with developing defense industries have also provided various fiscal and trade incen- have followed a common process to establish tives to help both domestic and foreign defense domestic defense production. The acquisition of an companies reduce their defense production costs. indigenous manufacturing capability, or the import The state-controlled aircraft industries in India, of technology or technological know-how, is often Indonesia, Singapore, and Taiwan are good exam- a continuation of direct arms imports. Domestic ples. The Singaporean case also demonstrates that if production may begin with the assembly under a country does not have a sizable government or license of knocked-down weapons and the manufac- private aircraft industry, it can create one by ture of components. Sophisticated equipment, how- attracting foreign investment. ever, continues to be imported. At a more advanced stage, developing countries design and produce their The final factor affecting arms production is weapon systems domestically, including compo- access to export markets, primarily in the developing nents, while still relying on imports of the more world. Arms producing countries like Brazil and advanced technologies, for example, avionics. Australia, which suffer from bottlenecks created by the high costs of production and the small size of A number of factors reconfigured the interna- their peacetime domestic requirements, must export tional arms trade in the 1980s. The cumulative effect to maintain the economic viability of their defense of these changes has reinforced the arms production Chapter 7—The Developing Defense Industrial Nations . 125 activities of and technology acquisitions by these In the past 5 years, defense collaboration has defense industrializing states. The most important moved into the early research and predevelopment shift was the erosion of U.S. and Soviet market stages with companies cooperating on design, fabri- shares in the international arms trade in the face of cation, and application of advanced technologies. growing competition from West European defense This approach, however, is restricted to relatively suppliers. 2 As one U.S. defense executive noted, advanced arms producers. Brazil’s aircraft industry, “Not only are the numbers of players increasing, but for example, has various collaborative international through processes of technology transfer and na- arrangements with Italy’s Aeritalia and Aermacchi tional commitment, we are finding more aggressive as well as with Argentina’s aircraft industry, Fubrica competitors out there. ’ The subsequent emergence Argentina de Materials Aerospaciales. in the 1980s of a buyers’ market for arms, and the enhanced technological capabilities of developing Another means to supplement a developing coun- arms producers, provided the latter with the addi- try’s defense industrial sector is through sub- tional leverage to secure licensed production and contracts with large international defense compa- offset agreements. Moreover, transfers increasingly nies. Many U. S.- and European-based companies consisted of military technology, not simply the have established production lines in the countries provision of finished military weapon systems. belonging to the Association of Southeast Asian Nations (ASEAN) to take advantage of their low Licensed production arrangements have been wages and skilled labor. Companies are also at- heavily favored by most developing arms producers. tracted to these countries because
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