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Malaysia Defence and Security Report Q2 2011

Malaysia Defence and Security Report Q2 2011

Additional Information
Price $530.00
Meta Description No
Publisher Business Monitor International
Date of Report Aug 4, 2011
Quick Overview
Malaysia's Q310 real GDP growth of 5.3% y-o-y was largely in line with our expectations, supporting our full-year forecast of 6.4% for 2010. Going forward, we expect robust private consumption and investment expansion to compensate for a moderating external sector, allowing Malaysia to register growth of 4.0% and 4.2% in 2011 and 2012 respectively. An upside risk to our forecast would be stronger-than-expected regional economic outperformance, allowing for stronger headline growth going forward.
We expect the overall outcome of the various federal-state disputes in Selangor to eventually favour the ruling Barisan Nasional coalition, which controls Putrajaya. We believe such intermittent political conflicts should not lead to a significant deterioration in the country's overall rule of law, although investor attractiveness may still be undermined.
The joint oil and gas exploration deal signed by Brunei and Malaysia on December 14 paves the way for closer diplomatic ties between the two countries. The bilateral agreement should also improve both nations' fiscal positions, but it particularly benefits Malaysia, which is expected to run a fiscal deficit of 5.8% in 2010. From Brunei's perspective, the deal could open up more trade opportunities with its larger neighbour, providing additional support to its non-oil sector.
There is a general threat from terrorism in Malaysia. The British Foreign and Commonwealth Office (FCO) warns that attacks could be indiscriminate, including in places frequented by expatriates and foreign travellers. However, Malaysia has not seen the high-profile attacks experienced by many of its regional neighbours, although Jemaah Islamiyah, which has been linked to attacks in Indonesia, reportedly maintains a presence.
On July 20 2010, defence minister Zahid Hamidi announced that Malaysia will use more offsets and financial packages, such as investment, for new defence equipment procurement. This will apply to Malaysia’s new five-year plan for defence purchasing, which began in January 2011. Further, the government is to establish the region’s first extensive defence and security technology park in Sungkai, Perak. The park will contain resources for manufacturing, support industries, and research & development. Construction began in October 2010.
Table of Contents
Executive Summary ........................................................................................................................................ 5
SWOT Analysis ................................................................................................................................................ 6
Malaysia Security SWOT ...................................................................................................................................................................................... 6
Malaysia Defence Industry SWOT ........................................................................................................................................................................ 6
Malaysia Political SWOT ..................................................................................................................................................................................... 7
Malaysia Economic SWOT ................................................................................................................................................................................... 7
Malaysia Business Environment SWOT ................................................................................................................................................................ 8
Global Political Outlook .................................................................................................................................. 9
The United States .................................................................................................................................................................................................. 9
China .................................................................................................................................................................................................................. 10
Japan And The Koreas ........................................................................................................................................................................................ 12
Russia ................................................................................................................................................................................................................. 13
Europe ................................................................................................................................................................................................................ 13
India ................................................................................................................................................................................................................... 14
Brazil .................................................................................................................................................................................................................. 15
Turkey ................................................................................................................................................................................................................. 16
Iran ..................................................................................................................................................................................................................... 16
Egypt, Saudi Arabia And Pakistan ...................................................................................................................................................................... 17
Terrorism ............................................................................................................................................................................................................ 18
Africa .................................................................................................................................................................................................................. 19
Space .................................................................................................................................................................................................................. 19
Competition ........................................................................................................................................................................................................ 20
Wild Card In Global Politics .............................................................................................................................................................................. 21
Conclusion .......................................................................................................................................................................................................... 24
South East Asia Security Overview .............................................................................................................. 25
The Strategic Outlook For The 2010s ................................................................................................................................................................. 25
South East Asia In A Global Context .................................................................................................................................................................. 25
Challenges And Threats To Stability And Security.............................................................................................................................................. 25
Main Islamist Militant Groups In South East Asia .............................................................................................................................................. 28
Piracy In The Malacca Strait .............................................................................................................................................................................. 31
The South China Sea/Spratly Islands .................................................................................................................................................................. 32
Other Regional Threats....................................................................................................................................................................................... 32
The Outlook For South East Asia ........................................................................................................................................................................ 35
Security Risk Analysis .................................................................................................................................. 37
BMI’s Security Ratings ....................................................................................................................................................................................... 37
Table: Asia Pacific Regional Security Ratings .................................................................................................................................................... 37
Table: Asia Pacific State Vulnerability To Terrorism Index ............................................................................................................................... 38
Malaysia’s Risk Ratings ...................................................................................................................................................................................... 38
City Terrorism Rating ......................................................................................................................................................................................... 39
Table: BMI’s Asia City Terrorism Index ............................................................................................................................................................. 40
Political Overview .......................................................................................................................................... 41
Domestic Politics ................................................................................................................................................................................................ 41
Foreign Policy .................................................................................................................................................................................................... 42
Long-Term Political Outlook .............................................................................................................................................................................. 43
Security Overview ......................................................................................................................................... 49
Internal Security Situation ....................................................................................................................................................................................... 49
Table: Insurgent Groups ..................................................................................................................................................................................... 49
External Security Situation ...................................................................................................................................................................................... 49
Territorial Disputes ............................................................................................................................................................................................ 49
Insurgent And Terrorist Activity ......................................................................................................................................................................... 50
Piracy ................................................................................................................................................................................................................. 50
Table: Piracy Attacks And Attempted Attacks, 1996-2006 .................................................................................................................................. 51
Bilateral And Multilateral Relations ................................................................................................................................................................... 51
Armed Forces And Government Spending ................................................................................................. 54
Armed Forces ..................................................................................................................................................................................................... 54
Defence Budget ................................................................................................................................................................................................... 54
Multilateral And Bilateral Defence Relations ..................................................................................................................................................... 55
International Deployment ................................................................................................................................................................................... 56
Weapons Of Mass Destruction ............................................................................................................................................................................ 56
Market Overview ............................................................................................................................................ 57
Industry Trends And Developments .................................................................................................................................................................... 58
Arms Trade Overview ......................................................................................................................................................................................... 59
Procurement Trends And Developments ............................................................................................................................................................. 59
Industry Forecast Scenario ........................................................................................................................... 61
Armed Forces ..................................................................................................................................................................................................... 61
Table: Malaysia’s Armed Forces, 2000-2008 (‘000 personnel, unless otherwise stated) .................................................................................... 61
Table: Malaysia’s Defence Personnel – Available Manpower For Military Services; 2008-2015 ...................................................................... 61
Defence Expenditure ........................................................................................................................................................................................... 61
Table: Malaysia’s Government Defence Expenditure, 2008-2015 ....................................................................................................................... 62
Table: Malaysia’s Defence Expenditure – Changing % Of GDP, 2008-2015 (US$mn) ...................................................................................... 63
Defence Trade ..................................................................................................................................................................................................... 63
Table: Malaysia’s Defence Exports, 2008-2015 (US$mn) .................................................................................................................................. 63
Table: Malaysia’s Defence Imports, 2008-2015 (US$ mn) ................................................................................................................................. 64
Table: Malaysia’s Defence Trade Balance, 2008-2015 (US$mn) ........................................................................................................................ 65
Key Risks To BMI’s Forecast Scenario ............................................................................................................................................................... 66
Macroeconomic Outlook ..................................................................................................................................................................................... 66
Malaysia – Economic Activity, 2008-2015 .......................................................................................................................................................... 68
Company Profiles .......................................................................................................................................... 70
AIROD ................................................................................................................................................................................................................ 70
Composite Technology Research Malaysia (CTRM) .......................................................................................................................................... 71
Deftech ................................................................................................................................................................................................................ 73
EADS .................................................................................................................................................................................................................. 74
Malaysia Marine and Heavy Engineering (MMHE) ........................................................................................................................................... 75
SME Ordnance ................................................................................................................................................................................................... 77
BMI Methodology .......................................................................................................................................... 78
How We Generate Our Industry Forecasts ......................................................................................................................................................... 78
Defence Industry ................................................................................................................................................................................................. 78
City Terrorism Rating ......................................................................................................................................................................................... 79
Table: Methodology ............................................................................................................................................................................................ 81
Sources ............................................................................................................................................................................................................... 82




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