India’s Role in the Defence Industry of Southeast Asia

Facts Asia, January 30, 2023
By Mihir Shekhar Bhonsale

Just over a year ago, India and the Philippines inked a $375 million deal for the sale of Brahmos missiles, and Manila is set to get the first delivery of missiles later this year. The exports of supersonic Brahmos missiles by India to the Southeast Asian nation was New Delhi’s first major arms sale.

The SIRPI report of 2022 on global arms transfers stated that despite India’s decline in arms import by 21 percent between 2012-16 and 2017-21, India remained the largest importer globally.

Hence, for New Delhi to sign off on the deal to export Brahmos to the Philippines is only the beginning of a promise of India’s transition from a defense-importing country to a defense exporter. The Philippines receiving the armament supply from India is also indicative of the strategic imperative that has brought them together.

Focus on exports

India’s defense exports have witnessed a whopping 334 percent rise in the past five years and 75 countries across the globe are recipients of New Delhi’s arsenal. This has been only possible with India’s policy shift to greater self-reliance in defense manufacturing and exports and as it allowed a great degree of technology transfer to private manufacturing firms.

The Indian Defense Ministry has set a target of Rs 1.75 lakh crore of defense production by 2025, which will include export of Rs 35,000 crore. India’s list of client nations includes several Southeast Asian countries that are recipients of*t only arms but also defense training, maintenance, and supply of spares.

About 50 percent of India’s defense exports between 2017 and 2021 went to Myanmar, followed by Sri Lanka at 25 percent and Armenia at 11 percent. India supplied a coastal surveillance system to Myanmar under an agreement signed in 2017, during Prime Minister Narendra Modi’s visit to the Southeast Asian country.

In 2021, in another export, Myanmar is said to have received a remote-controlled air defense station worth US$600,000 from Indian public sector manufacturing company Bharat Electronics Limited (BEL).

India had extended a Line of Credit (LOC) worth $100 million to Vietnam in 2013, which was used by the latter to purchase 12 offshore high-speed patrol boats for the Navy.

Vietnam is negotiating another US$500 million LOC with India. The latter is offering Brahmos missiles, Akash missile air defense system, Varunastra anti-submarine torpedoes and coastal radars.

As per a report, India’s Larsen & Toubro (L&T) has secured a contract to deliver 40 mm naval gun systems to the Indonesian Navy, which marks the first-ever export of the weapon system from India to Indonesia. Besides, Indonesia and Thailand, have evinced interest in the Brahmos supersonic missile system.

Malaysia is likely to procure 18 Light Combat Aircraft Tejas from India where the latter competed with the developed aircrafts of China, Russia and South Korea. Indonesia and the Philippines have also shown interest to procure the fighter jet from India.

New Delhi in the past had been reticent to supply arsenal to Southeast Asian countries over issues relating to the end user agreement and compliance to certain norms. The Philippines deal signifies the end of India’s strategic hesitation to transferring high-tech weapons to South East Asian countries.

SEA’s diversification

The security environment in Southeast Asia since the 1990s has witnessed a profound change with exacerbating tensions and occasional conflict between the 11 states in Southeast Asia.

China’s rise as a major military power in the region and its claims over the South China Sea have also contributed and pushed the military spending and arms acquisitions through imports.

Russia by far has been the largest exporter of arms to Southeast Asian nations while US, France, Germany and China were among the other exporters. Russia which was driven by economic interests in the region, had an advantage for offering advanced military technology at low prices.

Vietnam accounted $6.5 billion of Russia’s delivery of arms between 2000 and 2021. Other major importers included Myanmar, Malaysia and Indonesia. However, since Kremlin’s annexation of Crimea in 2014 and Western sanctions that ensued resulted in decline of Russian exports to Southeast Asia.

Today, the region finds itself at the epicentre of fierce US-China competition and the choice of defense purchases from ASEAN nations is reflective of it. Southeast Asian countries hate to choose between Beijing and Washington DC.

As far as defense purchases are concerned, Indonesia, Vietnam and the Philippines who have ongoing skirmishes with Beijing find themselves on one end of the spectrum while Cambodia, Laos and Thailand find themselves on the other end.

China is fast replacing Russia as an arms exporter to the region by offering affordable prices for its arsenal exports, thus giving Beijing a comparative edge over other players such as US, France and Germany. Cambodia, Laos and Thailand have been the largest recipients of Chinese arms.

But, Indonesia, the Philippines and Vietnam which have been facing Beijing’s assertion along its maritime territories have looked to other countries to fill up the void created by Russia. Indonesia has been shifting away from Russian and Chinese fighter planes for decades. Indonesia had already placed an order for 42 Rafale fighter jets in a $8.1 billion deal in 2022.

Growing ties with the US are testimony to the fact that Jakarta is negotiating a deal said to be in advanced stages for the purchase of 36 new F-15 jets from US based arms manufacturer Boeing. According to a report, the ASEAN power is also in talks with France to buy two Scorpene-class attack submarines.

However, Southeast Asian countries, despite their respective positions vis-à-vis China-US competition in the Indo-Pacific, would pursue their strategic autonomy objectives. Indonesia which has China as its largest trading partner has intensified its defense cooperation with the US, meanwhile, US’s treaty allies – Thailand and the Philippines have also maintained close relations with China.

Way forward

In the ensuing binary power competition between the US and China in the Indo-Pacific, India’s vision of multi-polarity and perseverance of its strategic autonomy is likely to further push ASEAN countries closer to India. The position taken by New Delhi on the Ukraine-Russia war has been similar to that taken by the Southeast Asian nations.

Riding on the strategic convergence that is derived from Beijing’s territorial aggression along the coasts of Southeast Asia, India could look at increasing its defense footprint in the region. Russia’s dwindling share as an armament supplier to South East Asia is set to work in India’s advantage.

Alongside, New Delhi’s needs-based outreach in the region through training, maintenance and spares, the country is also interested in exporting indigenous defense products such as Akash air defense systems, Astra air-to-air missile and HAL Dhruv utility helicopters on the market.

India needs to be competitive as a defense manufacturer and the role of its private sector offers immense potential in this regard. The private sector accounted for 90 percent of all defense exports in 2021. The increase in private sector manufacturing also provides scope for easier international collaboration, with other partners in South East Asia.

Indian Public Sector Units (PSU) that dominate India’s defense manufacturing, must open representative offices as many countries in the region. In 2022, Hindustan Aeronautics Limited opened a representative office in Kuala Lumpur to tap business opportunities in Malaysia and the entire Southeast Asian region. Others may follow suit.

India has also correctly identified the need for extending LOC to Southeast Asian countries for defense sales. A $500 million defense LOC to Vietnam in 2016 is still awaiting finalization. A Vision Document 2030 has also been prepared for scaling up India-Vietnam defense ties. India needs to take similar efforts to boost defense cooperation with other countries.

New Delhi may also consider improving the defense diplomacy as rightly indicated in a report. India must appoint more Defense Attaches in all missions in Southeast Asia, thus keeping a track of the requirements of the host nation and spreading awareness about India’s defense capabilities.

Time has come for bolstering India’s partnership with Southeast Asian countries, for ASEAN remains at the centre of New Delhi’s Indo-Pacific vision and expanding cooperation in areas such as defence would be in mutual interest of both sides.

Mihir Shekhar Bhonsale is an Assistant Policy Analyst at CUTS International, a policy think and action tank and a commentator on security and international affairs.

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