Northern Sky Research

Asia Rising & the U.S. Military Pivot Strategy

Mar 21st, 2012 by Jose Del Rosario   More from this Analyst | Profile

Amidst the trends of military budget cuts and troop withdrawals, one region is unquestionably on the rise for military satcom demand: Asia.  With China as the lead player and with numerous potential flashpoints on the horizon, this region is now the focus of a new “pivot strategy” from the U.S. Military.

China Rising
China’s continued spending patterns, which have been at double-digit levels over the past two decades, will likely lead to a rise in space-based capabilities, specifically satellite assets and services from the U.S. and its allies despite the tightening fiscal landscape.

China plans to boost its official defense budget by 11.2%, an increase to Rmb670.247billion or $110 billion in 2012. However, the Stockholm Institute for Peace Research (SIPRI) puts China’s official figure at about 60% of its actual total military spending, while Al Jazeera reported that China wants to double the current budget by 2015. China’s current levels can therefore be pegged at roughly $200 billion based on SIPRI’s estimates, and a doubling of the budget amounts to some $400 billion.  Compare this to the U.S.’ annual military budget of roughly $700 billion (and declining), and the spending gap with China will narrow significantly in the next 2-3 years.

Spending Smartly
Individual countries in Asia cannot outspend China for military purposes.  Rather, a smarter, more cost-effective approach will likely be undertaken as part of an emerging containment strategy.

In the area of satcoms, procurement models are likely to change where bulk leasing will see a drop in demand as more specific applications take-up capacity. In particular, UAV, aeronautical and maritime demand should see significant growth given the need for ISR missions and coverage of airspace and ocean regions in preparation for potential flashpoints.

It is worth noting that the above forecasts are NSR’s Baseline demand projections and depending on how events develop in the region, bandwidth demand can easily breach the 900 TPE mark by 2020.

New Customers
Southeast Asian countries welcome a stronger U.S. regional presence. The Philippines has been wooing the U.S. in its Spratly and Paracel Islands territorial dispute, and other neighbors such as Vietnam, Singapore, Thailand and Malaysia have boosted weapons purchases.

However, the most closely watched regional player apart from China is India. The 2012 Indian defense budget was set at $36 billion, an 11.6% rise compared to the previous year.  Although still significantly lower than China, New Delhi is reportedly on the threshold of a huge military procurement, and it is estimated that its defense spending in the next five years will reach $100 billion.

Australia and New Zealand should further add to demand as well as South Korea given tensions in the peninsula.  Japan could be the biggest wildcard where spending on commercial satcoms may need to be boosted as part of not only a budget contributor but as part of an emerging regional network architecture to contain China’s capabilities.

Bottom Line
The U.S. exit strategy in the Middle East has led to what has recently been referred to as the ”U.S. pivot strategy to the Asia-Pacific,” which many consider as a containment policy against a rising China.

In the area of commercial satcom demand, the U.S. via PACOM will unlikely account for the vast majority of spending similar to past missions in Iraq and Afghanistan.  Rather, the U.S. can and will likely count on increased contributions from other countries. Here’s why:

  • The perceived China threat “hits home” so to speak where it is more tangible and real compared to missions in Iraq and Afghanistan where many in the region consider as a U.S. engagement;
  • Many countries have the financial wherewithal to contribute more significantly, and a cash-strapped and over-stretched U.S. does not have to (and probably will not) provide a large regional financial umbrella;
  • Most of all, a semblance of indigenous military strength and technological prowess has to be undertaken by individual countries.  

Since it is expensive for small countries to launch dedicated military satellites, commercial satcom demand and creative partnership schemes may be the way forward in enabling military and technological capabilities.