Browse the complete Report on: Vietnam Defence and Security Report Q3 2010
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Deputy Minister of Defence Lieutenant General Nguyen Chi Vinh said in December 2009 that, as part of its modernisation drive, Vietnam’s military is considering many possible purchasing sources. In December, Vietnam ordered from Russia six diesel-electric Kilo-class Project 636 submarines (at US$2bn in total) and 12 Su-30 fighter jets. This is in addition to an earlier contract for another 12 Su-30MK2 fighter aircraft, signed in January 2009. Also, Vietnam’s Ministry of Defence signed a contract this year with Viking Air of Canada to purchase six DHC-6 Twin Otter Series 400 aircraft for Vietnam’s navy. Further, Vietnam’s Defence Minister Phung Quang Thanh announced on December 17 2009, while visiting France, that Vietnam wishes to purchase helicopters and army transport aircraft from France, as part of its modernisation drive for the military.
The government announced in December 2009 that it plans the ‘rapid development’ of its domestic, stateowned defence industries to supply the armed forces with the most modern military equipment. No further details have been revealed. Although the ‘rapid development’ effort is part of Vietnam’s aim to become a fully industrialised nation by 2020, the announcement is unlikely to affect procurement policy for many years.
Vietnam is experiencing a slowing economy. The 5.8% y-o-y GDP growth rate in Q110, as estimated by the General Statistics Office, is down from the stimulus-driven strong growth rates of H209. Exports are sluggish (-1.6% y-o-y in Q110) and domestic demand is likely to suffer from higher lending rates and double-digit inflation. The service sector, which grew 6.6% y-o-y in Q110, continues to be the main contributor to growth. We forecast a real GDP growth rate of 4.4% y-o-y for 2010, which is considerably lower than the government's 6.5% growth target.
Politically, we expect public resentment towards China to remain a concern for the government leading up to the Communist Party of Vietnam's National Congress in January 2011. With China increasingly using its expanding naval muscle to assert its claims in the South China Sea, the government has sought the means to counter Beijing without causing an escalation in tensions, which could potentially lead to an armed confrontation. Vietnam is trying to ‘internationalise’ the issue of the disputed islands in the South China Sea, while it holds the chairmanship of ASEAN in 2010. However, this is unlikely to quell nationalistic sentiment. Further, we believe the potential for Vietnam to mould a unified ASEAN stance against the Chinese claims for sovereignty over large parts of the South China Sea is limited, given that Brunei, Malaysia and the Philippines are the only other member countries with claims on the disputed islands. Moreover, China’s increasing importance as an economic partner means that many ASEAN nations are unwilling to confront Beijing politically on the issue.

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Browse the complete Report on: Uganda Defence and Security Report Q3 2010
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Concerns are rising that Uganda’s 2011 elections may be marked by violence, while some have called the army’s neutrality into question. Analysts have asserted that violent outbreaks are possible, partly because the opposition feels that it has been marginalised in the political process. General Aronda Nyakairima, the chief of the Defence Forces, has stated that the army would step in to ‘deal with’ violence triggered by political disputes, and urged Ugandans to use legal means to resolve them. Opposition leaders have made statements in the past which have been interpreted as suggesting that constitutional avenues to changing the country are not functioning. They have also stated that the electoral commission (EC) is biased and discredited.
Gen Nyakairima has said that violence would not be allowed to break out and sought to cool fears of conflict. Felix Kulayigye, a member of the Ugandan People’s Defence Force (UPDF), as the army is known, wrote on Ugandan website The New Vision in June that widespread violence and vandalism were the inevitable result of riots in the country, and that the UPDF has a responsibility to step in to prevent them occurring.
Uganda continues to commit troops beyond its borders. Ten Ugandan troops were killed in the CAR in May 2010, Reuters reported the following month. The Ugandan soldiers had been searching out remaining Lord’s Resistance Army units in the CAR. However, in June 2010, Lt. Gen. Edward Katumba Wamala, the commander of Ugandan ground forces, said that the army would pull out of Somalia once stability has returned. It remains to be seen which definition of ‘stability achieved’ the Ugandan government and army use. Maintaining a force in Somalia is expensive, particularly for a relatively poor country like Uganda. The additional support from other African states will be valuable, but a timeline for withdrawal, and a strategy for Somalia’s future, are far from apparent. Uganda will both be keen to avoid getting bogged down in an intractable conflict for several years, but equally will look to enhance stability in the Horn of Africa, an increasingly volatile but hugely strategically important area. It may also look to benefit from a visible expression of its ability to project power beyond its own borders, as a sign of what it sees as its growing status as a regional power.
Defence spending is on the rise in Africa. While global military spending has fallen by 35% since the end of the Cold War, in sub-Saharan Africa it has risen by more than a third, according to SPIRI. Indeed, Uganda’s military outlay had doubled between 1997 and 1998.
Meanwhile, the threat posed by militias and pirates has caused governments, companies and NGOs in Africa to invest in military equipment and protection. Industry insiders argue that defence is a growth sector for Africa and Uganda may look to capitalise in the longer term, though for the time being it remains largely an importer and consumer.

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Browse the complete Report on: Thailand Defence and Security Report Q3 2010
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Prime Minister Abhisit Vejjajiva’s victory in winning the support of lawmakers in a ‘no-confidence’ vote on June 1 2010 strengthens BMI’s view that a revisit of violent protests in Bangkok will be unlikely, at least in the short term.
However, we note that the resolution of Thailand’s structural problems in income inequality and a reconciliation of its divided population will be key to the country’s long-term outlook. On this front, we are sceptical whether these structural problems can be resolved anytime soon. Indeed, Thailand currently scores a relatively weak 65.4 for our short-term political risk rating, highlighting our concerns in the particular components of security and social stability.
While the domestic situation obviously dominates, at the same time the border dispute with Cambodia continues to simmer. In mid-February, Phnom Penh said it might seek intervention of International Court of Justice or the UN Security Council to settle the disagreement over land near Preah Vihear temple. The dispute is already threatening to spread to a wider ASEAN theatre.
There is also tension in the southern part of the country where more than 3,500 people have been killed in almost daily violence since January 2004. Insurgencies in neighbouring Myanmar, Cambodia and Laos are constant security concerns. Consequently, Thailand’s terrorism risk rating remains at a low 32.5. The industrial base is essentially commercial and defence contract works form only a part (and sometimes a small part) of the revenues for companies involved in Thailand’s defence sector.
In economic news, GDP surged 5.8% y-o-y in Q409 snapping four quarters of negative growth and confirming a full-year contraction of 2.5%. We are now forecasting GDP growth of 3.6% for 2010 but acknowledge this growth rate may be exceeded. There are good indications that consumer spending is picking up and this recovery trend can be sustained over the coming quarters. Low interest rates will be maintained by the Bank of Thailand as the economy is still not on a firm footing and this will encourage consumers to take on more debt.


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Browse the complete Report on: Taiwan Defence and Security Report Q3 2010
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The planned US-Taiwan arms deal worth US$6.4bn and announced on January 29 2010, continues to disrupt US-China relations. On June 5, US defence secretary Robert Gates again urged China to restore military relations with the US. He claimed that the lack of military contact between the US and China is detrimental to regional security in Asia.
The Quadrennial Defence Review (QDR) of 2009, as well as detailing military strategic directions, contains the strategy for ‘asymmetric warfare’ in relation to the military balance across the Taiwan Strait. In any conflict with China, Taiwan would retain the asymmetrical advantage of being the defender – it would aim to deny China’s achievements of its military objectives in Taiwan rather than try to destroy its weapons. President Ma Ying-jeou said on May 19 that Taiwan ‘cannot possibly engage in an arms race with China,’ and that Taiwan has ‘limited national resources and we have to make the best uses of them’. He said that Taiwan’s military forces will be ‘small but elite’. Taiwan maintains that China is continuing its military build-up against Taiwan, having set up more than 1,300 ballistic and cruise missiles. It also intends to acquire an aircraft carrier.
On May 18, the navy took delivery of the first 10 stealth 170-ton Kuang Hua-6 (KH-6) guided-missile patrol ships, built by CSBC. CSBC is constructing a further 20 ships for the navy – they are due for completion in 2012.
According to the Republic of China Yearbook 2009, the defence forces aim for growing self-reliance by increasing the ability of local companies to produce defence equipment. The government’s policy is for the defence budget to take up at least 3% of the country’s GDP.
Taiwan’s economy continues its strong rebound, in line with our expectations of a sizeable GDP expansion over the course of 2010. It may well exceed our earlier prediction of 5.0% y-o-y annual GDP growth for 2010. This contrasts sharply with 2009’s 1.9% contraction, which was the worst real growth figure for Taiwan in over 50 years. We expect the main drivers of 2010 growth to be inventory restocking, gross fixed capital formation and private consumption.
Taiwan has considerable trade links with (mainland) China, recorded at 29.9% this March. As Chinese demand recovered much more rapidly than that from the rest of the world in 2009, it boosted Taiwan’s economic performance through recent quarters. However, we are concerned about the health of mainland China’s economy, especially regarding their property market, which we believe is overheating and at risk of a correction. We see China’s economy slipping from 8.8% real growth in 2010 to a disappointing 7.5% in 2011. We forecast Taiwan’s real GDP growth at just 3.4% in 2011, well below the 5.2% average of 2002-2007.

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Browse the complete Report on: Sudan Defence and Security Report Q3 2010
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Sudan’s first ostensibly democratic, multi-party elections for 24 years in April 2010 left the political landscape fundamentally unchanged, although it was followed by the country’s deadliest month in two years. National Congress Party (NCP)’s incumbent President Omar al-Bashir predictably achieved an overwhelming majority, amid ubiquitous allegations of fraud. Sudan People’s Liberation Movement (SPLM)’s Salva Kiir apparently won the presidential election for south Sudan. That the elections did not result in severe unrest is only a sign that all parties are holding their breath for the January 2011 referendum. BMI believes this continuing tension will strengthen defence spending in Sudan to SDG4.18bn (US$1.84bn) in 2010.
BMI expects military expenditure to continue growing year-on-year (y-o-y) in the medium-term, jumping to SDG5.31bn (US$2.445bn) in 2011. Indeed, the Khartoum government’s rivals contented themselves with boycotts of the election only in anticipation of the referendum in 2011, whose outcome is sufficiently pivotal to reignite large-scale conflict and dismantle the 2005 Comprehensive Peace Agreement (CPA). The bulk of international efforts over the next six months will concentrate on safeguarding the fragile CPA and preventing a slide into civil war as a result, or lack, of the referendum. The upturn in violence after the elections was largely a result of failure in talks with Justice and Equality Movement (JEM), along with tribal violence, leaving as many as 600 dead in May 2010. A government operation to eject JEM forces from a location near Sudan’s border with Chad helped inflate the number of deaths. Negotiations appear to have deteriorated altogether, with JEM claiming that the talks have indeed ended in stalemate because of government obstinacy. JEM forces claimed later that they had defeated a government attack in Uzben and elsewhere in El Fashar. State-linked media made a counter-claim that the army had defeated JEM rebels, killing 43 JEM militants and losing seven soldiers. Leaving the February 2010 ceasefire agreement in tatters, there is little sign of conflict between the government and JEM abating, with the latter’s leader Khalil Ibrahim threatening to invade Khartoum, according to Saudi-based Al-Sharq al-Awsat.
The western region of Darfur saw fighting between Arab nomads and South Sudan’s army in April 2010, leaving at least 55 people dead and 85 injured. Security in the region is extremely tenuous as members of the Rezeigat tribe make their way to the location of the clashes, just as army reinforcements arrive. Meanwhile, south Sudan’s army spokesman Major General Kuol said in June 2010 that the south would be launching an air force by year-end ahead of the January 2011 referendum. Kuol claimed that pilots and engineers had already been trained but refused to reveal order volumes. Kuol also denied that the move would be in violation of the CPA and instead played it down as part of a modernisation process. Kuol also refused to disclose the companies or countries that might supply the military planes.

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Browse the complete Report on: Canada Defence and Security Report Q3 2010
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In early May 2010, the President of Canada’s Treasury Board, Stockwell Day, announced that 13 departments and agencies, including the Department of National Defence, had been asked to save CAD1.7bn out of the combined CAD35bn they spend a year, following the latest government spending review to reduce the country’s deficit. These savings would amount to around 5% per department. Nevertheless, in June the government announced a massive CAD35bn shipbuilding programme for the country’s navy and coast guard, chiefly to replace ageing destroyers and supply ships, following several years when the navy has been forced by increasing costs to postpone these replacements. The first ships will be built at two shipyards by 2012 or 2013, with the total number intended to supply 28 large ships and 100 smaller ships. Also, the government is to enter negotiations with Lockheed Martin to buy 65 F- 35 Joint Strike Fighter jets on a sole-source contract worth CAD9bn, to replace to replace the air force's ageing CF-18 fighters.
Also in June, a new R&D consortium was announced jointly by Boeing and Canadian industry partners, which intends to reinforce Canada’s competitiveness in advanced composite materials manufacturing, primarily for aerospace.
In June 2010, the controversial results of a public inquiry were published, which investigated the shortcomings of Canada’s security services at the time when an Air India flight bound to London from Vancouver and Montreal was blown up by British Columbia-based Sikh terrorists in 1985, killing 329. The incident meant lessons learned since by Canadian security agencies, whose poor relations during the 1980s were held as a prime factor in intelligence failures before the disaster. Of prime importance for current counterterrorist policy was the report’s claim that Canada’s security systems are still in need of improvement. It recommends enhanced policy-setting powers for the national security adviser to oversee inter-agency communication, as well as improvements to police investigations, intelligence, airport security and the conduct of terrorist trials.
The 2010 Winter Olympic Games held in Vancouver in February 2010 had indeed put Canada under the world’s security spotlight and achieved a high standard for future sporting events. More than 100 Canadian government agencies were involved in border security and measures to protect the events from terrorism, including nonconventional attacks. The Olympics cost the government CAD900mn (US$720mn) and was the country’s biggest ever and most expensive security operation.


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