Q3 2012 Defence and Security Industry Report of Australia

BMI’s Australia Defence and Security report for Q312 examines the country’s strategic position in the Pacific region and the wider world. It provides an overview of the contemporary geopolitical challenges facing the country, and the challenges it may face in the future.

The report examines the trends occurring in the country’s current and future defence procurement, and the order of battle across its armed forces. The report’s general conclusion is that the Australian defence establishment faces some difficult decisions, as fiscal constraints make some of the ambitions outlined in the country’s 2009 Defence White Paper increasingly difficult to realise. Some key procurement programmes could suffer as a result, and capability gaps may be unavoidable.

Australia’s supporting role in the United States’ ‘pivot to Asia’ is also examined, as US Marines beginarriving in Darwin and the use of the Australian-owned Cocos Islands as a base for US drones enters public debate.

The difficulty that Canberra faces in moving closer to the US while maintaining good relations with China, its key trading partner, is also discussed. The recent decision to bar a major Chinese firm from competing for a public contract due to national security concerns highlights the duality of Australia’s position on China, which it sees as a source of economic stability on the one hand and a potential source of geopolitical instability on the other.

Over the last quarter BMI has revised the following forecasts/views:

BMI has updated the information relating to the anticipated budget squeeze that the Department of Defence is expected to face, with analysis of where this leaves the ambitious procurement programmes outlined in the 2009 Defence White Paper.

The progress of several key procurement programmes is brought up to date, including: the F-35 Joint Strike Fighter; the proposed upgrade of F/A-18 Super Hornets to the Growler electronic warfare configuration; new submarines to replace the in-service Collins class; and new aircraft and surface ships.

The operational decision to withdraw combat forces from Afghanistan in 2013, earlier than planned.
The issue of refugees, who continue to reach Australia by boat with the assistance of Indonesian smugglers. This is a sensitive issue for Canberra because of Indonesia’s increasingly important status as an economic and security partner.

Australia Defence and Security Report Q3 2012

Published: June 2012                          No. of Pages: 92                           Price: US $ 1175



Table of Contents

Executive Summary . 5
SWOT Analysis 6
Australia Security SWOT ... 6
Australia Defence Industry SWOT . 7
Australia Political SWOT ... 8
Australia Economic SWOT 8
Australia Business Environment SWOT . 9
Global Political Outlook 10
Major Risks Looming In 2012-2013 .. 10
Global Flashpoints: Eurozone, Iran, Syria, Afghanistan, Korean Peninsula ... 10
Table: Election Timetable, Q312-Q113 ... 14
Wild Cards To Watch ... 18
South East Asia Security Overview . 21
The Strategic Outlook For The 2010s ... 21
South East Asia In A Global Context ... 21
Challenges And Threats To Stability And Security ... 22
Main Islamist Militant Groups In South East Asia ... 24
Sino-US Rivalry In South East Asia . 31
Sino-US Power Struggle To Intensify Over The Coming Decade .. 33
Chinese Influence In Asia: A SWOT Analysis .. 34
US Influence In Asia: A SWOT Analysis .. 36
Does China Seek To ''Dominate'' Asia? . 36
Do Asian States Have To Choose Between China And The US? .. 37
Table: Asian States And Their Relationships With China 38
Emerging Geopolitical Patterns... 40
Security Risk Analysis .. 43
Table: Asia Pacific Regional Security Ratings . 43
Table: Asia Pacific State Vulnerability To Terrorism Index 44
Political Overview .. 45
Domestic Politics .. 45
Slipping Voter Support Could Lead To More Populist Policies ... 45
Long-Term Political Outlook 47
Three Key Challenges: Population, Climate Change, China ... 47
Security Overview .. 50
Internal Security Situation ... 50
External Security Situation .. 50
Armed Forces And Government Spending . 54
Armed Forces... 54
Defence Budget 57
International Deployments ... 59
Weapons Of Mass Destruction . 59
Market Overview 60
Industry Trends And Developments . 61
Arms Trade Overview .. 63
Procurement Trends And Developments .. 64
Industry Forecast Scenario .. 66
Armed Forces... 66
Table: Australia’s Armed Forces, 2000-2008 (''000 personnel, unless otherwise stated) . 66
Table: Australia’s Manpower Available For Military Service, 2009-2016 (aged 16-49, unless otherwise stated) .. 66
Defence Expenditure 66
Table: Australia’s Defence Expenditure, 2009-2016 ... 67
Table: Australia’s Defence Expenditure Scenarios, 2009-2016 – Changing % Of GDP (US$mn) .. 68
Defence Trade .. 68
Table: Australia’s Defence Exports, 2009-2016 (US$mn) ... 68
Table: Australia’s Defence Imports, 2009-2016 (US$mn) ... 69
Table: Australia’s Defence Trade Balance, 2009-2016 (US$mn) 70
Macroeconomic Outlook ... 70
Staring Recession In The Face . 70
Company Profiles .. 76
Austal ... 76
BAE Systems Australia . 78
Boeing Australia .. 80
Raytheon Australia .. 82
Thales Australia ... 84
Country Snapshot: Australia Demographic Data ... 86
Section 1: Population ... 86
Table: Demographic Indicators, 2005-2030 86
Table: Rural/Urban Breakdown, 2005-2012 87
Section 2: Education And Healthcare .. 87
Table: Education, 2002-2005 ... 87
Table: Vital Statistics, 2005-2030 87
Section 3: Labour Market And Spending Power .. 88
Table: Employment Indicators, 2001-2006 .. 88
Table: Consumer Expenditure, 2000-2012 (US$) 88
Table: Average Annual Wages, 2000-2012 .. 89
BMI Methodology ... 90
How We Generate Our Industry Forecasts .. 90
Defence Industry .. 90
Sources 91Table: Election Timetable, Q312-Q113 . 14
Table: Asian States And Their Relationships With China . 38
Table: Asia Pacific Regional Security Ratings . 43
Table: Asia Pacific State Vulnerability To Terrorism Index . 44
Table: Australia''s Armed Forces, 2000-2008 (''000 personnel, unless otherwise stated) . 66
Table: Australia''s Manpower Available For Military Service, 2009-2016 (aged 16-49, unless otherwise stated) . 66
Table: Australia''s Defence Expenditure, 2009-2016 . 67
Table: Australia''s Defence Expenditure Scenarios, 2009-2016 – Changing % Of GDP (US$mn) . 68
Table: Australia''s Defence Exports, 2009-2016 (US$mn) . 68
Table: Australia''s Defence Imports, 2009-2016 (US$mn) . 69
Table: Australia''s Defence Trade Balance, 2009-2016 (US$mn) . 70
Table: Demographic Indicators, 2005-2030 . 86
Table: Rural/Urban Breakdown, 2005-2012 . 87
Table: Education, 2002-2005 . 87
Table: Vital Statistics, 2005-2030 . 87
Table: Employment Indicators, 2001-2006 . 88
Table: Consumer Expenditure, 2000-2012 (US$) . 88
Table: Average Annual Wages, 2000-2012 . 89

Libya Defence and Security Report Q3 2012

Libya is at a significant crossroads following the conclusion of the country''s civil war in 2011, and the subsequent end of the 42-year rule of its leader Colonel Muammar Qadhafi. The country is home to an educated population and a considerable oil and petrochemicals industry. For these reasons, the internal situation in Libya has significant ramifications beyond the country''s borders. The report examines Libya''s current defence and security environment, and the prospects for restoring the country to normality following the end of the civil war. The general conclusion reached is that while Libya has a clear potential to emerge as a peaceful, democratic and prosperous member of the international community much work remains to be done in stabilising the current security situation.

In terms of the reports key findings, BMI believes that the most pressing priority for Libya''s new leaders in the National Transitional Council (NTC); the caretaker government pending elections expected in June, is to stabilise the security situation by disarming those anti-Qadhafi militias still in existence and providing them with the opportunity to either join the emerging Libyan armed forces, or to be assisted in their search for productive work. Secondly, the NTC must work to reduce the illicit flow of arms from the country, which have been taken from Libyan army stocks during the civil war. These weapons are finding their way to insurgent groups in Africa and further afield. Thirdly, the NTC must press forward its efforts to reform, recapitalise and reorient the country''s armed forces. This can be done via the integration of former militias into the Libyan armed forces, and via the acquisition of new military equipment. The NTC must also continue to work for the disarmament of anti-Qadhafi militias whom have not yet surrendered their weapons.

In addition, the TNC must endeavour to reduce tensions existing between several of Libya''s ethnic groups.
A number of changes have been made since BMI published its last Libya Defence and Security Report.
These include: Updated analysis regarding Libya''s internal security situation and intra-ethnic violence. A detailed summary of the NTC''s efforts to reconstitute Libya''s armed forces, and to equip the armed forces with new materiel.

A summary of Libya''s developing defence and security relationship with the United States of America.

An examination of the NTC''s efforts to secure weapons looted from Libyan army stocks during the civil war, including Man-Portable Air Defence Systems (MANPADS).

A discussion of the efforts ongoing in Libya to destroy recently discovered and undeclared stocks of chemical weapons which were held by Qadhafi''s regime.

Q3 2012 Defence and Security Report Libya

Published: June 2012            No. of Pages:  65           Price: US $ 1175

   

Table of Contents

Executive Summary . 5
SWOT Analysis 6
Libya Security SWOT . 6
Libya Defence Industry SWOT ... 6
Libya Political SWOT 7
Libya Economic SWOT .. 7
Libya Business Environment SWOT ... 8
Global Political Outlook .. 9
Major Risks Looming In 2012-2013 ... 9
Table: Election Timetable, Q312-Q113 ... 13
Wild Cards To Watch ... 16
Middle East Security Overview 19
The Strategic Outlook For The 2010s ... 19
The Middle East In A Global Context .. 19
Challenges And Threats To Stability And Security ... 20
Regional Power Dynamics ... 30
Nuclear Proliferation ... 32
External Powers ... 33
Scenarios For The Middle East 34
Security Risk Analysis .. 37
Table: Middle East And Africa Defence And Security Ratings . 37
Table: Middle East And North Africa State Vulnerability To Terrorism Index 38
Political Overview .. 39
Institutional Vacuum Undermining Spending Plans 39
Security Overview .. 41
Armed Forces And Government Spending . 43
Armed Forces... 43
Equipment 45
Weapons Of Mass Destruction . 46
Market Overview 49
Industry Trends And Developments . 49
Latest Developments 50
Procurement Trends And Developments .. 52
Industry Forecast Scenario .. 53
Armed Forces... 53
Table: Libya’s Armed Forces, 2000-2008 (’000 personnel, unless otherwise stated) .. 53
Table: Libya’s Manpower Available For Military Services, 2008-2016 (aged 16-49, unless otherwise stated)... 53
Defence Expenditure 54
Table: Libya’s Government Defence Expenditure, 2008-2016 . 54
Table: Libya’s Defence Expenditure Scenario – Changing % Of GDP, 2008-2016 (US$mn) . 55
Defence Trade .. 55
Macroeconomic Forecast.. 56
Fastest-Growing Economy In The World In 2012 56
Table: Libya – GDP By Expenditure, Current Prices Breakdown, 2008-2016 59
Country Snapshot: Libya Demographic Data . 60
Section 1: Population ... 60
Table: Demographic Indicators, 2005-2030 60
Table: Rural/Urban Breakdown, 2005-2030 61
Section 2: Education And Healthcare .. 61
Table: Education, 2002-2005 ... 61
Table: Vital Statistics, 2005-2030 61
Section 3: Labour Market And Spending Power .. 62
Table: Consumer Expenditure, 2000-2012 (US$) 62
BMI Methodology ... 63
How We Generate Our Industry Forecasts .. 63
Defence Industry .. 63
Sources 64Table: Election Timetable, Q312-Q113 . 13
Table: Middle East And Africa Defence And Security Ratings . 37

Table: Middle East And North Africa State Vulnerability To Terrorism Index . 38
Table: Libya''s Armed Forces, 2000-2008 (''000 personnel, unless otherwise stated) . 53
Table: Libya''s Manpower Available For Military Services, 2008-2016 (aged 16-49, unless otherwise stated). 53
Table: Libya''s Government Defence Expenditure, 2008-2016 . 54

Table: Libya''s Defence Expenditure Scenario – Changing % Of GDP, 2008-2016 (US$mn) . 55
Table: Libya – GDP By Expenditure, Current Prices Breakdown, 2008-2016 . 59
Table: Demographic Indicators, 2005-2030 . 60
Table: Rural/Urban Breakdown, 2005-2030 . 61
Table: Education, 2002-2005 . 61
Table: Vital Statistics, 2005-2030 . 61
Table: Consumer Expenditure, 2000-2012 (US$) . 62