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CWA # 902, 29 January 2023
2023: The World This Year
Defence: Towards a new cold war
TWTW#200, 29 January 2023, Vol. 5, No. 4
Defence: Towards a new cold war
Surge in defense budgets along NATO principles, consolidating supply chain issues, technology and innovation, and emerging defense industrial players in non-western hemisphere will shape the contours of defence industrial complex vis a vis political order
What happened?
According to the report ‘2023 Aerospace and Defense Industry Outlook’ by Deloitte, 88 per cent of the surveyed senior executives indicated that they believed the general business outlook for the aerospace and defense industry for the next year is “somewhat to very positive”. The development comes amidst Russia-Ukraine conflict, which has heightened the security uncertainty and increased tendency of confrontational tactics by big powers in small military powers, be it Ukraine, Taiwan, Mali or even Central African Republic.
In 2022, Defense exports from the US surged by 53 per cent (USD 51.9 billion), Turkiye’s defence exports surged by 54 per cent (USD 4.3 billion) and China emerged as a became biggest armed UAV exporter in the last decade. According to the SIPRI yearbook 2022, the permanent five of UN security Council accounted for 80 per cent of the net defense exports across the world from 2016-20, while the US’s share of export was 38 per cent. According to a working paper by Institute for the World Economy, KIEL, by 24 December, 2022, Ukraine received aid of around EUR 113 billion, out of which 85.26 per cent were in the form of financial and military aid, while the rest was humanitarian aid. Of the total military and financial aid at EUR 96.348 billion, almost 40 per cent was provided by the US, the EU institutions provided 35 per cent and the rest was from individual EU nations.
According to an article published by McKinsey, ‘Invasion of Ukraine: Implications for European defense spending’, the defense spending by EU is to increase by 53 per cent by 2026 in the wake of sustained large-scale conflict between Ukraine and Russia. Germany, Poland, Sweden, Austria and France have declared intentions to increase defence spending as per cent of the GDP. China also raised its defense spending by 7.1 per cent to USD 230 billion for fiscal year 22. Japan and South Korea also unveiled their mid-term defence spending plans. While Japan has set aside USD 25.636 billion for next five year, it has allocated USD 51.272 billion for the current fiscal year 23 to achieve the NATO’s standard criterion of spending two per cent of the GDP, South Korea has also allocated USD 268.8 billion for next five years. Both the countries will invest substantially in air defense missiles and naval warships to deter any spill over effect of confrontation between the US and China.
Forecast for 2023
First, the return of NATO as a security umbrella. A working paper by KIEL mentions that the US and other European allies have donated from a maximum of 25 per cent of weapons systems to a minimum of five per cent of their heavy weapons including, tanks, howitzers and multiple rocket launching systems. This will propel the defense spending in those countries as more military aid to Ukraine will dry up inventories in EU nations, pushing the need for further replenishment by advanced defence systems. And dampened economic outlook will further compound in favour of NATO as common alliance. NATO is likely to be the winner which is based on a common vision of security and provides a security umbrella due to its political commitment to democracy. In times of supply chain disruptions, the defense industries will also look for integrated profit management to keep up with scale of production and efficiency and the US industries have the capital to take the lead in that race.
Second, the increasing importance of autonomous vessels and platforms. Weapon systems like drones will replace manned air platforms to minimise human loss while tolerance of confrontation and a full-scale war will increase. US Navy Design 2045 has targeted a fleet of 373 ships and 150 out of which are desired to be autonomous vessels. This arms race to autonomous platforms will further become clear in the current year.
Third, A&D and the fourth industrial revolution. The A&D will take the lead in realising the true achievements of fourth industrial revolution ranging from domains like additive manufacturing concepts 3-D printing and space, cyber and Maritime 4.0. The objective will be two-fold for the A&D industry, to scale up the profit management and to remain the best service providers.
Fourth, the emergence of China and Turkiye as viable defense industry competitors. Turkiye and China have medium and long term devised plans to develop the critical mass in the A&D sector and claim the stakes in arms race in 2023. While China will try to position itself as second alternative to the US defence industries with its cheaper and viable platforms, Turkiye will desire autonomy in arms race and shape political objectives in Middle East and North African nations in 2023. NATO 2030 document stated that: "It will be a world of competing great powers, in which assertive authoritarian states with revisionist foreign policy agendas seek to expand their power and influence."
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The World this Week
April 2019 | CWA # 110
GP Team
The World this Week
April 2019 | CWA # 109
GP Team
The World this Week
April 2019 | CWA # 107
GP Team
The World this Week
April 2019 | CWA # 106
GP Team
The World This Week
March 2019 | CWA # 101
GP Team
The World this Week
March 2019 | CWA # 100
GP Team
The World This Week
March 2019 | CWA # 91
GP Team
The World This Week
February 2019 | CWA # 90
GP Team
The World this Week
February 2019 | CWA # 89
GP Team
The World this Week
February 2019 | CWA # 86
GP Team
The World This Week
February 2019 | CWA # 84
GP Team
The World this Week
January 2019 | CWA # 79
GP Team
The World this Week
January 2019 | CWA # 75
GP Team
The World this Week
January 2019 | CWA # 72
GP Team
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