China, India boost defence as crisis takes toll on West

* Emerging giants dodge defence squeeze

* Ageing populations will raise pressure on European budgets

By Adrian Croft

LONDON, Feb 3 (BestGrowthStock) – China and India sharply raised
defence spending in 2009 despite the economic crisis but most
European NATO members face a squeeze on defence budgets as they
rein in gaping deficits, a report said on Wednesday.

The impact of the global financial crisis on defence and
security spending varied across regions and countries, the
International Institute for Strategic Studies thinktank said in
its annual report “The Military Balance”.

U.S. defence spending almost doubled under former President
George W. Bush but President Barack Obama had signalled that the
need to tackle a big budget deficit would require “a dramatic
reprioritisation within defence spending”, it said.

Obama asked Congress this week to approve a record $708
billion in defense spending for fiscal 2011 — including a 3.4
percent increase in the Pentagon’s base budget — but said he
would continue his drive to eliminate wasteful programmes.

A sharp recession had led the Russian government effectively
to abandon a comprehensive military re-equipment plan due to run
from 2007-15 and to replace it with a new 10-year plan starting
in 2011, the report said.

“In contrast to developments in advanced economies, both
India and China have maintained their recent trend of
double-digit increases in defence spending,” it said.

India boosted defence spending by 21 percent in 2009 after
the 2008 Mumbai attacks killed 166 people, it said.

China’s official 2009 budget included a 15 percent rise in
defence spending to 480 billion yuan, equal to $70.3 billion at
market exchange rates, the report said.

However, it said the official Chinese defence budget did not
reflect the true level of resources devoted to the People’s
Liberation Army. It was widely believed that the official budget
took no account of weapons bought overseas or research and
development funding, it said.

EUROPEAN DEFENCE LIKELY TO SUFFER

Other Asian countries, such as Australia, Indonesia and
Singapore, had also posted increases in defence spending, it
said.

In Europe, though, many countries had seen their budget
deficits rise sharply as they pumped money into the economy to
try to end the recession.

“When the time comes to redress these fiscal imbalances,
discretionary spending will come under considerable pressure and
defence is likely to suffer, particularly in those countries
facing a looming demographic shift requiring greater expenditure
on pensions and healthcare,” the editor of the Military Balance,
James Hackett, wrote in the report.

Britain faced a challenge in reconciling its budget deficit
with its large and growing future equipment plan, it said.

Among European members of NATO, only Norway and Denmark were
likely to increase their defence budgets in 2010, and over the
medium term most other countries would do well to increase
defence spending in line with inflation or match existing budget
levels, it said.

This would lead to pressure to step up pooling and
multinational management of defence assets, to countries
specialising in niche capabilities and to the collective
procurement of critical defence equipment, it said.

Stock Investing

(Editing by Angus MacSwan)

China, India boost defence as crisis takes toll on West