Malaysia Slashes 2017 Defence Budget

25 October 2016

The defence budget announced by Malaysia on 21 October has taken a serious slash compared to a year earlier. The amount allocated to the Ministry of Defence for 2017 is MYR15.06 billion (US$3.6 billion), equating to a 13% drop.

The budget has fallen to 2012 levels, and it represents the largest single cutback since 1998.

Most of the budget is for emolument or management expenses (MYR11.68 billion), but it also includes a development expenditure for buying new equipment. The latter has suffered an MYR440 million reduction to MYR3.37 billion, the new figure representing the lowest development expenditure since 2014.

Major acquisition programmes will continue, however, including six Second-Generation Patrol Vessel - Littoral Combat Ships for the Royal Malaysian Navy, ongoing deliveries of AV8 Gempita 8x8 armoured vehicles and the final A400M transport aircraft.

Defence Minister Hishammuddin Hussein told reporters on 23 October that other projects in addition to the above will not be affected: MD 530G helicopters, refits for Scorpene submarines, and upgrades to C-130, Hawk and S-61A-4 aircraft.

Interestingly, operational expenditure has increased 1.68% to RM13.683 billion.

With tensions in Eastern Sabah remaining high, money and assets continue to be prioritised to secure the Eastern Sabah Security Zone (ESSZONE). Thus, RM323 million is going on personnel deployment along the border, which may indicate a proposed ESSCOM brigade and border regiment have been funded.

A sea base and helicopter forward operating base are being established. AV8 and AV4 armoured vehicles will deploy to ESSZONE, and Hawk jets and H225M helicopters will be located at Labuan Air Base.

The Malaysian Army will receive the largest portion among the three services (RM5.42 billion), but all services are suffering tighter finances. The air force suffers the most with a 34% drop, while the navy’s allocation is 25% lower.

With such a squeeze, question remarks remain over the air force’s long-running Multi-Role Combat Aircraft (MRCA) programme, with no sign of any order coming soon to replace degenerating MiG-29s. Some sources speculate that the Rafale and Typhoon are now the two strongest remaining contenders.

The sharp drop in military expenditure stems from stiff economic headwinds being faced by Malaysia, especially with low commodity prices and a plunge in global oil prices. However, defence seems to have borne a disproportionate hit.

Malaysia’s purchasing power has not been helped by a 30% depreciation of the ringgit compared to the US dollar in the past four years.

Malaysia is now spending 1.2% of its GDP on defence. The Malaysian Maritime Enforcement Agency, essentially the national coast guard, receives its funding under the Prime Minister’s Department rather than the defence budget.


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