Asia-Pacific Defense Outlook 2016

Executive Summary

The following spheres indicate the challenges associated with these economic lifelines:

• The “Cyber Five” -- South Korea, Australia, New Zealand, Japan and Singapore -- appear nine times more vulnerable to cyberattack than other Asian economies.
• More than 50% of global container traffic now moves through Asia-Pacific. Naval budgets are projected to increase by 60% through 2020, as navies respond. China will build 30 new submarines and one new aircraft carrier.
• Total worldwide incidents of piracy declined by 45% from 2010 to 2014, but incidents in Asia-Pacific increased by nearly 30%.

Conventional armed conflict in Asia-Pacific fell by 30 percent in 2001-2014 over 1985-2000. Yet, there are new shift regarding the defense focus in Asia-Pacific countries – namely shift towards naval security and cyberattack. Defense focus across the region has been hugely shifted as more than half of global container traffic now moves through Asia-Pacific waters, and regional navies are building up to defend these economic lifelines. More than 50 percent of global container traffic now moves through Asia-Pacific. Naval budgets are projected to increase by 60 percent through 2020, as navies respond. China will build 30 new submarines and one new aircraft carrier. Total worldwide incidents of piracy declined by 45 percent from 2010 to 2014, but incidents in Asia-Pacific increased by nearly 30 percent in the midst of the Asia-Pacific economic growth. The Chinese navy has totaled more than 16,000 sailors and more than 30 surface ships through escort and anti-piracy missions in the Gulf of Aden.

Amid of economic growth, the naval buildup is also creating new kinds of vulnerability to cyberattack, particularly in the advanced economies of South Korea, Australia, New Zealand, Japan and Singapore – the Asia-Pacific “Cyber Five.” The Cyber Five are the most heavily dependent on internet-based interactions. Asia’s rapid economic development has pushed citizens, businesses and government agencies onto the internet, creating new risks and growing vulnerability to cyberattack. However, the internet push has not affected Asia-Pacific countries equally, and the emerging Asian cyber environment presents unique challenges for defense policy makers and their counterparts in intelligence and law enforcement. As a group, the Cyber Five are nine times more vulnerable to cyberattack than the other thirteen Asia-Pacific economies for which data are available. South Korea’s rapid move toward ubiquitous wireless access propelled it to the highest score for cyber risk in 2014.

The wide gap in vulnerability between the Cyber Five and the other Asia-Pacific economies may point toward an emerging defense challenge. China and India are far less vulnerable to cyberattack than the Cyber Five, but these two lower-vulnerability nations, and other Asia-Pacific nations, have committed to building advanced cyber capabilities. The lower-vulnerability nations may therefore be prepared to behave more aggressively in cyberspace, because their potential adversaries are much more exposed to internet-based damage.

Then, how do Asia-Pacific countries tackle these new defense challenges? Nineteen Asia-Pacific countries will account for nearly one-third of global defense budgets by 2020, and more than one-third of all activity-duty military personnel. As growth continues, the Asia-Pacific countries are devoting increased shares of gross domestic product to civilian investment priorities, reducing the share of their labor force devoted to military service, and raising the pay of active-duty service members to professionalize the armed forces, promote consumption spending and boost economic growth. Asia-Pacific economies are projected to drive 60 percent of the global increase in defense acquisition, research and development, and 30 percent of the total global defense acquisition budget through 2020.