Global Defense Outlook 2016 Shifting Postures and Emerging ......Middle East and South Asia. 836...

Global Defense Outlook 2016 Shifting Postures andEmerging Fault Lines

Global Defense Outlook 2016 | Shifting Postures and Emerging Fault Lines

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are applied to develop the insights

the data and conclusions herein have not

Higher-Growth Spenders

Higher-Growth Balancers

Lower-Growth Balancers

About Deloitte’s Global Defense Outlook

Economizers

with overall economic growth rates from

Outliers


3

Global Defense Outlook: Shifting Postures, Emerging Fault Lines 4

Defense Posture Index: Economic Development Drives Defense Postures 6

Most Nations Are Moderating Defense Postures 6

Defense Budgets Lag Economic Growth as Developed Nations Economize on Defense 9

Five Emerging Fault Lines

Implications for Defense Policymakers: Managing Shocks Along the Fault Lines

Authors

Endnotes


4

• Defense Posture Index (DPI) down from 100 to 98 globally from 2011-2016.

• Since 2011 only seven nations in the Top 50 raised their defense posture.

• These seven growing DPI nations are expected to spend a total of $116B on defense in 20201, or seven percent of the total Top 50 spenders.

• In contrast, 42 nations including China, Russia and the US maintained or lowered their defense postures. These 42 nations are expected to spend over $1,400B on defense in 2020.

• 92 percent of the global defense budget is owned by nations which have moderated their defense postures since 2011.

Moderating defense postures…

…but increasing global tensions on Five Fault Lines

Russia/NATO

The US increased itspresence in EasternEurope by

250 armoredvehiclesand self-propelled artillery

and 4,200 soldiers.

3 Russian Divisions inWestern Military District.

4,200

60%

1 US Armored Brigade inPoland.

Naval budgets are projected togrow by more than

60 percent above their 2011 levels by 2020 due to naval constructionprograms.

30 new Chinese submarines48 new Indian naval vessels

250

5


92 percent of terrorist attacks and fatalities from 2005-2014 occurred in Africa, the Middle East and South Asia.

836 percent increase in terrorist attacks in Sub-Saharan Africa (2005-07 vs. 2012-14).

144 Persistent terrorist groups in 2012 -14, which has

doubled compared to 2005-07.

43% increase in average global vulnerability to cyberattack

States/Terrorists Mature/EmergingNuclear Powers

Cyber Top Targets

9 Nuclear powers

5 Key Nuclear Security agreements

No agreements signedby all 9 nuclear powers

“Cyber Top 10” are

6x more vulnerable tocyberattack than the ten least

Russia

Israel

US

Pakistan

India

Iraq

Turkey

Singapore

Algeria

France

Denmark

Indonesia

South Africa

Canada

Argentina

Belgium

Mexico

Japan

Defense Posture Index By Country 2016　Global Average = 98

Defense Posture Index

Global D

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Economic Development Drives Defense Postures

These new tensions have produced

Powers and Information Economies/

frameworks are increasing the potential

Most Nations Are Moderating Defense Postures National defense posture develops through a continuous and complex set

in seven elements of national defense

The seven Defense Posture Index

Defense Share of Gross Domestic Product (GDP):

Defense Share of Labor Force: This


7

Chart 1: Defense Posture Index Elements3

Defense Posture Index Elements and Scoring

Defense Posture Element

Defense Share of GDP (Percent)

Lower Defense Posture

Defense Share of Labor Force (Percent)

Total Nuclear Warheads (Total)

Defense Share of Gross GovernmentExpenditures (Percent)

Total Trend Indicator Value of Arms Exports, Current and Trailing 4 Years ($M, US1990)

Battle-Related Deaths Current andTrailing 4 Years

Defense Posture Index Score

1 2 3 4 5


Global D

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efense Policymakers

Defense Share of Gross Government Expenditures:

limiting the share of government

government expenditures signals a

defense at the expense of other

Total Number of Nuclear Warheads:

This element counts

the most recent and four preceding

external engagement are considered to

Battle-Related Deaths: This element

Arms Exports: This element tracks the


8

Chart 2: Defense Posture Index: China, Russia, NATO, United States4

Chart 3: Defense Posture Index By Country5

Defense Posture Element

Defense Share of GDP

Defense Share of Labor Force

Total Nuclear Warheads

Defense Share of GrossGovernment Expenditures

Arms Exports

Battle-Related Deaths

Defense Posture Index Score1 32 4 5

Russia

Israel

US

Pakistan

India

Iraq

Turkey

Singapore

Algeria

France

Denmark

Indonesia

South Africa

Canada

Argentina

Belgium

Mexico

Japan

6

Lower Defense Posture

national approaches taken among

average Defense Posture Index declined

with the highest Defense Posture Index

defense posture index score and three


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Chart 4: Change In Defense Posture Index7

Nigeria

United Arab Emirates

Egypt

India

Singapore

Kuwait

Qatar

GLOBAL AVG

Israel

United States

Pakistan

United Kingdom

Finland

Spain

Switzerland

Belgium

Japan

Canada

Iraq

Chile

Germany

Turkey

Philippines

Libya

-6

-6

-6

-6

-6

-6

-6

-6

-6

-6

-12

-12

-12

-12

-18

-24

-2

6

6

6

6

6

18

0 5 10 15 2520-5-10-25 -15-20

12

moderating their defense postures?

and slower growth in the more

creating shifts in defense resources and

Defense Budgets Lag Economic Growth as Developed Nations Economize on Defense

9

As economic growth and development

European states are reducing the growth

defense spending to accelerate national economic development while further


Global D

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Implications for D

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Balancers and Economizers

indicating that the current defense

governments are choosing to prioritize

Higher-Growth Spenders This set of

Economizers

Balancers

their economies at a compound annual

defense spending than to other national

also mean that the Balancers can sustain

Nine Higher-Growth Balancers include

plan to increase their annual defense

Ten Lower-Growth Balancers

These nations plan to increase annual

Outliers

reductions greater than three percent

declines in the Russian defense

government revenue reductions following imposition of international economic sanctionsRussia is facing increasing tension with

11


8

7

6

5

4

3

2

1

0

-1

-2

-3

-4

-5

-6

-7

-8

%

0 1 2 3 4 5 6 7 8 9 10 11 12

Argentina OmanBrazil

EconomizersGDP: 2-7%Defense: -3-0%

Canada

United Kingdom

ChileKuwait

United States

NetherlandsNorway

Russian Federation

Colombia

Iraq Libya

Japan

Indonesia

Nigeria Vietnam

IndiaChina

Angola

PolandAustralia

South KoreaUnited Arab Emirates

Singapore

DenmarkSweden

South AfricaBelgium

Finland

Germany

Italy FranceSwitzerland

Saudi Arabia

Spain

Taiwan

Mexico

Iran

Malaysia

Qatar

Turkey

IsraelAlgeria

Philippines

MoroccoEgypt

PakistanLower-GrowthBalancersGDP: 3-4.5%Defense: 0-2.75%

Higher-GrowthBalancersGDP: 4.5-6.5%Defense: 0-2.75%

OutliersGDP: 3.5-11.5%Defense: <-3%

Higher-GrowthSpendersGDP: 5-10%Defense: 3-7%

Higher-Growth Spenders Lower-Growth BalancersHigher-Growth Balancers

2016

-20

Def

ense

Bud

get

CAG

R at

PPP

2016-20 GDP CAGR at PPP

Economizers Outliers

ThailandThailand

Chart 5: Defense Budget Approaches10


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the emerging economies accelerate

The Russia/NATO Fault Line: Conventional Forces Confrontation in Eastern Europe

Warsaw Pact nation as well as the Baltic

loss of previous arms control and crisis

new fault line in Europe posing increasing

as a return to a posture of deterrence

the persistent rotational presence of an

measures

the Russian government

The Baltic countries will increase their

units

the southwestern Black Sea region as a

The Russian Defense Minister indicated that Russia intends to expand permanent


13

western Russia

managing potential confrontations have

Representative to NATO Alexander

that improved coordination measures

agreement

While conventional forces move into

inspections—all of which have continued in spite of the recent deterioration in

other agreements which could provide

Maritime Confrontation in the South China Sea

over access and operations in the South

2001

16%12%

22%

30%

20%

100% = 219M TEU

52%

50%

100% = 631M TEU+188%

China

European Union

United States

Rest of World24%

7%

16%

25%

27%

2013

has its roots in the growing importance

islands

Chart 6: Global Maritime Shipping Container Volumes28


Global D

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Economic Development Drives Increased Maritime Commerce

developed their manufacturing and

total container shipment volume now

But this increased trade is moving

risks for countries dependent on free movement of commercial goods over

percent of world trade passes through

Maritime Commerce Drives Asia-

ocean routes for international trade

announced the design and construction of a second aircraft carrier intended to

Regional Navies Adjust to Expanding Commerce, and To China’s Emerging CapabilityWith a view toward their own reliance

programs drive higher spending


15

development of new torpedoes and

and increased procurement of maritime

spending programs

and crisis management mechanisms

laws and mechanisms are apparent in

The current confrontation appears

the conclusion of the Second World War46

realm of international law and resolved

Some claims have sought resolution

international participationannounced its intention to design and

is continuing with construction of its

service

structure

India announced plans to design and

construction44

expansion of undersea warfare

Table 1: Status of Countries on South China Sea-Related Mechanisms54

Australia

Brunei

China

Japan

Malaysia

Philippines

Taiwan

United States

Vietnam

NO

NO

NO

NO

NO

NO

NO

NO

NO

NO

NO

UNCLOS ASEAN 2002 ASEAN Declaration

clear; we will not participate to or accept

the Philippines contention that the 49

Other regional nations have looked to the Association of Southeast Asian

no avail

their own positions also produced no resolution

over language regarding the disputes

weak international legal and institutional mechanisms points toward deepening


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The States/Terrorist Fault Line: Asymmetric Confrontation in Africa and Middle East

focus of terrorist groups remains the

deep fault line continues to develop

Growing Chaos: Increasing Terrorism, More Persistent and Capable Adversaries

Middle East and South Asia have

Islamic State revenues from oil and other

East and South Asia appears to have

for more than one incident over multiple

Middle East & North Africa South Asia Southeast Asia Sub-Saharan Africa

3,443

2,526

13,873

+303%

+836%

+430%

+241%

13,392

840 475

4,446

2,861

2005 - 2007 2012 - 2014

Chart 7: Terrorist Incidents 2005-2007 and 2012-201456


17

information and making terrorist

and propaganda operations are

exploited social media networks to

from international constraints on arms

governments to government forces

social media networks64

terrorist groups carried out attacks in

Enabled By Technology and Limited International Mechanisms

Middle East & North Africa South Asia Southeast Asia Sub-Saharan Africa

2428

35+46%

+260%

+104%

+60%

57

10 10

36

16

2005 - 2007 2012 - 2014

Chart 8: Persistent, More Capable Terrorist Groups61


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The Mature Nuclear Powers/Emerging Nuclear Powers Fault Line: Asymmetries among Nuclear States

the emerging powers adopt a more opportunistic approach to development

The emerging nuclear powers are

international norms governing nuclear

nuclear powers operating outside this

use or even theft of nuclear weapons

principles for governing these dangerous

technical advancements are increasing

while not constraining these states to

restricted the testing and proliferation

on nuclear electric generation stations

weapons

Pakistan are looking to expand the

Asif stated that nuclear weapons existed

ensure national survival

advance of Indian troops under New 69

to limit its nuclear weapons arsenal

for an arms race among regional

indicated that India is also looking into stockpiling enriched uranium fuel to develop thermonuclear weapons and is developing a site to do so


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66

United States

Russia

France

United Kingdom

Israel

China

North Korea

India

Pakistan

Withdraw

Non-Proliferation Treaty

Comprehensive Test Ban Treaty

International Convention on the

Suppression of Acts of Nuclear Terrorism

Treaty Banning Nuclear Tests in the Atmosphere,Outer Space,and Under Water

(Partial Test Ban)

Treaty on the Prohibition of the Emplacement of Nuclear Weapons and Other WMD on the Seabed and Ocean Floor and in the Subsoil Thereof

and expressed concern regarding

But his remarks led to negative

engine

countries would have to implement

weapons from terrorist groups

developing new nuclear warhead and

to further limit the practical value of

arms control agreements

nuclear weapon sites without using

weaponsThe emerging nuclear fault line is

usefulness of traditional arms control


Global D

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The Information Economies/Emerging Economies Fault Line: Confrontation in CyberspaceEconomic development has pushed

organizations or private hackers in countries whose limited reliance on the

emerging economies which are less

Similar Policy Approaches: Security At Home; Collaboration Abroad

engaging international partners for

recognizes the growing risk of

made explicit commitments to expand

calls for strengthened management over the internet and

South KoreaNetherlandsSwitzerlandDenmarkFinlandVietnamUnited KingdomSwedenAustraliaGermanyWorld AverageMexicoLibyaIranUnited Arab EmiratesAlgeriaOmanKuwaitIraqSaudi ArabiaQatar

0

2009

50 100 150 200 250 300 350

2014

183

146

109

140

109

142

130

107

147

100

100

24

44

25

23

3333

30

28

27

27

1410

25

2213

15

296

231

209

200

196

158

158

158

150146

143

49

45

42

35

Chart 9: Cyber Vulnerability Index94


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including government inspection of

critical infrastructure and important

defense include an agreement with

includes commitments to protect critical

attacks and climate change impacts

cooperation and expanded investments

CanadaPolandUnited StatesSwedenFinlandNetherlandsItalyNorwaySouth KoreaFranceTop 50 AverageAlgeriaUnited Arab EmiratesSaudi ArabiaKuwaitQatarOmanLibyaAngolaNigeriaIraq

0 50 100 150 200 250 300 350

324

275

255

251

216

212

157

153

144

140

54

10

9

8

7

7

3

2

2

2

1

Chart 10: Internet-Exposed Industrial Control Systems by Country Per Unit of GDP96


Global D

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Widening Gap in Cyber-Vulnerability: The Global “Cyber Ten”

states in the Middle East and Africa

compiled historical data from the World

propelled it to the highest score for

potential adversaries are much more

the advanced economies present much

adopted

decline over the long term as the other


23

Although national defense postures are

defense environment invites national

Consider the potential contribution

building measures.

rules and procedures governing these

paid to shaping the channels for regular

diplomatic communications to manage

expanded international dialog and formal

opportunities for similar approaches

potential for negotiated agreements

Implications for Defense

Focus investment on productivity improvement rather than “innovation”.Defense ministries in the Balancer and Economizer nations have launched

99

Australia announced a similar initiative to invest in strategic technologies with

But moderating defense postures and emerging fault lines suggest

retention of skilled specialists have

precision guidance

Recognize the limited potential for defense export growth.Along with national defense postures and

nations

defense exporting nations accounted

procurement

and India also

and limited growth potential of new

suppliers and their respective national

volumes are assumed to come from


Global D

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AuthorsRieko Arashi

Rieko is a social scientist serving defense clients in

Catherine Cloud [email protected]

Jack [email protected]

in Afghanistan as a civilian senior advisor to the

Joseph M. [email protected]

rule of law development and transition of detention

Bobby [email protected]


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Endnotes


26

the Emplacement of Nuclear Weapons and Other Weapons of Mass Destruction


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Global Defense Outlook 2016 Shifting Postures and Emerging ......Middle East and South Asia. 836...

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