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The Thai defence budget is projected to grow at a compound annual growth rate (CAGR) of 4.06% to reach $6.9bn by 2021, says a report by Strategic Defence Intelligence (SDI).

Titled ‘Future of the Thailand Defense Industry – Market Attractiveness, Competitive Landscape and Forecasts to 2021’, the report states that the increase in Thailand’s defence expenditure will be driven by neighbouring conflicts, military modernisation programmes and an ongoing arms race in the ASEAN region (Association of Southeast Asian Nations).

"The army will account for approximately half of the defence budget followed by navy (19.6%), air force (18.2%), and other sectors (12.8%)."

Intense competition from China and India in massive military expenditure has led to Thailand increasing its defence expenditure by 1.2% from 2012 to 2016. In order to compete with other Asian nations to possess the most powerful armaments, Thailand has planned modernisation programmes for its military equipment.

The nation’s defence expenditure is expected to increase by 3.43% by 2021 to reach $3.8bn. The army will account for approximately half of the defence budget followed by navy (19.6%), air force (18.2%), and other sectors (12.8%).

The SDI report mentions that ambiguity in contract dealings and the prevalent corruption in the procurement process hamper the participation of foreign investors into the country’s defence sector. The country also accepts indirect offsets, which further restricts the growth of its defence sector.

Other factors that adversely affect the sector include counter-purchase, where foreign players are allowed to purchase non-defence-related goods as a trade-off for defence equipment.

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By GlobalData