I expected major spending on COVID-19 by the Australian Government will cause major payment delays in some naval defense projects, eg. submarines (see my April 7, 2020 comment.)
Commentators are beginning predict reductions in US defense spending. Meanwhile South Korea has actually announced a cut to its 2020 defence budget.
See RAND Corporation, https://www.rand.org/blog/2020/04/defense-budget-implications-of-the-covid-19-pandemic.html April 7/8, 2020:
"We anticipate that [US Govenment spending on COVID-19] could have significant medium-term implications for the defense budget and that there will be a need for the U.S. Department of Defense (DoD) to find efficiencies that are of at least the same magnitude as the recent sequestration."
--------------
Also South Korean cuts - see Janes https://www.janes.com/article/95556/covid-19-south-korea-cuts-defence-budget-in-response-to-pandemic April 16, 2020 :
"South Korea has announced a cut to its 2020 defence budget in response to Covid-19. The move means the country is one of the first in the world to officially reduce military spending due to the impact of the pandemic.
This is just the beginning of defense budget cut announcements from major Indo-Pacific countries. Large contractors should not be surprised.
Pete
Commentators are beginning predict reductions in US defense spending. Meanwhile South Korea has actually announced a cut to its 2020 defence budget.
See RAND Corporation, https://www.rand.org/blog/2020/04/defense-budget-implications-of-the-covid-19-pandemic.html April 7/8, 2020:
"We anticipate that [US Govenment spending on COVID-19] could have significant medium-term implications for the defense budget and that there will be a need for the U.S. Department of Defense (DoD) to find efficiencies that are of at least the same magnitude as the recent sequestration."
--------------
Also South Korean cuts - see Janes https://www.janes.com/article/95556/covid-19-south-korea-cuts-defence-budget-in-response-to-pandemic April 16, 2020 :
"South Korea has announced a cut to its 2020 defence budget in response to Covid-19. The move means the country is one of the first in the world to officially reduce military spending due to the impact of the pandemic.
The Ministry of
Economy and Finance (MOEF) in Seoul said in a statement on 16 April that the
2020 defence budget will be cut by KRW904.7 billion (USD738 million).
The MOEF added
that defence budget reduction removes KRW192.7 billion from operating expenses,
with the remaining KRW712 billion sourced from military modernisation, which
includes procurement and research and development (R&D).
...In comments
reported by the Yonhap news agency, Kim Il-dong, the director general of the
MND's Military Force Policy Bureau, said, "Regarding new business, the
contract schedules - including those for overseas tests and evaluations - have
already been postponed due to the coronavirus situation, so we cut the budget
taking into consideration such delays."...”
This is just the beginning of defense budget cut announcements from major Indo-Pacific countries. Large contractors should not be surprised.
Pete
7 comments:
This will be the trend over 12-24 months unless china or pakistan or any other potential mischief maker decides to take advantage to fish in troubled waters.
God knows what trump will do...this virus could start stressing too many fault lines in places like the middle east, north africa, korea or even the indo-pak border...trouble with internal cohesion could lead to 'adventurous' external solutions
the one thing that is clear is that 800-1,000 billion USD annual defense budgets are probably going to be harder to sustain... over time stressing and misusing the dollar's hegemony might lead the US into inadvertent crossing of 'solvency' tipping points...then Hemingway's quote on bankruptcy might come true..
---> 'How did you go bankrupt? Two ways. Gradually, then suddenly.'
PS: Cut off my arm and poke my eye out... I never thought I would see the day when I made a sentence that contained the words Scotty and responsible in a positive tone. But compared to the malodorous & malevolent BoJo and trump or Bolsonaro...Scotty has been the unlikely sane, responsible chappie (though he was likely shoehorned into being a statesman by extremely terrible circumstances.)
Hi GhalibKabir [at April 20, 2020 at 3:50 PM]
Yes there's room for much geo-strategic, COVID induced, uncertainty boosted by China under-reporting deaths, spread and costs of COVID-19. Meanwhile might Pakistan being economically unable to pay for sufficient testing and medical care lead to unpredictable internal refugee flows. Impact on Kashmir? and other Indo-Pak border areas? I don't know.
Afgani refugees moving into Iran and/or Pakistan?
Greater numbers of Middle Eastern and N African refugees making the crossing into the EU?
With Trump-induced COVID-19 treatment delays, Trump may create more foreign policy distractions where he shines before the November Elections.
- Yes the defacto 800-1,000 billion USD defense budget will be hard to justify unless a greater China or Iranian threat is concocted.
North Korea hiding the COVID impact is a real uncertainty. Unless China financially helps NK (more than usual) NK might extort medical funding from any neighbour it can threaten. NK doesn't even get an IMF mention https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19#N
- There is little enlightenment from https://en.wikipedia.org/wiki/2020_coronavirus_pandemic_in_North_Korea which notes "There are no officially confirmed cases of COVID-19 in North Korea,"
Muslim vs Christian refugee flows in Sahel Africa won't help.
Yes Scott Morrison has been very proactive whipping Australia's States together on national COVID-19 measures while targetting stimulus spending like a good socialist. He has redeemed himself since that other crisis this year - the bushfires.
I see Prime Minister Modi has also been very active, announcing "on March 24 that the entire country will go under lockdown for the next 21 days, now further extended to May 3... https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19
Regards
Pete
PS I just noticed: April 20's 2020 https://www.abc.net.au/news/2020-04-20/vietnam-protests-beijings-expansion-in-disputed-south-china-sea/12165646
"Vietnam protests Beijing's expansion in disputed South China Sea as world remains occupied with coronavirus
...China has recently been pushing its presence in the energy-rich waters while other claimants are pre-occupied with tackling the coronavirus pandemic, prompting the United States to call on China to stop its "bullying behaviour" there.
On [April 19, 2020] Beijing said it had established an administrative district on the Paracel islands and another on the Spratly islands.
The two districts are under the control of China's Sansha city, according to China Global Television Network..."
I expected this to happen... pushing the envelope in HK, in SCS...perfect storm that keeps others busy....
John Mearsheimer's prescient early 2000s statement that the rise of china would be violent is slowly being realized...matter of time before china decides to give a bloody nose to one neighboring country to send a message to everyone about irredentist territorial claims,resources grab and military base building...the US has unwittingly built an economically stronger version of the USSR through offshoring since the early 1990s
I don't see how this ends welll... neither the present portents nor the past history serve as comforting examples...rather the opposite...that humans are probably going to trigger yet another unwanted global scale conflict. a regional conflict started by China should rank right up there amongst highly probable events..
I watch markets with anxiety everyday and wonder if the peak years of my career (I am in my late 30s) are going to be impacted by a deep recession rivaling the 1930s depression... the way the impacts are rolling out...makes me think we are already in the early stages of a painful depression (any other word seems pedantic and we seem to simply consoling ourselves with false bravado and pretenses of things being normal)
Hi GhalibKabir
Given the US backed ROC, now Taiwan, also claims most of the South China Sea (including the Paracels and Spratlys), China's Nine-Dash line view is partly understandable.
Unlike Taiwan, only China has the strategic power, allied with infrastructure building capability, to enforce its claim on the South China Sea.
See my reasoning along those lines at http://gentleseas.blogspot.com/2020/04/us-backed-taiwan-also-claims-most-of.html of April 23, 2019.
Cheers
Pete
In the negotiation of US-SK defense contribution, Moon Jae-in insists 13% of increase of the contribution while Trump does 5 time of increase. As Moon Jae-in administration won landsliding victory in the recent national election, SK is going to destroy US-SK alliance. SK borrowed 60 billion usd fluidity (6 months of return period) from FRB to defend won. If SK does not lesten to US, US does not admit extension of the return perid of the fluidity. This will result in default of SK.
Hi Anonymous on US-SK defense contribution negotiations.
Hopefully those negotiations can drag on to November 2020 when Trump will Hopefully be voted out. If Joe Biden comes in a sensible, reasonable US position, may return.
That might be more in line with the 13% increase South Korean President Moon Jae-in is offering.
Regards
Pete
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