Diverse regional strategic challenges compel Malaysia to increase defense acquisition budget through 2026, finds GlobalData

In response to conflicting territorial claims over the South China Sea and the complex other regional strategic challenges, Malaysia plans to modernize air force and the naval capabilities. Against this backdrop, the defense acquisition budget of the country is expected to increase at a compound annual growth rate (CAGR) of 9.45% between 2022 and 2026, forecasts GlobalData, a leading data and analytics company.

GlobalData’s report, ‘Malaysia Defense Market – Attractiveness, Competitive Landscape and Forecasts to 2026’, reveals that Malaysia’s defense acquisition expenditure accounted for 28.4% of the country’s total defense budget in 2021, an increase of 6.2% from 2020. However, Malaysia’s defense expenditure is anticipated to register 5.81% CAGR during 2022-26.

Rouble, Aerospace & Defense Analyst at GlobalData, comments: “The increase in budget is primarily driven by Malaysia’s efforts to modernize its armed forces, participation in peacekeeping programs, and ongoing territorial disputes with the neighboring countries. Despite the adverse effect of COVID-19 on the country’s economy, there has been an increasing trend in defense expenditure.

“The defense acquisition expenditure grew from $0.7bn in 2020 to $1.1bn in 2021, with an annual growth rate of 46.5%. The increase in expenditure is majorly due to ongoing programs to procure Maharaja Lela class stealth frigates, Tun Fatimah-class offshore patrol vessels, and AV8 Gempita armored vehicles.”

The Malaysian government has proposed a 2022 defense budget of $4bn. The allocation represents an increase of 1.8% from 2021. The defense budget for 2022 was tabled before parliament on October 22, 2021. The 2022 budget comprises $1.2bn for development expenses and $2.7bn for operations expenses and others.

Rouble concludes: “The Malaysian MoD is currently working on modernizing its armed forces with advanced equipment. To enhance the competencies of their navy and air force, Malaysia has developed plans to upgrade legacy platforms in recent years. Its decision of procuring six second-generation patrol vessels – littoral combat ships (SGPV-LCS) and four littoral mission ships (LMS), will strengthen the country’s operations in its waters. The patrol vessels will help in securing its main Sea Lines of Communications in the peninsular region such as the Straits of Malacca and the Straits of Singapore and secure its strategic interests in Spratly islands.

“As a major nation in Southeast Asia, tackling China’s advances in the Malaysian waters and securing borders especially in the Sabah and Sarawak region remains a core concern for the country. The acquisition of modern frigates will play a major role in improving Malaysia’s combat abilities and will be a step forward towards achieving its goal of ‘15 to 5′ fleet transformation.”

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