The South China Sea and Joint Defense Procurement

By Koh Swee Lean Collin

October 20, 2014

Can ASEAN members join forces on defense procurement? It’s more complex than it seems. 

A recent thought-provoking article in The Diplomatby Liang Tuang Nah titled “Joining Forces in South China Sea Defense Procurement” made some salient observations.

First, in the face of more assertive Chinese moves to enforce its extensive claims in the South China Sea (SCS), the Philippines and Vietnam need to project presence sufficient to “turn their de jure claims into de factoreality.” In the eyes of international law, effective administration over disputed territory holds more water over mere historical claim. The International Court of Justice verdict in May 2008 to grant ownership of Pedra Branca islet to Singapore and not Malaysia is a case in point.

Second, given Beijing’s moves to construct more patrol assets to project and sustain presence in the SCS, more needs to and can be done by Hanoi and Manila. There is no doubt about “need.” However, on “can be done,” the question is how. Nah’s central argument is therefore an interesting one: The Philippines and Vietnam can ramp up their patrol capabilities through joint procurement of technically less capable assets by exploiting economies of scale.

From an economic standpoint, the proposal appears highly attractive. But joint defense procurement is easier said than done. The thrust of Nah’s article is almost exclusively economic and, except for a brief mention, does not discuss political, operational or technical considerations. But joint defense procurement is not merely about economic expediency.

Warships Do Matter

Nah wrote: “In the business of contested sovereignty, what matters is not the ownership of several technologically advanced warships… but rather the ability to deploy less technically capable yet more numerous patrol craft or cutters so as to maintain a constant EEZ enforcement presence.” This assertion misses a few important considerations.

The first concerns the threat environment in question. The SCS differs from, say, the South Pacific, where the island microstates generally face low-intensity maritime security threats such as illegal fishing, not armed naval incursions, and where coastguard-type vessels thus suffice.

True, coastguard vessels have been at the forefront of recent actions in the SCS. But as the Sino-Vietnamese oil rig standoff in May this year had illustrated, heavily armed warships often cast an ominous shadow – in the form of recessed deterrence – behind coastguard patrols. Chinese navy and paramilitary forces have been exercising together in recent years to foster synergy. Hanoi and Manila cannot be certain when naval assets will be unleashed for action in support of coastguards but it pays to possess them as a form of insurance. The ownership of several technologically advanced warships does matter.

For countries with only navies and not coastguards, the logical solution is to opt for a multi-purpose ship of modular design, capable of configuring mission modules for a spectrum of low-to-high intensity operations. But such ships, with the storage and maintenance of mission modules, are expensive to procure. The MalaysianKedah class, a modified MEKO-100 design, is an example. The programme was scaled down drastically from 27 to just six units.

Both the Philippines and Vietnam have separate coastguards distinct from navies, which means having to divide scarce national resources between them. Competition for funding can influence the numbers of coastguard vessels that can be procured in lieu of navy warships. One ought not to be too sanguine about convincing defense planners in Hanoi and Manila of the necessity to buy more coastguard-type patrol vessels instead of warships.

How Many to Build?

A collective acquisition approach, according to Nah, could involve: 1) standardized hulls and crew fittings; 2) common propulsion and engine systems; and 3) joint procurement of non-security sensitive systems and weaponry; thereafter followed by installations of sensitive components customized for national needs. This appears a straightforward solution but implementation will be hard.

A major hurdle is that participants need to agree on these basic technical requirements that are subject to differing threat perceptions and operational needs. For example, the Philippine Navy may require a ship of longer and wider hull to accommodate those capabilities it desires but its Vietnamese counterpart may consider such specifications superfluous to its needs.

Deeper thinking is also required about the numbers of ships required to hit the minimum threshold for economies of scale. Each participant needs to have a long-term perspective of potential security challenges and the operational, technical and fiscal requirements to sustain this capability. The time taken by defense establishments, each imbued with its own set of cultures and doctrines, to reach consensus can be lengthy.

Moreover, the question is whether joint procurement involving just two participants can really achieve economies of scale. Evolving threat perceptions and priorities also pose risks to commitments. The case of Western Europe is instructive, demonstrating that even close treaty allies may scale back commitments on joint defense purchases for reasons such as domestic politics and costs. Are such risks not higher for participants who do not belong to an alliance?

Not Simply About Building More

The point about less technically capable patrol craft or cutters, as Nah mentioned, deserves attention. We are not talking merely about simple patrol vessels converted from civilian hulls and retrofitted with light weapons. We are also not referring to less technically demanding inshore and coastal patrol vessels. Ships optimized for EEZ operations represent a different category altogether.

EEZ-optimized patrol vessels in today’s market are designed with contemporary and future maritime security challenges in mind. They are larger with longer range, better seakeeping qualities, and higher endurance, equipped with advanced radar, electro-optical sensors, satellite navigation, and long-range communications for sustained EEZ operations under all-weather, day-and-night conditions. They are customarily armed with machine guns or at most a medium-caliber cannon. They can accommodate rigid-hulled inflatable boats and many may sport a helicopter – complete with hangar facilities – for close-in inspection and boarding tasks.

These ships are of course less expensive than technologically complex warships but this does not mean they are inexpensive to purchase, especially if they are required in significant number. The Philippines and Vietnam are certainly not looking to acquire patrol vessels of earlier designs, not when China is building not just numerous but better-equipped ships. The oil rig standoff made Hanoi realize that its future patrol assets also require strengthened hulls robust enough to withstand ramming by Chinese vessels. Such technical enhancements entail further costs.

If such patrol vessels already cost more, will the Philippines and Vietnam be able to procure them in appreciable quantity even with economies of scale factored in? And bear in mind that construction and delivery of the ships is not all: Maintenance and repair, fuel, training and infrastructural costs all have to be considered in the long term unless the ships are destined to be “port queens.”

Emulating the European Union?

Nah suggested that “considering the comparatively modest Vietnamese and Filipino defense budgets… these states can emulate the EU’s collective procurement.” The only question is: Can the Association of Southeast Asian Nations (ASEAN) or individual member states like the Philippines and Vietnam emulate the EU along the lines of the European Defence Agency?

The closest one can get, short of a formal agency being established, is the Concept Paper on Establishing ASEAN Defence Industry Collaboration (ADIC) adopted during the 5th ASEAN Defence Ministers Meeting in May 2011. But participation is “flexible, non-binding and voluntary” and this principle “shall supersede all other clauses in this paper.” This stems from general intra-ASEAN acknowledgement of the diverse characteristics of national defense planning and procurement policies in the region, conditioned by differing threat perceptions, priorities and resource capacities. This is a challenge for joint procurement.

Since 2011, there has been little practical implementation of the initiative, except for some intra-ASEAN transactions of mainly small arms and light weapons. If there is ever going to be joint procurement, the area that urgently deserves attention is amphibious sealift capabilities for disaster relief, as Super Typhoon Haiyan illustrated. Yet even this persistent threat has not propelled ASEAN member states into joint procurement. For instance, Myanmar and the Philippines looked at the same landing ship design built by Indonesia, but as separate not joint acquisitions, since national acquisition timelines differ.

Political Winds of Influence

Defense procurements – unilateral or joint – cannot be trivialized as a commercial enterprise. Such processes constitute peacetime preparations for a perceived potential likelihood of conflict in which weapons find utility. Defense procurements are political issues. Nah’s only allusion to this was a brief mention about building hulls and required crew fittings in “a politically supportive third country” and “a state that seeks to balance potential Chinese regional hegemony,” identifying Japan and the U.S. as respective examples.

Japan may appear to fit the mold of a “politically supportive third country,” with its recent relaxation of arms export policy and a prime minister more predisposed towards policies that incur Beijing’s displeasure. Yet political interests do not stay static, especially with changes to the incumbent political party or prime minister.The hawkish Abe is now trying to mend ties with China while exercising caution in helping Hanoi and Manila build maritime security capacities: small numbers of either second-hand vessels or basically non-EEZ-optimized Multi-Role Response Vessels respectively.

Foot-dragging over political sensitivities can cause delays resulting in valuable opportunity costs for the buyers. A good example is the case of India foot-dragging over the decision to export the BrahMos supersonic anti-ship cruise missile to Vietnam, because of the “China factor.” By the time Tokyo decides to risk setting back Sino-Japanese ties even further by selling ships to a Philippine-Vietnam joint purchase, China may have already raced ahead with more ships and consolidated control over the SCS.

Modus Vivendi Over the SCS?

Nah sounded a final note of optimism: “It is the intangible benefits that are arguably more important… the establishment of a modus vivendi between Hanoi and Manila that sovereignty over the Spratly Islands will ultimately have to be shared, leading to an avoidance of future territorial disputes between them.”

Hanoi and Manila have long cooperated to some degree in the South China Sea but recent camaraderie, such as the inter-navy Spratlys soccer game (which is not a new initiative at all; it also happened in 1999), should not be overstated. Despite the misgivings over the oil rig incident, Hanoi took rapid steps thereafter to improve ties with China and hesitated at following Manila in referring the Scarborough Shoal dispute with Beijing to international arbitration.

Manila’s Kalayaan Island Group overlaps into Vietnam’s Truong Sa (Spratlys) claims and these two countries also have a history of bilateral maritime incidents. There is no guarantee that just because both are ASEAN members, they will not come to blows in the SCS in the future, as the Thai-Cambodian border clashes attest. For now, the Philippines and Vietnam enjoy a convergence of interests in the SCS but what about the future and its implications for any joint defense procurement?

Final Thoughts

Joint procurement or not, China will more likely continue to widen the “patrol asymmetry” with the Philippines and Vietnam in the SCS. China is an established naval shipbuilder, whereas Vietnam and the Philippines, with their limited shipbuilding capacities and reliance on foreign acquisitions, are at a clear disadvantage.

A longer-term, more sustainable, less risky approach is to individually purchase small numbers of patrol vessels from foreign vendors but license-build under transfer-of-technology (ToT) schemes. In fact, having successfully purchased patrol vessels from Russia and the Netherlands and built them locally via ToT arrangements, Hanoi is grooming its naval shipbuilding sector to meet long-term maritime security needs. With its recent defense modernization drive, is not implausible for the Philippines to pursue the same pathway. Such a move would not only promote defense self-reliance, it would facilitate the development of an indigenous defense industry tailored to unique national interests and operational requirements.

Buying patrol vessels is not like buying yachts. Defense procurement – joint or unilateral – is not just a commercial exercise, but a confluence of multiple factors.

Koh Swee Lean Collin is an associate research fellow at the Institute of Defence and Strategic Studies, a constituent of the S. Rajaratnam School of International Studies based in Nanyang Technological University, Singapore.

http://thediplomat.com/2014/10/the-south-china-sea-and-joint-defense-procurement/