Malaysia’s defence procurement will slow down owing to budget cuts in defence sector, says a report by Strategic Defence Intelligence (SDI).

Titled “Future of the Malaysian Defense Industry – Market Attractiveness, Competitive Landscape and Forecasts to 2021” the report States that the Malaysian government has allocated $4.5bn for defence in 2016, a 2.6% decrease compared to last year. The defence budget has witnessed a negative compound annual growth rate (CAGR) of 0.33% over the last five years.

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“The Malaysian government has allocated $4.5bn for defence in 2016, a 2.6% decrease compared to last year.”

An average of 33.9% of the total defence budget has been allocated to the army from 2012 to 2016, whereas the average allocation over the next five years is estimated to be 33.5%. Revenue expenditure is to be centred on new recruitment, training and development programmes for troops.

Capital expenditure allocation is anticipated to increase to an average of 20.8% from 2017 to the 2021, compared to an average of 20.6% during the last five years.

The nation’s defence spending is primarily driven by the procurement of corvettes, multi-role aircraft and armoured vehicles. The procurement is anticipated to come down in the next two years due to the completion of certain acquisitions in 2016 and 2017.

Despite the slowdown in procurement, Malaysia’s defence imports and exports are anticipated to increase in the next five years as a result of the Ministry of Defence’s (MoD) modernisation and procurement efforts.

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The Royal Malaysian Army expects to receive 8×8 APC vehicles and armoured fighting vehicles as part of the procurement plan.