Defence Budget Defence Reform

Defence Priorities Amidst the COVID-19 Pandemic : What Should be in the 2021 Defence Budget and Beyond?

With the nation battling the pandemic and trying to recover from the economic slowdown, we can expect that the healthcare and social protection systems will be the main focus of this year’s budget. This is understandable, given the direct effects of the virus crisis on livelihoods and health. However, the existing budget is already underfunding the Malaysian Armed Forces’ core obligatory operations, notwithstanding commitments to increase readiness and capabilities and expanded operational demands due to the pandemic.

All eyes are on the Budget Day as it draws near. 

With the nation battling the pandemic and trying to recover from the economic slowdown, we can expect that the healthcare and social protection systems will be the main focus of this year’s budget. This is understandable, given the direct effects of the virus crisis on livelihoods and health. However, the existing budget is already underfunding the Malaysian Armed Forces’ core obligatory operations, notwithstanding commitments to increase readiness and capabilities and expanded operational demands due to the pandemic. 

Defence Expenditures (Estimated) for the last three years by Operating and Development expenditures. These values have remained relatively constant in recent years but have not been sufficient to resolve many pressing legacy issues.

Last year, the Ministry of Defence was allocated about RM 15 billion. While we expect that the overall budget share will not decrease or increase significantly, we would expect that some elements of defence related to the healthcare crisis will receive increased allocations. For example, since the Malaysian Armed Forces has deployed forces to help support MCO, and has set up field hospitals to supplement Health Ministry facilities (particularly in Tawau), we should expect that these elements receive the appropriate funding increases.  

Even so, the government will do well to remember that beyond the virus, there are also other national security concerns that persist. Amid the pandemic, Malaysia continues to face increasing tensions in the South China Sea, a fluid security situation in Sabah with the ongoing kidnap-for-ransom activities in the Sulu Sea as well the claim staked by the Philippines. As such, it is important for us to maximise the value limited budget with proper prioritisation and good stewardship of the money. 

To take a sneak peak into what might be the highlights for the defence budget this year, we take a leave out from the speech by the Chief of Defence Forces, during the Malaysian Armed Forces Day on Sept 22. He outlined four pillars outlined, which were: 

  1. Memperkasakan Kesiagaan AsetImproving Asset Readiness
  2. Memperkasa Warga ATMStrengthening MAF Personnel
  3. Mengukuhkan Keupayaan SiberEnhancing Cyber Capabilities
  4. Menterjemahkan Kertas Putih Pertahanan – Translating the Defence White Paper   

We agree with this framework and the importance of these priorities. Further to that, for Budget 2021, we propose the following focus areas for the government to fix.  

Improve MAF readiness by systematically replacing obsolete equipment and plan procurement for the future force. 

We agree with the CDF on the importance of improving MAF Asset readiness. Aging and obsolescent equipment (faktor usia dan keusangan aset-aset) is a major priority that needs to be rectified to improve MAF’s readiness and capabilities. We need to “do more with less”, spending on assets should provide optimal impact. This is especially pertinent given that many assets still in MAF service are at least two decades old, with some approaching 60 years.

This is particularly important considering that aging equipment has had very visible effects on the ability of MAF to carry out its missions. The S-61A Nuri helicopters have been in MAF service since 1967; the helicopter itself is a design from 1959. In recent years, the helicopter has suffered several crashes, some of which have been fatal for the passengers and crew.

In a similar vein, the lack of new ships for the Navy, coupled with insufficient maintenance allocations, have hampered the Navy’s ability to uphold maritime security. The Auditor-General’s 2018 Series 3 report outlines that many ships from both APMM and Navy are in some state of disrepair, and this has hampered maritime operations.

A comprehensive plan to replace these assets while reconciling against resource limitations is absolutely necessary. This must be viewed in line with pillar 4 stated by the CDF – translating the Defence White Paper. This does not mean literally “translating” the  document from one language to the other, but instead means to implement the DWP and “translate” its aspirations into action. In other words, it is taking the strategic guidance provided by the DWP and turning it into a practical set of plans for the military to evolve capabilities in order to perform relevant missions. 

We understand that a revised version of the Strategi Ketenteraan Negara (National Military Strategy), SKN 2.0, will be produced to realign the national military strategy from one that is based on desired capabilities (capability-based) to one based on national interests (interest-based). This ought to be followed by the joint capability development plan that should then be presented to an inter-ministerial Investment Committee that includes the finance ministry in order to the National Defence Investment Plan

At the moment, the three services each have their own capability plans, namely the the Army4NextGen for the Army, the 15-to-5 Programme for the Royal Malaysian Navy, and the CAP55 for the Royal Malaysian Air Force, but there is no joint capability plan for the MAF where all items are budgetarily approved. As such, to put it crudely, these programmes are just a wishlist, and there is no guarantee that the government of the day will commit to funding the listed items.  

Once the streamlining of the development plans has been done, the government must do its utmost to commit to a funding plan that is well-timed, with significant oversight components to ensure every penny is spent as promised. The sooner this plan is presented, the sooner it can be debated, and the sooner it can be put into motion. 

Enhance MAF capabilities in the maritime domain. 

An important priority that the government should emphasise is MAF capabilities in the maritime domain. Malaysia is a “Maritime Nation with Continental Roots”, as stated in the 2019 Defence White Paper. We benefit immensely from both our rich resources both on land and at sea. The principal threats faced by Malaysia is coming from the sea, including increased tension from assertive maritime behaviors,  overlapping claims to maritime zones with neighboring countries, as well as unconventional threats such as piracy, smuggling, unregulated and illegal fishing, terrorism and extremism. 

The Auditor-General’s 2018 Report Series 3 notes that there have been 89 incursions into Malaysia’s Maritime Zone by the People’s Republic of China. These incursions have severe implications for our hydrocarbon and fisheries industries. We saw earlier this year how Chinese vessels managed to force a situation that required the removal of Petronas’ contracted oil rig, West Capella, near the edge of East Malaysia’s maritime zone. 

Operating Expenditures by service branch and Joint Force Headquarters. Even though Malaysia faces many pressing maritime issues, the Army still takes up most of the fiscal space afforded to the Armed Forces.
Development Expenditures by service branch. In terms of acquiring new assets, the Navy tops out. One must consider though the fact that generally, for the same unit echelon / size, the Navy tends to have less personnel but much more expensive assets.

When you consider that the Littoral Combat Ship program is far behind schedule, this is all the more pressing and concerning. In that regard, the government needs to come clean on the management of the project and take decisive action to resolve the project’s outstanding dues, failing which the Navy will continue to have to operate with aging equipment. 

As much as possible, national defence must be able to protect these vast areas at the outer edges of Malaysia’s strategic depths. The failure of which will see Malaysia not only losing prestige and credibility as a sovereign nation, but also the loss of a significant economic resource area.  

Develop our Cyber Electromagnetic Capabilities. 

As the MAF continues to evolve technologically, so too must its ability to protect the information technology infrastructure that will become an increasingly important key enabler. Network-centric warfare will enable the MAF to conduct missions involving forces across all domains, but doing so will require the employment of cyberspace effectively. To that effect, the MAF must not only be able to conduct information and cyberspace operations to protect data flows and communications, but must also be adept at electronic warfare, which concerns the attack and defence of the physical platforms of the network responsible for managing signal transmission and reception.

To that end, we welcome the CDF’s announcement of a Cyber Command that will be responsible for both of these mission sets. Previously, the two different missions were carried out by separate units within MAF, which are the Cyber Defence Operations Center under the Defence Intelligence Staff Division (Bahagian Staf Perisikan Pertahanan), and the Defence Communications and Electronics Division (KOMLEK – Bahagian Komunikasi dan Elektronik Pertahanan) of the MAF Headquarters. Joining the two units under one command will be an important measure for streamlining all cyber-electromagnetic activities for the MAF.

The government must ensure that this mission profile is given the appropriate recognition in terms of funding and integration. We note with concern how the newly released Cyber Security Strategy fails to mention the cyber and electronic elements of MAF as part and parcel of the nation’s strategy to safeguard cyberspace. The MAF should be seen as an equal partner in this regard given its capabilities and organizational strengths. 

Strengthen the Welfare for the Military Personnel and Veterans. 

Military personnel have had to expose themselves to extra risk during MCO while many veterans have lost their income due to the economic impact of MCO. The efforts to improve the living quarters (RKAT) for service personnel must also be continued. Having a decent living condition and the peace of mind that their family is safe is important for the morale of the soldiers, who are carrying out their duty away from home. Efforts have been made in the past two years to improve their living conditions, with RM150million allocated to fix about 2000 houses last year. These efforts must continue.

Operating expenditures, by civilian programs of the Ministry. Managing veteran’s affairs takes a much smaller bandwidth than general management, which is understandable. However, every effort must be made to ensure that the allocation is effectively used to service veteran needs and welfare.

Overall, the Ministry has to adopt a new paradigm when it comes to ensuring the welfare of retired personnel. Although welfare spending here remains important, considerations must be made to help facilitate their adjustment to civilian life and civilian jobs. Many of the retired veterans have broad skill sets as a result of specialist trade training during service, and these should be leveraged by the private sector as much as possible.

On average, many of the enlisted personnel who retire do so in their late 40s to early 50s. Officers may also serve a short commission of up to 10 years, retiring around their late 30s and early 40s, forgoing pensions.  Enlisted pensions may range from RM1500 to RM3000 depending on rank at retirement. Jobs that can match this pension will do much to not only provide for these retirees and their families but also give them much pride and dignity.

Our veterans have sacrificed much in their long years of service. Society at large must work with the government to ensure that there are appropriate programs to ease their lives back into the very societies that they have defended for so long. 

Step up Defence Diplomacy. 

One of the three pillars of our defence strategy is “Credible Partnerships” (the other two being “Concentric Deterrence” and “Comprehensive Defence”). This credibility is through proactive participation and promotion of defence activities that provide value to the nation, region and broader international community. A limited budget warrants Malaysia to more clearly define its foreign and national security priorities so that international defence engagements are focused and relevant. Many exercises and staff and defence college exchanges have been postponed this year, but these initiatives are key to fostering vital networks and a familiarisation with defence partners.   

Invest in our Defence Industry.  

Investment in the defence sector should be focused on developing niche areas in our defence industry that best supports the Malaysian Armed Forces’ transformation along interest-based requirements under the Defence White Paper, while also creating new high-paying jobs. A principle of limited self-reliance should be employed, where focus needs to be given on some basic defence needs as well as more high-value added, dual-use, and niche sectors, such as shipbuilding and cyber capabilities. The National Development Investment Plan and the revised Joint Capability Plan will be crucial for scrutiny and discourse as these developments unfold. 

Development Expenditures for the civilian administration of MinDef. As noted here, the R&D portfolio is small relative to other office and land-related acquisitions.

We understand that the ministry is set to launch a Defence Industry Policy, which is aimed to guide government interaction with industry players, and commit the government to developing key defence-economic capabilities domestically. 

Malaysia has some capability in ship-building, heavy industry, and small arms, but these  are not without complication and do not leverage on some of Malaysia’s comparative advantages. Programs such as the Littoral Combat Ship and the AV8 Infantry Fighting Vehicle have been found to be behind schedule. On the other hand, Malaysia has significant experience with semiconductor manufacturing, albeit primarily for civilian usage. Efforts should consider leveraging on this experience for defence uses as well.

The government must play a direct role in investing and steering these developments and ensuring that the industry does not remain vendor-driven. Doing so will also yield economic returns in the form of high-value jobs and spur innovation which is transferable to other sectors too. 

Conclusion

Defending our nation is an indispensable task that we must not lose sight of. In a time when the country is faced with great challenges and limited resources, we must, more than ever, effectively reconcile limited resources against pressing priorities.  The government must see to it that funds and appropriate resources are made available to service those pressing priorities effectively. The opportunity cost of not investing properly in defence planning will be felt in the long run and will not serve the interests of Malaysia.  

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