Thailand - Defense Spending

Beginning in the 1950s, when Thailand undertook to build up and modernize its armed forces to withstand perceived threats from communist expansion in Southeast Asia, there was a relatively steady increase in government expenditures for defense. During that time, social and economic developments had to compete with an expanding military establishment for limited financial resources. The high cost of maintaining a credible defense posture was compounded by a desire to stay abreast of weaponry advances in a rapidly changing technological age as well as by rising inflation rates and economic retrenchment.

During the three decades of Thai military modernization, the amounts of money budgeted and expended for defense varied somewhat according to whether or not a military regime controlled the government. Predictably, defense expenditures tended to rise moderately when military governments were in power, but even then the percentages of total government outlays for the armed forces were not inordinate when compared with defense expenditures in some other countries, nor were they high when compared with amounts spent on social needs, such as education and health.

In the mid-1980s, defense spending averaged about 30 percent of the government's annual current expenditures and about 4.2 percent of the gross national product (GNP). Additional costs of internal security, which were attributed in government statistics to the Ministry of Interior rather than to the Ministry of Defense, further increased the country's total current security burden by an average of about 6 percent annually. But even with internal security costs added, government statistics still did not reflect the total defense bill. Reports of funds budgeted and expended reflected only amounts covering current accounts and did not include the cost of new equipment acquired to update the armed forces' fighting capabilities.

Although the country's armed forces did not constitute a large military establishment when compared with those of some other Asian nations, the costs of maintaining combat readiness began, by the late 1980s, to pose problems for the government treasury. The country was experiencing many of the economic problems common to developing countries undergoing rapid economic change. Among these were a worrisome trade deficit inherited from previous regimes and the continuing impact of rising oil prices. At the same time, moreover, the government was still coping with a persistent possibility of insurgency and with the threat from Vietnam.

During the era of American involvement in the war in Vietnam, the United States met most of Thailand's military equipment needs with a steady flow of hardware, mainly in the form of grant aid. In the mid-1970s, the United States Congress dramatically reduced the role of grant military assistance, relying instead on foreign military sales and direct commercial sales. To make up for the loss of United States grants and to cover the costs of equipment needed in the country's efforts to modernize its armed forces, the government in 1976 authorized its Ministry of Finance to obtain US$1 billion in loans from private banks in the United States and Western Europe over the next 6 to 8 years. Approximately one-half of this amount was devoted to hardware requirements of the army; air force and navy needs were to be met by equal portions of the remaining one-half. This approximate distribution of funds was the pattern for defense expenditures followed by succeeding governments.

Although it was not a common practice for private banks to lend money to foreign governments for military purposes, banks in the United States, Britain, Canada, and the Federal Republic of Germany (West Germany) had loaned Thailand more than US$335 million by the late 1980s. Thailand's unconventional approach to its defense needs was aided by its generally high credit rating among the world's private banks and the judgment of most bankers that the money would be used for the country's own defense rather than for purposes of aggression.

Defense Expenditures and Manpower Levels, Fiscal Years 1980-86

Fiscal Year 1	Defense Expenditures 2 (in billions of baht)	Defense as Percentage of Total Expenditures	Defense as Percentage of GNP	Military Manpower 3	Paramilitary Forces 4
1980	22.4	20.1	4.0	230,000	67,000
1981	27.7	19.5	3.8	233,000	67,000
1982	33.1	30.4	4.2	235,000	71,000
1983	35.5	30.3	4.2	256,000	71,000
1984	39.4	30.6	4.2	256,000	73,000
1985	41.4	30.8	4.2	265,000	75,000
1986	41.2	30.8	4.3	273,000	80,000

1 Fiscal year extends from October 1 through the following September 30, e.g., fiscal year 1980 began October 1, 1979.
2 Accounts do not include expenditures for internal security or major military equipment purchases.
3 Gross national product.
4 Includes Thahan Phran (Rangers), Village Defense Corps, Border Patrol Police, Marine Police, Police Aviation, and Special Action Forces.

By the 1990s Thailand's yearly defense spending was about US $4 to 4.3 billion. The defense budget as a percentage of Gross Domestic Product (GDP) had remained constant at 2.1 percent. About US $800 million to US $1 billion was spent annually for military hardware, both to replace outdated items and for new programs. Thailand's domestic defense industry capabilities remained rudimentary. Although Thai industry was able to produce some forms of ammunition, the Ministry of Defense (MOD) relied heavily on foreign sources for virtually everything else such as transportation, communications gear, and weapons.

Thailand's Ministry of Defense published a defense white paper, the "Defense of Thailand 1996" which was a convenient source of information. With respect to future trends, the Thai Armed Forces began a process of downsizing the number of personnel. The military hoped to maintain readiness by offsetting the downsizing of personnel with more sophisticated equipment.

In the late 1990s, due to the economic situation and conditions laid down by the International Monetary Fund (IMF), the Royal Thai Government (RTG) scaled down its defense spending by almost 50 percent, to about US$2 billion. Purchasing during this period were mostly replacement parts and upgrading of aging aircraft. However, the Royal Thai Air Force in its five year (2000-2004) plan was considering its requirements for each two new Airborne Early Warning and Aerial Mapping aircaft, two squadrons of used F-16 fighters, and a number of search and rescue helicopters.

Thailand has traditionally placed an emphasis on internal security and counter-insurgency warfare. Over the past decade it has pursued a doctrinal shift emphasizing conventional warfare instead. This is partly the result of growing stability within the country, together with Bangkok's view of itself as a regional power. Thailand's priority to develop a well-rounded conventional warfare capability is not driven by any obvious threat; rather, it reflects an interest in having the means to react quickly to unforeseen developments, as well as in national pride. The improvement in the economy following the late 1990s economic downturn has given rise to procurement funds being more readily available. Capital equipment procurement included the 11,400-ton HMTS Chakri Naruebet vertical/short take off and landing (VSTOL) carrier (US$350-million), two 2,270-ton Yarrow-class frigates (US$680-million), and Chinese Jianghu IV type missile frigates, OPVs and replenishment vessels. The Thai government also purchased two GKN Westland Super Lynx 300 multirole helicopters for US$35.6 million. The helicopters were scheduled to be deployed on the Yarrow-class frigates and will perform anti-submarine and surface surveillance duties.

In the post Vietnam War period, the U.S. was Thailand's main source of military equipment; the relationship was particularly strong during Washington's involvement in Vietnam and immediately after the conflict. China's contribution has also been relatively significant. However, Thailand was now more open towards trade with a wide variety of suppliers as it was poised to join Malaysia, Singapore, Vietnam and other Asian countries in procuring cheap (yet effective) Russian military hardware. In addition, the Thai government is interested in procuring systems from Western non-European nations such as Canada and Australia, along with European arms suppliers like the Czech Republic, Spain, and Sweden. (The acquisition of their VSTOL carrier from Spain is a case in point.) New buying has also been carried out in Pakistan, North Korea, Singapore and other suppliers of niche products. It has been reported that Thai Armed forces sources recently said that the air force has expressed an interest in Russian ground-to-air missiles. Thailand played host to a defense exhibition (Defense Asia), in December of 2003.

Defense expenditures in fiscal year (FY) 2006 were estimated at US$2 billion, representing 1.09 percent of the gross domestic product (GDP). The military-backed administration that came to power following the September 2006 coup endorsed an almost 35 percent increase in the defense budget for FY 2007. A Ministry of Defense spokesperson said additional funding was needed to make up for shortfalls accumulated during Thaksin Shinawatra's five-year rule, expand the counterinsurgency campaign in the southern provinces, replace or refurbish equipment, and replenish ammunition, stores, and fuel stocks. The projected defense budget for FY 2007 was US$3.2 billion.

Prime Minister Thaksin of Thailand said he favored a three-billion-baht increase to 20 billion baht a year in the defense budget for arms procurement and development during 2005-2013. He also gave the green light to the army's plan to buy 33 new Black Hawk helicopters by 2009 and an air force proposal to upgrade F-16 and F-5 jet fighters. At recent meetings on the structure of the armed forces at Government House, the prime minister agreed with all arms procurement proposals for the years 2005-2013, submitted by the Supreme Command and the three armed forces. He was also quoted to have said "Whatever they want to buy, even if it costs billions of baht, I am willing to support if they have good reasons and supporting facts. It does not matter how much it is." A problem with Thai procurement, some analysts argue, is that the armed forces have often stressed procurement of high-tech arms at the expense of support, maintenance and training.

Following the military coup in 2006 and the civil unrest in 2010, the Thai military played an important role in both maintaining internal security and protecting national interests and sovereignty. With support from the Thai government for the military’s ongoing force development plan, the Thai defense equipment market remains attractive for both local and foreign defense equipment manufacturers and suppliers. Procurement priorities are dictated by the national security situations and the anticipated threats. Current key military initiatives with major campaigns include: the promotion of national reconciliation, protection of border areas and maritime interests, suppression of illegal immigrants and goods smuggling, anti-terrorism, disaster relief, and anti-riot and internal peacekeeping activities.

Defense Budget Unit: Million US$	2008	2009	2010	2011	2012(e)
Defense Budget	5,126	6,077	5,501	6,082	6,478
GDP	329,721	350,493	347,364	369,943	381,041
Defense Budget in % to GDP	1.55%	1.73%	1.58%	1.64%	1.70%
Annual Inc/(Dec)	47.05%	18.56%	-9.48%	10.55%	6.51%
Exchange Rate	28	28	28	28	28

The Thai armed forces will continue to follow their 2011-2020 military development plan to improve efficiency and effectiveness; prioritizing maintenance requirements and new procurements are the critical tasks for the Thai armed forces. Under the plan, the annual defense budget will be in the range of 1.6 to 1.7 percent of the Gross Domestic Product (GDP) or approximately 8 percent of the total budget expenditure.

With the recovering Thai economy, the Thai military budget remained relatively high compared to the early 1990s, with the Thai defense budget has remained in the USD four to six billion range. This budget will fund the long-awaited development plan of the Thai armed forces, ensuring Thailand’s ability to cope with national security threats, especially for maintaining internal security, fighting terrorist and separatist groups, and coping with border area disputes, all of which have become more prevalent in recent years.

Thailand increased defense spending in FY 2013 7% - up to 180.8 billion baht (5.7 billion dollars). According to the budget committee of the government, the military budget in 2013 fiscal year 7.5% of total government spending, or about 1.45% of GDP. In the 2013 fiscal year that began in October 2012, the needs of the Army were about half of the allocation for defense appropriations. Army will be 88.8 billion baht, Navy and Air Force - 35.2 and 33.9 billion baht, respectively.

Under the Thai military development plan, the Thai armed forces have prioritized their military upgrades, reconditioning/refurbishment projects, and new procurements. This is to ease the Thai government’s critical budget constraints by spreading the appropriation over several budget years – so called “tied-over” budget allocations. Based on the development plan for future military projects, the following are items with high procurement potential: C4I tactical communications systems, helicopters (tactical and transport), tanks and armored vehicles, training simulators, Unmanned Aerial Vehicles (UAVs), Air Defense Systems (ADSs), Tactical Data Links (TDLs), Electronic Warfare (EW) equipment, radar systems, and combat communications equipment.

The Royal Thai Army (RTA) is relatively self-sufficient despite its needs for hardware improvements, new equipment, upgrades, and refurbishment. The challenge that the RTA faces is operating aging equipment. Therefore, main focuses of the RTA’s development plan include replacing obsolescing hardware, increasing crowd-control capability, improving firepower and mobility, improving the armored air cavalry regiment, and enhancing its ability to fight around the clock (e.g. night mission capability).

The Royal Thai Air Force (RTAF) is striving to ensure its combat readiness to respond to the air forces of neighboring countries by keeping pace with regional developments in air power and continuing to develop its force through refurbishment and upgrades of existing equipment. In recent years, new threats requiring RTAF support include: air support for ground troops during anti-terrorist activities in the three Southern provinces, border area conflicts, disaster relief and internal peacekeeping missions.

The Royal Thai Navy (RTN) is responsible for a relatively large area, including Thai bodies of water as well as other areas such as those involved in its participation with international task forces to suppress pirate activities in the Middle East. However, the RTN’s main duty is to protect Thailand’s territorial waters, natural resources, fishing areas, and shipping lanes. In peacetime, the RTN also assists with disaster relief and related search and rescue missions. The RTN has introduced a development plan to improve its capability; however, its needs must be prioritized given the limited budget. Currently, there are plans for maintenance work, upgrades and replacement of aging hardware.