Vietnam's Defense Budget

Vietnam has been trying to dramatically expand and modernize its own military capabilities. Hanoi has spent $2 billion buying six submarines from Russia and a large number of fighter aircraft. And from 2004 to 2013, Vietnam’s military spending has more than doubled, Vietnam was increasingly alarmed by China’s growing assertiveness over its sovereignty rights in the South China Sea, known in Vietnam as the East Sea. These concerns rested on a long historic record of mutual suspicion and distrust between Beijing and Hanoi.

Vietnam's defense budget was until recently a state secret. According to the assessment of many experts, actual defense spending is more than double Vietnam's official published figures. Vietnam only rarely provides information on arms procurements, servicing agreements and defense industry cooperation. For example, Vietnam has submitted reports on arms imports and exports for inclusion on the United Nations Register of Conventional Weapons annually since 1994. During this period Vietnam reported arms imports for only four years, 1995, 1997, 2004 and 2005. Vietnam submitted 'nil' reports for all the other years.

In recent years, Vietnamese political and military leaders have given priority to preventing the further deterioration of its stock of military weapons and equipment. Vietnam has sought out sources of spare parts and foreign assistance to maintain, refurbish and upgrade its defense equipment inventory. As a secondary priority, Vietnam has also sought access to relevant modern military technology and its transfer to Vietnam's own national defense industry through joint ventures and co-production. In trying to attain these twin objectives - maintenance and modernization - Vietnam has been constrained by cost, compatibility and U.S. national security trade restrictions.

Other areas of priority for the Vietnamese military are the protection and surveillance of its coastline, which stretches the entire length of the country (3,444 km), and search and rescue operations. In recent years, the Vietnamese military has played an increasingly important role in prevention and rescue efforts related to natural disasters (hurricanes, flooding, landslides, etc.) and humanitarian response.

Military expenditures data from SIPRI are derived from the NATO definition, which includes all current and capital expenditures on the armed forces, including peacekeeping forces; defense ministries and other government agencies engaged in defense projects; paramilitary forces, if these are judged to be trained and equipped for military operations; and military space activities. Such expenditures include military and civil personnel, including retirement pensions of military personnel and social services for personnel; operation and maintenance; procurement; military research and development; and military aid (in the military expenditures of the donor country).

Excluded are civil defense and current expenditures for previous military activities, such as for veterans' benefits, demobilization, conversion, and destruction of weapons. This definition cannot be applied for all countries, however, since that would require much more detailed information than is available about what is included in military budgets and off-budget military expenditure items. For example, military budgets might or might not cover civil defense, reserves and auxiliary forces, police and paramilitary forces, dual-purpose forces such as military and civilian police, military grants in kind, pensions for military personnel, and social security contributions paid by one part of government to another.

In the late 1980s the Vietnamese economy underwent a substantial contraction, with GDP at current exchange rates falling from about $37 billion in 1987 to $63 billion in 1989 [not adjusted for inflation]. By 2010 Vietnam had a Gross Domestic Product [GDP] of $260 billion [PPP] or about $90 billion at current exchange rates. Major industries include machine-building, mining, coal, steel, cement, and chemical fertilizers. Vietnam has exports worth $56 billion a year, with the largest segments being crude oil and maritime products.

The spike in estimated Vietnamese defense spending as a fraction of GDP in the late 1980s was not so much a function of increased military spending as it was a shrinking economy. Vietnamese defense spending has been cut by about two-thirds since 1990. Variously estimated at between 8% to 12% of GDP in the 1990-1991 timeframe, by 2000 Vietnam was spending less than 4% of GDP on its military, and by some estimates spending was barely above 2% of GDP. Vietnam has a significant military capacity. It has one of the largest militaries in Southeast Asia, with about 500,000 soldiers. There are about 21 million males available for military service. In 2003 Vietnam's defense budget was estimated at US$2.3 billion. Vietnam's defense budget (as of 2008) was estimated to be about $4.7 bn, about 5.2 percent of real GDP. Total spending is estimated at about $4 billion a year on its military, or about 2% of its GDP.

Vietnam’s spending on defence rose in absolute terms from US$ 2.6 billion in 2001 to 3.3 billion in 2007, with significant funds allocated to the VPA’s modernization program. Defence spending fell precipitously in 2008 and 2009 when the global financial crisis impacted on Vietnam. The December 2009 White Paper said Vietnam's defense budget in 2008 was VND27 trillion (US $1.46 billion), or 1.8 percent of gross domestic product (GDP). Jane's Defence Industry reported 14 January 2011 that Vietnam's military spending was to rise by 70% in 2011. Vietnam's defense budget in 2011 will increase to VND52 trillion (US $2.6 billion), Defence Minister Phung Quang Thanh said at the XI Congress of the Communist Party of Vietnam. This numbers is an increase of 70% compared to 2010. Although the increase is unprecedented, but the defense minister of Vietnam, is consistent with a commitment that the government launched 12 May 2009 to increase publicly acknowledged defense spending to 1.8% of GDP.