Jon Grevatt, Asia-Pacific defence industry analyst at Jane’s
The effect of Covid-19 on defence industrial bases in the Asia-Pacific region has been largely mixed to date, although temporary lockdowns across the region could have major adverse repercussions for local companies and their contract partners.
As of early April, the impact of the virus has forced many regional defence firms to halt industrial activities, while companies in East Asia are ramping up work close to pre-pandemic levels. And like in many sectors, working from home has become the norm.
While defence companies in the Asia-Pacific region have faced similar challenges – albeit in different periods of time – the longer-term impact of Covid-19 could be starkest in terms of defence funding. This could force regional countries to consider downsizing military modernisation initiatives or introduce spending rationalisation measures: something that the Japanese MoD has already indicated it is pursuing.
According to Jane’s Defence Budgets, the impact of the pandemic in the Asia-Pacific region could reduce cross-region defence spending by several percentage points, with the worst of the cuts coming in the early 2020s.
Another long-term requirement emerging from the Covid-19 crisis could be industrial restructuring and consolidation. This has been a trend in the Asia-Pacific defence industrial base in the past few years – especially in Northeast Asia – and could accelerate and expand if the impact of the virus persists.
