When you look at this market and the opportunities, its mind boggling.For a few years now, its been impossible to pick up a newspaper or turn on the news without stumbling into these kinds of comments about the huge untapped markets in Asia. But these guys arent talking about the combined 2.5 billion people in India and China expected to begin large-scale purchasing of consumer goods in the next 20 years. Theyre talking about the other large and growing Asian market thats been increasingly discussed the last few weeks: the Asian arms market. The quote, from a Lockheed Marketing VP, is mentioned in a recent piece from the International Relations and Security Network. The piece also notes estimates that in the next few years East Asia will pass the Middle East as the worlds number three defense market. (Dont worry, were still number one with a gun.) Ideally, this would happen because the Middle East had become so peaceful and stable that their weapons market was quietly shrinking. But no.The big excitement came a few months ago after an annual arms show held in Singapore called Asian Aerospace 2006. The events promoters were agog with the news that this had been the biggest year in the events history, with new records for attendance, participating nations and deals inked. (Although the fact that the record deals amounted to US$15.2 billion is a good reminder that we're still talking about an emerging market...)Activity has been manifesting itself in a lot of other places, as well. Last week federal authorities arrested 4 men trying to negotiate an illegal arms deal between Indonesia and a Detroit-based company. Yes, where the market goes, the black market will follow. (Actually, where the market goes, the black market was probably the pathfinder, but thats neither here nor there.) One shady deal caught and stopped invariably means many others completed, particularly in nations a little more ambivalent about whos buying their weapons.Americas most intense scrutiny is not, obviously, on Indonesias military ascension. But while America and much of the West may be focused on Chinas military ascendancy, more eyes in Asia are on a rising Japan. Even within its established constitutional limits, the Japanese Self Defense Force is already a world class power, and arguably the best in the region, even if its not the biggest. The prospect of a resurgent Japan - and one with a little bit less self-conscious approach to security has started to receive more attention in the West as well. Meanwhile, a Japanese diplomatic report just released reiterated Japans concern with Chinas military build-up.Of course, arms acquisitions this large, in a geographic area this small, have a tendency to make things pretty tense, pretty fast. One spokesman has already asserted that its going to be very, very competitive, but we have the products, technology and people to win. Oh, sorry, that was the Lockheed guy again.Actually, most of the Southeast Asian military improvements are more likely to be used to quell domestic instability and threats than against other states. India-Pakistan and China-Taiwan remain the flashpoints theyve been for the last few decades, but thats why both of these troubled relationships have head starts on the arms race dynamic.The concern for the horizon is competition fueling an arms race between China and Japan. The prospect is discussed in an article from the current issue of Foreign Affairs, where a comparison is made between Sino-Japanese competition and the arms race between Germany and England that fueled the start of World War I (subscription required). If you buy this, there may be a silver lining to the cooperation implied by shady arms deals between Japan and China. But with an established military and commercial leader of the region facing the prospect of an assertive, late-coming nation seeking to take what it deems its rightful place as a regional hegemon, WWI is an analogy thats difficult to ignore.-- Matthew Tompkins
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