In 2012, Singapore’s defense expenditure is estimated to be US$9.8 bn. During the review period (2008-2012), the country’s defense budget registered a CAGR of 6.4% and, over the forecast period (2013-2017), it is expected to record a CAGR of 3.4% to reach US$12.1 bn by 2017. The Singaporean government is expected to spend a total of US$56.5 bn on defense during the forecast period, of which US$37.6 bn is expected to be spent on procurement. In 2012 the country’s defense expenditure was equal to 3.6% of GDP. Over the forecast period, Singapore’s defense budget is expected to remain at 3.5–4% of GDP (reference see graph).
Despite a favorable and attractive foreign investment environment, foreign OEMs are discouraged from entering Singapore’s defense industry due to a shortage of production factors such as land and labor. Singapore is a small island of 710 square kilometers, which had a population of 5.16 m in 2010 and has a declining birth rate, and the combination of these factors represents a major barrier to the further industrialization of the country. Singapore’s acute land shortage is also reflected by the fact that the country is forced to purchase training space in foreign countries in order to train its armed forces.
During 2007–2011, Singapore was the world’s fifth-largest arms importer, and during 2007–2009, in particular, Singapore’s arms imports registered robust growth and reached US$1698 m in 2009, a significant 341% growth from US$385 m in 2007. However, taking cue from the global slowdown, the import trend witnessed a significant decline of 44% in 2010 and by a further 3% in 2011 to reach US$920 m.