Friday 3 May 2013, Amsterdam
In 2013, the Thai government allocated US$6.1 billion to its total defense budget, recording a CAGR of 5.14% during the review period (2009-13). The country’s defense budget is further expected to grow at an estimated CAGR of 7.22% over the forecast period (2014-18), to reach US$8.7 billion in 2018. This consistent increase is primarily driven by the need to compensate for the country’s historically low levels of defense expenditure, as well as the fact that Thailand is located in a politically unstable region. Consequently, the Thai MoD is expected to procure a significant amount of military equipment during the forecast period.
Thailand’s defense industrial base is largely undeveloped and, as a result, the country is highly dependent on foreign suppliers to meet its military needs. The modernization of Thailand’s armed forces increased imports substantially during the period 2011-2012. Sweden emerged as the largest supplier of defense equipment to the country, accounting for one third of total arms imports during 2008-2012. While aircraft were the most imported military hardware during this period, it is anticipated that, over the forecast period, the country will focus more on the procurement of helicopters, armored vehicles, and frigates.
Offsets are compulsory for all defense procurements in the country exceeding US$10.4 million and foreign investors are obligated to invest between 20% and 50% of their contract value into the Thai economy. Even though the government encourages offsets in order to enhance the defense industrial base of the country, indirect offsets are also accepted and the country treats counter-purchase as an eligible offset activity. Additionally, if a foreign OEM is unable to fulfill its offset commitment, it is obligated to pay 5% of the unfulfilled offset obligation as penalty.
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