Asia Money Crisis Shoots Down Arms Deals

And with the region's once-affluent economies reduced to receiving alms instead of buying arms, global defense contractors are finding that their growing market has begun to slow down.

However, security experts say the dampening of the Asian arms market does not necessarily reduce the potential for conflict and is sure to worry the United States, which stands to lose big with flagging arms sales.

The latest country to ask for cancellation of a major defense order is Thailand, which recently pleaded with visiting U.S. Secretary of Defense William Cohen for help in putting off the purchase from U.S. manufacturers of eight F/A-18 Hornet jet fighters worth $392 million.

"We want to delay payment as long as possible or pay as less as possible. If possible, we don't want to pay at all," said Mongkol Ampornpisit, Supreme Commander of the Thai armed forces.

In a frank confession to officers at Thailand's National Defense College recently, Mongkol said the Thai Air Force had nearly gone bankrupt due to the country's economic crisis.

The Thai military has already scuttled the idea of putting up a communications satellite called the "Star of Siam" for national security operations, due to the economic difficulties.

Since July 1997, when Asia's economic crisis broke out, governments in South Korea, Indonesia and Malaysia have also put off plans to buy new weapons and military equipment as the value of their currencies plunged and made imports prohibitive.

South Korea has shelved plans to buy new and sophisticated coastal radar systems from the U.S. and is reportedly hesitant about paying its annual bill of $400 million for U.S. troops stationed on its soil.

The Indonesians have also scrapped a plan to purchase fighter aircraft from Russia. "At this moment we are concentrating on economic recovery. So we are not thinking of buying military equipment," Indonesian defense minister Edi Sudradjat said after a meeting with Cohen.

Apart from Indonesia and Thailand, the U.S. defense chief had also visited Malaysia, Singapore, China, Japan and South Korea.

While U.S. officials claimed that Cohen's 11-day tour of the region was not meant to boost arms sales and aimed only to "assure its friends of support during economic crisis," there was skepticism in Thailand about the real purpose of his visit.

Confronted with Thailand's request for help in sorting out the cancellation of the fighter jets, Cohen remained non-committal and even "indifferent," say some Thai media commentators.

But on Jan. 30, Thailand and the U.S. reached agreement agreed to find a third country to buy the fighter jets from the U.S. manufacturer, McDonnell-Douglas.

Thailand can also cancel the contract, but faces a penalty of $250 million if voids the purchase order.

To garner U.S. cooperation, Thailand has even offered Washington permission to set up a floating arms stockpile in the Gulf of Thailand. A similar U.S. proposal made in 1993 was rejected by the government of Chuan Leekpai at the time.

According to the U.S. Arms Control and Disarmament Agency, spending by East Asian countries on imported weapons in 1985 to 1994 reached about $67 billion. Japan ranked first with $11.7 billion worth of purchases, Taiwan with $9.5 billion, South Korea with $8.7 billion and Thailand, $3.8 billion.

Major purchases during this period included: 60 French Mirage-2000-5 and 150 U.S. F-16 jet fighters acquired by Taiwan; 120 F-16 fighters and 80 U.S. UH-60 Blackhawk helicopters purchased by South Korea; 20 Russian MiG-29 and eight U.S. F-18 fighters by Malaysia; and 18 F-16 fighters and three U.S. EC-2 Hawkeye early-warning planes purchased by Thailand.

These countries were also reported to have snapped up air-to-air and air-to-ground missiles, long-range surveillance radar, and other high-tech systems of the sort used by U.S. forces against Iraq in 1991.

Analysts expressed concern about a spiraling "arms race," but Asian governments said they were "merely modernizing their antiquated stockpile weapons." Defense analysts say that they may have been prodded on by the U.S. to prepare for China's emergence as a economic and military superpower.

Corruption -- where military officials placing big orders got commissions from defense manufacturers -- seems to be among the major reasons for the large arms purchases in recent years.

Likewise, many countries long dominated by the military have also been making weapons purchases for domestic political reasons, not to fight external enemies.

"Weapons are also symbols -- albeit expensive symbols -- of state power. To see weapons systems in merely operational terms tends to miss the point. In Asia, symbolism is as important, if not more important, than substance," said Derek da Cunha of the Institute of Southeast Asian Strategic Studies in Singapore.

While Asia's economic turmoil is likely to result in further cuts in defense spending, some worry that the downturn in the arms market could revive the Cold War-era rivalry in the region between the U.S. and Russia.

This time, the reasons for rivalry lie not along ideological but financial lines -- with the "merchants of death" in both countries vying to peddle arms to Asian countries.