During the recent India-Pakistan conflict, it was reported that Pakistan, flying Chinese-made J-10 fighter jets, downed at least one Indian Air Force Rafale. The Rafales, which are produced by France’s Dassault Aviation, are among the most advanced of India’s air assets. Days before the conflict erupted, India announced it had signed a deal to buy 26 more Rafales for $7.4 billion. The fact that a Chinese-made fighter without much of a combat record was apparently able to down a Rafale has touched off an intense debate about the quality of Chinese arms, and whether India made the right choice procuring advanced weaponry from Dassault in the first place.
This discourse has implications for Southeast Asia, where many countries are now modernizing their militaries after years of stagnation. And quite a few have chosen to do so by deepening defense ties with French and other European arms suppliers. Indonesia has been very active in this regard with its own $8 billion deal to acquire 42 Rafales from Dassault, the first of which is scheduled for delivery next year.
Beyond the air domain, Indonesia recently acquired a pair of Thaon di Revel-class frigates from Italy’s Fincantieri for $1.25 billion, and is building two Arrowhead 140 frigates under license from the U.K.’s Babcock at state-owned shipbuilder PT PAL. A project to co-develop two battery-powered Scorpene submarines with France’s Naval Group is also in the works.
In neighboring Malaysia, Naval Group is helping to deliver six long-delayed Littoral Combat Ships to the Royal Malaysian Navy. Meanwhile, the Philippines announced it would be procuring 40 fast patrol boats from France to shore-up its Coast Guard, and has plans to buy at least two submarines. No final decision has been announced yet, but Naval Group and the Scorpene are surely in the running.
With geopolitical tensions on the rise, countries in Southeast Asia have been investing more in upgrading their defense capabilities. And they have often tilted toward Europe for procurement of major weapons platforms. Notably, many countries in the region have avoided leaning too heavily on China to supply critical arms and technology, such as fighter jets or warships.
One obvious reason is that until recently Chinese products like the J-10 fighter jet have been unproven in combat, and there isn’t a big export market for them. The other reason is that China is locked into a series of ongoing territorial disputes with many countries in Southeast Asia, which is an obvious impediment to big arms deals.
Could recent developments change this calculus? Potentially. But there are a couple of caveats. First, it’s difficult to draw strong conclusions from a single combat engagement. Details have been hard to verify, and other factors such as tactics, training, and mission support would likely have played a big role. It’s not possible to conclusively say the J-10 is superior to the Rafale.
Another key point is that for industrializing countries looking to climb up the value chain, which includes Indonesia, the Philippines and India, defense procurement is not always solely about buying the best equipment at the most competitive price. A second and sometimes more important objective is to acquire technology, skills and indigenous production capabilities.
In 2016 India agreed to purchase 36 Rafales for a little under 8 billion euros. A condition of the deal involved offsets, wherein Dassault would use local supply chains and invest in Indian companies. Similar terms were part of India’s Scorpene submarine deal with Naval Group. India didn’t just want to buy submarines, it sought (and received) technology transfers with an eye toward indigenous production.
Southeast Asian countries approach defense modernization with a similar mindset. PT PAL’s co-production of Scorpene submarines with Naval Group will involve local production as well as skill and technology transfers. Half of the forty patrol vessels the Philippines is slated to receive from France will be produced in domestic shipyards. And Indonesia’s purchase of 42 Rafales is also likely to include offsets of some kind.
When it comes to purchasing big-ticket combat systems, political economic considerations cannot be ignored. Sweeteners such as technology transfer, upskilling and indigenous production often play a critical role in these decisions, and French firms have shown a willingness to meet many of these terms in recent years. It a big reason why India is using French fighter jets and submarines in the first place.
If China wants to sell more arms into markets like Southeast Asia, offering fighter jets that can compete with Rafales at a lower price point is a good start. Offering technology transfer, upskilling and indigenous production might be even more appealing. Of course, whether this would be enough to overcome the countervailing geopolitical baggage from ongoing territorial disputes remains to be seen.