On August 31, the Philippines Department of Budget and Management proposed a substantial increase in defence spending for FY11, to PHP104.5bn (US$2.3bn), a rise of 81% y-o-y. It is expected to be approved by parliament before the end of 2010. The increase is seen as a means to counter domestic insurgency, as well as to contain China's military expansion. The expenditure items will be: PHP82.3bn for 'personal services,' including military operations, PHP17.1bn for maintenance operations and PHP5.1bn for purchasing. PHP10.1 billion will be allocated to the Air Force, PHP11.3 billion to the Navy, and PHP34.7 billion for the Armed Forces headquarters. It is not clear whether some of this increased spending is actually a re-working of the existing budget allocation. President Aquino has appointed Marvic Leonen - the Dean of the University of the Philippines' College of Law - as chief of the government's peace panel. Leonen's appointment will strongly aid the Aquino administration in sealing a final peace agreement with the Moro Islamic Liberation Front (MILF), due to his expertise in Philippine indigenous law as well as natural resources law, two key knowledge areas that will be crucial for the talks in the coming months. Communist rebels of the New People's Army (NPA) in August launched a spate of ambushes against the Philippine military and police, resulting in scores of deaths in places such as Northern Samar, Surigao del Sur and Negros Occidental. The most deadly attack was the strike on the police in Northern Samar, which led to the loss of the lives of eight policemen and a district official. Despite the strikes by the militants, the government will continue its efforts in holding peace talks with the NPA. Although the Philippines is one of Asia's longest-established democracies, it is arguably one of the less mature ones. More than most other Asian states, the Philippines is prone to public unrest and either attempted military coups or rumours of such disturbances. There have been two 'People Power' popular uprisings against corrupt presidents (in 1986 and 2001), and several repeated attempts during the 2000s. As a result of the election of President Benigno Aquino in May, we expect an improvement in the country's business environment, given that the new leader has made corruption eradication his key electoral promise earlier this year. While we anticipate that Aquino's campaign against graft will be challenging, we still anticipate a reduction in corruption in response to the new government's efforts.

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Philippines Defence and Security Report Q4 2010
Published on October 2010
Report Summary
On August 31, the Philippines Department of Budget and Management proposed a substantial increase in defence spending for
FY11, to PHP104.5bn (US$2.3bn), a rise of 81% y-o-y. It is expected to be approved by parliament before the end of 2010. The
increase is seen as a means to counter domestic insurgency, as well as to contain China's military expansion.
The expenditure items will be: PHP82.3bn for 'personal services,' including military operations, PHP17.1bn for maintenance
operations and PHP5.1bn for purchasing. PHP10.1 billion will be allocated to the Air Force, PHP11.3 billion to the Navy, and PHP34.7
billion for the Armed Forces headquarters. It is not clear whether some of this increased spending is actually a re-working of the
existing budget allocation.
President Aquino has appointed Marvic Leonen - the Dean of the University of the Philippines' College of Law - as chief of the
government's peace panel. Leonen's appointment will strongly aid the Aquino administration in sealing a final peace agreement with
the Moro Islamic Liberation Front (MILF), due to his expertise in Philippine indigenous law as well as natural resources law, two key
knowledge areas that will be crucial for the talks in the coming months.
Communist rebels of the New People's Army (NPA) in August launched a spate of ambushes against the Philippine military and
police, resulting in scores of deaths in places such as Northern Samar, Surigao del Sur and Negros Occidental. The most deadly
attack was the strike on the police in Northern Samar, which led to the loss of the lives of eight policemen and a district official.
Despite the strikes by the militants, the government will continue its efforts in holding peace talks with the NPA.
Although the Philippines is one of Asia's longest-established democracies, it is arguably one of the less mature ones. More than most
other Asian states, the Philippines is prone to public unrest and either attempted military coups or rumours of such disturbances.
There have been two 'People Power' popular uprisings against corrupt presidents (in 1986 and 2001), and several repeated attempts
during the 2000s. As a result of the election of President Benigno Aquino in May, we expect an improvement in the country's business
environment, given that the new leader has made corruption eradication his key electoral promise earlier this year. While we
anticipate that Aquino's campaign against graft will be challenging, we still anticipate a reduction in corruption in response to the new
government's efforts.
Table of Content
Executive Summary 5
SWOT Analysis 7
Philippines Security SWOT ... 7
Philippines Defence Industry SWOT . 8
Philippines Political SWOT .. 9
Philippines Economic SWOT .. 10
Philippines Business Environment SWOT ... 10
Global Political Outlook 11
Global Hotspots .. 11
Table: Election Timetable, H210-2011 ... 12
United States: Obama To Be Tested By Mid-Term Elections ... 15
Latin America: Beyond Lula ... 16
Western Europe: All About Austerity .. 17
Philippines Defence and Security Report Q4 2010 Page 1/5

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Central Europe: New Governments To Be Tested ... 18
South-East Europe: Turkey's Ongoing Evolution 19
Russia And The Former Soviet Union: Focus On Security . 20
Middle East: Ongoing Challenges .. 21
Sub-Saharan Africa: The Election Conundrum... 23
Asia: The Usual Risks Prevail 24
Wild Cards To Watch .. 25
South East Asia Security Overview .. 27
The Strategic Outlook for the 2010s ... 27
Main Islamist Militant Groups In South East Asia .. 30
Other Regional Threats... 34
Political Overview .. 38
Domestic Politics I .. 38
Domestic Politics II 39
Long-Term Political Outlook .. 40
Security Risk Analysis .. 44
BMI's Security Ratings ... 44
Table: Asia Pacific Regional Security Ratings 44
Table: Asia Pacific State Vulnerability To Terrorism Index ... 45
Philippines Security Risk Ratings ... 45
City Terrorism Rating . 46
Table: BMI's Asia City Terrorism Index . 47
Security Overview . 48
Internal Security Situation .. 48
Moro Islamic Liberation Front (MILF) .. 49
Abu Sayyaf .. 52
New People's Army . 53
Table: Philippine Insurgent Groups ... 54
External Security Situation . 54
Piracy . 54
Table: Instances of Piracy In South East Asia, 1996-2006 . 55
The South China Sea ... 55
Bilateral Military Relations 56
Armed Forces . 57
Table: Regional Armed Forces, 2010 Forecast (including conscripted, '000 personnel) 57
Government Expenditure 59
International Deployments .. 60
Weapons Of Mass Destruction 61
Market Overview 62
Industry Trends and Developments . 63
Arms Trade Overview . 64
Procurement Trends and Developments . 64
Industry Forecast Scenario ... 67
Armed Forces . 67
Table: Philippines' Armed Forces, 2006-2014 ('000 personnel) . 67
Government Expenditure 68
Table: Philippines' Government Defence Expenditure, 2006-2014 . 68
Macroeconomic Forecast ... 70
Philippines ' Economic Activity . 72
Company Profiles .. 73
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Arms Corporation of the Philippines (Armscor) . 73
Government Arsenal ... 74
Country Snapshot: Philippines Demographic Data 75
Section 1: Population .. 75
Table: Demographic Indicators, 2005-2030 ... 75
Table: Rural/Urban Breakdown, 2005-2030 .. 76
Section 2: Education And Healthcare . 76
Table: Education, 2002-2005 . 76
Table: Vital Statistics, 2005-2030 ... 76
Section 3: Labour Market And Spending Power . 77
Table: Employment Indicators, 2001-2006 . 77
Table: Consumer Expenditure, 2007-2012 (US$) ... 77
Table: Average Annual Manufacturing Wages, 2004-2006 78
BMI Methodology .. 79
How We Generate Our Industry Forecasts . 79
Defence Industry . 79
City Terrorism Rating . 80
Table: Methodology 82
Sources ... 83
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