SINGAPORE/KUALA LUMPUR With an eye on China's more muscular stance in the South China Sea, Southeast Asian governments are stepping up efforts to replace ageing fighter aircraft fleets, paving the way for multi-billion dollar deals in a boon for warplane makers.
Despite tight budgets across the region, sales executives say they are busier than ever after a five-year lull - and both industry and government sources say the next months could see several multi-billion dollar deals from Malaysia to Vietnam.
A trade conference held in Kuala Lumpur this week thronged with would-be buyers and salesmen from Russian, French, British, Chinese, Pakistani and American firms. Held every other year, attendees reported it was busier than ever.
A prime drawcard was one of the region's biggest prizes: Malaysia, which is set to finally replace its Russian 1990s-era MiG-29 fighters after several years of delays. Industry sources say Kuala Lumpur could buy up to 18 jets, a deal potentially worth more than $2.5 billion.
Options include the Saab Gripen, the Eurofighter Typhoon, Russian Sukhoi Su-30, and the Sino-Pakistani JF-17. France is optimistic about winning an order for Dassault-built Rafales but other bidders are also hopeful.
"We are hoping to make Malaysia the ninth country to buy the Typhoon," said John Brosnan, who heads the Asian business for BAE Systems (BAES.L), one of the partners in the Eurofighter consortium.
Malaysia's defence ministry did not respond to requests for comment on the talks.
Vietnam, eyeing options beyond traditional supplier Russia, is among those next on the buyers list. It has had preliminary talks with Saab and France's Dassault to purchase at least 12 fighter jets, industry sources and a separate source familiar with the government talks said.
"They seem to be keen on moving away from Russia, but it has been dormant so far," said Kaj Rosender, regional director for Gripen exports at Saab. "It looks like the next call will be on Vietnam."
Industry sources say Vietnam is also in talks with Moscow over several Su-35s. Officials at Rosoboronexport, Russia's arms export agency, declined to comment on any negotiations.
Vietnamese officials rarely comment on procurement matters, and did not respond to Reuters' requests for comment.
While reluctant to comment publicly, officials in countries including Indonesia and Vietnam privately say their renewed interest in new fighter jets is driven in large part by China's growing presence in the disputed South China Sea.
Chinese state media reported this week that a military plane had landed on Fiery Cross Reef, one of a number of new runways on reclaimed artificial islands, fuelling expectations that China will soon deploy fighter jets at the doorstep of many of the Southeast Asian claimants.
"Rising tensions in (the Asia Pacific region) have seen a long overdue process of military modernization move up the political agenda in a number of countries," Craig Caffrey, principal analyst at IHS Jane's said in a report. "The Philippines, Indonesia, Japan and Vietnam are all following China’s lead and we see no sign of this trend coming to an end."
Beijing for its part says it needs the facilities for self-defence and says the United States and others are militarising the region, not China.
By rights, U.S. defence firms should be benefitting as the region renews and revamps - they were a heavy presence in Southeast Asian sales 1980s and 1990s. But they now they face tough competition, as well as tighter purse strings.
Thailand, which has Northrop F-5s and Lockheed Martin F-16s, has bought the Saab Gripen and could order more from the Swedes, say industry sources familiar with the negotiations.
"We do want new jets, we have long-term plans, but we don't have the money for it," Major General Kongcheep Tantrawanit, Thai defence ministry spokesman, said.
"There are no deals in the making right now."
Boeing executives had been plugging their F/A-18E/F Super Hornets to Malaysia, which operates the older Boeing F-18 Hornet variants. But Kuala Lumpur appears to be leaning towards the Europeans, say industry sources.
Boeing's only presence at this week's show was to promote its unmanned systems. Boeing officials did not respond to requests for comment.
Meanwhile, Indonesia, which operates older Lockheed Martin F-16s, is close to an order for Russian Su-35s to supplement its Su-30s, industry and government sources said.
It is also a partner in the Korean Aerospace Industry KF-X fighter jet programme, which Lockheed is helping to develop. Lockheed did not respond to requests for comment.
For U.S. players, that leaves the list of likely partners at Singapore, which operates only U.S. fighters jets and is a partner in the Lockheed F-35 programme.
The region's other supplier, of course, is China itself.
Its JF-17, which it developed with Pakistan is a being marketed as a viable low-cost option for air forces, including Malaysia and Myanmar.
(Additional reporting by Patpicha Tanakasempipat in BANGKOK, Manuel Mogato in MANILA, Aradhana Aravindan in SINGAPORE; Editing by Clara Ferreira Marques and Lincoln Feast)
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