Global arms sales grew 3% in 2005, fuelled by US demand

Global arms sales grew 3% in 2005, fuelled by US demand
AFP
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First Published: Tue, Jun 12 2007. 12 22 AM IST
Updated: Tue, Jun 12 2007. 12 22 AM IST
Sales by the world’s 100 largest weapons manufacturers rose by 3% in 2005 to $290 billion (Rs11.8 trillion), spurred primarily by the US, the Stockholm International Peace Research Institute (Sipri) said on Monday.
Companies in the US and western Europe dominated Sipri’s “Top 100” list, together accounting for 92% of arms sales in 2005, the latest year for which figures are available, the institute said in its 2006 yearbook.
Forty US firms accounted for 63% of sales, while 32 western European companies accounted for 29% and nine Russian companies accounted for 2%.
Companies based in Japan, Israel and India accounted for most of the remaining 6%.
“A major factor behind current developments in the arms industry has been the high and rising fixed costs of advanced weapons systems,” Sipri said.
“Companies use mergers and acquisitions to achieve economies of scale, but the increased concentration of production can also lead to reduced competition and thus remove incentives to keep prices down and innovation up,” it said.
Four US companies increased their sales by more than $1 billion in 2005: L-3 Communications Corp., Raytheon Co., Northrop Grumman Corp. and General Dynamics Corp. The same was true for one British company, BAE Systems Plc., and one Italian, Finmeccanica SpA.
“Two ways in which the United States’ post-September 2001 policies have affected the US arms industry are through the increase in demand from the department of defense generated by the massive increase in military expenditure to finance the military operations in Afghanistan and Iraq, and through their impact on arms exports,” Sipri said.
“These policies have also led to a strong growth in expenditure on homeland security, thereby increasing demand in the broader security industry,” it said. Eleven companies, including four Russian companies, increased their arms sales by more than 30%.
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First Published: Tue, Jun 12 2007. 12 22 AM IST
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