A country's military budget is the best indicator of its investment in military power - much more so than the size of navies, armies and air forces. This is because the smart money nowadays is on small but well- equipped forces, and large but ill-equipped and ill-trained forces are considered more of a liability than an asset in modern warfare - as Iraq discovered in the Gulf War.
The defence budgets of the "Tiger economies" of Asia and the Pacific have been rising by about 10 per cent per year. Their dynamic economies have enabled them to buy weapons from abroad and they are also keen to develop their own military industries.
In the long term, this will limit the scope for exporting arms to the Pacific Rim and East Asia. In the mid-term, it will increase the scope for technology transfer deals, but eventually these will help to develop the indigenous arms industries and eventually the scope for these, too, will diminish.
Japan has shown the most dramatic increase in defence spending in the region and now spends more on defence than any other country in the world apart from the US and possibly Russia. In 1995, Japan spent $56bn on defence - an increase of one-fifth over the previous year - compared with $37bn for France and $34bn for the UK. Although the Japanese government claims that defence spending is no more than 1 per cent of gross domestic product, many analysts believe the "defence" budget excludes items which would be classified as military expenditure under Nato definitions.
Other countries showing a dramatic increase in military spending are China and the five strongest Asian economies - South Korea, Malaysia, Singapore, Taiwan and Thailand. The London-based International Institute for Strategic Studies forecasts that all these countries will see a growth in their defence budgets of 6 to 10 per cent per year - well in excess of global economic growth rates.
In 1995, South Korea's military budget increased from $13.3bn to $14.4bn - an 8 per cent rise. Singapore's budget increased by over 20 per cent, from $3.1bn to $4bn, and Indonesia's from $2.3bn to $2.6bn - up 13 per cent. For comparison, India and Pakistan, which dominate central and South Asia, and both possess highly professional armed forces and are regarded as standing on the "nuclear threshold", have military budgets growing at about 6 per cent each year.
The markets in Latin America and Africa are expected to expand slightly. However, the US has recently ended its former ban on the export of high technology arms sales to Latin America and this could spark a new arms race. Chile, Argentina and Brazil are all expected to try to compete to preserve the regional balance of power.
US pounds 7bn, UK pounds 3bn, Russia pounds 2.9bn
Top buyers (developing countries):
India pounds 1.57bn, Saudi Arabia pounds 1.2bn, S Korea pounds 750m, Indonesia pounds 630m