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Asian Crisis Taking Toll on U.S. Arms Sales

November 27, 1998| From Washington Post

WASHINGTON — The Asian economic crisis is causing some of the developing world's biggest arms buyers to delay or cancel hefty weapons purchases crucial to U.S. defense contractors.

That will hurt the bottom lines of companies such as Lockheed Martin Corp., Raytheon Systems Co. and Boeing Co., which in recent years have come to depend on foreign sales of their highest-priced products. Among the popular weapons systems affected are Lockheed's F-16 fighter, Raytheon's Patriot missile and Boeing's AWACS early-warning plane.

Deals are being stretched out or canceled in countries such as Thailand and South Korea, because those nations can no longer afford new armaments with currencies that have been devalued and economies that are under siege.

The falling prices of major commodities such as oil and copper, however, are also crimping purchases in countries far removed from Asia, analysts say. Latin American and Middle Eastern nations are pulling back from some of their more elaborate military spending plans because of declining commodity prices.

"I think 1998 sales will be down from 1997," when worldwide arms orders surged 21% to $42.6 billion, said Digby Waller, an economist with the London-based International Institute for Strategic Studies. Waller said 1999 sales will depend on how quickly Asian economies recover, as well as on oil prices.

The institute monitors worldwide arms sales and tracks all suppliers, not just those in the United States, the world's No. 1 arms exporter, ahead of Britain and France.

Wherever in the world deadly weapons are sought, customers increasingly prefer U.S.-made products. Five years ago, U.S. defense companies controlled 39.5% of the international arms trade. Last year, it was 45%--and the value of the market has increased by about $9 billion in that time.

Both Asia and the Middle East have been the primary export markets for U.S. weapons makers in recent years, as East Asian nations diverted some of their newfound economic wealth toward buying arms, and as oil-rich Gulf nations built up their militaries following Iraq's 1990 invasion of Kuwait.

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