The uncertain environment has created a sustained increase in defence spending and heightened demand for advanced, future of defence, military capabilities

The Indo-Pacific region includes the countries of Australia, India, Indonesia, Japan, New Zealand, the Philippines, Singapore, South Korea, Taiwan, and Thailand. The region has become an area of rising strategic importance due to China’s global military expansion, ongoing tensions in the South China Sea related to uncertainty about Taiwan, and most recently an escalation of tensions between India and Pakistan. NATO, the United States, and its allies have identified the Indo-Pacific region as a top defence priority. This has translated into record-high defence budgets, new joint cooperation frameworks such as AUKUS, the U.S.-Japan (USJF) Alliance, and the U.S.-India TRUST, and a renewed focus on technological innovation and capacity expansion.

The Indo-Pacific defence market constituted 22% of the world’s total global defence expenditures in 2024.¹ China’s defence spending amounts to 46% of the region’s total, followed by India, Japan, and Taiwan, combining for a total of 26%. While currently 65%-70% of its military inventory is foreign-sourced, increasingly, countries such as Japan, Singapore, South Korea, Taiwan, and India are becoming more self-sufficient from an equipment perspective with
the potential to equip other countries in the region. Defence industrial bases of smaller — but growing — capability are also being cultivated in Australia,
Indonesia, Malaysia, Thailand, and Vietnam. Ultimately, similar to Europe, the future of Indo-Pacific defence is expected to become a region less dependent on foreign-sourced technologies and equipment, with the potential to partner and supply other nations on a surplus basis.

The case for Indo-Pacific defence exposure is as follows:

• Rising tensions in the region: Rising geopolitical tensions and perceived threats from China, North Korea, as well as regional disputes are fueling record defence spending in the region.
• Desire for regional autonomy: Push for expanded regional production and innovation along with reduced foreign dependency.
• Strategic importance driving investment: Policy and budgetary support from NATO, the U.S., and allies, given the region’s strategic importance.

Indo-Pacific defence market

The Indo-Pacific region constituted 22% of the world’s global military expenditures in 2024. China’s defence expenditures amounted to 46% of the region’s total spending on defence, with India, Japan, and Taiwan combining for 26%.²  While currently 65%-70% of its military inventory is foreign-sourced, increasingly, countries such as Japan, Singapore, South Korea, Taiwan, and India are becoming more self-sufficient from an equipment perspective, with the potential to equip other countries in the region.