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Future of the Sri Lankan Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2020

  • June 2015
  • 111 pages
  • Strategic Defence Intelligence (SDI)
Report ID: 1498005

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Summary
This new report published by industry experts Strategic Defence Intelligence (SDI), provides detailed analysis of the Sri Lankan defense industry, including market size forecasts covering the next five years. In addition to factors influencing demand, the report also highlights key challenges faced by industry participants and contains analysis of industry-leading companies.

This latest SDI report includes:

- An investigation of the key demand drivers and growth stimulators in the Sri Lankan defense market.

- A snapshot of Sri Lanka's defense expenditure and modernization patterns.

- Insights into procurement schedules formulated within the country and a breakdown of the defense budget with respect to the army, navy and air force.

- Detail on the key challenges faced by defense market participants within the Sri Lankan industry.

- An analysis of the prevalent trends in the country's imports and exports over the last five years.

- The top five defense investment opportunities over the coming 10 years.

- Analysis of the competitive landscape of the Sri Lankan defense industry, containing an overview of key players, insights on key alliances, strategic initiatives and a brief financial analysis.


Key Findings
- What is the Sri Lankan Armed Forces expected response to increasing border security issues? In which equipment categories is this issue likely to significantly drive investment?

- With who has Sri Lanka sought to strengthen ties? What has prompted these moves? How has this been reflected in terms of investment and broader economic policy?

- What has accounted for the majority of Sri Lankan defense expenditure historically? How is this likely to change during the forecast period?

- What is the total expenditure of the Sri Lankan Air Force in 2015? What CAGR is expenditure expected to register in 2020? What will be the most influential procurement factor on this forecast figure?

- How does Sri Lanka's defense expenditure compare with China, Japan, India, and Oman, as well as global leading spenders such as the US, Russia, the UK, and France? How will Sri Lanka's preferred strategy impact on foreign Original Equipment Manufacturers (OEMs)?


Synopsis
Sri Lanka's defense budget is expected to register a CAGR of 7.55% during the forecast period to value US$2.9 billion in 2020. This is primarily driven by the country's post-war military ambitions to de-mine land containing anti-tank mines and other IEDs (Improvised Explosive devices); rehabilitate the Northern Province and also counter the threat of the re-emergence of the separatist militant organization - LTTE. The replacement of obsolete military equipment and a tense relationship with India are also significant contributory factors.

As a percentage of GDP, the country's defense expenditure is forecast to average 2.5%, as compared to an historical average of 2.7%. The capital expenditure allocation is expected to increase at an average of 21.4% during the forecast period. This is primarily due to the procurement of advanced defense equipment and the focus on increasing indigenous defense manufacturing capabilities. Key opportunities for equipment suppliers are expected in sectors such as: patrol vessels, naval infrastructure, combat aircraft and transport helicopters. Consequently, revenue expenditure is expected to decrease from an historic average of 85.3% to an average of 78.6% over the forecast period. This will be directed towards additional recruitment, training and development programs for military personnel.

Sri Lanka's homeland security (HLS) stands at US$515.2 million in 2015. It is estimated to reach US$683.6 million in 2020 by registering a growth rate of 6.44% during 2016 to 2020. This expenditure is primarily driven by the efforts to build the country's internal security system to counter the growing problems of communal violence, as well as the growing threats from human, weapon and drug traffickers. As a result, the country is expected to invest in maritime security systems and platforms, surveillance systems and joint military training.

The Sri Lankan defense industrial base is largely undeveloped and, as a result, the country is highly dependent on foreign suppliers to meet its military needs. Ships were the most imported military hardware and this is expected to continue along with the procurement of military aircraft. Sri Lanka does not export any arms to foreign countries, as its domestic defense industry is still in a nascent stage, a situation that this is expected to remain unchanged over the next five years.

To strengthen its indigenous defense capabilities and increase its technological know-how, the government is encouraging partnerships and joint training programs. For example, in January 2014, Sri Lanka discussed military collaboration with Brazil, including joint training exercises and military exchanges. These are expected to commence in 2015.


Reasons To Buy
- Analyse the challenges to foreign defense manufacturers and suppliers. Ensure you comply with prevailing market conditions to avoid any potentially negative effects on your strategies.

- Identify the key factors driving defense expenditure. Target the opportunities threats to Sri Lankan security represent for equipment manufacturers, to develop your expansion plans and generate revenues accordingly.

- Investigate the procurement dynamics of the Sri Lankan defense industry. Identify the key suppliers, whilst assessing the forecast growth categories which offer you the best commercial opportunities.

- Identify what is forecast to generate revenues in reference to technical specifications, recent orders and the country's expected investment pattern. Align your strategy efficiently and cost-effectively to provide you with the best returns.


Key Highlights
- Over the historic period, Sri Lanka's defense expenditure registered growth of 4.07%, increasing from US$1.8 billion in 2011 to US$2.1 billion in 2015

- Sri Lanka's military expenditure, valued at US$2.1 billion in 2015, is expected to increase to US$2.9 billion by 2020, registering a CAGR of 7.55% over the forecast period

- Sri Lankan military expenditure will be driven by the re-emergence of terrorism, de-mining and rehabilitation, and the country's strained relationship with India

- The Defense Ministry is expected to procure patrol vessels and naval infrastructure, combat aircraft, and transport helicopters

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