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Rapidly Evolving Defence Markets: 10-country Budget Assessment

  • June 2014
  • 285 pages
  • Frost & Sullivan
Report ID: 2162027

Summary

Table of Contents

From 'Know-how' to 'Know Why'

This research service analyses the rapidly evolving defence markets for 10 selected countries: Algeria, Brazil, Chile, India, Indonesia, Japan, Oman, Poland, the Russian Federation, and the United Arab Emirates. From a global perspective, the countries' defence budgets are most significantly driven by modernisation programs and arms threats due to increased threat perceptions in Southeast Asia, Arabian Peninsula, and Eurasia. Concerns regarding potential foreign aggression and territorial disputes fuel military spending, particularly at the personnel and new equipment levels. The base year of the study is 2013; forecasts are provided through 2022.

Key Findings

-Rapidly evolving markets will continually increase their military spending, but at a low pace and volume due to challenging implementation of ambitious modernisation and indigenisation programmes. The selected countries—Algeria, Brazil, Chile, India, Indonesia, Japan, Oman, Poland, the Russian Federation, and United Arab Emirates (UAE)—are expected to spend more than $ trillion in total on defence between 2013 and 2022. Forecast military expenditures are expected to grow at a compound annual growth rate (CAGR) of %.
-The Russian Federation will remain the biggest spender, accounting for % of total spending. Its defence budget is expected to reach at least $ billion in 2022.
-Growing regional instability is also driving Japanese defence expenditures, and Japan is reforming its military warfare doctrine. Japan is forecast to represent % of total spending.
-Brazil and Poland will increase their defence expenditures at a slower pace, at CAGRs of % and %, respectively, because of financial concerns. Moreover, Brazil, which represents nearly % of the total spending in 2013, will represent only % in 2022. Poland is forecast to experience a similar decline, accounting for % of the total expenditures in 2013 and only % in 2022.
-Conversely, defence spending is witnessing the highest growth rate in the UAE and Algeria, with respective CAGRs of % and % for 2013 to 2022. While Algeria represented almost % of the total spending in 2013, it is expected that the country will account for % of it by 2022.
-Spending will remain the most stable for Oman and Chile, with a slight increase, but they will still be the smallest military spenders of the market size considered in this study.

Executive Summary

-Despite the relatively limited impact of the financial slowdown on the selected countries’ defence budgets, creeping inflation, social reforms, and upcoming elections are still affecting defence spending in the short term, and most significant programmes are being put on hold and/or delayed, as illustrated by Poland, India, and Brazil.
-Fleet renewal and modernisation programmes will be among the biggest drivers stimulating defence expenditures among the countries considered.
-Another very significant trend affecting the selected countries relates to the strong incentives being developed to boost domestic nascent or developing industry.
-In this regard, high-end technology procurement is the most critical success factor, not only as a translation of ongoing modernisation programmes but also as a means of deterrence of any potential foreign aggression and as a perceived long-term investment for the developing domestic industrial base.
-However, domestic supply chains remain quite dominated by foreign original equipment manufacturers (OEMs), except for the Russian Federation and Japan. The localisation of procurements is expected to become much more significant in the long term for Brazil, Poland, the UAE, and, to a lesser extent, Chile.
-There is still a strong demand for partnerships with foreign OEMs in order to gain further expertise on the “know why” of the “know-how,” but this implies adoption of new structures to encourage such targeted objectives and reduce risks for foreign OEMs.

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