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Aerospace & Defence Market Opportunities in Central and Eastern Europe

  • September 2014
  • -
  • Frost & Sullivan
  • -
  • 32 pages

Summary

Table of Contents

Major Programme Opportunities are to be Found in Poland

Despite the economic slowdown and defence budget cuts in Western Europe, the Central and Eastern European (CEE) military markets will present positive dynamics fuelled by defence procurement programs in the CEE countries. Therefore, the study assesses the market opportunities for industry participation in the aerospace & defence sector in the CEE region across all military platforms in the coming years. The research study covers 9 countries: Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, and Slovakia.

Key Findings
-Despite economic slowdown and defence budget cuts in Western Europe, the Central and Eastern European (CEE) military markets will present positive dynamics fuelled by defence procurement programmes in the CEE countries.
-Poland is expected to be the biggest military market among the analysed countries due to ambitious defence modernisation programmes and a legal obligation to spend 1.95% of its previous year’s annual gross domestic product (GDP) on defence.
-Poland, with multiple defence procurement programmes, is the most lucrative market among CEE countries for defence suppliers.
-Price-conscious CEE end users demand that suppliers establish lower life cycle costs for their equipment.
-Defence original equipment manufacturers (OEMs) interested in the CEE market should increase their industrial footprints in the region and proactively engage with local counterparts, specifically in the military research and development (R&D) and technology areas.
-Decision makers view defence modernisation programmes as a tool for the development of indigenous defence sector capabilities in the CEE region which will lead to the increased importance of technology transfers.

Drivers Explained

The Annexation of Crimea by the Russian Federation and the Crisis in Ukraine Boost Defence Spending in CEE
Due to the tense situation involving Ukraine, a number of CEE states, particularly Poland, Romania, and the Baltic States, have announced their intention to increase defence expenditures to % of their gross domestic product to meet the NATO requirement. This is a direct reaction to the threat posed by Russia in the region after the annexation of Crimea. It is expected that more money will be allocated to defence procurements, specifically in air defence domains in the abovementioned countries. Additionally, Denmark, Germany, and Poland are working on raising the readiness of Multinational Corps Northeast in Poland to strengthen military capabilities in order to address potential threats in the region.

The Implementation of Re-armament Programs in CEE Countries Create Many Business Opportunities for Western Aerospace and Defence OEMs
As a consequence of NATO membership, the CEE countries are in the middle of a renewal and modernisation cycle of their ageing military platforms. Some programmes have already been announced, notably in Poland, such as a tender for medium utility helicopters, and additional tenders, including air and missile defence systems, surface naval combatants, submarines, unmanned systems, and C4ISR, are to be announced in the short term.

Key: C4ISR = Command, control, communications, computers, intelligence, surveillance, and reconnaissance

Defence Modernisation Programmes Act as a Stimulus for Industrial Development and Increasing the Capabilities of the Indigenous Defence Sector
Defence modernisation programmes present the opportunity to increase technological understanding and industrial capacity through significant technology transfers and long-term partnerships with Western defence OEMs. Therefore, decision makers in CEE countries perceive modernisation programmes as a stimulus for the local economies’ industrial development, including the indigenous defence sector, due to expected wide participation of local companies in the implemented programmes. However, CEE countries need to ensure that the local defence sector possesses the skills and capabilities that are necessary for the proper absorption of technology transfers. Therefore, a long-term and consistent defence industrial policy is needed in the CEE countries.

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