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The Egyptian Defense Industry - Market Opportunities and Entry Strategies, Analyses and Forecasts to 2017

Description

Product Synopsis

This report is the result of SDI's extensive market and company research covering the Egyptian defense industry, and provides detailed analysis of both historic and forecast defense industry values including key growth stimulators, analysis of the leading companies in the industry, and key news.

Introduction and Landscape

Why was the report written?

The Egyptian defense Industry Market Opportunities and Entry Strategies, Analyses and Forecasts to 2017 offers the reader aninsight into the market opportunities and entry strategies adopted by foreign original equipment manufacturers (OEMs) to gain market share in the Egyptian defense industry.

What is the current market landscape and what is changing?

Egypt is a major non-NATO ally of the US and, for the past three decades, has been receiving Foreign Military Financing from the US amounting to US$1.3 billion per year. This FMF makes up 80 percent of the country's defense capital expenditure and comes with a clause which requires the country to spend the entire amount on purchasing military equipment from American contractors. Egypt has used this financing to replace the majority of its aging Soviet and Chinese equipment with American military hardware and, as a result, the vast majority of the Egyptian arsenal is produced by US contractors and Egypt is highly dependent on American financing and support. The preponderance of American military hardware also means that Egypt is reliant on contracts with US companies for the maintenance of its armed forces equipment.

What are the key drivers behind recent market changes?

Although Egypt is not under any real threat of aggression from its neighbors, the perceived threat from Israel and the increasing political instability in the country are a cause of concern for the military and these factors are expected to drive and determine the country's defense expenditure in the forecast period. In 1979, the US brokered a peace treaty between Israel and Egypt. Under the terms of the agreement the US provides FMF to both countries, with US$3 billion per year to Israel and US$1.3 billion per year to Egypt, and this is one of the main influences on the Egyptian defense budget.

What makes this report unique and essential to read?

The Egyptian defense Industry Market Opportunities and Entry Strategies, Analyses and Forecasts to 2017 provides detailed analysis of the current industry size and growth expectations from 2013 to 2017, including highlights of key growth stimulators. It also benchmarks the industry against key global markets and provides a detailed understanding of emerging opportunities in specific areas.

Key Features and Benefits

The report provides detailed analysis of the current industry size and growth expectations from 2013to 2017, including highlights of key growth stimulators, and also benchmarks the industry against key global markets and provides a detailed understanding of emerging opportunities in specific areas.

The report includes trend analysis of imports and exports, together with their implications and impact on the Egyptian defense industry.

The report covers five forces analysis to identify various power centers in the industry and how these are expected to develop in the future.

The report allows readers to identify possible ways to enter the market, together with detailed descriptions of how existing companies have entered the market, including key contracts, alliances, and strategic initiatives.

The report helps the reader to understand the competitive landscape of the defense industry inEgypt. It provides an overview of key defense companies, both domestic and foreign, together with insights such as key alliances, strategic initiatives, and a brief financial analysis.

Key Market Issues

Egypt does not follow open market and fair competition principles regarding defense deals; instead preferring to conduct private government to government or military to military talks regarding defense procurements and making it difficult for foreign firms to compete. Additionally, the country does not follow a structured defense budgeting mechanism, which often results in improper budget allocations and a high level of corruption in the armed forces. A number of foreign OEMs find the lack of transparency in Egypt's defense deals, and delays in finalization, key challenges to the successful execution of defense deals in the country.

Egypt is currently undergoing its greatest political change in half a century; and the mass civil protest that started in January 2011, has led to the fall of the country's authoritarian regime and the promise of democratic presidential elections in November 2011. As a result of this period of dramatic change, the country is currently characterized by political instability. This uncertainty has discouraged foreign defense companies from continuing to participate in Egypt's defense sector and deterred new participants from establishing operations in the country.

US FMF accounts for almost 80% of the country's defense capital expenditure, and according to the contract, the whole amount is spent on military procurement from the US contractors, resulting large quantity of US equipment in Egypt's arsenal. The two countries enjoy a close relationship that is set to continue in the forecast period due to Egypt's dependence on the US companies for the maintenance and life support of its equipment and weapons. This relationship poses a greater roadblock for other foreign companies to enter the Egyptian defense market.

Key Highlights

The Egyptian defense industry, which valued US$3.9 billion in 2012, is anticipated to record a CAGR of 1.78% over the forecast period and value US$4.15 billion by 2017. This growth is expected to be driven by the increased internal stability of the country following the political unrest and resultant need for modern military hardware, maintenance, and support. Egypt is expected to allocate 1.3% of its GDP for defense expenditure during the forecast period, despite its relatively small economy. However, it is also projected that the recent downturn in the country's economy, due to the political uprising, may bring about a change in the percentage of GDP the armed forces will spend across the forecast period.

Egypt's location in the Middle East and the presence of transnational terrorist organizations and radical groups in the country have encouraged it to spend considerable amounts on homeland security. In 2010, Egypt spent US$3.15 billion on internal security forces, an increase of US$323 million over the previous year. In the forecast period, homeland security spending is expected to increase due to factors including the threat of international terrorism, dangers to maritime security and the increased crime rate and growing sectarian violence that have followed the country's political crisis.

Egypt is expected to procure equipment to strengthen all branches of its armed forces. Procurements expected to be made during the forecast period include attack , transport and maritime patrol aircraft, attack and cargo helicopters, various weapon systems including anti-tank, anti-ship, air-to-air missiles and rockets, unmanned systems, C4ISR equipment, and engines, maintenance and support for the country's existing aircraft fleet. The air defense force has also been vigorously modernizing its Soviet air defense systems during the review period. As most of these systems are old, fleet wide upgradation and new procurements are expected to continue in the forecast period.

Table of Contents

1 Introduction

1.1. What is this Report About?

1.2. Definitions

1.3. Summary Methodology

1.4. SDI Terrorism Index

1.5. About Strategic Defence Intelligence (www.strategicdefenceintelligence.com)

2 Executive Summary

3 Market Attractiveness and Emerging Opportunities

3.1. Defense Market Size Historical and Forecast

3.1.1. Egyptian annual defense expenditure to reach US$XX billion by 2017

3.1.2. Perceived Threats and internal instability expected to drive defense expenditure

3.2. Analysis of Defense Budget Allocation

3.2.1. Egypt's defense expenditure expected to grow at a CAGR of XX% during the forecast period

3.2.2. Share of capital expenditure in the overall defense budget to be maintained at an average of XX% during the forecast period

3.2.3. Egypt's capital expenditure expected to remain constant during the forecast period

3.2.4. The country is expected to spend US$XX billion on revenue expenditure over the forecast period

3.2.5. The country's defense expenditure as per-capita defense spend declined over the review period

3.3. Homeland Security Market Size and Forecast

3.3.1. Egypt spent US$XX billion on internal security in 2011

3.3.2. Egypt is at a significant risk from external and internal threats

3.3.3. Egypt experienced considerable terror activity during the review period

3.4. Benchmarking with Key Global Markets

3.4.1. Egyptian defense expenditure expected to increase at a CAGR of XX% during the forecast period

3.4.2. Egypt ranks XXst in global defense spend

3.4.3. Egypt allocates approximately XX% of its GDP for defense

3.4.4. Egypt faces a substantial threat from foreign terrorist organizations

3.5. Market Opportunities: Key Trends and Growth Stimulators

3.5.1. Modernization of Naval and coast guard assets to drive naval defense procurements

3.5.2. Procurement of modern armored vehicles, support vehicles, advanced weapon systems and C4ISR systems to drive spending for the Land Forces

3.5.3. Demand for air defense systems expected to increase as replacement of obsolete systems continues

3.5.4. Procurement of new systems and modernization of existing systems in the Air Force to create a robust demand

3.5.5. Demand for unmanned aerial vehicle (UAV) is expected to surge during the forecast period

3.5.6. Demand for patrol vessels is expected to increase

4 Defense Procurement Market Dynamics

4.1. Import Market Dynamics

4.1.1. Challenges to regional security dynamics to trigger defense imports

4.1.2. US was the leading supplier of arms to Egypt in the review period

4.1.3. Imports from Europe threatened due to the recent political upheaval

4.1.4. Armored vehicles accounted for the majority of defense imports during the review period

4.2. Export Market Dynamics

4.2.1. Defense Exports from Egypt negligible during the review period

5 Industry Dynamics

5.1. Five Forces Analysis

5.1.1. Bargaining power of supplier: High

5.1.2. Bargaining power of buyer: Low

5.1.3. Barrier to entry: medium to high

5.1.4. Intensity of rivalry: low

5.1.5. Threat of substitution: medium

6 Market Entry Strategy

6.1. Market Regulation

6.1.1. Egypt has not disclosed any offset obligation

6.1.2. Defense procurements lacks legitimate procurement laws

6.2. Market Entry Route

6.2.1. Government-to-government agreements are the preferred market entry route for foreign OEMs

6.2.2. Technology transfer and license manufacturing agreements provides an attractive market entry route

6.3. Key Challenges

6.3.1. Lack of transparency in Egyptian defense establishment

6.3.2. Political uncertainty and internal instability discourages foreign participation

6.3.3. US domination of the market to pose challenge to other foreign firms

7 Competitive Landscape and Strategic Insights

7.1. Competitive Landscape Overview

7.1.1. Egyptian Defense Industry is predominantly state-run

7.2. Key Domestic Companies

7.2.1. Abu Zaabal Tank Repair Factory: overview

7.2.2. Abu Zaabal Tank Repair Factory: products and services

7.2.3. Abu Zaabal Tank Repair Factory: recent announcements and strategic initiatives

7.2.4. Arab Organization for Industrialization-Engine Factory: overview

7.2.5. Arab Organization for Industrialization-Engine Factory: products and services

7.2.6. Arab Organization for Industrialization-Aircraft Factory: overview

7.2.7. Arab Organization for Industrialization-Aircraft Factory: products and services

7.2.8. Arab Organization for Industrialization-Sakr Factory: overview

7.2.9. Arab Organization for Industrialization- Sakr Factory: products and services

7.2.10. Arab Organization for Industrialization-Kader Factory: overview

7.2.11. Arab Organization for Industrialization-Kader Factory: products and services

7.2.12. Arab Organization for Industrialization-Electronics Factory: overview

7.2.13. Arab Organization for Industrialization-Electronics Factory: products and services

7.2.14. Arab British Dynamic Company: overview

7.2.15. Arab British Dynamics Company: products and services

7.2.16. Helwan Factory for Developed Industries: overview

7.2.17. Helwan Factory for Developed Industries: products and services

8 Business Environment and Country Risk

8.1. Demographics and Social Statistics

8.1.1. Population - Female

8.1.2. Population - Male

8.2. Economic Performance

8.2.1. Construction Output, Current Prices, Local Currency

8.2.2. Construction Output, Current Prices, US Dollars

8.2.3. Current Account Balance as Percentage of GDP

8.2.4. GDP at Purchasing Power Parity

8.2.5. GDP, Constant Prices (Local Currency)

8.2.6. GDP, Constant Prices (US$)

8.2.7. GDP, Current Prices (Local Currency)

8.2.8. GDP, Current Prices (US$)

8.2.9. General Government Final Consumption Expenditure

8.2.10. Gross Fixed Capital Formation, Current Prices

8.2.11. Inflation, average consumer prices

8.2.12. Manufacturing Output, Current Prices (Local Currency Bn)

8.2.13. Manufacturing Output, Current Prices (US$ Billions)

8.2.14. Market cap of Stock Exchange (US$ mn)

8.2.15. Wholesale Price Index

8.3. Energy and Utilities

8.3.1. Crude Oil Distillation Capacity

8.3.2. Electricity Exports

8.3.3. Electricity Imports

8.3.4. Electricity Installed Capacity

8.3.5. Fossil Fuels Proved Natural Gas Reserves

8.3.6. Fossil Fuels Proved Oil Gas Reserves

8.3.7. Hydroelectricity Installed Capacity

8.3.8. Natural Gas Consumption

8.3.9. Natural Gas Production

8.3.10. Net Conventional Thermal Electricity Generation

8.3.11. Net Geothermal, Solar, Wind, and Wood Electric Power Generation

8.3.12. Net Hydroelectric Power Generation

8.3.13. Petroleum Consumption

8.3.14. Petroleum Production

8.4. Minerals

8.4.1. Coal Consumption

8.4.2. Coal Production

8.5. Social and Political Risk

8.5.1. Political Stability Index

8.5.2. Transparency Index

8.6. Technology

8.6.1. Patents Granted

9 Appendix

9.1. About SDI

9.2. Disclaimer

List of Tables

  • Table 1: Egyptian Defense Expenditure, 2008-2012
  • Table 2: Egyptian Defense Expenditure, 2013-2017
  • Table 3: Egyptian Defense Budget Split Between Capital and Revenue Expenditure (US$ Billion), 2008-2012
  • Table 4: Egyptian Defense Budget Split Between Capital and Revenue Expenditure (US$ Billion), 2008-2012
  • Table 5: Egyptian Defense Budget Allocation for Capital and Revenue Expenditure (%), 2008-2012
  • Table 6: Egyptian Defense Budget Allocation for Capital and Revenue Expenditure (%), 2013-2017
  • Table 7: Egyptian Capital Budget Allocation (US$ billion), 2008-2012
  • Table 8: Egyptian Capital Budget Allocation (US$ billion), 2008-2012
  • Table 9: Egyptian Revenue Budget Allocation (US$ billion), 2008-2012
  • Table 10: Egyptian Revenue Budget Allocation (US$ billion), 2013-2017
  • Table 11: Egyptian Defense Expenditure as Per-Capita Defense Spend (US$), 2008-2012
  • Table 12: Egyptian Defense Expenditure as Per-Capita Defense Spend (US$), 2008-2012
  • Table 13: Benchmarking with Key Markets - 2008-2012 vs. 2013-2017
  • Table 14: SDI Intelligence Terrorism Index
  • Table 15: Abu Zaabal Tank Repair Factory - Product Focus
  • Table 16: Arab Organization for Industrialization-Engine Factory - Product Focus
  • Table 17: Arab Organization for Industrialization-Aircraft Factory - Product Focus
  • Table 18: Arab Organization for Industrialization-Sakr Factory - Product Focus
  • Table 19: Arab Organization for Industrialization-Kader Factory - Product Focus
  • Table 20: Arab Organization for Industrialization- Electronics Factory - Product Focus
  • Table 21: Arab British Dynamics Company - Product Focus
  • Table 22: Arab British Dynamics Company - Product Focus

List of Figures

  • Figure 1: Egyptian Defense Expenditure, 2008-2012
  • Figure 2: Egyptian Defense Expenditure, 2013-2017
  • Figure 3: Egyptian Defense Budget Split Between Capital and Revenue Expenditure (US$ Billion), 2008-2012
  • Figure 4: Egyptian Defense Budget Split Between Capital and Revenue Expenditure (US$ Billion), 2013-2017
  • Figure 5: Egyptian Defense Budget Allocation for Capital and Revenue Expenditure (%), 2008-2012
  • Figure 6: Egyptian Defense Budget Allocation for Capital and Revenue Expenditure (%), 2013-2017
  • Figure 7: Egyptian Capital Budget Allocation (US$ billion), 2008-2012
  • Figure 8: Egyptian Capital Budget Allocation (US$ billion), 2013-2017
  • Figure 9: Egyptian Revenue Budget Allocation (US$ billion), 2008-2012
  • Figure 10: Egyptian Revenue Budget Allocation (US$ billion), 2013-2017
  • Figure 11: Egyptian Defense Expenditure as Per-Capita Defense Spend (US$), 2008-2012
  • Figure 12: Egyptian Defense Expenditure as Per-Capita Defense Spend (US$), 2013-2017
  • Figure 13: SDI Terrorism Heat Map, 2011
  • Figure 14: SDI Terrorism Index, 2011
  • Figure 15: Benchmarking with Key Markets - 2008-2012 vs. 2013-2017
  • Figure 16: Defense Expenditure of the World's Largest Military Spenders (US$ Billion), 2011 and 2016
  • Figure 17: Countries with the Largest Defense Expenditure as a Percentage of GDP (%), 2011
  • Figure 18: Egyptian Defense Import Trend, 2007-2011 (TIV values)
  • Figure 19: Egyptian Defense Imports by Country (%), 2008-2012
  • Figure 20: Egyptian Imports by Weapons Type (%), 2008-2012
  • Figure 21: Egyptian Defense Industry Dynamics
  • Figure 22: Egyptian Population - Female (In Millions), 2008-2017
  • Figure 23: Egyptian Population - Male (In Millions), 2008-2017
  • Figure 24: Egyptian Construction Output, Current Prices, Local Currency (In Billions), 2001-2010
  • Figure 25: Egyptian Construction Output, Current Prices, US Dollars (In Billions), 2001-2010
  • Figure 26: Egyptian Current Account Balance as Percentage of GDP, 2008-2017
  • Figure 27: Egyptian GDP at Purchasing Power Parity (US$ Billion), 2006-2015
  • Figure 28: Egyptian GDP at Constant Prices (Local Currency Billion), 2006-2015
  • Figure 29: Egyptian GDP at Constant Prices (US$ Billion), 2006-2015
  • Figure 30: Egyptian GDP at Current Prices (Local Currency Billion), 2006-2015
  • Figure 31: Egyptian GDP at Current Prices (US$ Billion), 2006-2015
  • Figure 32: Egyptian General Government Final Consumption Expenditure (US$ Billion), 2001-2010
  • Figure 33: Egyptian Gross Fixed Capital Formation, Current Prices (US$ Billion), 2001-2010
  • Figure 34: Egyptian Inflation, average consumer prices, 2008-2017
  • Figure 35: Egyptian Manufacturing Output, Current Prices (Local Currency Billion), 2001-2010
  • Figure 36: Egyptian Manufacturing Output, Current Prices (US$ Billion), 2001-2010
  • Figure 37: Egyptian Market cap of Stock Exchange (US$ Billion), 2001-2010
  • Figure 38: Egyptian Wholesale Price Index, 2000-2009
  • Figure 39: Egyptian Crude Oil Distillation Capacity (Thousand Barrels Per Cal Day), 2000-2009
  • Figure 40: Egyptian Electricity Exports Trend (Million Kilowatts), 2001-2009
  • Figure 41: Egyptian Electricity Imports Trend (Million Kilowatts), 2001-2009
  • Figure 42: Egyptian Electricity Installed Capacity (Million Kilowatts), 2000-2009
  • Figure 43: Egyptian Fossil Fuels Proved Natural Gas Reserves (Trillion Cubic Feet), 2002-2011
  • Figure 44: Egyptian Fossil Fuels Proved Oil Gas Reserves (Billion Barrels), 2002-2011
  • Figure 45: Egyptian Hydroelectricity Installed Capacity (Million Kilowatts), 2000-2009
  • Figure 46: Egyptian Natural Gas Consumption (Billion Cubic Feet), 2001-2010
  • Figure 47: Egyptian Natural Gas Production (Billion Cubic Feet), 2001-2010
  • Figure 48: Egyptian Net Conventional Thermal Electricity Generation (Billion Kilowatt hours), 2001-2010
  • Figure 49: Egyptian Net Geothermal, Solar, Wind, and Wood Electric Power Generation (Billion Kilowatt hours), 2001-2010
  • Figure 50: Egyptian Net Hydroelectric Power Generation (Billion Kilowatt hours), 2001-2009
  • Figure 51: Egyptian Petroleum Consumption (Thousand Barrels Per Day), 2002-2011
  • Figure 52: Egyptian Petroleum Production (Thousand Barrels Per Day), 2002-2011
  • Figure 53: Egyptian Coal Consumption (Thousand Short Tons), 2001-2010
  • Figure 54: Egyptian Coal Production (Thousand Short Tons), 2001-2010
  • Figure 55: Egyptian Political Stability Index, 2002-2010
  • Figure 56: Egyptian Transparency Index, 2002-2011
  • Figure 57: Egyptian Patents Granted, 2002-2011
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