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Market Research Report

Future of the Vietnamese Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2023

Published by Strategic Defence Intelligence Product code 654971
Published Content info 80 Pages
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Future of the Vietnamese Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2023
Published: June 11, 2018 Content info: 80 Pages
Description

Summary

The growing strength of the Chinese Navy and its assertiveness with regards to territorial claims in the South China Sea has compelled the Vietnamese Government to enhance its military capabilities. In addition, the country is in the process of addressing its limitations with respect to combating modern threat scenarios with its existing obsolete equipment, and has embarked on military modernization plans over the last few years. This has driven Vietnam's defense expenditure throughout 2014-2018 and is expected to do so over. The Vietnamese Government allocated US$5.4 billion towards military expenditure in 2018, of which 32.2% is earmarked for the procurement of defense equipment. The country's defense expenditure increased at a CAGR of 6.14% over 2014-2018.

The country's economy is projected to grow at a CAGR of 8.99% over the forecast period, and defense expenditure as a percentage of GDP is expected to average 2.1%. However, slow population growth is projected to increase per capita defense expenditure to US$76.9 by 2023.

Vietnamese homeland security expenditure, on a cumulative basis, is expected to be US$20.5 billion over the forecast period. Efforts to police its maritime boundaries, coupled with the need to counter human trafficking and the illicit drug trade are anticipated to drive homeland expenditure. This is likely to increase the demand for equipment capable of enhancing seaport and airport security as well as border surveillance systems such as CCTV cameras and scanners.

The country's limited domestic defense industrial capability offers an opportunity for a considerable number of foreign OEMs to venture into the Vietnamese defense market. Vietnam's defense industry is largely dominated by Russian defense equipment suppliers, but other European and Israeli suppliers have recently entered the defense market through direct commercial sale of advanced defense systems. Moreover, Vietnam prefers government-to-government deals when procuring armory; therefore, developing government-to-government relationships is expected to open up business opportunities over the forecast period.

"Future of the Vietnamese Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2023", provides readers with detailed analysis of both historic and forecast defense industry values, factors influencing demand, the challenges faced by industry participants, analysis of industry leading companies, and key news.

Key Inclusions of the report are -

Market opportunity and attractiveness: detailed analysis of the current industry size and growth expectations during 2019-2023, including highlights of the key growth stimulators

Procurement dynamics: trend analysis of imports and exports, together with their implications and impact on the Vietnamese defense industry

Industry structure: five forces analysis to identify various power centers in the industry and how these are expected to develop in the future

Market entry strategy: analysis of 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

Competitive landscape and strategic insights: analysis of the competitive landscape of the defense industry in Vietnam.

Business environment and country risk: a range of drivers at country level, assessing business environment and country risk.

Companies Mentioned: Vietnam Shipbuilding Industry Corporation (SBIC), Sukhoi JSC, Admiralty Shipyards and Damen Schelde Naval Shipbuilding (DSNS)

Scope

Conflicts in the South China Sea and the need to replace obsolete military equipment have driven Vietnam's defense expenditure throughout 2014-2018 and are expected to do so over the forecast period. Vietnam's defense budget grew from US$4.3 billion in 2014 to US$5.4 billion in 2018, at a CAGR 6.14%.

The Vietnamese Government is expected to maintain a steady allocation of an average of 32.3% of defense budget for capital expenditure over the forecast period, which is same as average of 32.3% between 2014 and 2018.

The country is expected to procure military equipment to boost its naval strength and maritime security in order to counter the threat from China's growing naval strength in the South China Sea. In addition, Vietnam intends to procure military equipment such as corvettes, patrol vessels, frigates, submarines, aircraft, missiles, and armored vehicles as part of its modernization program.

Reasons to buy

This report will give the user confidence to make the correct business decisions based on a detailed analysis of Vietnamese defense industry market trends for the coming five years

The market opportunity section will inform the user about the various military requirements that are expected to generate revenues during the forecast period. The description includes technical specifications, recent orders, and the expected investment pattern by the country during the forecast period

Detailed profiles of the top domestic and foreign defense manufacturers with information about their products, alliances, recent contract wins, and financial analysis wherever available. This will provide the user with a total competitive landscape of the sector

A deep qualitative analysis of Vietnamese defense industry covering sections including demand drivers, Porter's Five Forces Analysis, Key Trends and Growth Stimulators, and latest industry contracts

Table of Contents
Product Code: DF0501MR

Table of Contents

1. Introduction 7

  • 1.1. What is this Report About? 7
  • 1.2. Definitions 7
  • 1.3. Summary Methodology 11
  • 1.4. About Strategic Defence Intelligence 13

2. Executive Summary 14

3. Market Attractiveness and Emerging Opportunities 16

  • 3.1. Current Market Scenario 18
    • 3.1.1. Military Fleet Size 18
    • 3.1.2. Procurement Programs 22
    • 3.1.3. Key Drivers and Challenges 24
  • 3.2. Defense Market Size Historical and Forecast 26
    • 3.2.1. Defense expenditure is projected to grow at a CAGR of 7.05% during the forecast period 26
    • 3.2.2. Military modernization and the crisis in the South China Sea are expected to be the prime factors driving Vietnamese military expenditure 29
    • 3.2.3. Defense expenditure as a percentage of GDP is expected to hover at 2.1% over the forecast period 32
  • 3.3. Analysis of Defense Budget Allocation 34
    • 3.3.1. Share of capital expenditure in the overall defense budget is expected to increase 34
    • 3.3.2. Vietnam's capital expenditure is expected to grow at a CAGR of 7.03% over the forecast period 36
    • 3.3.3. Per capita defense expenditure to be US$76.9 by 2023 39
  • 3.4. Homeland Security Market Size and Forecast 41
    • 3.4.1. Homeland security expenditure is expected to be US$4.5 billion by 2023 41
    • 3.4.2. The main factors driving homeland security expenditure are the illicit drugs trade and human trafficking 43
    • 3.4.3. Vietnam faces a some level threat from foreign terrorist organizations 45
    • 3.4.4. Vietnam faces negligible threat from foreign terrorist organizations 46
    • 3.4.5. Vietnam has a minimal terrorism index score of 0 48
  • 3.5. Benchmarking with Key Global Markets 49
    • 3.5.1. Vietnamese defense expenditure is expected to remain low compared to leading spenders 49
    • 3.5.2. Vietnam has a low defense expenditure compared to other Asian countries 51
    • 3.5.3. Vietnam's defense expenditure as a percentage of GDP is higher than leading Asian defense spenders 52
  • 3.6. Defense Market Opportunities: Key Trends and Growth Stimulators 53
    • 3.6.1. Top Defense Market Sectors by Value (US$ Million) - Projections over 2018-2023 53

4. Defense Procurement Market Dynamics 54

  • 4.1. Import Market Dynamics 55
    • 4.1.1. Limited domestic defense capabilities drives the country's defense imports 55
    • 4.1.2. Defense imports are expected to increase over the forecast period 56
    • 4.1.3. Russia is a significant defense trade partner of Vietnam 57
    • 4.1.4. Naval vessels and aircraft accounted for the majority of defense imports over 2013-2017 59
  • 4.2. Export Market Dynamics 60
    • 4.2.1. The country has been unable to access the global defense market 60

5. Industry Dynamics 61

  • 5.1. Market Regulation 61
    • 5.1.1. Vietnamese procurement rules stress on international collaborations 61
    • 5.1.2. Vietnam has not disclosed any offset obligations 61
  • 5.2. Market Entry Route 62
    • 5.2.1. Budget Process 62
    • 5.2.2. Procurement Policy and Process 63
    • 5.2.3. Foreign equipment manufacturers can enter the market through direct commercial sales 63
    • 5.2.4. Government-to-government deals are an attractive entry route to the country's defense market 63
  • 5.3. Key Challenges 64
    • 5.3.1. Lack of private participants and foreign direct investment may restrict domestic defense industry growth 64
    • 5.3.2. Lack of transparency and corruption impedes the growth of Vietnam's defense industry 64

6. Competitive Landscape and Strategic Insights 65

  • 6.1. Competitive Landscape Overview 65

7. Business Environment and Country Risk 66

  • 7.1. Economic Performance 66
    • 7.1.1. Gross Domestic per Capita 66
    • 7.1.2. Gross Domestic Product, current US$ 67
    • 7.1.3. Exports of Goods and Services 68
    • 7.1.4. Imports of Goods and Services 69
    • 7.1.5. Local Currency Unit per US$ 70
    • 7.1.6. Market capitalization of listed companies (US$ Billion) 71
    • 7.1.7. Market capitalization of listed companies as a % of GDP 72
    • 7.1.8. Goods Exports as a percentage of GDP 73
    • 7.1.9. Goods Imports as a percentage of GDP 74
    • 7.1.10. Services Imports as a percentage of GDP 75
    • 7.1.11. Services Exports as a percentage of GDP 76
    • 7.1.12. Foreign direct investment, net (BoP, current US$ Bn) 77
    • 7.1.13. Net foreign direct investment as a % of GDP 78
    • 7.1.14. Mining, Manufacturing, Utilities Output 79

8. Appendix 80

  • 8.1. About SDI 80
  • 8.2. Disclaimer 80

List of Tables

  • Table 1: Vietnam Army Strength 18
  • Table 2: Vietnamese Navy Strength 19
  • Table 3: Vietnamese Air Force Strength 20
  • Table 4: Vietnam - Ongoing Development and Procurement Programs 22
  • Table 5: Vietnamese - Future Procurement Programs 23
  • Table 6: Vietnamese Defense Expenditure (VND Trillion & US$ Billion), 2014-2023 27
  • Table 7: Vietnamese GDP Growth and Defense Expenditure as a Percentage of GDP Growth, 2014-2023 32
  • Table 8: Vietnamese Defense Budget Split Between Capital and Revenue Expenditure (%), 2014-2023 34
  • Table 9: Vietnamese Defense Capital Expenditure (VND Trillion & US$ Billion), 2014-2023 37
  • Table 10: Vietnamese Per Capita Defense Expenditure (US$), 2014-2023 39
  • Table 11: Vietnamese Homeland Security Expenditure (VND Trillion & US$ Billion), 2014-2023 41
  • Table 12: Terrorism Index, 2018 46
  • Table 13: Benchmarking with Key Markets - 2014-2018 vs. 2019-2023 49
  • Table 14: Top Vietnamese Defense Market Sectors by Value (US$ Million) - 2018-2023 53
  • Table 15: Vietnamese Budget Formation Process 62
  • Table 16: Competitive Landscape of the Vietnamese Defense Industry 65

List of Figures

  • Figure 1: Vietnamese Defense Expenditure (VND Trillion), 2014-2023 27
  • Figure 2: Vietnamese Defense Expenditure (US$ Billion), 2014-2023 28
  • Figure 3: Vietnamese GDP Growth vs. Defense Expenditure as a Percentage of GDP Growth, 2014-2023 33
  • Figure 4: Vietnamese Defense Budget Split Between Capital and Revenue Expenditure (%), 2014-2023 35
  • Figure 5: Vietnamese Defense Capital Expenditure (VND Trillion), 2014-2023 37
  • Figure 6: Vietnamese Defense Capital Expenditure (US$ Billion), 2014-2023 38
  • Figure 7: Vietnamese Per Capita Defense Expenditure (US$), 2014-2023 40
  • Figure 8: Vietnamese Homeland Security Expenditure (VND Trillion), 2014-2023 42
  • Figure 9: Vietnamese Homeland Security Expenditure (US$ Billion), 2014-2023 42
  • Figure 10: Terrorism Heat Map, 2018 45
  • Figure 11: Terrorism Index, 2018 48
  • Figure 12: Benchmarking with Key Markets - 2014-2018 vs. 2019-2023 50
  • Figure 13: Benchmarking with World's Largest and Top Regional Defense Spenders (US$ Billion), 2018 and 2023 51
  • Figure 14: Defense Expenditure as a Percentage of GDP of Largest Military Spenders (%), 2018 52
  • Figure 15: Vietnamese Defense Import Trend, 2013-2017 (TIV values) 56
  • Figure 16: Vietnamese Defense Imports by Country (%), 2013-2017 58
  • Figure 17: Vietnamese Defense Imports by Category (%), 2013-2017 59
  • Figure 18: Vietnam's GDP per capita, 2015-2025 66
  • Figure 19: Vietnam's Gross Domestic Product (current US$ Billion), 2015-2025 67
  • Figure 20: Vietnam's Exports of goods and services (LCU Billion), 2005-2014 68
  • Figure 21: Vietnam's Imports of goods and services (LCU Bn), 2005-2014 69
  • Figure 22: Vietnam's LCU per US$, 2015-2024 70
  • Figure 23: Vietnam's market capitalization of listed companies (US$ Billion), 2005-2012 71
  • Figure 24: Vietnam's market capitalization of listed companies as a % of GDP, 2005-2012 72
  • Figure 25: Vietnam's Goods Exports as a percentage of GDP, 2005-2013 73
  • Figure 26: Vietnam's Goods Imports as a percentage of GDP, 2005-2013 74
  • Figure 27: Vietnam's Services Imports as a percentage of GDP, 2005-2013 75
  • Figure 28: Vietnam's Services Exports as a percentage of GDP, 2005-2013 76
  • Figure 29: Vietnam's Foreign direct investment, net (BoP, current US$ Bn), 2005-2013 77
  • Figure 30: Vietnam's Net foreign direct investment as a % of GDP, 2005-2013 78
  • Figure 31: Vietnam's Mining, Manufacturing, Utilities Output (LCU Billion), 2005-2014 79
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