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Market Research Report

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

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Future of the Afghan Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2023
Published: July 3, 2018 Content info: 89 Pages
Description

Summary

Afghanistan is emerging as one of the most interesting defense markets in Central and South Asia. The US invasion of Afghanistan after the September 2001 attacks led to the formation of a democratic government which is now putting focusing on the total revamp of its national infrastructure and defense industry. Its main objective is to have a strong, efficient and well-equipped armed force that can counter the Taliban insurgency and provide strong public security. These are the prime drivers of the Afghan government's investment in the defense sector.

After the NATO-led International Security Assistance Force (ISAF) left the country in 2014, Afghan security forces were made responsible for protecting the country. Afghanistan's total defense expenditure decreased at a CAGR of -1.78% during the historic period, from US$6.4 billion in 2014 to US$6 billion in 2018. Around 34% of the national budget was allocated to security expenditure in 2017, however, the negative CAGR was caused by a decrease in foreign aid which previously benefitted the security sector.

The withdrawal of the International Security Assistance Force (ISAF) from Afghanistan in 2014 necessitated the need for a strong and efficient Afghan National Defense Security Forces (ANDSF). As a result, the Afghan government is expected to assign an average of 3.7% of its GDP to defense purposes over 2019-2023. The county is expected to acquire defense equipment such as light fighter aircraft, attack helicopters, small arms and ammunitions, and armored vehicles over the forecast period. Instability within the country's political scene, along with internal security threats emerging from the growing human trafficking and drug trade, is expected to drive the Afghan government's investments in homeland security over the forecast period. Police force modernization, border security and infrastructure development are expected to be the primary areas of focus.

The report "Future of the Afghan Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2023" offers detailed analysis of Afghan defense industry with market size forecasts covering the next five years. This report will also analyze factors that influence demand for the industry, key market trends, and challenges faced by industry participants.

In particular, it provides an in-depth analysis of the following -

Afghan defense industry market size and drivers: detailed analysis of Afghan defense industry during 2019-2023, including highlights of the demand drivers and growth stimulators for the industry. It also provides a snapshot of the country's expenditure and modernization patterns

Budget allocation and key challenges: insights into procurement schedules formulated within the country and a breakdown of the defense budget. It also details the key challenges faced by defense market participants within the country

Porter's Five Force analysis of Afghan defense industry: analysis of the market characteristics by determining the bargaining power of suppliers, bargaining power of buyers, threat of substitution, intensity of rivalry, and barriers to entry

Import and Export Dynamics: analysis of prevalent trends in the country's imports and exports over the last five years

Market opportunities: details of the top five defense investment opportunities over the next 10 years

Competitive landscape and strategic insights: analysis of the competitive landscape of Afghan defense industry. It provides an overview of key players, together with insights such as key alliances, strategic initiatives, and a brief financial analysis

Companies Mentioned - General Dynamics Corporation, Sierra Nevada Corporation (SNC), Lockheed Martin, and MD Helicopters

Scope

After the NATO-led International Security Assistance Force (ISAF) left the country in 2014, Afghan security forces were made responsible for protecting the country. Afghanistan's total defense expenditure decreased at a CAGR of -1.78% during the historic period, from US$6.4 billion in 2014 to US$6 billion in 2018. Around 34% of the national budget was allocated to security expenditure in 2017, however, the negative CAGR was caused by a decrease in foreign aid which previously benefitted the security sector.

Over the forecast period, the procurement of weapons, construction of infrastructure, and acquisition of assets are expected to drive capital expenditure. The average share of revenue expenditure is expected to be 89.4% over the forecast period, higher than the average share of 84.8% during 2014-2018. The country's increased focus on Afghan armed forces training sessions and better military personnel pay has resulted in a higher share of the defense budget being allocated to revenue expenditure, a trend expected to continue over 2019-2023.

The MoD is expected to invest in land-based C4ISR, man-portable and vehicular tactical communications, multi-mission helicopters, starionary tactical communication stations, and attack helicopters.

Reasons to buy

This report will give the user confidence to make the correct business decisions based on a detailed analysis of Afghan 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 Afghan 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: DF0506MR

Table of Contents

1. Introduction 7

  • 1.1. What is this Report About? 7
  • 1.2. Definitions 7
  • 1.3. Summary Methodology 9
  • 1.4. About Strategic Defence Intelligence 10

2. Executive Summary 11

3. Market Attractiveness and Emerging Opportunities 12

  • 3.1. Current Market Scenario 13
    • 3.1.1. Primary Threat Perception 13
    • 3.1.2. Military Doctrine and Strategy 15
    • 3.1.3. Military Fleet Size 16
    • 3.1.4. Procurement Programs 18
    • 3.1.5. Social, Political and Economic Environment and Support for Defense Projects 20
    • 3.1.6. Political and Strategic Alliances 21
  • 3.2. Defense Market Size Historical and Forecast 23
    • 3.2.1. Afghanistan's defense expenditure is expected to grow at a CAGR of 3.03% over 2019-2023 23
    • 3.2.2. US aid to Afghanistan is expected to increase over the forecast period 25
    • 3.2.3. The resurgence of the Taliban, the ongoing war against terrorism and the capacity building of Afghan forces is expected to fuel defense expenditure over the forecast period 27
    • 3.2.4. Afghan defense expenditure as a percentage of GDP expected to decrease considerably over the forecast period 29
  • 3.3. Analysis of Defense Budget Allocation 31
    • 3.3.1. Capital expenditure's share is anticipated to decrease over forecast period 31
    • 3.3.2. Capital expenditure expected to increase at a CAGR of 0.58% over the forecast period 33
    • 3.3.3. Per capita defense expenditure anticipated to remain steady over the forecast period 35
  • 3.4. Homeland Security Market Size and Forecast 37
    • 3.4.1. Afghanistan's homeland security budget is set to increase at a CAGR of 3.11% over the forecast period 37
    • 3.4.2. Homeland security expenditure to be triggered by the country's efforts to counter drug trade and human trafficking 39
    • 3.4.3. Afghanistan is one of the most terror prone countries in the world 41
    • 3.4.4. Afghanistan falls under "worst affected" terrorism category 42
    • 3.4.5. Afghanistan has a terrorism index score of "9.4" 44
  • 3.5. Benchmarking Against Key Global Markets 45
    • 3.5.1. Afghanistan defense expenditure expected to grow significantly over forecast period 45
    • 3.5.2. Afghanistan's defense expenditure is low compared to other Asian countries 47
    • 3.5.3. Afghanistan allocates a higher share of GDP to defense compared to other Asian countries 48
  • 3.6. Market Opportunities: Key Trends and Growth Stimulators 49
    • 3.6.1. Top 10 Defense Market Sectors by Value (US$ Million) - Projections over 2018-2023 49
    • 3.6.2. Land-based C4ISR 50
    • 3.6.3. Man-Portable Tactical Communications 51
    • 3.6.4. Vehicular Tactical Communications 52

4. Defense Procurement Market Dynamics 53

  • 4.1. Import Market Dynamics 55
    • 4.1.1. Afghanistan relies on defense imports from foreign countries 55
    • 4.1.2. The US emerged as the largest suppliers of arms 56
    • 4.1.3. Armored vehicles and aircraft dominate Afghanistan's military imports 57
  • 4.2. Export Market Dynamics 58
    • 4.2.1. Afghanistan's domestic defense manufacturing is expected to be nil over the forecast period 58

5. Industry Dynamics 59

  • 5.1. Five Forces Analysis 59
    • 5.1.1. Bargaining Power of Supplier: Medium 60
    • 5.1.2. Bargaining Power of Buyer: Medium 60
    • 5.1.3. Barrier to Entry: Low 60
    • 5.1.4. Intensity of Rivalry: Medium 60
    • 5.1.5. Threat of Substitution: High 60

6. Market Entry Strategy 61

  • 6.1. Budget process 61
  • 6.2. Procurement Policy and Process 62
  • 6.3. Market Regulation 63
    • 6.3.1. Afghanistan has not disclosed an FDI policy or investment regulations 63
    • 6.3.2. Offset obligation not disclosed by the government 63
  • 6.4. Market Entry Route 64
    • 6.4.1. Equipment manufacturers can enter the market through government-to-government deals 64
  • 6.5. Key Challenges 65
    • 6.5.1. Corruption and malpractices 65
    • 6.5.2. Lack of skilled labor 65
    • 6.5.3. Limited defense budget 65

7. Competitive Landscape and Strategic Insights 66

  • 7.1. Competitive Landscape Overview 66
  • 7.2. Key Companies 68
    • 7.2.1. General Dynamics: Overview 68
    • 7.2.2. General Dynamics: Products 68
    • 7.2.3. General Dynamics: Recent Contract Wins 69
    • 7.2.4. Sierra Nevada Corporation: Overview 70
    • 7.2.5. Sierra Nevada Corporation: Products 70
    • 7.2.6. Sierra Nevada Corporation: Recent Announcements and Strategic Initiatives 70
    • 7.2.7. Sierra Nevada Corporation: Alliances 70
    • 7.2.8. Sierra Nevada Corporation: Recent contract Wins 71
    • 7.2.9. Lockheed Martin Corp.: Overview 72
    • 7.2.10. Lockheed Martin Corp.: Products and Services 72
    • 7.2.11. Lockheed Martin Corp.: Recent Announcements and Strategic Initiatives 72
    • 7.2.12. Lockheed Martin Corp.: Recent Contract Wins 73
    • 7.2.13. MD Helicopters: Overview 74
    • 7.2.14. MD Helicopters: Products and Services 74
    • 7.2.15. MD Helicopters: Recent Announcements and Strategic Initiatives 74
    • 7.2.16. MD Helicopters: Recent Contract Wins 75

8. Business Environment and Country Risk 76

  • 8.1. Economic Performance 76
    • 8.1.1. GDP Per Capita 76
    • 8.1.2. GDP, Current Prices (US$ Billion) 77
    • 8.1.3. Local Currency Unit per US Dollar 78
    • 8.1.4. Exports of Goods and Services (LCU) 79
    • 8.1.5. Imports of Goods and Services (LCU) 80
    • 8.1.6. Goods Exports as a Percentage of GDP 81
    • 8.1.7. Goods Imports as a Percentage of GDP 82
    • 8.1.8. Service Imports as a Percentage of GDP 83
    • 8.1.9. Service Exports as a Percentage of GDP 84
    • 8.1.10. Government Cash Surplus/Deficit as a Percentage of GDP 85
    • 8.1.11. Net Foreign Direct Investment 86
    • 8.1.12. Net Foreign Direct Investment as a Percentage of GDP 87
    • 8.1.13. Mining, Manufacturing, Utilities Output 88

9. Appendix 89

  • 9.1. About SDI 89
  • 9.2. Disclaimer 89

List of Tables

  • Table 1: Afghanistan National Army (ANA) Strength 16
  • Table 2: Afghanistan Air Force (AAF) Strength 17
  • Table 3: Afghanistan Ongoing Procurement Programs 18
  • Table 4: Afghanistan Future Procurement Programs 18
  • Table 5: Top Afghan Defense Procurement Programs by Value (US$ Million) 2018-2023 19
  • Table 6: Afghanistan Defense Expenditure (AFN billion & US$ billion), 2014-2023 23
  • Table 7: US aid to Afghanistan (US$ Billion), 2014-2023 25
  • Table 8: Afghanistan GDP Growth vs. Defense Expenditure as a Percentage of GDP, 2014-2023 29
  • Table 9: Afghanistan Defense Budget Split Between Capital and Revenue Expenditure (%), 2014-2023 31
  • Table 10: Afghanistan Defense Capital Expenditure (AFN Billion and US$ Million), 2014-2023 33
  • Table 11: Afghanistan Per-Capita Defense Expenditure (US$), 2014-2023 35
  • Table 12: Afghanistan Defense Homeland Security Expenditure (AFN Billion and US$ Billion), 2014-2023 37
  • Table 13: Terrorism Index, 2018 42
  • Table 14: Benchmarking with Key Markets - 2014-2018 vs. 2019-2023 45
  • Table 15: Top Afghan Defense Market Sectors by Value (US$ Million) - 2018-2023 49
  • Table 16: Afghanistan Budget Preparation Process 61
  • Table 17: Top Defense Suppliers in the Afghan Defense Industry - By Value (US$ Million) 2018-2023 66
  • Table 18: Competitive Landscape of the Afghan Defense Market 67
  • Table 19: General Dynamics - Products 68
  • Table 20: General Dynamics - Recent Contract Wins 69
  • Table 21: Sierra Nevada Corporation - Products 70
  • Table 22: Sierra Nevada Corporation - Alliances 70
  • Table 23: Sierra Nevada Corporation - Recent Contract Wins 71
  • Table 24: Lockheed Martin Corp. - Products and Services 72
  • Table 25: Lockheed Martin Corp. - Recent Contract Wins 73
  • Table 26: MD Helicopters - Products and Services 74
  • Table 27: MD Helicopters - Recent Contract Wins 75

List of Figures

  • Figure 1: Afghanistan Defense Expenditure (AFN Billion), 2014-2023 24
  • Figure 2: Afghanistan Defense Expenditure (US$ Billion), 2014-2023 24
  • Figure 3: US Aid to Afghanistan (US$ Billion), 2014-2023 26
  • Figure 4: Afghanistan GDP Growth vs. Defense Expenditure as Percentage of GDP, 2014-2023 30
  • Figure 5: Afghanistan Budget Split Between Capital and Revenue Expenditure (%), 2014-2023 32
  • Figure 6: Afghanistan Defense Capital Expenditure (AFN Billion), 2014-2023 34
  • Figure 7: Afghanistan Defense Capital Expenditure (US$ Million), 2014-2023 34
  • Figure 8: Afghanistan Per-Capita Expenditure (US$), 2014-2023 36
  • Figure 9: Afghanistan Defense Homeland Security Expenditure (AFN Billion), 2014-2023 38
  • Figure 10: Afghanistan Defense Homeland Security Expenditure (US$ Billion), 2014-2023 38
  • Figure 11: Terrorism Heat Map, 2018 41
  • Figure 12: Terrorism Index, 2018 44
  • Figure 13: Benchmarking with Key Markets - 2014-2018 vs. 2019-2023 46
  • Figure 14: Defense Expenditure of the World's Largest Military Spenders (US$ Billion), 2018 and 2023 47
  • Figure 15: Defense Expenditure as a Percentage of GDP of Largest Military Spenders (%), 2018 48
  • Figure 16: Land-based C4ISR Market Size (US$ Million), 2018-2023 50
  • Figure 17: Man-Portable Tactical Communications Market Size (US$ Million), 2018-2023 51
  • Figure 18: Vehicular Tactical Communications Market Size (US$ Million), 2018-2023 52
  • Figure 19: Top Afghan Defense Procurements in Terms of Their Supplier Relationships 54
  • Figure 20: Afghanistan Defense Imports (US$ Million), 2013-2017 55
  • Figure 21: Afghanistan Defense Imports by Country (%), 2013-2017 56
  • Figure 22: Afghanistan Defense Imports by Weapon Category (%), 2013-2017 57
  • Figure 23: Industry Dynamics Porter's Five Forces Analysis 59
  • Figure 24: Afghanistan GDP Per Capita, 2015-2025 (US$) 76
  • Figure 25: Afghanistan GDP, Current Prices (In US$ Billion), 2015-2025 77
  • Figure 26: Local Currency Unit per US$ - Exchange Rate, 2015-2024 78
  • Figure 27: Afghanistan Exports of Goods and Services (in LCU Billion), 2005-2014 79
  • Figure 28: Afghanistan Imports of Goods and Services (in LCU Billion), 2005-2014 80
  • Figure 29: Afghanistan Goods Exports as a Percentage of GDP, 2008-2013 81
  • Figure 30: Afghanistan Goods Imports as a Percentage of GDP, 2008-2013 82
  • Figure 31: Afghanistan Service Imports as a Percentage of GDP, 2008-2013 83
  • Figure 32: Afghanistan Service Exports as a Percentage of GDP, 2008-2013 84
  • Figure 33: Government Cash Surplus/Deficit as a Percentage of GDP (LCU), 2008-2012 85
  • Figure 34: Afghanistan Foreign Direct Investment, Net (current US$ Billion), 2008-2013 86
  • Figure 35: Afghanistan Net Foreign Direct Investment as a Percentage of GDP, 2008-2013 87
  • Figure 36: Afghanistan Mining, Manufacturing, Utilities Output (US$ Billion), 2005-2014 88
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