- February 14, 2018
- Posted by: Marketing
- Category: Aerospace, Energy, Land Systems, Maritime Systems, Software, Strategy, Technology
Growing strength of the Chinese Navy and its assertiveness with regards to territorial claims in the South China Sea has forced the Vietnamese Government to enhance its military capabilities. The Vietnamese Government allocated US$5 billion towards military expenditure in 2017, of which 32.7% is earmarked for the procurement of defense equipment. 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.
The country’s defense expenditure increased at a CAGR of 6.41% over 2013-2017. In the coming years, demand for defense equipment is mainly expected to revolve around fighter and multi-role aircraft, naval vessels, patrol ships, maritime patrol aircraft, submarines, and surveillance equipment. The country’s defense expenditure is expected to increase at a CAGR of 7+%.
Vietnam’s domestic defense production capabilities are relatively underdeveloped and, as a result, the country relies on foreign OEMs to fulfill its military requirements. Traditionally, the country has been an importer of weapon systems as domestic military production is small-scale and technologically inferior. Over 2012 to 2016, Russia was the largest supplier of military hardware to Vietnam with a share of over 88.2% of Vietnam’s imports, followed by Belarus, Ukraine, and Israel.
Vietnamese homeland security expenditure, on a cumulative basis, is expected to be US$17.1 billion over the forecast period compared to US$11.3 billion spent between 2013 and 2017. Efforts to police its maritime boundaries, coupled with the need to counter human trafficking and the illicit drug trade, are expected 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 sales of advanced defense systems. Vietnam prefers government-to-government deals when procuring equipment, therefore, developing government-to-government relationships is expected to open up business opportunities over the forecast period.
This report offers insights into the market opportunities and entry strategies adopted by foreign OEMs (original equipment manufacturers) to gain a market share in the Vietnamese defense industry.
In particular, it offers in-depth analysis of the following:
- Market opportunity and attractiveness: detailed analysis of the current industry size and growth expectations during 2018-2022, 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, providing an overview of key defense companies (both domestic and foreign), together with insights such as key alliances, strategic initiatives, and a brief financial analysis
- Business environment and country risk: a range of drivers at country level, assessing business environment and country risk. It covers historical and forecast values for a range of indicators, evaluating business confidence, economic performance, infrastructure quality and availability, labor force, demographics, and political and social risk
Companies included within the research comprise of Vietnam Shipbuilding Industry Corporation (SBIC), Sukhoi, Admiralty Shipyards, and Damen Schelde Naval Shipbuilding (DSNS)
- The Vietnamese Government allocated US$5 billion towards military expenditure in 2017, of which 32.7% is earmarked for the procurement of defense equipment. The country’s defense expenditure increased at a CAGR of 6.41% over 2013-2017. The growing strength of the Chinese Navy and its assertiveness with regards to territorial claims in the South China Sea has forced 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. These plans are expected to pick up pace over the forecast period and increase Vietnam’s defense expenditure.
- Between 2013 and 2017,Vietnam allocated an average of 32.3% of its defense budget to capital expenditure and the remainder to revenue expenditure. The share of capital expenditure in the overall defense budget is predicted to marginally increase to an average of 33.6% over the forecast period, predominantly due to Vietnam’s planned military modernization initiatives and procurement programs. Vietnam cumulatively spent US$7.4 billion on defense equipment, while US$15.4 billion was assigned for revenue expenditure during the analysis period.
- The MoD is expected to invest in fighter and multi-role aircraft, naval vessels, patrol ships, maritime patrol aircraft, and surveillance equipment.
Reasons to look into the Vietnam market:
- Clearly an open market for small and medium size businesses to enter.
- Budgets are allocated for procurement (direct sale, ToT)
- We currently have clients that are ready to purchase technology (receive local production rights/ToT)
How We Can Assist:
- Defensys Group’s local Vietnam office can assist in providing local agency support to assist in penetrating the green market for your firm. Contact us!