Frost & Sullivan outlines rapidly evolving defence markets

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Even though Colombia, Kuwait, Malaysia, Morocco and Singapore have very different perspectives and agendas, they are all expected to sharply increase their defence spending over the next 10 years, according to Frost & Sullivan.

In its new analysis, Rapidly Evolving Defence Markets, Part 1, Frost & Sullivan forecasts defence spending in Colombia, Kuwait, Malaysia, Morocco and Singapore to increase from $38.73 billion in 2015 to $55.51 billion in 2025 at a compound annual growth rate of 3.7 percent.

Due to the arms race and an increasing threat perception, the effects of the 2008 financial slowdown on defence spending in these transitioning markets are gradually reducing, the company notes.
“Unlike leading transitioning economies like India, South Korea, Turkey, the United Arab Emirates and Brazil, the five countries selected for this study are still attempting to develop an industrial base to bolster their local footprint and diminish reliance on foreign equipment,” said Frost & Sullivan Aerospace & Defence Industry Analyst Alix Leboulanger. “Upon a closer look at these countries’ dynamics, it is found that their political intent is stronger than their financial and infrastructure capabilities.”

Several factors are dampening indigenisation plans. The increasingly competitive marketplace has left little room for emerging local players unless they can distinguish themselves appropriately – for instance, with price in Colombia and technology in Singapore. Moreover, weak market prospects beyond local demand, along with the absence of small- and medium-sized enterprises, have restricted partnership opportunities and transfer-of-technology ventures with foreign companies.
“Investing in high-end foreign technology is perceived as the way forward to fulfil three objectives: achieving modernisation programmes, consolidating the domestic industrial base, and providing employment to locals,” explained Leboulanger. “This will require efficient and easily-applicable regulations to create an attractive and stable environment for foreign investments and industrial partnerships. The lack of skilled personnel and infrastructure, also need to be addressed.”



While rising regional threats directly impact defence equipment spending and upgrades, military capabilities and fleet size do not necessarily increase. Financial constraints mean that governments will try to reduce armed forces and invest in combat-proven platforms, surplus material and second-hand equipment, Frost & Sullivan said.
“On account of financial challenges in Malaysia and Morocco as well as high reliance on oil revenues in Kuwait, defence spending remains below anticipated levels,” noted Leboulanger. “As a matter of fact Colombia, Kuwait, Malaysia, Morocco and Singapore are expected to spend 21 percent of their total budget, circa $9.77 billion per year, on new equipment.”