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

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


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Executive Summary

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

Summary

Future of the Afghan Defense Industry-Market Attractiveness, Competitive Landscape and Forecasts to 2023, published by Strategic Defence Intelligence, 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.

Synopsis

This report 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

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 USD6.4 billion in 2014 to USD6 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



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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 (USD 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 (USD 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 Figures

Figure 1: Afghanistan Defense Expenditure (AFN Billion), 2014-2023 24

Figure 2: Afghanistan Defense Expenditure (USD Billion), 2014-2023 24

Figure 3: US Aid to Afghanistan (USD 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 (USD Million), 2014-2023 34

Figure 8: Afghanistan Per-Capita Expenditure (USD), 2014-2023 36

Figure 9: Afghanistan Defense Homeland Security Expenditure (AFN Billion), 2014-2023 38

Figure 10: Afghanistan Defense Homeland Security Expenditure (USD 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 (USD 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 (USD Million), 2018-2023 50

Figure 17: Man-Portable Tactical Communications Market Size (USD Million), 2018-2023 51

Figure 18: Vehicular Tactical Communications Market Size (USD Million), 2018-2023 52

Figure 19: Top Afghan Defense Procurements in Terms of Their Supplier Relationships 54

Figure 20: Afghanistan Defense Imports (USD 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 (USD) 76

Figure 25: Afghanistan GDP, Current Prices (In USD Billion), 2015-2025 77

Figure 26: Local Currency Unit per USD-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 USD 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 (USD Billion), 2005-2014 88

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 (USD Million) 2018-2023 19

Table 6: Afghanistan Defense Expenditure (AFN billion & USD billion), 2014-2023 23

Table 7: US aid to Afghanistan (USD 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 USD Million), 2014-2023 33

Table 11: Afghanistan Per-Capita Defense Expenditure (USD), 2014-2023 35

Table 12: Afghanistan Defense Homeland Security Expenditure (AFN Billion and USD 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 (USD Million)-2018-2023 49

Table 16: Afghanistan Budget Preparation Process 61

Table 17: Top Defense Suppliers in the Afghan Defense Industry-By Value (USD 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

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