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Future of the Sri Lankan Defense Industry-Market Attractiveness, Competitive Landscape and Forecasts to 2022

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Future of the Sri Lankan Defense Industry-Market Attractiveness, Competitive Landscape and Forecasts to 2022

Summary

The Future of the Sri Lankan Defense Industry-Market Attractiveness, Competitive Landscape and Forecasts to 2022, 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.

This report offers detailed analysis of the Sri Lankan 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

The Sri Lankan defense industry market size and drivers: detailed analysis of the Sri Lankan defense industry during 2018-2022, 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 the Sri Lankan 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 the Sri Lankan defense industry. It provides an overview of key players, together with insights such as key alliances, strategic initiatives, and a brief financial analysis

Scope

The Sri Lankan defense budget is valued at US$2 billion in 2017, and registered a CAGR of 4.11% during the historic period. The post-war rehabilitation, threat of the re-emergence of LTTE affiliates, and a tense relationship with India drove the Sri Lankan defense expenditure during the historic period. With this trend expected to continue over the forecast period.

The capital expenditure allocation, which stood at an average of 13% during the historic period, is expected to decrease to an average of 6.6% during the forecast period.

This is primarily due to the procurement of advanced defense equipment and focus on increasing the indigenous defense manufacturing capabilities.

Key opportunities for equipment suppliers are expected in sectors such as patrol vessels and naval infrastructure, combat aircraft, and transport helicopters.

Consequently, revenue expenditure is expected to increase from an average of 87% during the historic period to an average of 93.4% over the forecast period, which will be directed towards additional recruitment, training, and development programs for military personnel.

The MoD is expected to invest in Infrastructure development, Facilities management and MRO for patrol vessels and corvettes.

Reasons to Buy

This report will give the user confidence to make the correct business decisions based on a detailed analysis of the Sri Lankan 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 the Sri Lankan 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 Content

Scope

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 13

3.1. Current Market Scenario 14

3.1.1. Primary threat perception 14

3.1.2. Military Doctrine & Strategy 15

3.1.3. Military Fleet Size 16

3.1.4. Procurement Programs 19

3.1.5. Ongoing procurement programs 19

3.1.6. Future procurement programs 19

3.1.7. Social, Political and Economic Environment & Support for Defense Projects 20

3.1.8. Political & Strategic Alliances 21

3.2. Defense Market Size Historical and Forecast 22

3.2.1. Sri Lankan defense budget to grow at a CAGR of 1.24% during 2018-2022 to value US$2 billion in 2022 22

3.2.2. The re-emergence of the LTTE, geopolitics of Indian Ocean & balancing relationships with regional superpowers are expected to drive Sri Lankan defense expenditure 25

3.2.3. Sri Lankan defense expenditure as a percentage of GDP is expected to decrease to an average of 1.8% during 2018-2022 27

3.3. Analysis of Defense Budget Allocation 29

3.3.1. Share of capital expenditure expected to increase over forecast period 29

3.3.2. Capital expenditure to increase at a CAGR of 3.38% during the forecast period 31

3.3.3. Sri Lankan Army accounts for the largest share of defense expenditure 33

3.3.4. The country is expected to invest US$5.3 billion in its army during the forecast period 35

3.3.5. Naval defense budget projected to grow at a CAGR of 1.21% during the forecast period 37

3.3.6. Air force expenditure expected to register a CAGR of 1.71% during the forecast period 38

3.3.7. Per capita defense expenditure expected to increase over the forecast period 41

3.4. Homeland Security Market Size and Forecast 42

3.4.1. Sri Lankan homeland security expected to grow steadily over the forecast period 42

3.4.2. Maritime security, Counterterrorism, and countering violent extremism are expected to drive Sri Lankan homeland security expenditure 43

3.4.3. Sri Lank falls under highly affected terrorism category 44

3.4.4. Sri Lanka is highly affected by terrorism 46

3.4.5. Sri Lanka has a terrorism index score of 3.5 48

3.5. Benchmarking with Key Global Markets 49

3.5.1. Sri Lankan defense budget expected to increase over the forecast period 49

3.5.2. Sri Lankan military expenditure remains limited compared to countries with the largest defense expenditure 51

3.5.3. Sri Lanka spent over 2.3% of its GDP on defense in 2017 52

3.6. Market Opportunities: Key Trends and Growth Stimulators 53

3.6.1. Demand for infrastructure construction expected to increase over the forecast period 53

3.6.2. Facilities Management 54

3.6.3. Corvette MRO 56

4. Defense Procurement Market Dynamics 57

4.1. Import Market Dynamics 58

4.1.1. Defense imports are expected to remain low during the forecast period. 58

4.1.2. Sri Lanka sourced the majority of its arms imports from Russia 59

4.1.3. Ships and aircraft dominated military hardware imports 60

4.2. Export Market Dynamics 61

4.2.1. The country exported negligible defense goods during 2012-2016 61

5. Industry Dynamics 62

5.1. Five Forces Analysis 62

5.1.1. Bargaining power of supplier: low 63

5.1.2. Bargaining power of buyer: medium 63

5.1.3. Barrier to entry: medium 63

5.1.4. Intensity of rivalry: low 63

5.1.5. Threat of substitution: high 63

6. Market Entry Strategy 64

6.1. Market Regulation 64

6.1.1. Undisclosed FDI policy relating to defense 64

6.2. Market Entry Route 65

6.2.1. Budgeting Process 65

6.2.2. Procurement Policy & Process 67

6.2.3. Cooperative agreement and partnerships an easier way to access the Sri Lanka defense market 68

6.2.4. Equipment manufacturers enter the market through direct sales 68

6.3. Key Challenges 69

6.3.1. Corruption and lack of transparency pose an obstacle for market entry 69

6.3.2. Underdeveloped domestic industry and internal instability discourages foreign participation 69

6.3.3. Limited defense budget deters investors from market entry 69

7. Competitive Landscape and Strategic Insights 70

7.1. Competitive Landscape Overview 70

7.1.1. Colombo Dockyard Plc.: overview 70

7.1.2. Colombo Dockyard Plc.: products 70

7.1.3. Colombo Dockyard Plc.: recent announcements and strategic initiatives 71

7.1.4. Colombo Dockyard Plc: alliances 71

7.1.5. Colombo Dockyard Plc.: recent contract wins 71

8. Business Environment and Country Risk 72

8.1. Economic Performance 72

8.1.1. Gross Domestic per Capita 72

8.1.2. Gross Domestic Product, current US$ 73

8.1.3. Exports of Goods and Services 74

8.1.4. Imports of Goods and Services 75

8.1.5. Gross National Disposable Income 76

8.1.6. Local Currency Unit per US$ 77

8.1.7. Market Capitalization of Listed Companies 78

8.1.8. Market Capitalization of Listed Companies as a % of GDP 79

8.1.9. Government cash surplus/deficit as % of GDP (LCU) 80

8.1.10. Goods Exports as a % of GDP 81

8.1.11. Goods Imports as a % of GDP 82

8.1.12. Services Imports as a % of GDP 83

8.1.13. Services Exports as a % of GDP 84

8.1.14. Net Foreign Direct Investment 85

8.1.15. Net FDI as a % of GDP 86

8.1.16. Mining, Manufacturing, Utilities Output 87

9. Appendix 88

9.1. About SDI 88

9.2. Disclaimer 88


List Of Figure

List of Figures

Figure 1: Sri Lankan Defense Expenditure (LKR Billion), 2013-2022 23

Figure 2: Sri Lankan Defense Expenditure (US$ Billion), 2013-2022 24

Figure 3: Sri Lankan GDP Growth vs. Defense Expenditures Percentage of GDP Growth, 2013-2022 28

Figure 4:Sri Lankan defense Budget Split Between Capital and Revenue Expenditure (%), 2013-2022 30

Figure 5: Sri Lankan Defense Capital Expenditure (LKR Billion), 2013-2022 32

Figure 6: Sri Lankan Defense Capital Expenditure (US$ Million), 2013-2022 32

Figure 7: Sri Lankan Defense Budget Allocation (%), 2013-2022 34

Figure 8: Sri Lankan Defense Budget Allocation for Army (LKR Billion), 2013-2022 36

Figure 9: Sri Lankan Defense Budget Allocation for Army (US$ Billion), 2013-2022 36

Figure 10: Sri Lankan Defense Budget Allocation for Navy (LKR Billion), 2013-2022 38

Figure 11: Sri Lankan Defense Budget Allocation for Navy (US$ Million), 2013-2022 38

Figure 12: Sri Lankan Defense Budget Allocation for Air Force (LKR Billion), 2013-2022 40

Figure 13: Sri Lankan Defense Budget Allocation for Air Force (US$ Million), 2013-2022 40

Figure 14: Sri Lankan per capita defense expenditure (US$), 2013-2022 41

Figure 15: Sri Lankan Homeland Security Budget (LKR Billion), 2013-2022 43

Figure 16: Sri Lankan Homeland Security Budget (US$ Million), 2013-2022 43

Figure 17: Terrorism Heat Map, 2017 45

Figure 18: Terrorism Index, 2017 48

Figure 19: Benchmarking with Key Markets-2013-2017 vs. 2018-2022 50

Figure 20: Defense Expenditure of the World's Largest Military Spenders (US$ Billion), 2017 and 2022 51

Figure 21: Defense Expenditure as a Percentage of GDP of Largest Military Spenders (%), 2017 52

Figure 22:Sri Lankan Infrastructure Construction Market Size (US$ Million), 2017-2027 54

Figure 23:Sri Lankan Facilities Management Market Size (US$ Million), 2017-2027 55

Figure 24:Sri Lankan Corvette MRO Market Size (US$ Million), 2017-2027 56

Figure 25: Sri Lankan Defense Import Trend, 2012-2016 (TIV values) 58

Figure 26: Sri Lankan Defense Imports by Country (%), 2012-2016 59

Figure 27: Sri Lankan Defense Imports by Category (%), 2012-2016 60

Figure 28: Industry Dynamics-Porter's Five Forces Analysis 62

Figure 29: Sri Lankan GDP per capita, 2016-2025 72

Figure 30: Sri Lankan Gross Domestic Product (current US$ Bn), 2016-2025 73

Figure 31: Sri Lankan Exports of goods and services (current LCU Bn), 2005-2010 74

Figure 32: Sri Lankan Imports of goods and services (current LCU Bn), 2005-2010 75

Figure 33: Sri Lankan gross national disposable income (US$ Bn), 2005-2014 76

Figure 34: Sri Lankan LCU per US$, 2015-2024 77

Figure 35: Sri Lankan Market Capitalization of listed Companies (US$ Bn), 2005-2012 78

Figure 36: Sri Lankan Market Capitalization of listed companies as a % of GDP, 2005-2012 79

Figure 37: Sri Lankan Government cash surplus/deficit as % of GDP (LCU), 2005-2012 80

Figure 38: Sri Lankan Goods Exports as a % of GDP, 2005-2014 81

Figure 39: Sri Lankan Goods Imports as a % of GDP, 2005-2014 82

Figure 40: Sri Lankan Services Imports as a % of GDP, 2005-2014 83

Figure 41: Sri Lankan Services Exports as a % of GDP, 2002-2011 84

Figure 42: Sri Lankan Net Foreign Direct Investment (current US$ BN), 2005-2014 85

Figure 43: Sri Lankan Net FDI as a % of GDP, 2005-2014 86

Figure 44: Sri Lankan Mining, Manufacturing, Utilities Output(LCU Bn), 2005-2014 87


List Of Table

List of Tables

Table 1: Sri Lankan Land Forces Strength 16

Table 2: Sri Lankan Navy Strength 17

Table 3: Sri Lankan Air Force Strength 18

Table 4: Sri Lankan Ongoing Procurement Programs 19

Table 5: Sri Lankan Future Procurement Programs 19

Table 6: Sri Lankan Defense Expenditure (LKR billion & US$ billion), 2013-2022 23

Table 7: Sri Lankan GDP Growth vs. Defense Expenditure as a Percentage of GDP, 2013-2022 27

Table 8: Sri Lankan Defense Budget Split Between Capital and Revenue Expenditure (%), 2013-2022 29

Table 9: Sri Lankan Defense Capital Expenditure (LKR Billion & US$ Billion), 2013-2022 31

Table 10: Sri Lankan Defense Capital Expenditure Breakdown (%), 2013-2022 33

Table 11: Sri Lankan Defense Expenditure for Army (LKR Billion & US$ Billion), 2013-2022 35

Table 12: Sri Lankan Defense Expenditure for Navy (LKR Billion & US$ Million), 2013-2022 37

Table 13: Sri Lankan Defense Expenditure for Air Force (LKR Billion & US$ Billion), 2013-2022 39

Table 14: Sri Lankan Per Capita Defense Expenditure (US$), 2013-2022 41

Table 15: Sri Lankan Homeland Security Expenditure (LKR Billion & US$ Billion), 2013-2022 42

Table 16: Terrorism Index, 2017 46

Table 17: Benchmarking with Key Markets-2013-2017 vs. 2018-2022 49

Table 18: Sri Lankan Budget Formation Timetable: 65

Table 19: Market Entry Strategies by Key Foreign Companies 68

Table 20: Colombo Dockyard Plc.- Key Products 70

Table 21: Colombo Dockyard Plc.-Alliances 71

Table 22: Colombo Dockyard Plc.-Recent Contracts 71

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Colombo Dockyard Plc. (CDPLC)