apac defense procurement dynamics
DESCRIPTION
Frost & Sullivan Analyst Briefing on APAC Defense Procurement DynamicsTRANSCRIPT
Neil Dave, Consulting Analyst
Aerospace & Defense
13th December 2012
APAC DefenseAPAC Defense Procurement DynamicsProcurement Dynamics
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13th December 2012
Focus Points
Overview of defense budgets and spending in APAC.
Forecasts and trends of defense budgets in APAC region and globally.
Country-wise break-up of defense
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Country-wise break-up of defense spending in APAC.
Procurement and defense spending trends by APAC countries.
Conclusion and key takeaways.
APAC Defense Budget – Overview
• In recent years, several countries in the APAC region have been witnessing a rise in
defense spending.
• This is due to the increasing economic development along with rising geo-political
instabilities in the region which have driven countries to modernize their defense forces.
• Countries such as Australia, New Zealand, Indonesia and Malaysia in particular have
been recently engaging in new military procurement and replacement programs.
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• Countries like Japan and South Korea are likely to engage in procurement of better
ground-based and mounted weapon systems in the near future.
• Other major procurement programs in the APAC region include procurement of armored
vehicles, ships and aircraft along with others.
• However, the procurement of UAVs (Unmanned Aerial Vehicles) by many nations is
expected to be a major contributor to the increased defense spending in the region.
APAC Defense Budget – Overview
• Geographic Scope: This briefing will be discussed on 10 countries in the APAC region, namely; Malaysia,Singapore, Indonesia, Thailand, Vietnam, Philippines, Japan, South Korea, Australia and New Zealand.
• However, countries that will be discussed in depth are Japan, South Korea, Australia, Singapore andIndonesia.
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Note: Marked in blue are countries that will be discussed.Source: Frost & Sullivan analysis.
Defense Budgets: Forecasts and Trends
• The APAC defense budget reached
USD 151.45 billion in 2012.
• This is an increase of 4% from 2011 and
close to 8% of global spending in 2012.
• This budget is expected to reach close
to USD 207.84 billion by 2020. 1500
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Defense Spending: 2008 - 2012
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• This increased spending is being driven
by replacement of aging equipment.
• Most of the rise in spending is expected
to be driven by Indonesia, S Korea,
Australia and Japan.
• These four countries are expected to
collectively contribute 80% of total
defense spending by 2020.
2008 2009 2010 2011 2012
World 1,473 1,560 1,630 1,738 1,850
APAC 116.79 119.47 132.27 145.60 151.45
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Source: Frost & Sullivan analysis.
• Japan, South Korea and Australia
collectively contribute to 76% of APAC
defense budgets in 2012.
• Japan alone contributes to 39% of the total
defense budget in APAC. However, a
slowdown is expected.
Defense Budgets: By Countries in APAC
Malaysia, 3%
Singapore, 6%
Indonesia, 5%
Thailand, 4%
Vietnam, 2%
Australia, 17%
New Zealand,
2%
Defense Budgets by Countries in APAC - 2012
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• On second place is South Korea with 20%
of defense budget in APAC. This is being
driven by modernization of military and
newer weapon systems.
• On third place is Australia, with about 17%
of APAC defense budget. Spending will
be driven by procurement of military
aircraft, ground vehicles and ships.
Vietnam, 2%
Philippines, 2%
Japan, 39%
South Korea,
20%
Source: Frost & Sullivan analysis.
• Japan contributes to the highest market share in
defense spending.
• Spending is driven by investment in technological
improvement in armed forces.
• Lesser procurement budget is due to financial
constraints and reliance on US forces.
Defense Budgets by Country: Japan
26.58, 45%
10.63, 18%
21.85, 37%
Japan: Defense Budget by Expenditure Type
(2012)
Operations &
Maintenance
Procurement
Personnel Costs
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Major Procurement Programs
• Army: Ground Vehicles and missile defense systems
• Navy: Mainly submarines
• Air Force: Several fighter jets
21.85, 37%
13.58, 23%
13.58, 23%
10.04, 17%
Japan: Defense Budget by Organization
(2012)
Army
Navy
Air Force
Others
Source: Frost & Sullivan analysis.
• South Korea has the 2nd highest defense spending in
APAC having about 20% of market share.
• China’s increasing military power and the decreasing
influence of US forces is set to drive spending.
• Procurement makes up about 31% of the country’s
defense budget.
Defense Budgets by Country: South Korea
8.69, 28%
9.62, 31%
12.72, 41%
South Korea: Defense Budget by
Expenditure Type (2012)
Operations &
Maintenance
Procurement
Personnel Costs
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Major Procurement Programs
• Army: Tactical ground missile & weapon systems.
• Navy: Mainly submarines.
• Air Force: Fighter and stealth fighter jets.
13.65, 44%
6.20, 20%
5.58, 18%
5.58, 18%
South Korea: Defense Budget by
Organization (2012)
Army
Navy
Air Force
Others
Source: Frost & Sullivan analysis.
• Australia is the 3rd highest defense spending country
in the region with close to 17% in market share.
• Spending will be driven by a need to replace obsolete
military vehicles and equipment.
• Procurement makes up about 26% of Australia’s
defense budget.
Defense Budgets by Country: Australia
9.81, 37%
6.89, 26%
9.01, 34%
0.80, 3%
Australia: Defense Budget by Expenditure
Type (2012)
Operations &
Maintenance
Procurement
Personnel Costs
Others
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Major Procurement Programs
• Army: Unprotected and armoured ground vehicles.
• Navy: Mainly frigate ships
• Air Force: Fighter jets, bombers and transport aircraft.
9.81, 37%
6.89, 26%
9.01, 34%
0.80, 3%
Australia: Defense Budget by Organization
(2012)
Army
Navy
Air Force
Others
Source: Frost & Sullivan analysis.
• Singapore contributes to about 6% of the total APAC
defense budget in 2012.
• Spending is being driven technological advancement
of existing equipment.
• The country has only 10% of spending on
procurement.
Defense Budgets by Country: Singapore
4.86, 50%
0.97, 10%
3.70, 38%
0.19, 2%
Singapore: Defense Budget by Expenditure
Type (2012)
Operations &
Maintenance
Procurement
Personnel Costs
Others
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Major Procurement Programs
• Army: Light Armoured Vehicles
• Navy: Stealth frigates and landing platform dock ships.
• Air Force: UAVs, stealth aircraft, refuelling tankers,
missiles.
0.97, 10%
4.28, 44%
2.53, 26%
2.43, 25%
0.49, 5%
Singapore: Defense Budget by
Organization (2012)
Army
Navy
Airforce
Others
Source: Frost & Sullivan analysis.
Defense Budgets by Country: Indonesia
1.61, 23%
2.38, 34%
3.01, 43%
Indonesia: Defense Budget by Expenditure
Type (2012)
Operations &
Maintenance
Procurement
Personnel Costs
• Indonesia contributes to about 5% of the total APAC
defense budget in 2012.
• Geopolitical tensions and replacement of aging
equipment will drive procurement spending.
• The country has a healthy 34% of spending on
procurement.
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2.73, 39%
1.12, 16%
0.84,
12%
2.31, 33%
Indonesia: Defense Budget by
Organization (2012)
Army
Navy
Air Force
Others
Major Procurement Programs
• Army: Battle tanks and armoured vehicles.
• Navy: Mainly submarines
• Air Force: Fighter jets and heavy transport aircraft.
Source: Frost & Sullivan analysis.
Conclusion : Key Takeaways
2Most of the ground vehicles procured will consist of light-weight vehicles as a result
of the region’s combat strategy of agility as opposed to size & strength.
Indonesia is expected to drastically increase its defense spending in the next few
1Focus of procurement in the APAC region will be on land vehicles, MBTs (Main
Battle Tanks), anti-aircraft and anti-tank weapon systems and artillery.
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3Indonesia is expected to drastically increase its defense spending in the next few
years and is expected to be a major driver for the increased spending in APAC.
4Gradual withdrawal of US presence and support will cause countries like Japan and
South Korea to increase spending from 2017 onwards.
5Overall, technological advancements and the need to replace aging equipment will
drive defense spending in the APAC region in the future.
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Today’s Presenter
Neil Dave, Consulting Analyst
Frost & Sullivan
Neil is a consulting analyst with the Aerospace and Defense practice at Frost &
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For any other enquiries, email us:
Neil is a consulting analyst with the Aerospace and Defense practice at Frost &
Sullivan. He works with clients on market strategy, best practices, opportunity
analysis and competitive intelligence analysis across various sectors in the
Aerospace & Defense Industry as well as other industries which include ICT,
Healthcare and Electronics & Security.