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

  • ID: 4209484
  • Report
  • Region: Pakistan
  • 130 Pages
  • Strategic Defence Intelligence
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Summary

Pakistan’s domestic defense industry is able to fulfill the majority of the national requirements for low and mid-market technology defense systems, but is largely unable to supply technologically advanced defense systems. As a result, Pakistan was the seventh-largest importer of arms during 2011-2015, behind India, Saudi Arabia, China, UAE, Australia and Turkey. The country has strong relations with both the US and China, and these nations cater to the majority of Pakistan’s defense requirements. China was the primary arms supplier to Pakistan during 2012-2016. Pakistan also signed deals for the procurement of F-16 fighters, cobra helicopters, submarines, and the modernization of tanks.

Pakistan’s total defense budget increased significantly over 2013-2017, with a CAGR of 9.94%, the country invested US$6.3 Billion in the defense sector in 2013, and increased it to US$9.1 Billion in 2017. This trend is expected to continue during the forecast period, due to the government’s well-defined military procurements plans, in a bid to fight terrorist attacks. Moreover, the nation’s long-standing territorial dispute with India indicates that the Pakistani defense strategy will largely correspond with India’s expenditure and development programs.

However, the Pakistani export market is set to gradually grow over the forecast period, as the country begins to develop high quality indigenous defense systems. The country has also established a defense export promotion board to promote the export of systems such as battle tanks, advanced aircraft trainers, UAVs, and surface-to-air, and anti-tank missile systems.

The Pakistani defense budget is projected to increase from US$10.2 Billion in 2018 to US$15.8 Billion in 2022, at a CAGR of 11.63%. Pakistan is expected to allocate an average of 3% of its GDP to defense expenditure over the forecast period, despite its relatively small economy. Per capita defense expenditure is forecast to increase from US$47.2 in 2017 to US$73.9 in 2022.

Due to the lack of a structured defense budgeting policy until 2008, the Pakistani defense industry has experienced widespread corruption in the use of funds. Although defense procurements are supposed to be made through competitive bidding, this rule is not strictly enforced, which leads to a lack of transparency in the awarding of defense deals. Furthermore, while efforts have been made to streamline the defense budget, Pakistan does not disclose the portion of US military aid assigned for expenses.

The report “Future of the Pakistan Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2022” offers detailed analysis of the Pakistani defense industry with market size forecasts covering the next five years. Moreover, 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 Pakistani defense industry market size and drivers: Detailed analysis of the Pakistani 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 Pakistani 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 Pakistani defense industry. It provides an overview of key players, together with insights such as key alliances, strategic initiatives, and a brief financial analysis.

Companies mentioned in this report: Karachi Shipyard & Engineering Works (KSEW), Pakistan Aeronautical Complex (PAC),  Pakistan Ordnance Factories (POF), Pakistan Space and Upper Atmosphere Research Commission (SUPARCO), Heavy Industries Taxila (HIT), Heavy Mechanical Complex (HMC), Surveillance and Target Unmanned Aircraft (SATUMA), The Boeing Company, Raytheon Missile Systems, Lockheed Martin, and Chengdu Aircraft Industry Group.

Scope

One of the most attractive defense markets in South Asia, Pakistan is expected to invest US$64.4 billion cumulatively over the forecast period, compared to US$38.3 billion spent between 2013 and 2016. The country’s defense expenditure is expected to focus more on the procurement of equipment to augment its air defense capabilities, enhancing operational capabilities of the current fleet of naval vessels, and communications and surveillance systems. Cumulative expenditure on the procurement of advanced military hardware is projected to be US$24.1 billion over the next five years.

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.The country’s total defense budget increased significantly over 2013-2017, with a CAGR of 9.94%, the country invested US$6.3 billion in the defense sector in 2013, and increased it to US$9.1 billion in 2017. This trend is expected to continue during the forecast period, due to the government’s well-defined military procurements plans, in a bid to fight terrorist attacks. Moreover, the nation’s long-standing territorial dispute with India indicates that the Pakistani defense strategy will largely correspond with India’s expenditure and development programs. Key opportunities for equipment suppliers are expected in sectors such asfighters and multi-role aircraft, aviation MRO, frigates and submarines. Consequently, Pakistan’s capital expenditure share is expected to increase during the forecast period due to internal and external instability. Consequently, the share of capital expenditure as a percentage of overall defense expenditure is expected to increase from an average of 32.0% between 2011 and 2015 to 33.5% over the forecast period.

The MoD is expected to invest in fighters and Multi-role aircraft, SSK-Diesel Electric Submarine, Aviation MRO and Main Battle Tanks.

Reasons to Buy:

  • This report will give the user confidence to make the correct business decisions based on a detailed analysis of the Pakistani 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 Pakistani 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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FEATURED COMPANIES

  • Lockheed Martin
  • Raytheon Missile Systems
  • The Boeing Company
  • MORE

1. Introduction
1.1. What is this Report About?
1.2. Definitions
1.3. Summary Methodology
1.4. About

2. Executive Summary

3. Market Attractiveness and Emerging Opportunities
3.1. Current Market Scenario
3.1.1. Primary threat perception
3.1.2. Military Doctrine & Strategy
3.1.3. Military Fleet Size
3.1.4. Procurement Programs
3.1.5. Ongoing procurement programs
3.1.6. Future procurement programs
3.1.7. Social, Political and Economic Environment & Support for Defense Projects
3.1.8. Political & Strategic Alliances
3.2. Defense Market Size Historical and Forecast
3.2.1. Pakistani annual defense expenditure to reach US$15.8 billion by 2022
3.2.2. Annual US military aid to Pakistan boosts military spending
3.2.3. Territorial disputes and the war against terrorism expected to drive defense expenditure
3.2.4. The country’s defense expenditure as a percentage of GDP to increase over 2018-2022
3.3. Analysis of Defense Budget Allocation
3.3.1. Capital expenditure share to average 33.5% during the forecast period
3.3.2. Capital expenditure to increase at a CAGR of 12.15% over 2018-2022
3.3.3. Budget allocation for the army to be highest over the forecast period
3.3.4. Army expenditure to reach US$7.5 billion in 2022
3.3.5. Air force expenditure to cumulatively value US$13.7 billion over the forecast period
3.3.6. Naval expenditure is expected to reach US$1.8 billion by 2022
3.3.7. Per capita defense expenditure expected to increase during the forecast period
3.4. Homeland Security Market Size and Forecast
3.4.1. Allocation for the police forms the major component of homeland security expenditure
3.4.2. Measures to curb organized crime and cyber-attacks will drive homeland security expenditure
3.4.3. Pakistan is at a significant risk from external and internal threats
3.4.4. Pakistan is one of the most terror prone countries in the world
3.4.5. Pakistan has a terrorism index score of “8.6”
3.5. Benchmarking with Key Global Markets
3.5.1. Pakistani defense expenditure expected to increase at a CAGR of 11.63% over 2018-2022
3.5.2. Pakistani defense expenditure is low compared to other Asian defense spenders
3.5.3. Pakistan’s defense expenditure expected to reach 3% of GDP by 2022
3.6. Market Opportunities: Key Trends and Growth Stimulators
3.6.1. Fighter and Multi-role Aircraft
3.6.2. SSK-Diesel Electric Submarine
3.6.3. Aviation MRO
3.6.4. Main Battle Tank (MBT)

4. Defense Procurement Market Dynamics
4.1. Import Market Dynamics
4.1.1. Defense imports projected to increase over the forecast period
4.1.2. China and the US were the leading suppliers of arms to Pakistan during 2012-2016
4.1.3. Aircraft and armored vehicles accounted for the majority of defense imports between 2012 and    2016
4.2. Export Market Dynamics
4.2.1. DEPO expected to start defense exports

5. Industry Dynamics
5.1. Five Forces Analysis
5.1.1. Bargaining power of the supplier: low to medium
5.1.2. Bargaining power of the buyer: high
5.1.3. Barriers to entry: medium to high
5.1.4. Intensity of rivalry: low to medium
5.1.5. Threat of substitution: low to medium

6. Market Entry Strategy
6.1. Market Regulation
6.1.1. Defense procurements assigned to DGDP and DGMP
6.1.2. Pakistani government introduces new Offset Act for defense equipment procurements
6.2. Market Entry Route
6.2.1. Budgeting Process
6.2.2. Procurement Policy & Process
6.2.3. Foreign firms enter the Pakistani defense industry through Foreign Military Sales (FMS)
6.2.4. Collaborations and joint ventures - a viable market entry route
6.3. Key Challenges
6.3.1. Corruption in the Pakistani defense sector hinders its growth
6.3.2. An unstable political system coupled with internal instability discourages foreign participation

7. Competitive Landscape and Strategic Insights
7.1. Competitive Landscape Overview
7.1.1. Foreign suppliers manufacture defense systems overseas and deliver to Pakistan
7.1.2. Growing domestic defense industry is predominantly state run
7.2. Key Domestic Companies
7.2.1. Karachi Shipyard & Engineering Works: overview
7.2.2. Karachi Shipyard & Engineering Works: products and services
7.2.3. Karachi Shipyard & Engineering Works (KS&EW): recent announcements and strategic initiatives
7.2.4. Karachi Shipyard & Engineering Works: alliances
7.2.5. Karachi Shipyard & Engineering Works: recent contract wins
7.2.6. Pakistan Aeronautical Complex: overview
7.2.7. Pakistan Aeronautical Complex: products and services
7.2.8. Pakistan Aeronautical Complex: recent announcements and strategic initiatives
7.2.9. Pakistan Aeronautical Complex: alliances
7.2.10. Pakistan Aeronautical Complex: recent contract wins
7.2.11. Pakistan Ordnance Factories: overview
7.2.12. Pakistan Ordnance Factories: products and services
7.2.13. Pakistan Ordnance Factories: recent announcements and strategic initiatives
7.2.14. Pakistan Ordnance Factories: alliances
7.2.15. Pakistan Ordnance Factories: recent contract wins
7.2.16. Pakistan Space and Upper Atmosphere Research Commission: overview
7.2.17. Pakistan Space and Upper Atmosphere Research Commission: products and services
7.2.18. Pakistan Space and Upper Atmosphere Research Commission: recent announcements and strategic initiatives
7.2.19. Pakistan Space and Upper Atmosphere Research Commission: alliances
7.2.20. Pakistan Space and Upper Atmosphere Research Commission: recent contract wins
7.2.21. Heavy Industries Taxila: overview
7.2.22. Heavy Industries Taxila: products and services
7.2.23. Heavy Industries Taxila: recent announcements and strategic initiatives
7.2.24. Heavy Industries Taxila: alliances
7.2.25. Heavy Industries Taxila: recent contract wins
7.2.26. The Heavy Mechanical Complex: overview
7.2.27. The Heavy Mechanical Complex: products and services
7.2.28. The Heavy Mechanical Complex: recent announcements and strategic initiatives
7.2.29. The Heavy Mechanical Complex: alliances
7.2.30. SATUMA: overview
7.2.31. SATUMA: products and services
7.2.32. SATUMA: recent announcements and strategic initiatives
7.2.33. SATUMA: recent contract wins
7.3. Key Foreign Companies
7.3.1. Boeing: overview
7.3.2. Boeing: products and services
7.3.3. Boeing: recent announcements and strategic initiatives
7.3.4. Boeing: recent contract wins
7.3.5. Raytheon: overview
7.3.6. Raytheon: products and services
7.3.7. Raytheon: recent announcements and strategic initiatives
7.3.8. Raytheon: recent contract wins
7.3.9. Lockheed Martin: overview
7.3.10. Lockheed Martin: products and services
7.3.11. Lockheed Martin: recent announcements and strategic initiatives
7.3.12. Lockheed Martin: alliances
7.3.13. Lockheed Martin: recent contract wins
7.3.14. Chengdu Aircraft Industry Group: overview
7.3.15. Chengdu Aircraft Industry Group: products and services
7.3.16. Chengdu Aircraft Industry Group: recent announcements and strategic initiatives
7.3.17. Chengdu Aircraft Industry Group: alliances
7.3.18. Chengdu Aircraft Industry Group: recent contract wins

8. Business Environment and Country Risk
8.1. Economic Performance
8.1.1. GDP Per Capita
8.1.2. GDP, Current Prices
8.1.3. Exports of Goods & Services (LCU)
8.1.4. Imports of Goods & Services (LCU)
8.1.5. Local Currency Unit per US$
8.1.6. Market Capitalization of Listed Companies US$ Billion
8.1.7. Market Capitalization of Listed Companies (% of GDP)
8.1.8. Government Cash Surplus/Deficit as % of GDP
8.1.9. Goods exports as % of GDP
8.1.10. Goods imports as % of GDP
8.1.11. Service Imports as % of GDP
8.1.12. Service Exports as % of GDP
8.1.13. Foreign Direct Investment
8.1.14. Net foreign direct investment as % of GDP
8.1.15. Mining, Manufacturing, Utilities Output

9. Appendix
9.1. About
9.2. Disclaimer

List of Tables

Table 1: Pakistani Land Forces Strength
Table 2: Pakistani Navy Strength
Table 3: Pakistani Air Force Strength
Table 4: Pakistani Ongoing Procurement Programs
Table 5: Pakistani Future Procurement Programs
Table 6: Pakistani Defense Expenditure (PKR billion & US$ billion), 2013-2022
Table 7: Total Pakistani Defense Expenditure Including US Aid, 2013-2017
Table 8: Pakistani GDP Growth vs. Defense Expenditure as a Percentage of GDP, 2013-2022
Table 9: Pakistani Defense Budget Split Between Capital and Revenue Expenditure (%),2013-2022
Table 10: Pakistani Defense Capital Expenditure (PKR Billion & US$ Billion), 2013-2022
Table 11: Pakistani Defense Capital Expenditure Breakdown (%), 2013-2022
Table 12: Pakistani Defense Expenditure for Army (PKR Billion & US$ Billion), 2013-2022
Table 13: Pakistani Defense Expenditure for Air Force (PKR Billion & US$ Billion), 2013-2022
Table 14: Pakistani Defense Expenditure for Navy (PKR Billion & US$ Billion), 2013-2022
Table 15: Pakistani Per Capita Defense Expenditure (US$), 2013-2022
Table 16: Pakistani Homeland Security Expenditure (PKR Billion & US$ Billion), 2013-2022
Table 17: Terrorism Index, 2017
Table 18: Benchmarking with Key Markets - 2013-2017 vs. 2018-2022
Table 19: Offset Multiplier Categories
Table 20: Pakistani Budget Formation Timetable:
Table 21: FMS route followed by Foreign Companies
Table 22: Market Entry Strategies by Key Foreign Companies
Table 23: Key Foreign Companies and Operations in the Pakistani Defense Industry
Table 24: Karachi Shipyard & Engineering Works - Product Focus
Table 25: Karachi Shipyard & Engineering Works - Alliances
Table 26: Karachi Shipyard & Engineering Works - Recent Contract Wins
Table 27: Pakistan Aeronautical Complex - Product Focus
Table 28: Pakistan Aeronautical Complex - Alliances
Table 29: Pakistan Aeronautical Complex - Recent Contract Wins
Table 30: Pakistan Ordnance Factories - Product Focus
Table 31: Pakistan Ordnance Factories - Alliances
Table 32: Pakistan Ordnance Factories - Recent Contract Wins
Table 33: Pakistan Space and Upper Atmosphere Research Commission - Product Focus
Table 34: Pakistan Space and Upper Atmosphere Research Commission - Alliances
Table 35: Pakistan Space and Upper Atmosphere Research Commission - recent contract wins
Table 36: Heavy Industries Taxila - product focus
Table 37: Heavy Industries Taxila - alliances
Table 38: Heavy Industries Taxila - recent contract wins
Table 39: The Heavy Mechanical Complex - product focus
Table 40: The Heavy Mechanical Complex - alliances
Table 41: SATUMA - product focus
Table 42: SATUMA - recent contract wins
Table 43: Boeing - Product Focus
Table 44: Boeing - Recent Contract Wins
Table 45: Raytheon - Product Focus
Table 46: Raytheon - Recent Contract Wins
Table 47: Lockheed Martin - Product Focus
Table 48: Lockheed Martin - alliances
Table 49: Lockheed Martin - Recent Contract Wins
Table 50: Chengdu Aircraft Industry Group - Product Focus
Table 51: Chengdu Aircraft Industry Group - Alliances
Table 52: Chengdu Aircraft Industry Group - Recent Contract Wins

List of Figures

Figure 1: Pakistani Defense Expenditure (PKR bn), 2013-2022
Figure 2: Pakistani Defense Expenditure (US$ bn), 2013-2022
Figure 3: US Coalition Support Fund Aid (US$ Million), 2013-2017
Figure 4: Pakistani Defense Expenditure Including US Aid (US$ Billion), 2013-2017
Figure 5: Pakistani Defense Budget Excluding US Aid (US$ Billion) Vs Pakistani Defense Expenditure Including US Aid  (US$ Billion), 2013-2017
Figure 6: Pakistani GDP Growth vs. Defense Expenditure as Percentage of GDP Growth, 2013-2022
Figure 7:Pakistani Defense Budget Split Between Capital and Revenue Expenditure (%),2013-2022
Figure 8: Pakistani Defense Capital Expenditure (PKR Billion), 2013-2022
Figure 9: Pakistani Defense Capital Expenditure (US$ Billion), 2013-2022
Figure 10: Pakistani Defense Expenditure Breakdown (%), 2013-2022
Figure 11: Pakistani Defense Expenditure for Army (PKR billion), 2013-2022
Figure 12: Pakistani Defense Expenditure for Army (US$ billion), 2013-2022
Figure 13: Pakistani Defense Expenditure for Air Force (PKR billion), 2013-2022
Figure 14: Pakistani Defense Expenditure for Air Force (US$ billion), 2013-2022
Figure 15: Pakistani Defense Expenditure for the Navy (PKR billion), 2013-2022
Figure 16: Pakistani Defense Expenditure for the Navy (US$ billion), 2013-2022
Figure 17: Pakistani Per Capita Defense Expenditure (US$), 2013-2022
Figure 18: Pakistani Homeland Security Budget (PKR Billion), 2013-2022
Figure 19: Pakistani Homeland Security Budget (US$ Billion), 2013-2022
Figure 20: Terrorism Heat Map, 2017
Figure 21: Terrorism Index, 2017
Figure 22: Benchmarking with Key Markets - 2013-2017 vs. 2018-2022
Figure 23: Defense Expenditure of the World’s Largest Military Spenders (US$ Billion), 2017 and 2022
Figure 24: Defense Expenditure as a Percentage of GDP of Largest Military Spenders (%), 2017
Figure 25: Fighter and Multi-role Aircraft Market Size (US$ Million), 2017-2027
Figure 26: SSK-Diesel Electric Submarine & MRO Market Size (US$ Million), 2017-2027
Figure 27: Aviation MRO Market Size (US$ Million), 2017-2027
Figure 28: Main Battle Tank Market Size (US$ Million), 2017-2027
Figure 29: Pakistani Defense Import Trend, 2012-2016 (TIV values)
Figure 30: Pakistani Defense Imports by Country (%), 2012-2016
Figure 31: Pakistani Defense Imports by Category (%), 2012-2016
Figure 32: Industry Dynamics Porter’s Five Forces Analysis
Figure 33: Pakistan’s GDP Per Capita, 2015-2025
Figure 34: Pakistan’s GDP, Current Prices (In US$ Billions), 2015-2025
Figure 35: Exports of Goods & Services (LCU), 2005-2014
Figure 36: Imports of Goods & Services (LCU), 2005-2014
Figure 37: Local Currency per US$- Exchange Rate, 2015-2024
Figure 38: Pakistan’s Market Capitalization of Listed Companies (US$ Billion), 2005-2012
Figure 39: Pakistan’s Market Capitalization of Listed Companies (% of GDP), 2005-2012
Figure 40: Pakistan’s Government Cash Surplus/Deficit as % of GDP, 2005-2013
Figure 41: Pakistan’s Goods Exports as % of GDP, 2005-2014
Figure 42: Pakistan’s Goods Imports as % of GDP, 2005-2014
Figure 43: Pakistan’s Service Imports as % of GDP, 2005-2014
Figure 44: Pakistan’s Service Exports as % of GDP, 2005-2014
Figure 45: Pakistan’s Foreign Direct Investment (US$ Billion), 2005-2014
Figure 46: Pakistan’s Net foreign direct investment as % of GDP, 2005-2014
Figure 47: Pakistan’s Mining, Manufacturing, Utilities Output (USD Billion), 2005-2014

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  • Chengdu Aircraft Industry Group
  • Heavy Industries Taxila (HIT)
  • Heavy Mechanical Complex (HMC)
  • Karachi Shipyard & Engineering Works (KSEW)
  • Lockheed Martin
  • Pakistan Aeronautical Complex (PAC)
  • Pakistan Ordnance Factories (POF)
  • Pakistan Space and Upper Atmosphere Research Commission (SUPARCO)
  • Raytheon Missile Systems
  • Surveillance and Target Unmanned Aircraft (SATUMA)
  • The Boeing Company
Note: Product cover images may vary from those shown
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