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

  • ID: 4391665
  • Report
  • Region: Vietnam
  • 93 pages
  • Strategic Defence Intelligence
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Summary

Growing strength of the Chinese Navy and its assertiveness with regards to territorial claims in the South China Sea has forced the Vietnamese Government to enhance its military capabilities. The Vietnamese Government allocated US$5 billion towards military expenditure in 2017, of which 32.7% is earmarked for the procurement of defense equipment. In addition, the country is in the process of addressing its limitations with respect to combating modern threat scenarios with its existing obsolete equipment, and has embarked on military modernization plans over the last few years.

The country’s defense expenditure increased at a CAGR of 6.41% over 2013-2017. In the coming years, demand for defense equipment is mainly expected to revolve around fighter and multi-role aircraft, naval vessels, patrol ships, maritime patrol aircraft, submarines, and surveillance equipment. The country’s defense expenditure is expected to increase at a CAGR of 7+%.

Vietnam’s domestic defense production capabilities are relatively underdeveloped and, as a result, the country relies on foreign OEMs to fulfill its military requirements. Traditionally, the country has been an importer of weapon systems as domestic military production is small-scale and technologically inferior. Over 2012 to 2016, Russia was the largest supplier of military hardware to Vietnam with a share of over 88.2% of Vietnam’s imports, followed by Belarus, Ukraine, and Israel.

Vietnamese homeland security expenditure, on a cumulative basis, is expected to be US$17.1 billion over the forecast period compared to US$11.3 billion spent between 2013 and 2017. Efforts to police its maritime boundaries, coupled with the need to counter human trafficking and the illicit drug trade, are expected to drive homeland expenditure. This is likely to increase the demand for equipment capable of enhancing seaport and airport security, as well as border surveillance systems such as CCTV cameras and scanners.

The country’s limited domestic defense industrial capability offers an opportunity for a considerable number of foreign OEMs to venture into the Vietnamese defense market. Vietnam’s defense industry is largely dominated by Russian defense equipment suppliers, but other European and Israeli suppliers have recently entered the defense market through direct commercial sales of advanced defense systems. Vietnam prefers government-to-government deals when procuring equipment, therefore, developing government-to-government relationships is expected to open up business opportunities over the forecast period.

This report offers insights into the market opportunities and entry strategies adopted by foreign OEMs (original equipment manufacturers) to gain a market share in the Vietnamese defense industry.

In particular, it offers in-depth analysis of the following:

  •  Market opportunity and attractiveness: detailed analysis of the current industry size and growth expectations during 2018-2022, including highlights of the key growth stimulators.
  •  Procurement dynamics: trend analysis of imports and exports, together with their implications and impact on the Vietnamese defense industry
  •  Industry structure: five forces analysis to identify various power centers in the industry and how these are expected to develop in the future
  •  Market entry strategy: analysis of possible ways to enter the market, together with detailed descriptions of how existing companies have entered the market, including key contracts, alliances, and strategic initiatives
  •  Competitive landscape and strategic insights: analysis of the competitive landscape of the defense industry in Vietnam, providing an overview of key defense companies (both domestic and foreign), together with insights such as key alliances, strategic initiatives, and a brief financial analysis
  •  Business environment and country risk: a range of drivers at country level, assessing business environment and country risk. It covers historical and forecast values for a range of indicators, evaluating business confidence, economic performance, infrastructure quality and availability, labor force, demographics, and political and social risk

Companies included within the research comprise of Vietnam Shipbuilding Industry Corporation (SBIC), Sukhoi, Admiralty Shipyards, and Damen Schelde Naval Shipbuilding (DSNS)

Scope

  • The Vietnamese Government allocated US$5 billion towards military expenditure in 2017, of which 32.7% is earmarked for the procurement of defense equipment. The country’s defense expenditure increased at a CAGR of 6.41% over 2013-2017. The growing strength of the Chinese Navy and its assertiveness with regards to territorial claims in the South China Sea has forced the Vietnamese Government to enhance its military capabilities. In addition, the country is in the process of addressing its limitations with respect to combating modern threat scenarios with its existing obsolete equipment, and has embarked on military modernization plans over the last few years. These plans are expected to pick up pace over the forecast period and increase Vietnam’s defense expenditure.
  • Between 2013 and 2017,Vietnam allocated an average of 32.3% of its defense budget to capital expenditure and the remainder to revenue expenditure. The share of capital expenditure in the overall defense budget is predicted to marginally increase to an average of 33.6% over the forecast period, predominantly due to Vietnam’s planned military modernization initiatives and procurement programs. Vietnam cumulatively spent US$7.4 billion on defense equipment, while US$15.4 billion was assigned for revenue expenditure during the analysis period.
  • The MoD is expected to invest in fighter and multi-role aircraft, naval vessels, patrol ships, maritime patrol aircraft, and surveillance equipment.

Reasons to buy

  • This report will give the user confidence to make the correct business decisions based on a detailed analysis of the Vietnamese 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 Vietnamese 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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1. Introduction
1.1. What is this Report About?
1.2. Definitions
1.3. Summary Methodology
1.4. About the Publisher

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. Social, Political and Economic Environment & Support for Defense Projects
3.1.6. Political and Strategic Alliances
3.2. Defense Market Size Historical and Forecast
3.2.1. Defense expenditure is projected to grow at a CAGR of 7.08% during the forecast period
3.2.2. Military modernization and the crisis in the South China Sea are expected to be the prime factors driving Vietnamese military expenditure
3.2.3. Defense expenditure as a percentage of GDP is expected to remain at 2.3% over the forecast period
3.3. Analysis of Defense Budget Allocation
3.3.1. Share of capital expenditure in the overall defense budget is expected to increase
3.3.2. Vietnam’s capital expenditure is expected to grow at a CAGR of 7.88% over the forecast period
3.3.3. Per capita defense expenditure expected to be US$72.5 by 2022
3.4. Homeland Security Market Size and Forecast
3.4.1. Homeland security expenditure is expected to be US$4.3 billion by 2022
3.4.2. The main factors driving homeland security expenditure are the illicit drugs trade and human trafficking
3.4.3. Vietnam faces ‘some risk’ from foreign terrorist organizations
3.4.4. Vietnam faces some level of threat from foreign terrorist organizations
3.4.5. Vietnam has a minimal terrorism index score of 0
3.5. Benchmarking with Key Global Markets
3.5.1. Vietnamese defense expenditure is expected to remain low compared to leading spenders
3.5.2. Vietnam has a relatively low defense expenditure compared to other Asian countries
3.5.3. Vietnam’s defense expenditure as a percentage of GDP is higher than leading Asian defense spenders
3.6. Defense Market Opportunities: Key Trends and Growth Stimulators
3.6.1. Naval Vessels - Frigates
3.6.2. Infrastructure Construction
3.6.3. Facilities Management

4. Defense Procurement Market Dynamics
4.1. Import Market Dynamics
4.1.1. Limited domestic defense capabilities drive the country’s defense imports
4.1.2. Defense imports are expected to increase over the forecast period
4.1.3. Russia is a significant defense trade partner of Vietnam
4.1.4. Ships and aircraft accounted for the majority of defense imports over 2012-2016
4.2. Export Market Dynamics
4.2.1. The country has been unable to access the global defense market

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

6. Market Entry Strategy
6.1. Market Regulation
6.1.1. Vietnamese Government unveils new procurement rules
6.1.2. Vietnam has not disclosed any offset obligations
6.2. Market Entry Route
6.2.1. Budget Process
6.2.2. Procurement Policy and Process
6.2.3. Foreign equipment manufacturers can enter the market through direct commercial sales
6.2.4. Government-to-government deals are an attractive entry route to the country’s defense market
6.3. Key Challenges
6.3.1. Lack of private participants and foreign direct investment may restrict domestic defense industry growth
6.3.2. Lack of transparency and corruption impedes the growth of Vietnam’s defense industry

7. Competitive Landscape and Strategic Insights
7.1. Competitive Landscape Overview
7.2. Key Companies
7.2.1. Vietnam Shipbuilding Industry Corporation (SBIC): overview
7.2.2. Vietnam Shipbuilding Industry Corporation (SBIC): products
7.2.3. Vietnam Shipbuilding Industry Corporation (SBIC): recent announcements and strategic initiatives
7.2.4. Vietnam Shipbuilding Industry Corporation (SBIC): alliances
7.2.5. Vietnam Shipbuilding Industry Corporation (SBIC): recent contract awards
7.2.6. Sukhoi: overview
7.2.7. Sukhoi: products
7.2.8. Sukhoi: recent contract awards
7.2.9. Admiralty Shipyards: overview
7.2.10. Admiralty Shipyards: recent announcements and strategic initiatives
7.2.11. Admiralty Shipyards: products
7.2.12. Admiralty Shipyards: recent contract awards
7.2.13. Damen Schelde Naval Shipbuilding: overview
7.2.14. Damen Schelde Naval Shipbuilding: products
7.2.15. Damen Schelde Naval Shipbuilding: recent announcements and strategic initiatives
7.2.16. Damen Schelde Naval Shipbuilding: recent contract awards

8. Business Environment and Country Risk
8.1. Economic Performance
8.1.1. Gross Domestic per Capita
8.1.2. Gross Domestic Product, current US$
8.1.3. Exports of Goods and Services
8.1.4. Imports of Goods and Services
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 as a % of GDP
8.1.8. Goods Exports as a percentage of GDP
8.1.9. Goods Imports as a percentage of GDP
8.1.10. Services Imports as a percentage of GDP
8.1.11. Services Exports as a percentage of GDP
8.1.12. Foreign direct investment, net (BoP, current US$ Bn)
8.1.13. Net foreign direct investment as a % of GDP
8.1.14. Mining, Manufacturing, Utilities Output

9. Appendix
9.1. About the Author
9.2. Disclaimer

List of Tables
Table 1: Vietnam Army Strength
Table 2: Vietnamese Navy Strength
Table 3: Vietnamese Air Force Strength
Table 4: Vietnam - Ongoing Development and Procurement Programs
Table 5: Vietnam - Future Procurement Programs
Table 6: Vietnamese Defense Expenditure (VND Trillion & US$ Billion), 2013-2022
Table 7: Vietnamese GDP Growth and Defense Expenditure as a Percentage of GDP Growth, 2013-2022
Table 8: Vietnamese Defense Budget Split Between Capital and Revenue Expenditure (%), 2013-2022
Table 9: Vietnamese Defense Capital Expenditure (VND Trillion & US$ Billion), 2013-2022
Table 10: Vietnamese Per Capita Defense Expenditure (US$), 2013-2022
Table 11: Vietnamese Homeland Security Expenditure (VND trillion & US$ billion), 2013-2022
Table 12: Terrorism Index, 2017
Table 13: Benchmarking with Key Markets - 2013-2017 vs. 2018-2022
Table 14: Vietnamese Budget Formation Process
Table 15: Competitive Landscape of the Vietnamese Defense Industry
Table 16: Vietnam Shipbuilding Industry Corporation (SBIC) - Product Focus
Table 17: Vietnam Shipbuilding Industry Corporation (SBIC) - Alliances
Table 18: Vietnam Shipbuilding Industry Corporation (SBIC) - Recent Contract Wins
Table 19: Sukhoi - Product Focus
Table 20: Sukhoi - Recent Contract Wins
Table 21: Admiralty Shipyards - Product Focus
Table 22: Admiralty Shipyards - Recent Contract Wins
Table 23: Damen Schelde Naval Shipbuilding - Product Focus
Table 24: Damen Schelde Naval Shipbuilding - Recent Contract Wins

List of Figures
Figure 1: Vietnamese Defense Expenditure (VND Trillion), 2013-2022
Figure 2: Vietnamese Defense Expenditure (US$ Billion), 2013-2022
Figure 3: Vietnamese GDP Growth vs. Defense Expenditure as a Percentage of GDP Growth, 2013-2022
Figure 4: Vietnamese Defense Budget Split Between Capital and Revenue Expenditure (%), 2013-2022
Figure 5: Vietnamese Defense Capital Expenditure (VND Trillion), 2013-2022
Figure 6: Vietnamese Defense Capital Expenditure (US$ Billion), 2013-2022
Figure 7: Vietnamese Per Capita Defense Expenditure (US$), 2013-2022
Figure 8: Vietnamese Homeland Security Expenditure (VND Trillion), 2013-2022
Figure 9: Vietnamese Homeland Security Expenditure (US$ billion), 2013-2022
Figure 10: Terrorism Heat Map, 2017
Figure 11: Terrorism Index, 2017
Figure 12: Benchmarking with Key Markets - 2013-2017 vs. 2018-2022
Figure 13: Benchmarking with World’s Largest and Top Regional Defense Spenders (US$ Billion), 2017 and 2022
Figure 14: Defense Expenditure as a Percentage of GDP of Largest Military Spenders (%), 2017
Figure 15: Frigates Market Size (US$ Million), 2017-2027
Figure 16: Infrastructure Construction Market Size (US$ Million), 2017-2027
Figure 17: Facilities Management Market Size (US$ Million), 2017-2027
Figure 18: Vietnamese Defense Import Trend, 2012-2016 (TIV values)
Figure 19: Vietnamese Defense Imports by Country (%), 2012-2016
Figure 20: Vietnamese Defense Imports by Category (%), 2012-2016
Figure 21: Industry Dynamics Porter’s Five Forces Analysis
Figure 22: Vietnam’s GDP per capita (US$), 2015-2025
Figure 23: Vietnam’s Gross Domestic Product (current US$ Billion), 2015-2025
Figure 24: Vietnam’s Exports of goods and services (LCU Billion), 2005-2014
Figure 25: Vietnam’s Imports of goods and services (LCU Bn), 2005-2014
Figure 26: Vietnam’s LCU per US$, 2015-2024
Figure 27: Vietnam’s market capitalization of listed companies (US$ Billion), 2005-2012
Figure 28: Vietnam’s market capitalization of listed companies as a % of GDP, 2005-2012
Figure 29: Vietnam’s Goods Exports as a percentage of GDP, 2005-2014
Figure 30: Vietnam’s Goods Imports as a percentage of GDP, 2005-2014
Figure 31: Vietnam’s Services Imports as a percentage of GDP, 2005-2014
Figure 32: Vietnam’s Services Exports as a percentage of GDP, 2005-2013
Figure 33: Vietnam’s Foreign direct investment, net (BoP, current US$ Bn), 2005-2013
Figure 34: Vietnam’s Net foreign direct investment as a % of GDP, 2005-2013
Figure 35: Vietnam’s Mining, Manufacturing, Utilities Output (LCU Billion), 2005-2014

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  • Admiralty Shipyards
  • Damen Schelde Naval Shipbuilding (DSNS)
  • Sukhoi
  • Vietnam Shipbuilding Industry Corporation (SBIC)
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