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

  • ID: 4399636
  • Report
  • Region: Malaysia
  • 116 pages
  • Strategic Defence Intelligence
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FEATURED COMPANIES

  • Aircraft Inspection
  • Denel Land Systems (DLD)
  • Leonardo Malaysia
  • SME Aerospace Sdn Bhd
  • Sukhoi
  • MORE

Defense budget of Malaysia for the year 2017 is US$3.5 Billion, which reflected a drop of 17.6% from the previous year. For the historic period, 2013-2017, the defense budget of the country registered a CAGR of -8.58%. One of the major causes of this falling defense budget over the years is the lower percentage allocation of GDP towards defense sector. Malaysia has also postponed some of its new procurement programs and is increasingly favoring the modernization of its current equipment to cut costs.

Modernization and procurement programs of the armed forces, the country’s participation in UN peacekeeping missions, and territorial disputes with neighboring countries such as Brunei over Limbang, Louisa, and Mariveles, with Indonesia over Ambalat, with the Philippines over Ardasier and Erica, and with Thailand over Ko Kra and Ko Losin, drove the Malaysian defense expenditure during the historic period. With this trend expected to continue over the forecast period, the country is projected to cumulatively spend US$20.3 Billion over 2018-2022.

Malaysia’s homeland security (HLS) budget stands at US$2.9 Billion in 2017, and is estimated to reach US$3.6 Billion in 2022 with a growth rate of 3.07% over 2018-2022. This expenditure is primarily driven by the need to curb drug smuggling, illegal immigration, and increasing criminal activities in the country. This is expected to lead to an increased demand for maritime security equipment, air defense systems, and technology catering to border security, as well as equipment designed to counter security threats posed by international terrorist organizations, pirates, and cross border insurgents.

Malaysia’s defense exports were negligible during 2012-2016 due to the absence of an advanced and developed domestic defense industry. However, it is expected that the domestic market will gain capabilities with collaborations and technology transfers during the forecast period, resulting in less reliance on defense imports. Malaysia has enforced a robust defense offset policy to enhance the participation of its local industries. The country seeks to develop capability to produce at least some critical defense equipment locally and has already entered into deals with Turkey for the supply of Pars AV-8 armored vehicles.

The report “The Future of the Malaysia Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2022” offers insights into the market opportunities and entry strategies adopted by foreign OEMs (original equipment manufacturers) to gain market share in the Malaysian defense industry.

In particular, this report provides the following analysis:

  • Market opportunity and attractiveness: Detailed analysis of the current industry size and growth expectations during 2018-2022, including highlights of the key growth stimulators. It also benchmarks the industry against key global markets and provides a detailed understanding of emerging opportunities in specific areas.
  • Procurement Dynamics: Trend analysis of imports and exports, together with their implications and impact on the Malaysian 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 Malaysia, 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.

Scope

  • The defense budget of Malaysia for the year 2017 is US$3.5 billion, which reflected a drop of 17.6% from the previous year. For the historic period, 2013-2017, the defense budget of the country registered a CAGR of -8.58%. One of the major causes of this falling defense budget over the years is the lower percentage allocation of GDP towards defense sector. Malaysia has also postponed some of its new procurement programs and is increasingly favoring the modernization of its current equipment to cut costs. This is part of attempts by the Malaysian government to bring in economic reforms and stabilize the economy. Malaysia has also released the 11th growth plan, wherein plans for achieving economic growth have been well drafted. It is expected that with the implementation of the plans the country’s GDP will rise.
  • During the historic period, the Malaysian MoD allocated an average of 21.1% of the total defense budget to capital expenditure, while an average of 78.9% was reserved for revenue expenditure. Over the forecast period, allocation towards capital expenditure is forecasted to remain at an average of 23.2%. For the next couple of years, allocation towards capital expenditure is expected to reduce slightly due to the postponement of some procurement programs.
  • The MoD is expected to invest in multi-role aircraft and Armoured Personnel Carrier (APC).

Reasons to buy

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

  • Aircraft Inspection
  • Denel Land Systems (DLD)
  • Leonardo Malaysia
  • SME Aerospace Sdn Bhd
  • Sukhoi
  • MORE

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. The Malaysian defense budget is expected to reach US$4.5 billion by 2022, at a CAGR of 6.31%
3.2.2. Modernization of the armed forces, participation in UN peacekeeping operations, and territorial disputes are the major drivers of the Malaysian defense industry
3.2.3. Defense budget as a percentage of GDP will average 0.99% over the forecast period
3.3. Analysis of Defense Budget Allocation
3.3.1. Capital expenditure allocation is expected to increase slightly over the forecast period
3.3.2. The Malaysian defense capital expenditure is expected to reach US$1.1 billion by 2022, at a CAGR of 7.93%
3.3.3. Defense expenditure allocation on others expected to remain highest
3.3.4. Budget allocation on others is expected to remain highest over the forecast period
3.3.5. Per capita defense expenditure expected to increase during the forecast period
3.4. Homeland Security Market Size and Forecast
3.4.1. Malaysian homeland security expenditure is expected to grow at a CAGR of 3.07% over the forecast period
3.4.2. The homeland security expenditure in Malaysia is mainly driven by rising criminal activities and natural disasters
3.4.3. Malaysia is “moderately affected” by terrorism
3.4.4. Malaysia faces “moderate risk” from acts of terrorism
3.4.5. Malaysia has a terrorism index score of “2.7”
3.5. Benchmarking with Key Global Markets
3.5.1. Malaysian defense expenditure is expected to increase over the forecast period
3.5.2. Malaysian defense expenditure is lower than other Asian countries
3.5.3. The Malaysian defense budget as a percentage of GDP is expected to decline over the forecast period
3.6. Market Opportunities: Key Trends and Growth Stimulators
3.6.1. Multi-Role Aircraft
3.6.2. Armored Personnel Carrier (APC)

4. Defense Procurement Market Dynamics
4.1. Import Market Dynamics
4.1.1. Malaysian defense imports are expected to increase over the forecast period
4.1.2. Germany and France to remain the key arms suppliers to Malaysia
4.1.3. Aircrafts accounted for the majority of imports during 2012-20
4.2. Export Market Dynamics
4.2.1. Negligible defense exports for Malaysia

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

6. Market Entry Strategy
6.1. Market Regulation
6.1.1. The Malaysian defense industry is largely driven by the government’s offset policy
6.2. Market Entry Route
6.2.1. Budgeting Process
6.2.2. Procurement Policy and Process
6.2.3. Entry through technology transfer program
6.2.4. Entry through partnerships with domestic defense companies
6.2.5. Defense exhibitions can be used as a direct entry route into the Malaysian defense industry in the form of Exports
6.3. Key Challenges
6.3.1. Negligible defense exports pose a challenge for domestic defense companies
6.3.2. Limited defense budget discourages investors from market entry
6.3.3. Corruption and a lack of transparency impede the growth of Malaysia’s defense industry
6.3.4. Malaysia’s new economic policy (NEP) limits the entry of foreign investors

7. Competitive Landscape and Strategic Insights
7.1. Competitive Landscape Overview
7.2. Key Foreign Companies
7.2.1. Leonardo Malaysia: Overview
7.2.2. Leonardo Malaysia: Products and services
7.2.3. Leonardo Malaysia: Recent announcements and strategic initiatives
7.2.4. Leonardo Malaysia: alliances
7.2.5. Leonardo Malaysia: recent contract wins
7.2.6. Sukhoi: Overview
7.2.7. Sukhoi: Products and services
7.2.8. Sukhoi: recent contract wins
7.2.9. Denel Land Systems: Overview
7.2.10. Denel Land Systems: Products and services
7.2.11. Denel Land Systems: Recent announcements and strategic initiatives
7.2.12. Denel Land Systems: alliances
7.2.13. Denel Land Systems: recent contract wins
7.3. Key Public Sector Companies
7.3.1. SME Ordnance Sdn Bhd: overview
7.3.2. SME Ordnance Sdn Bhd: products and services
7.3.3. SME Ordnance Sdn Bhd: Recent announcements and strategic initiatives
7.3.4. SME Ordnance Sdn Bhd: Alliances
7.3.5. SME Ordnance Sdn Bhd: recent contract wins
7.3.6. SME Aerospace Sdn Bhd: Overview
7.3.7. SME Aerospace Sdn Bhd: Products and services
7.3.8. SME Aerospace Sdn Bhd: Recent announcements and strategic initiatives
7.3.9. SME Aerospace Sdn Bhd: Recent contract wins
7.3.10. AIROD Sdn Bhd: Overview
7.3.11. AIROD Sdn Bhd: Products and services
7.3.12. AIROD Sdn Bhd: Recent announcements and strategic initiatives
7.3.13. AIROD Sdn Bhd: Alliances
7.3.14. AIROD Sdn Bhd: Recent contract wins
7.4. Key Private Sector Companies
7.4.1. Boustead Naval Shipyard: Overview
7.4.2. Boustead Naval Shipyard: Products and services
7.4.3. Boustead Naval Shipyard: Alliances
7.4.4. Boustead Naval Shipyard: Recent contract wins
7.4.5. Sapura Thales Electronics Sdn Bhd: Overview
7.4.6. Sapura Thales Electronics Sdn Bhd: Products and services
7.4.7. Sapura Thales Electronics Sdn Bhd: Recent announcements and strategic initiatives
7.4.8. Sapura Thales Electronics Sdn Bhd: Alliances
7.4.9. Sapura Thales Electronics Sdn Bhd: Recent contract wins
7.4.10. DRB Hicom Defence Technologies Sdn Bhd: Overview
7.4.11. DRB Hicom Defence Technologies Sdn Bhd: Products and services
7.4.12. DRB Hicom Defence Technologies Sdn Bhd: Recent announcements and strategic initiatives
7.4.13. DRB Hicom Defence Technologies Sdn Bhd: Alliances
7.4.14. DRB Hicom Defence Technologies Sdn Bhd: Recent contract wins
7.4.15. Labuan Shipyard & Engineering Sdn Bhd: overview
7.4.16. Labuan Shipyard & Engineering Sdn Bhd: products and services
7.4.17. Labuan Shipyard & Engineering Sdn Bhd: recent announcements and strategic initiatives
7.4.18. Labuan Shipyard & Engineering Sdn Bhd: alliances
7.4.19. Labuan Shipyard & Engineering Sdn Bhd: recent contract wins
7.4.20. D’Aquarian Sdn Bhd: Overview
7.4.21. D’Aquarian Sdn Bhd: Products and services
7.4.22. D’Aquarian Sdn Bhd: Recent contract wins

8. Business Environment and Country Risk
8.1. Economic Performance
8.1.1. Nominal GDP per capita
8.1.2. GDP at current prices (US$)
8.1.3. Exports of Goods and Services (Current LCU Billion)
8.1.4. Imports of Goods and Services (Current LCU Billion)
8.1.5. Gross National Disposable Income (US$ billion)
8.1.6. LCU per US$ (period average)
8.1.7. Market Capitalization of Listed Companies (US$ Billion)
8.1.8. Market capitalization of listed companies (% of GDP)
8.1.9. Government cash surplus/deficit as a percentage of GDP (LCU)
8.1.10. Goods exports as a percentage of GDP
8.1.11. Goods imports as a percentage of GDP
8.1.12. Services imports as a percentage of GDP
8.1.13. Service exports as a percentage of GDP
8.1.14. Foreign Direct Investment, Net (BoP, current US$ billion)
8.1.15. Net foreign direct investment as a percentage of GDP
8.1.16. Mining, Manufacturing, Utilities Output (LCU Billion)

9. Appendix

List of Tables
Table 1: Malaysian Ground Forces Strength
Table 2: Malaysian Air Force Strength
Table 3: Malaysian Navy Strength
Table 4: Malaysian - Ongoing Development and Procurement Programs
Table 5: Malaysian - Future Procurement Programs
Table 6: Malaysian Defense Expenditure (MYR Billion & US$ Billion), 2013-2022
Table 7: Malaysian GDP Growth and Defense Expenditure as a Percentage of GDP Growth, 2013-2022
Table 8: Malaysian Defense Budget Split Between Capital and Revenue Expenditure (%), 2013-2022
Table 9: Malaysian Defense Capital Expenditure (MYR Billion & US$ Billion), 2013-2022
Table 10: Malaysian Defense Budget Split Between Military Services (Army, Air Force, Navy and Others) (%), 2013-2022
Table 11: Malaysian Defense Budget in MYR Billion - Breakdown by Services (Army, Navy, Air Force and Others) 2013-2022
Table 12: Malaysian Defense Budget in US$ Billion - Breakdown by Services (Army, Navy, Air Force and Others) 2013-2022
Table 13: Malaysian Per Capita Defense Expenditure (US$), 2013-2022
Table 14: Malaysian Homeland Security Expenditure (MYR Billion & US$ Billion), 2013-2022
Table 15: Terrorism Index, 2017
Table 16: Benchmarking with Key Markets - 2013-2017 vs. 2018-2022
Table 17: Malaysian Defense Offset Regulations
Table 18: Malaysian Budget Formation Timetable
Table 19: Market Entry by Key Foreign Companies
Table 20: Malaysian Defense Industry Capability
Table 21: Competitive Landscape of the Malaysian Defense Industry
Table 22: Leonardo Malaysia - Product Focus
Table 23: Leonardo Malaysia - Alliances
Table 24: Leonardo Malaysia - Recent Contract Wins
Table 25: Sukhoi - Product Focus
Table 26: Sukhoi - Recent Contract Wins
Table 27: Denel Land Systems - Product Focus
Table 28: Denel Land Systems - Alliances
Table 29: Denel Land Systems - Recent Contract Wins
Table 30: SME Ordnance Sdn Bhd - Product Focus
Table 31: SME Ordnance Sdn Bhd - Alliances
Table 32: SME Ordnance Sdn Bhd - Recent Contract Wins
Table 33: SME Aerospace Sdn Bhd - Product Focus
Table 34: SME Aerospace Sdn Bhd - Recent Contract Wins
Table 35: AIROD Sdn Bhd - Product Focus
Table 36: AIROD Sdn Bhd - Alliances
Table 37: AIROD Sdn Bhd - Recent Contract Wins
Table 38: Boustead Naval Shipyard - Product Focus
Table 39: Boustead Naval Shipyard - Alliances
Table 40: Boustead Naval Shipyard - Recent Contract Wins
Table 41: Sapura Thales Electronics Sdn Bhd - Product Focus
Table 42: Sapura Thales Electronics Sdn Bhd - Alliances
Table 43: Sapura Thales Electronics Sdn Bhd - Recent Contract Wins
Table 44: DRB Hicom Defence Technologies Sdn Bhd - Product Focus
Table 45: DRB Hicom Defence Technologies Sdn Bhd - Alliances
Table 46: DRB Hicom Defence Technologies Sdn Bhd - Recent Contract Wins
Table 47: Labuan Shipyard & Engineering Sdn Bhd - Product Focus
Table 48: Labuan Shipyard & Engineering Sdn Bhd - Alliances
Table 49: Labuan Shipyard & Engineering Sdn Bhd - Recent Contract Wins
Table 50: D’Aquarian Sdn Bhd - Product Focus
Table 51: D’Aquarian Sdn Bhd - Recent Contract Wins

List of Figures
Figure 1: Malaysian Defense Expenditure (MYR Billion), 2013-2022
Figure 2: Malaysian Defense Expenditure (US$ Billion), 2013-2022
Figure 3: Malaysian GDP Growth vs. Defense Expenditure as Percentage of GDP, 2013-2022
Figure 4:Malaysian Defense Budget Split Between Capital and Revenue Expenditure (%), 2013-2022
Figure 5: Malaysian Defense Capital Expenditure (MYR Billion), 2013-2022
Figure 6: Malaysian Defense Capital Expenditure (US$ Billion), 2013-2022
Figure 7: Malaysian Defense Budget Split Between Army, Navy, Air Force and Others, 2013-2022
Figure 8: Malaysian Defense Budget in MYR Billion - Breakdown by Services (Army, Navy, Air Force and Others) 2013-2022
Figure 9: Malaysian Defense Budget in US$ Billion - Breakdown by Services (Army, Navy, Air Force and Others) 2013-2022
Figure 10: Malaysian Per Capita Defense Expenditure (US$), 2013-2022
Figure 11: Malaysian Homeland Security Expenditure (MYR Billion), 2013-2022
Figure 12: Malaysian Homeland Security Expenditure (US$ Billion), 2013-2022
Figure 13: Terrorism Heat Map, 2017
Figure 14: Terrorism Index, 2017
Figure 15: Benchmarking with Key Markets - 2013-2017 vs. 2018-2022
Figure 16: Defense Expenditure of the World’s Largest Military Spenders (US$ Billions), 2017 and 2022
Figure 17: Defense Expenditure as a Percentage of GDP of Largest Military Spenders (%), 2017
Figure 18: Multi-role Aircraft Market Size (US$ Million), 2017-2027
Figure 19: Armored Personnel Carrier Market Size (US$ Million), 2017-2027
Figure 20: Malaysian Defense Import Trend, 2012-2016 (TIV values)
Figure 21: Malaysian Defense Import by Country, 2012-2016 (TIV values)
Figure 22: Malaysia Defense Imports by Category (%), 2012-2016
Figure 23: Industry Dynamics - Porter’s Five Forces Analysis
Figure 24: Malaysian GDP Per Capita at Constant Prices (US$), 2015-2025
Figure 25: Malaysia - GDP at Current Prices (US$ Billion), 2015-2025
Figure 26: Malaysian Exports of Goods and Services (LCU Billion), 2005-2025
Figure 27: Malaysian Imports of Goods and Services (LCU Billion), 2005-2025
Figure 28: Malaysian Gross National Disposable Income (US$ billion), 2005-2025
Figure 29: Malaysia LCU per US$, 2015-2024
Figure 30: Malaysian Market Capitalization of Listed Companies (US$ Billion), 2005-2013
Figure 31: Malaysian market capitalization of listed companies (% of GDP), 2005-2013
Figure 32: Malaysian Government cash surplus/deficit as % of GDP (LCU), 2005-2013
Figure 33: Malaysia - Goods exports as a % of GDP (%), 2005-2013
Figure 34: Malaysia - Goods imports as a % of GDP (%), 2005-2013
Figure 35: Malaysian Services imports as a % of GDP (%), 2005-2013
Figure 36: Malaysia Service exports as a % of GDP (%), 2005-2013
Figure 37: Malaysia - Foreign direct investment, net (BoP, current US$ billion), 2005-2013
Figure 38: Malaysian Net foreign direct investment as % of GDP, 2005-2013
Figure 39: Malaysian Mining, Manufacturing, Utilities Output (LCU Billion), 2005-2013

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  • Aircraft Inspection
  • Boustead Naval Shipyard (BN Shipyard)
  • DRB Hicom Defence Technologies Sdn Bhd (DEFTECH)
  • Denel Land Systems (DLD)
  • D’Aquarian (M) Sdn Bhd (DASB)
  • Labuan Shipyard & Engineering Sdn Bhd (LSE)
  • Leonardo Malaysia
  • Repair & Overhaul Depot (AIROD) Sdn Bhd
  • SME Aerospace Sdn Bhd
  • SME Ordnance Sdn Bhd (SMEO)
  • Sapura Thales Electronics Sdn Bhd (STE)
  • Sukhoi
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