The Netherlands - Defense and Security: Innovation powering the Dutch defense industry (Strategy, Performance and Risk Analysis)
The Netherlands ranks 15th globally in terms of militarization, following France and the UK. The country’s defense expenditure has been low over the historic period because of the low level of violence and conflicts in the Netherlands. However, with countries across the globe focusing on the modernization of their forces, technological innovations in arms and ammunitions, aircraft and helicopters, C4ISR, other IT platforms and homeland security, the country’s defense expenditure is expected to show steady growth over the forecast period.
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Revenue and capital expenditure expected to increase:
Dutch revenue expenditure was US$7,583.6 million in 2016, having witnessed a CAGR of -2.9% over the historic period. However, it’s expected to increase at a CAGR of 2.9% over 2017-2021 to reach US$8,972.2 million. This is mainly due to an increase in investments towards training and maintenance activities. Dutch capital expenditure was US$1,599.4 million in 2016, having posted a CAGR of -3.9% over the historic period. Budget cuts and the implementation of reform measures, such as the reduction in troop size by the ministry, are responsible for the decline in capital expenditure. However, this value is expected to increase at a CAGR of 3.4% over 2017-2021 to reach US$1,909.2 million. This is mainly due to modernization programs which require the procurement of new equipment and upgrade of existing military hardware.
Dutch total defense expenditure observed a CAGR of -3.1% over the historic period, from US$10.4 billion in 2012 to US$9.2 billion in 2016. However, it is forecast to increase at a CAGR of 2.9% over 2017-2021 to reach US$9,183.0 billion.
Aircraft and homeland security segments lead in terms of capital expenditure:
In terms of the different defense segments, aircraft and homeland security witnessed the highest capital expenditure, with US$1,626.8 million and US$1,385.3 million respectively in 2016. Aircraft segment expenditure increased at 1.6%, from US$1,600.4 million in 2015 to US$1,626.8 million in 2016. The replacement of aging aircraft equipment and the installation of new engines have driven expenditure in the segment. The homeland security segment reported capital expenditure of US$1,385.3 million in 2016, and is forecast to increase at a CAGR of 3.0% over 2017-2021 to reach US$1,608.3 million. The country is expected to spend more on border and port security, including cyber security, biometric identification systems, and human and technical surveillance systems to combat the country’s increasing terrorism and drug trafficking problems.
The Royal Netherlands Navy’s decision to replace its aging Walrus class submarine fleet with modern submarines helps it to strengthen its defense and security capabilities. As part of the Wheeled Vehicle Replacement Program, the army intends to procure armored vehicles. Also, the country’s problems with Russia have forced it to re-prioritize its defense strategy and increase its investments in replacing its aging weapon platforms.
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