United States - Defense and Security: Leading spending for military supremacy (Strategy, Performance and Risk Analysis)
The US ranks 17th globally in terms of level of conflict and third in terms militarization. The US’s involvement in the armed conflict against Islamic State, including several airstrikes on IS-held territory, drastically increased the country’s international conflict score. The US ranks ninth in terms of economic impact and violence, seventh in terms of military expenditure (% of GDP), 14th in terms of the costs of terrorism and 20th in terms of the business costs of crime and violence.
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Declining revenue and capital expenditure is expected to change over the forecast period:
Capital expenditure in the US witnessed a CAGR of -5.2% over the historic period, from US$227.2 billion in 2012 to US$183.5 billion in 2016. However, the country’s capital expenditure is expected to increase at a CAGR of 2.8% over 2017-2021 to reach US$198.7 billion. This increase is mainly due to the country’s focus on replacing the damaged and obsolete defense equipment used in the Iran and Afghan wars. Similarly, the country’s revenue expenditure observed a CAGR of -5.2% over the historic period, from US$418.2 billion in 2012 to US$338.1 billion in 2016. This decline was primarily due to sequestration measures imposed by the government. However, it is expected to increase at a CAGR of 2.8% over 2017-2021 to reach US$386.4 billion. This growth is primarily due to the country’s increased spending on training activities and its efforts towards maintaining military superiority.
The US’s total defense expenditure posted a CAGR of -2.6% over the historic period, from US$645.5 billion in 2012 to US$580.3 billion in 2016, but is expected to increase at a CAGR of 0.7% over 2017-2021 to reach US$599.4 billion.
Aircraft and C4ISR electronics & IT segments led in terms of capital expenditure:
In terms of the different defense segments, aircraft and C4ISR electronics & IT led in terms of capital expenditure, registering US$82.0 billion and US$54.9 billion respectively in 2016. Aircraft expenditure in the US stood at US$81.9 billion in 2016 and is forecast to increase at a CAGR of 2.7% over 2017-2021 to reach US$91.4 billion. This growth is primarily driven by the replacement of aging aircraft, equipment and technological innovations in the industry.
C4ISR electronics & IT expenditure stood at US$54,945.5 million in 2016 and is expected to witness a CAGR of -0.5% over 2017-2021 to reach US$55,845.9 million. However, the DoD’s (Department of Defense) aim to develop next generation C4ISR technologies such as AESA, hi-tech radars, cloaking technology, un-jammable imaging systems, and Video Synthetic Aperture Radar (ViSAR) will maintain C4ISR segment expenditure.
Strong tie-ups with overseas countries:
Even though the US has a highly advanced military industrial base, making it a high military hardware exporter, it imports arms in order to build strategic relations with countries such as the UK, Germany, Canada, and Norway. The country imports military hardware primarily from European countries. Germany is the largest supplier of arms to the US, followed by the UK and Canada. The US and the UK have also built strong military relations through mutual cooperation, such as the joint operation of the British Armed Forces and the US Armed Forces in Operation Iraqi Freedom.
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