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

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

Summary

Increased threat of terrorism from the Islamic group, Al-Qaeda in the Islamic Maghreb (AQIM) operating in North Africa, an arms race with neighboring countries such as Morocco and Tunisia, and the ongoing modernization of the armed forces are key factors that have compelled Algeria to bolster its defenses and develop a robust defense posture.

With a defense budget of US$10.3 billion in 2017, Algeria is currently the largest military spender in the African region and the world’s tenth largest defense importer of military goods. Military expenditure is strongly supported by the presence of the oil and natural gas industry, where the revenues are directed towards strengthening defense and security.

The country’s capital expenditure is expected to grow at a robust CAGR of 9.48% during the forecast period 2017 to 2022. The Algerian Government is expected to procure replacement air refueling tankers, transport aircraft, multi role fighters, armored vehicles, corvettes, and frigates, among others. Additionally, opportunities in security systems and platforms such as unmanned aerial vehicles (UAV), thermal imaging sensors, motion sensors, alarms, and radar systems are expected to arise as a result of the country’s focus on strengthening border security.

Algeria’s sudden rise as a major military force in Africa can be attributed to its burgeoning economy and a desire to establish its military superiority in the region. Algeria’s domestic defense manufacturing capabilities are still underdeveloped, due to which the country mainly relies on foreign imports. Historically, Algeria has primarily imported weapons and related systems from Russia, occupying a 60.4% share; however, this trend is gradually changing as it opens its market to other countries and reduces its dependency on one particular nation.

The country is increasing efforts to reduce its military dependency on foreign suppliers and, therefore, is largely concentrating on the joint development of defense systems as to strengthen its domestic defense manufacturing capabilities. Furthermore, Algeria has witnessed a number of JVs with Algerian, Russian, French, and Serbian companies in areas such as armored vehicles, unmanned aircraft, military healthcare, and counter-terrorism equipment.

This report offers insights into market opportunities and entry strategies adopted by foreign OEMs (original equipment manufacturers) to gain a market share in the Algerian 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. It also benchmarks the industry against key global markets and provides detailed understanding of emerging opportunities in specific areas
- Procurement dynamics: trend analysis of imports and exports, together with the implications and impact this will have on the Algerian 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, coupled 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 Algeria, 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 the 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 JSC Rosoboronexport, Entreprise Nationale des Véhicules Industriels, NIMR-Algerie , Khenchela Mechanical Constructions Establishment (ECMK),Seriana Company of Industrial Achievements (ERIS) and National Office of Explosive Substances, EPE

Scope

- With a defense budget of US$10.3 billion in 2017, Algeria is currently the largest military spender in the African region and the world’s tenth largest defense importer of military goods. Military expenditure is strongly supported by the presence of the oil and natural gas industry, where the revenues are directed towards strengthening defense and security. The increased threat of terrorism from the Islamic group, Al-Qaeda in the Islamic Maghreb (AQIM) operating in North Africa, an arms race with neighboring countries such as Morocco and Tunisia, and the ongoing modernization of the armed forces are key factors to drive military expenditure. The instability in neighboring Libya, coupled with the rapid spread of the Islamic State (IS) in the country, has compelled Algeria to bolster its defenses and develop a robust defense posture.
- During 2013-2017, an average of 20% of the country’s total defense budget was allocated to capital expenditure, while an average of 80% was reserved for revenue expenditure. The capital expenditure share valued 19.6% in 2017, and is expected to marginally increase during the forecast period to reach 21.5% in 2022. This is primarily due to Algeria having initiated a broad range of military modernization programs, with explicit emphasis on developing the country’s domestic defense industrial capabilities. In 2016, the Algerian Government announced future modernization plans in order to develop a strong defense industry, much of which is expected to focus on domestic industrial capability development.
- The MoD is expected to invest in fighter and multi-role aircraft, transport aircraft, attack helicopters, and Armored 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 Algerian 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 Algerian defense industry covering sections including demand drivers, Porter’s Five Forces Analysis, Key Trends and Growth Stimulators, and latest industry contracts


1. Introduction
1.1. What is this Report About?
1.2. Definitions
1.3. Summary Methodology
1.4. About Strategic Defence Intelligence
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 and Strategy
3.1.3. Military Fleet Size
3.1.4. Procurement Programs
3.1.5. Social, Political, and Economic Environment and Support for Defense Projects
3.1.6. Political and Strategic Alliances
3.2. Defense Market Size: Historical and Forecast
3.2.1. Algeria’s defense budget to grow at an expected CAGR of 7.25% during 2018-2022
3.2.2. Rising threat of terrorism and an arms race in the region to drive Algeria’s defense expenditure
3.2.3. The defense budget as a percentage of GDP will remain at an average of 8.6% over the forecast period
3.3. Analysis of Defense Budget Allocation
3.3.1. Share of capital expenditure is expected to increase during the forecast period
3.3.2. Capital expenditure is expected to record a CAGR of 9.48% during the forecast period
3.3.3. Algeria’s per-capita defense expenditure is expected to increase during the forecast period
3.4. Homeland Security Market Size and Forecast
3.4.1. The homeland security market in Algeria is expected to decline at a CAGR of 1.94% during the forecast period
3.4.2. Human trafficking and drug trafficking form the main components of homeland security expenditure
3.4.3. Algeria is at high risk from external and internal threats
3.4.4. Algeria faces “high risk” from acts of terrorism
3.4.5. Algeria has a terrorism index score of 4.3
3.5. Benchmarking with Key Global Markets
3.5.1. Algerian defense expenditure is expected to remain low compared to leading spenders
3.5.2. Algeria will continue to remain a small contributor in the global arms market
3.5.3. Defense budget as a percentage of GDP is expected to remain low over the forecast period
3.6. Market Opportunities: Key Trends and Drivers
3.6.1. Multi−role Aircraft
3.6.2. Transport Aircraft
3.6.3. Attack Helicopters
3.6.4. Armored Personnel Carrier (APC)
4. Defense Procurement Market Dynamics
4.1. Import Market Dynamics
4.1.1. Defense imports increased during 2012−2016
4.1.2. China, the US, Germany, and Italy are the major defense equipment suppliers for Algeria
4.1.3. Aircraft, armored vehicles, and naval vessels accounted for a total share of 78.5% in Algerian defense imports
4.2. Export Market Dynamics
4.2.1. Algeria does not export arms due to an undeveloped domestic arms industry
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: medium
5.1.3. Barriers to entry: high
5.1.4. Intensity of rivalry: low to medium
5.1.5. Threat of substitution: high
6. Market Entry Strategy
6.1. Market Regulation
6.1.1. Formal offset policy to be drafted to ensure growth of the country’s domestic defense manufacturing industry
6.1.2. Foreign direct investment in defense
6.2. Market Entry Route
6.2.1. Budget process
6.2.2. Defense procurement process
6.2.3. Collaborations provide market entry opportunities
6.2.4. Government-to-government agreements are the preferred market entry route for foreign OEMs
6.3. Key Challenges
6.3.1. Corruption and lack of transparency pose an obstacle for market entry
6.3.2. Lack of relevant defense procurement policy
7. Competitive Landscape and Strategic Insights
7.1. Competitive Landscape Overview
7.1.1. Foreign suppliers manufacture defense systems overseas and deliver to Algeria
7.1.2. Rosoboronexport: overview
7.1.3. Rosoboronexport: products
7.1.4. Rosoboronexport: recent announcements and strategic initiative
7.1.5. Rosoboronexport: alliances
7.1.6. Rosoboronexport: recent contract wins
7.2. Key Domestic Companies
7.2.1. Entreprise Nationale des Véhicules Industriels: overview
7.2.2. Entreprise Nationale des Véhicules Industriels Vehicles: products and services
7.2.3. Entreprise Nationale des Véhicules Industriels: recent announcements and strategic initiatives
7.2.4. Entreprise Nationale des Véhicules Industriels: alliances
7.2.5. NIMR-Algerie Joint Stock Company: overview
7.2.6. NIMR-Algerie Joint Stock Company: products
7.2.7. Khenchela Mechanical Constructions Establishment (ECMK): overview
7.2.8. Khenchela Mechanical Constructions Establishment: products
7.2.9. Khenchela Mechanical Constructions Establishment: recent announcements and strategic initiatives
7.2.10. Khenchela Mechanical Constructions Establishment: alliances
7.2.11. Seriana Company of Industrial Achievements (ERIS): overview
7.2.12. Seriana Company of Industrial Achievements: products
7.2.13. National Office of Explosive Substances, EPE (ONEX): overview
7.2.14. National Office of Explosive Substances: products
8. Business Environment and Country Risk
8.1. Economic Performance
8.1.1. GDP Per-Capita At Constant Prices (US$)
8.1.2. GDP at Current Prices (US$ Billions)
8.1.3. Exports of Goods and Services, Local Currency Unit (LCU Billions)
8.1.4. Imports of Goods and Services, Local Currency Unit (LCU Billions)
8.1.5. Gross National Disposable Income (US$ Billions)
8.1.6. Local Currency Unit (LCU) per US$ (Period Average)
8.1.7. Government Cash Surplus/Deficit as a Percentage of GDP, local currency unit (LCU)
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 (Balance of Payments or BoP, Current US$ Billions)
8.1.13. Net Foreign Direct Investment as a Percentage of GDP
8.1.14. Mining, Manufacturing, Utilities Output (Local Currency Units or LCU, Billions)
9. Appendix
9.1. About SDI
9.2. Disclaimer
List of Tables
Table 1: Algerian Army Strength
Table 2: Algerian Navy Strength
Table 3: Algerian Air Force Strength
Table 4: Algeria - Ongoing Development and Procurement Programs
Table 5: Algerian - Future Procurement Programs
Table 6: Algerian Defense Expenditure (DZD Billions & US$ Billions), 2013-2022
Table 7: Algerian GDP Growth and Defense Expenditure as Percentage of GDP Growth, 2013-2022
Table 8: Algerian Defense Budget Split Between Capital and Revenue Expenditure (%), 2013-2022
Table 9: Algerian Defense Capital Expenditure (DZD Billions and US$ Billions), 2013-2022
Table 10: Algerian Per Capita Defense Expenditure (US$), 2013-2022
Table 11: Algerian Homeland Security Expenditure (DZD Billions & US$ Billions), 2013-2022
Table 12: Terrorism Index, 2017
Table 13: Benchmarking with Key Markets - 2013-2017 vs. 2018-2022
Table 14: Algerian Budget Planning Process
Table 15: Competitive Landscape of the Algerian Defense Industry
Table 16: Rosoboronexport - Product Focus
Table 17: Rosoboronexport - Alliances
Table 18: Rosoboronexport - Recent Contract Wins
Table 19: Entreprise Nationale des Véhicules Industriels - Product Focus
Table 20: Entreprise Nationale des Véhicules Industriels - Alliances
Table 21: NIMR-Algerie - Product Focus
Table 22: Khenchela Mechanical Constructions Establishment - Product Focus
Table 23: Khenchela Mechanical Constructions Establishment (ECMK) - Alliances
Table 24: Seriana Company of Industrial Achievements - Product Focus
Table 25: National Office of Explosive Substances: Products 79"
List of Figures
Figure 1: Algerian Defense Expenditure (DZD Billions), 2013-2022
Figure 2: Algerian Defense Expenditure (US$ Billions), 2013-2022
Figure 3: Algeria’s GDP Growth and Defense Expenditure as Percentage of GDP Growth, 2013-2022
Figure 4: Algerian Defense Budget Split Between Capital and Revenue Expenditure (%), 2013-2022
Figure 5: Algerian Defense Capital Expenditure (DZD Billions), 2013-2022
Figure 6: Algerian Defense Capital Expenditure (US$ Billions), 2013-2022
Figure 7: Algerian Per Capita Defense Expenditure (US$), 2013-2022
Figure 8: Algerian Homeland Security Expenditure (DZD Billions), 2013-2022
Figure 9: Algerian Homeland Security Expenditure (US$ Billions), 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: Defense Expenditure of the World’s Largest Military Spenders (US$ Billions), 2017 and 2022
Figure 14: Defense Expenditure as a Percentage of GDP of the Largest Military Spenders (%), 2017
Figure 15: Multi−role Aircraft Market Size (US$ Millions), 2017-2027
Figure 16: Transport Aircraft Market Size (US$ Millions), 2017-2023
Figure 17: Attack Helicopters Market Size (US$ Millions), 2017-2027
Figure 18: Algeria’s Armored Personnel Carrier Market Size (US$ Millions), 2017-2027
Figure 19: Algeria Defense Import Trend (US$ Millions), 2012-2016 (TIV values*)
Figure 20: Algerian Defense Import by Country (%), 2012-2016
Figure 21: Algerian Defense Imports by Category (%), 2012-2016
Figure 22: Industry Dynamics Porter’s Five Forces Analysis
Figure 23: Algeria’s GDP Per Capita at Constant Prices (US$), 2015-2025
Figure 24: Algeria’s GDP at Current Prices (US$ Billions), 2015-2025
Figure 25: Algeria’s Exports of Goods and Services (LCU Billions), 2005-2014
Figure 26: Algerian Imports of Goods and Services (LCU Billions), 2005-2014
Figure 27: Algeria’s Gross National Disposable Income (US$ Billions), 2005-2014
Figure 28: Algeria’s LCU per US$, 2015-2024
Figure 29: Algeria−Government cash surplus/deficit as % of GDP (DZD), 2005-2011
Figure 30: Algeria − Goods Exports as a % of GDP (%), 2005-2014
Figure 31: Algeria − Goods Exports as a % of GDP (%), 2005-2014
Figure 32: Algeria− Services Imports as a % of GDP (%), 2005-2013
Figure 33: Algeria − Services Exports as a % of GDP (%), 2005-2013
Figure 34: Algeria − Foreign Direct Investment, net (BoP, current US$ Billions), 2005-2013
Figure 35: Algeria’s Net Foreign Direct Investment as % of GDP, 2005-2013
Figure 36: Algeria’s Mining, Manufacturing, Utilities Output LCU Billions, 2005-2014

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