Future of the Indonesia Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2022
Indonesia, the world’s sixteenth largest economy, is currently one of the most attractive defense markets in South Asia but recorded a CAGR of -0.22% during 2013-2017 to reach US$8.7 Billion in 2017. The was mainly attributed to the instability in exchange rates, which resulted in slight decline in defense spending in US dollars. However, over the forecast period, the country is anticipated to boost its defense spending primarily to replace ageing defense equipment and systems.
Indonesian defense market, is anticipated value US$10.1 Billion in 2018, is expected to grow at a CAGR of 14.38% during the forecast period to value US$17.2 Billion in 2022. The economy has been growing at an average rate of 2.72% historically, and this has fueled defense expenditure in the country. Furthermore, the growth in defense spending is also driven by the need to modernize the Indonesian armed forces under the Strategic Plan 2024.
The Indonesian MoD is expected to increase its capital expenditure from US$3.5 Billion in 2017 to US$7.6 Billion in 2022 in an effort to modernize its armed forces and support existing projects. Various procurements, which have led to the increase in capital budget allocation, include Sukhoi Su-30MK2s aircraft, Su-27 SKM, and Su-35 fighters, AS565 Panther anti-submarine warfare (ASW) helicopters, hang Bogo-class tactical submarines, two landing ship tanks (LSTs), AH-64 Apache Longbow gunship helicopters, and German Leopard tanks.
Homeland security is an area that has gained prominence in Indonesia over the last decade, with expenditure expected to increase from US$6.4 Billion in 2018 to US$9.6 Billion in 2022 at a CAGR of 10.46%. The increasing expenditure is stimulated by initiatives to counter the growing threat of terrorism, and to control piracy and illegal fishing, illegal immigration, drug smuggling, and criminal activities in the country. Furthermore, this is anticipated to result in increased demand for maritime surveillance and security equipment, cameras, airport security, biometric systems, and video-surveillance systems to mitigate security threats from internal and external sources.
Indonesian defense industry is one of the fastest-growing defense markets in South Asia and, historically, has relied on foreign OEMs (original equipment manufacturers) to strengthen its defense capabilities. The country observed an increase in arms imports in 2013 and 2014 due to its recent modernization plans and countries such as the UK, the US, Russia, and South Korea are major suppliers to the Indonesian defense industry. Aircraft accounted for 45.1% of Indonesia’s arms imports, followed by naval vessels, armored vehicles, missile systems, and air defense systems.
The report “Future of the Indonesia Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2022” offers detailed analysis of Indonesia defense industry with market size forecasts covering the next five years. This report will also analyze factors that influence demand for the industry, key market trends, and challenges faced by industry participants.
In particular, it provides an in-depth analysis of the following -
- Indonesia defense industry market size and drivers: Detailed analysis of Indonesia defense industry during 2018-2022, including highlights of the demand drivers and growth stimulators for the industry. It also provides a snapshot of the country’s expenditure and modernization patterns.
- Budget allocation and key challenges: insights into procurement schedules formulated within the country and a breakdown of the defense budget. It also details the key challenges faced by defense market participants within the country.
- Porter’s Five Force analysis of Indonesia defense industry: Analysis of the market characteristics by determining the bargaining power of suppliers, bargaining power of buyers, threat of substitution, intensity of rivalry, and barriers to entry.
- Import and Export Dynamics: Analysis of prevalent trends in the country’s imports and exports over the last five years.
- Market opportunities: Details of the top five defense investment opportunities over the next 10 years.
- Competitive landscape and strategic insights: Analysis of the competitive landscape of Indonesia defense industry. It provides an overview of key players, together with insights such as key alliances, strategic initiatives, and a brief financial analysis.
Companies mentioned in this report: PT Dirgantara, PAL Indonesia, PT Pindad, Dok & Perkapalan, PT Dahana, PT Multiintegra , Radar and Communications Systems, and PT SOG.
- Indonesia, the world’s sixteenth largest economy, is currently one of the most attractive defense markets in South Asia but recorded a CAGR of -0.22% during 2013-2017 to reach US$8.7 billion in 2017. The was mainly attributed to the instability in exchange rates, which resulted in slight decline in defense spending in US dollars. However, over the forecast period, the country is anticipated to boost its defense spending primarily to replace ageing defense equipment and systems. The country’s increasing military capital expenditure is reflected in the ongoing modernization drive to replace its aging military hardware, in addition to building its indigenous defense industrial base. Furthermore, continuous territorial disputes and the country’s vulnerability to natural disasters have led to the upgrade of military equipment such as military transport aircraft, rescue helicopters, and naval vessels.
- The Indonesian MoD allocated an average of 30.8% of the total budget to capital expenditure during 2013-2017, which is expected to increase to an average of 42.4% over the forecast period. The substantial allocation for capital expenditure is primarily due to a number of procurements and modernization programs formulated by the Indonesian MoD. The country’s 2010 strategic defense plan outlined a modernization program that included the procurement of 10 jet fighter squadrons, 274 ships, and 12 submarines by 2024, a significant increase in the country’s military capabilities. The country’s military investments are in tandem with this strategy. Recent purchases include Sukhoi Su-30MK2s aircraft, Su-27 SKM, F-16, and Su-35 fighters, AS565 Panther anti-submarine warfare (ASW) helicopters, and Chang Bogo-class tactical submarines, among many others.
- The MoD is expected to invest in fighters and Multi-role aircraft, Military-IT networking and submarines.
Reasons to buy
- This report will give the user confidence to make the correct business decisions based on a detailed analysis of Indonesia 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 Indonesia defense industry covering sections including demand drivers, Porter’s Five Forces Analysis, Key Trends and Growth Stimulators, and latest industry contracts