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

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

Summary

Netherlands is the fifth-largest economy in the Eurozone and has been battling to overcome the effects of the debt crisis through defense budget cuts. During the historic period (2013-2017), expenditure decreased at a compound annual growth rate (CAGR) of -2.71%, from US$10.3 Billion in 2013 to US$9.3 Billion in 2017.

The industry is expected to return to growth at a forecast CAGR of 3.38%, rising from US$9.4 Billion in 2018 to US$10.7 Billion in 2022. Military expenditure will be driven by modernization programs and a NATO mandate to spend a minimum of 2% of GDP on defense. The Netherlands is likely to default on this target, allocating an average of 1.2% of GDP to defense over the forecast period.

Army accounted for the highest budget allocation during the historic period, with an average share of 14.3%. Over the forecast period, the army’s share will decrease to an average budget allocation of 14.2%. After falling to US$11.0 Million in 2014, defense imports recovered to US$118 Million in 2016 and are set to increase over the forecast period due to the procurement of F-35s, armored vehicles, and modernization programs for naval vessels. Historically, US defense companies have been the country’s main arms supplier; however Romania, Italy, Germany and Sweden are being used as import sources for aircraft, naval vessels, armored vehicles, missiles, sensors, and engines.

Government’s offset policy helped the country to build defense manufacturing capabilities in areas such as ship building and aircraft manufacturing. The country enforces its offset policy to gain access to technological innovations while allowing 100% foreign direct investment (FDI). The policy necessitates offsets of 100% of the contract value for all defense contracts above US$6.7 Million.

Foreign companies can enter the Dutch defense market by establishing joint ventures within the domestic defense industry. Foreign companies can also acquire domestic firms or establish subsidiaries as the government’s FDI policy allows 100% investment. There are also opportunities to establish joint R&D programs involving the Netherlands as a consortium member. Due to defense cuts, collaborations and partnerships are encouraged by the government to save costs.

The report “Future of the Netherlands 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 a market share in the Netherlands 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 their implications and impact on the Netherlands 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 Netherlands, 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.

Companies mentioned in this report: Fokker Technologies, DamenSchelde Naval Shipbuilding (DSNS), TNO Defense, Thales Nederland, Fokker Aerostructures, RH Marine Group, Lockheed Martin.

Scope

- The Netherlands is the fifth-largest economy in the Eurozone and has been battling to overcome the effects of the debt crisis through defense budget cuts. During the historic period (2013-2017), expenditure decreased at a compound annual growth rate (CAGR) of -2.71%, from US$10.3 billion in 2013 to US$9.3 billion in 2017. Although the economy is likely to improve, the country’s defense budget will be capped at an average of 1.2% of GDP over the forecast period (2018-2022).After falling to US$11.0 million in 2014, defense imports recovered to US$118 million in 2016 and are set to increase over the forecast period due to the procurement of F-35s, armored vehicles, and modernization programs for naval vessels. Historically, US defense companies have been the country’s main arms supplier, however Romania, Italy, Germany and Sweden are being used as import sources for aircraft, naval vessels, armored vehicles, missiles, sensors, and engines.

- During the historic period, revenue expenditure accounted for 82.7% of the Netherland’s total defense expenditure, while the remaining 17.3% was spent on procuring equipment and services. The implementation of budget cuts and reform measures, such as the reduction of troop size, by the MoD adversely affected capital expenditure. However, due to an increasing level of threat from Russia, NATO member states are expected to gradually enhance their defense spending. The share of capital expenditure will reach 17.5% over the forecast period, with the majority allotted to the F-35 procurement program, AIM-9X-2 Sidewinder Block II all-up-round missiles, mortars, surveillance radar, MQ-9 Reaper UAVs, and the Walrus class submarine replacement project.
- The MoD is expected to invest in fighters and Multi-role aircraft, fighters & multi-role aircraft MRO and conventional submarines.

Reasons to buy

- This report will give the user confidence to make the correct business decisions based on a detailed analysis of the Netherlands 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 Netherlands 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 & Strategy
3.1.3. Military Fleet Size
3.1.4. Procurement Programs
3.1.5. Ongoing procurement programs
3.1.6. Future procurement programs
3.1.7. Social, Political and Economic Environment & Support for Defense Projects
3.1.8. Political & Strategic Alliances
3.2. Defense Market Size Historical and Forecast
3.2.1. Netherland defense budget to post at a forecast-period CAGR of 3.38%
3.2.2. Military modernization, and commitment levels to NATO, UN and EU stipulations
3.2.3. Netherlands defense expenditure as a percentage of GDP expected to decrease
3.3. Analysis of Defense Budget Allocation
3.3.1. Share of Capital Expenditure expected to average 17.5% over forecast period
3.3.2. Capital expenditure expected to increase at a CAGR of 3.33% over 2018-2022
3.3.3. Allocation for peacekeeping operations to decline
3.3.4. Army expenditure to grow at a CAGR of 3.31% over the forecast period to reach US$1.5 Billion in 2022
3.3.5. Air force expenditure to post forecast-period CAGR of 2.94% to value US$852.7 million in 2022
3.3.6. Navy expenditure to post forecast-period CAGR of 2.83% to reach US$915.5 million in 2022
3.3.7. Support command expenditure to post forecast-period CAGR of 3.81% to reach US$1.3 billion in 2022
3.3.8. Per capita defense expenditure set to increase
3.4. Homeland Security Market Size and Forecast
3.4.1. Homeland security market is expected register a CAGR of 4.31% over the forecast period
3.4.2. Counter measures for drug trafficking and terrorism to drive homeland security expenditure
3.4.3. Netherlands falls under the “some risk of terrorism” category
3.4.4. The Netherlands faces some level of threat from foreign terrorist organizations
3.4.5. Netherlands has a terrorism index score of 0.9
3.5. Benchmarking with Key Global Markets
3.5.1. Netherlands defense budget expected to be marginally increase over the forecast period
3.5.2. Netherlands military budget is limited compared to other countries
3.5.3. The Netherlands’ expected to spend an average of 1.1% of GDP on defense over the forecast period
3.6. Market Opportunities: Key Trends and Growth Stimulators
3.6.1. Fighters and multi-role aircraft
3.6.2. Fighters and multi-role aircraft-MRO
3.6.3. Diesel electric submarine
4. Defense Procurement Market Dynamics
4.1. Import Market Dynamics
4.1.1. Defense imports are expected to increase slightly over the forecast period
4.1.2. US was the leading supplier of arms to Netherlands during 2012-2016
4.1.3. Aircraft and armored vehicles dominate military hardware imports
4.2. Export Market Dynamics
4.2.1. Arms exports to recover during the forecast period
4.2.2. Netherlands arms exports expected to increase
4.2.3. Sensors and ships are the main exported defense products
5. Industry Dynamics
5.1. Five Forces Analysis
5.1.1. Bargaining power of supplier: medium to low
5.1.2. Bargaining power of buyer: medium
5.1.3. Barrier to entry: medium
5.1.4. Intensity of rivalry: high
5.1.5. Threat of substitution: low to high
6. Market Entry Strategy
6.1. Market Regulation
6.1.1. Offset policy aids development of domestic defense industry and research activities
6.1.2. FDI in defense sector is unrestricted without review
6.2. Market Entry Route
6.2.1. Budgeting Process
6.2.2. Procurement Policy & Process
6.2.3. Acquisition of domestic companies is effective market entry route for foreign firms
6.2.4. Collaborations provide market entry opportunities
6.2.5. Joint ventures, partnerships and subcontracting offer alternative entry strategies
6.2.6. Joint R&D programs provide an effective strategy to gain market access
6.3. Key Challenges
6.3.1. Inadequate government support for defense industry
6.3.2. Defense procurements affected by European debt crisis
7. Competitive Landscape and Strategic Insights
7.1. Competitive Landscape Overview
7.2. Key Domestic Companies
7.2.1. Fokker Technologies: overview
7.2.2. Fokker Technologies: products and services
7.2.3. Fokker Technologies: recent announcements and strategic initiatives
7.2.4. Fokker Technologies: alliances
7.2.5. Fokker Technologies: recent contract wins
7.2.6. DamenSchelde Naval Shipbuilding: overview
7.2.7. DamenSchelde Naval Shipbuilding: products and services
7.2.8. DamenSchelde Naval Shipbuilding: recent announcements and strategic initiatives
7.2.9. DamenSchelde Naval Shipbuilding: alliances
7.2.10. DamenSchelde Naval Shipbuilding: recent contract wins
7.2.11. TNO Defense: overview
7.2.12. TNO Defense: products and services
7.2.13. TNO Defense: recent announcements and strategic initiatives
7.2.14. TNO Defense: alliances
7.2.15. TNO Defense: recent contract wins
7.2.16. Thales Nederland: overview
7.2.17. Thales Nederland: products and services
7.2.18. Thales Nederland: recent announcements and strategic initiatives
7.2.19. Thales Nederland: alliances
7.2.20. Thales Nederland: recent contract wins
7.2.21. Fokker Aerostructures: overview
7.2.22. Fokker Aerostructures: services
7.2.23. Fokker Aerostructures: recent announcements and strategic initiatives
7.2.24. Fokker Aerostructures: alliances
7.2.25. Fokker Aerostructures: recent contract wins
7.2.26. RH Marine Group: overview
7.2.27. RH Marine Group: products and services
7.2.28. RH Marine Group: recent announcements and strategic initiatives
7.2.29. RH Marine Group: alliances
7.2.30. RH Marine Group: recent contract wins
7.2.31. Lockheed Martin: overview
7.2.32. Lockheed Martin: products and services
7.2.33. Lockheed Martin: recent announcements and strategic initiatives
7.2.34. Lockheed Martin: alliances
7.2.35. Lockheed Martin: recent contract wins
8. Business Environment and Country Risk
8.1. Economic Performance
8.1.1. Gross Domestic per Capita
8.1.2. Gross Domestic Product, current US$
8.1.3. Exports of Goods and Services
8.1.4. Imports of Goods and Services
8.1.5. Gross National Disposable Income
8.1.6. Local Currency Unit per US$
8.1.7. Market Capitalization of Listed Companies
8.1.8. Market Capitalization of Listed Companies as a % of GDP
8.1.9. Government Cash Surplus/Deficit
8.1.10. Goods Exports as a % of GDP
8.1.11. Goods Imports as a % of GDP
8.1.12. Services Imports as a % of GDP
8.1.13. Services Exports as a % of GDP
8.1.14. Net Foreign direct investment, (BoP, current US$ Bn)
8.1.15. Net FDI as a % of GDP
8.1.16. Mining, Manufacturing, Utilities Output
9. Appendix
9.1. About SDI
9.2. Disclaimer
List of Tables
Table 1: The Deployment of Netherlands Armed Forces vs Defense Tasks
Table 2: The Netherlands Army Strength
Table 3: The Netherlands Navy Strength
Table 4: The Netherlands Air Force Strength
Table 5: The Netherlands - Ongoing Procurement Programs
Table 6: The Netherlands - Future Procurement Programs
Table 7: Netherlands Defense Expenditure (EUR Billion and US$ Billion), 2013-2022
Table 8: The Netherlands - GDP Growth vs Defense Expenditure as a Percentage of GDP, 2013-2022
Table 9: The Netherlands - Defense Budget Split Between Capital and Revenue Expenditure (%), 2013-2022
Table 10: The Netherlands - Defense Capital Expenditure (EUR Billion and US$ Billion), 2013-2022
Table 11: The Netherlands - Defense Expenditure Breakdown (%), 2013-2022
Table 12: The Netherlands - Defense Expenditure for Army (EUR Billion and US$ Million), 2013-2022
Table 13: The Netherlands - Defense Expenditure for Air Force (EUR Million and US$ Million), 2013-2022
Table 14: The Netherlands - Defense Expenditure for Navy (EUR Million and US$ Million), 2013-2022
Table 15: The Netherlands - Defense Expenditure for Support Command (EUR Billion and US$ Billion), 2013-2022
Table 16: The Netherlands - Per Capita Defense Expenditure (US$), 2013-2022
Table 17: The Netherlands - Homeland Security Expenditure (EUR Billion and US$ Billion), 2013-2022
Table 18: Terrorism Index, 2017
Table 19: The Netherlands - Benchmarking with Key Markets, 2013-2017 vs 2018-2022
Table 20: Offset Regulations in the Netherlands
Table 21: The Netherlands Budget Formation Timetable:
Table 22: The Netherlands - Competitive Landscape of the Defense Industry
Table 23: Fokker Technologies - Product Focus
Table 24:Fokker Technologies- Alliances
Table25:Fokker Technologies- Recent Contract Wins
Table26:Damen Schelde Naval Shipbuilding- Product focus
Table27:Damen Schelde Naval Shipbuilding- Alliances
Table 28:Damen Schelde Naval Shipbuilding - Contracts
Table29:TNO Defense- Product focus
Table30:TNO Defense- Alliances
Table31:TNO Defense- Recent Contract Wins
Table32:Thales Nederland- Product focus
Table33:Thales Nederland- Alliances
Table34:Thales Nederland- Recent Contract Wins
Table35:Fokker Aerostructures - Service focus
Table36:Fokker Aerostructures- Alliances
Table37:Fokker Aerostructures- Recent Contract Wins
Table38: RH Marine Group - Product focus
Table39: RH Marine Group - Alliances
Table40: RH Marine Group - Recent Contract Wins
Table41:Lockheed Martin- Product focus
Table42:Lockheed Martin- Alliances
Table43:Lockheed Martin- Recent Contract Wins 106"
List of Figures
Figure 1: The Netherlands - Defense Expenditure (EUR Billion), 2013-2022
Figure 2: The Netherlands - Defense Expenditure (US$ Billion), 2013 - 2022
Figure 3: The Netherlands - GDP Growth vs. Defense Expenditures as Percentage of GDP Growth, 2013 - 2022
Figure 4: The Netherlands - Defense Budget Split Between Capital and Revenue Expenditure (%), 2013-2022
Figure 5: The Netherlands - Defense Capital Expenditure (EUR Billion), 2013-2022
Figure 6: The Netherlands - Defense Capital Expenditure (US$ Billion), 2013-2022
Figure 7: The Netherlands - Defense Expenditure Breakdown (%), 2013-2022
Figure 8: The Netherlands - Defense Expenditure for Army (EUR Billion), 2013-2022
Figure 9: The Netherlands - Defense Expenditure for Army (US$ Billion), 2013-2022
Figure 10: The Netherlands - Defense Expenditure for Air Force (EUR Million), 2013-2022
Figure 11: The Netherlands - Defense Expenditure for Air Force (US$ Million), 2013-2022
Figure 12: The Netherlands - Defense Expenditure for Navy (EUR Million), 2013-2022
Figure 13: The Netherlands - Defense Expenditure for Navy (US$ Million), 2013-2022
Figure 14: The Netherlands - Defense Expenditure for Support Command (EUR Billion), 2013-2022
Figure 15: The Netherlands - Defense Expenditure for Support Command (US$ Billion), 2013-2022
Figure 16: The Netherlands - Per Capita Defense Expenditure (US$), 2013-2022
Figure 17: The Netherlands - Homeland Security Budget (EUR Billion), 2013-2022
Figure 18: The Netherlands - Homeland Security Budget (US$ Billion), 2013-2022
Figure 19: Terrorism Heat Map, 2017
Figure 20: The Netherlands - Terrorism Index, 2017
Figure 21: The Netherlands - Benchmarking with Key Markets, 2013-2017 vs 2018-2022
Figure 22: The Netherlands - Benchmarking with World’s Largest and Top Regional Defense Spenders (US$ Billion), 2017 and 2022
Figure 23: The Netherlands - Defense Expenditure as a Percentage of GDP of Largest Military Spenders (%), 2017
Figure 24: The Netherlands - Fighters and Multi-Role Aircraft Market Size (US$ Million), 2017-2027
Figure 25: The Netherlands - Fighters and Multi-Role Aircraft-MRO Market Size (US$ Million), 2017-2027
Figure 26: The Netherlands - C2/C4ISR Market Size (US$ Million), 2017-2027
Figure 27: The Netherlands - Defense Import Trends, 2012-2016 (TIV Values US$ Million)
Figure 28: The Netherlands - Defense Imports by Country (%), 2012-2016
Figure 29: The Netherlands - Defense Imports by Category (%), 2012-2016
Figure 30: The Netherlands - Defense Export Trends, 2012-2016 (TIV Values US$ Million)
Figure 31: Netherlands Defense exports by Country (%), 2012-2016
Figure 32: Netherlands Defense Exports by Category (%), 2012-2016
Figure 33: Industry Dynamics Porter’s Five Forces Analysis
Figure 34: Netherlands GDP Per Capita US$, 2015-2025
Figure 35: Netherlands Gross Domestic Product (current US$ Bn), 2015-2025
Figure 36: Netherlands Exports of goods and services (LCU Bn), 2005-2014
Figure 37: Netherlands Imports of goods and services (LCU Bn), 2005-2014
Figure 38: Netherlands gross national disposable income (US$ Bn), 2005 - 2013
Figure 39: Netherlands LCU per US$, 2015-2024
Figure 40: Netherlands Market Capitalization of listed Companies (US$ Bn), 2005-2012
Figure 41: Netherlands Market Capitalization of listed companies as a % of GDP, 2005-2012
Figure 42: Netherlands Government cash Surplus/deficit as a % of GDP, 2005-2012
Figure 43: Netherlands Goods Exports as a % of GDP, 2005-2014
Figure 44: Netherlands Goods Imports as a % of GDP, 2005-2014
Figure 45: Netherlands Services Imports as a % of GDP, 2005-2014
Figure 46: Netherlands Services Exports as a % of GDP, 2005-2014
Figure 47: Netherlands Net Foreign Direct Investment (current US$ BN), 2005-2014
Figure 48: Netherlands Net FDI as a % of GDP, 2005-2014
Figure 49: Netherlands Mining, Manufacturing, Utilities Output(US$ Bn), 2005-2014

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