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

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

Summary

Sri Lankan defense budget is valued at US$2 Billion in 2017, and it registered a CAGR of 4.11% during the historic period. The post-war rehabilitation, threat of the re-emergence of LTTE affiliates, and a tense relationship with India drove the Sri Lankan defense expenditure during the historic period. With this trend expected to continue, Sri Lanka’s defense budget is estimated to register a CAGR of 1.24% to value US$2 Billion in 2022.

Homeland security (HLS) spends is expected to stands at US$477.4 million in 2017, and is estimated to reach US$488 million in 2022 by registering a growth rate of 1.15% during 2018-2022. This expenditure is primarily driven by the efforts to build the country’s internal security system to counter the growing problems of LTTE resurgence, communal violence, and the growing threats from human, weapon, and drug traffickers.

Sri Lanka’s capital expenditure allocation, which stood at an average of 13%, is expected to decrease to an average of 6.6% during the period 2017-2022. This is primarily due to the procurement of advanced defense equipment and focus on increasing the indigenous defense manufacturing capabilities. Key opportunities for equipment suppliers are expected in sectors such as patrol vessels and naval infrastructure, combat aircraft, and transport helicopters.

The Sri Lankan defense industrial base is largely undeveloped and, as a result, the country is highly dependent on foreign suppliers to meet its military needs. Russia emerged as the largest supplier of defense equipment to the country, accounting for 80% total arms imports, followed by the Australia with 20% during 2012-2016. Moreover, aircraft were the most imported military hardware during this period, and this is expected to continue during the forecast period along with naval vessels. Sri Lanka does not export any arms to foreign countries, as its domestic defense industry is still in a nascent stage, and this is expected to remain the same over the next five years.

The report “Future of the Sri Lankan Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2022” offers detailed analysis of the Sri Lankan defense industry with market size forecasts covering the next five years

In particular, it provides an in-depth analysis of the following -

- The Sri Lankan defense industry market size and drivers: Detailed analysis of the Sri Lankan defense industry during 2018-2022, including highlights of the demand drivers and growth stimulators for the industry.
- 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.
- 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 the Sri Lankan 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: Colombo Dockyard Plc. (CDPLC)

Scope

- The Sri Lankan defense budget is valued at US$2 billion in 2017, and registered a CAGR of 4.11% during the historic period. The post-war rehabilitation, threat of the re-emergence of LTTE affiliates, and a tense relationship with India drove the Sri Lankan defense expenditure during the historic period. With this trend expected to continue over the forecast period.
- The capital expenditure allocation, which stood at an average of 13% during the historic period, is expected to decrease to an average of 6.6% during the forecast period.
- This is primarily due to the procurement of advanced defense equipment and focus on increasing the indigenous defense manufacturing capabilities.
- Key opportunities for equipment suppliers are expected in sectors such as patrol vessels and naval infrastructure, combat aircraft, and transport helicopters.
- Consequently, revenue expenditure is expected to increase from an average of 87% during the historic period to an average of 93.4% over the forecast period, which will be directed towards additional recruitment, training, and development programs for military personnel.
- The MoD is expected to invest in Infrastructure development, Facilities management and MRO for patrol vessels and corvettes.

Reasons to buy

- This report will give the user confidence to make the correct business decisions based on a detailed analysis of the Sri Lankan 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 Sri Lankan 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. Sri Lankan defense budget to grow at a CAGR of 1.24% during 2018-2022 to value US$2 billion in 2022
3.2.2. The re-emergence of the LTTE, geopolitics of Indian Ocean & balancing relationships with regional superpowers are expected to drive Sri Lankan defense expenditure
3.2.3. Sri Lankan defense expenditure as a percentage of GDP is expected to decrease to an average of 1.8% during 2018-2022
3.3. Analysis of Defense Budget Allocation
3.3.1. Share of capital expenditure expected to increase over forecast period
3.3.2. Capital expenditure to increase at a CAGR of 3.38% during the forecast period
3.3.3. Sri Lankan Army accounts for the largest share of defense expenditure
3.3.4. The country is expected to invest US$5.3 billion in its army during the forecast period
3.3.5. Naval defense budget projected to grow at a CAGR of 1.21% during the forecast period
3.3.6. Air force expenditure expected to register a CAGR of 1.71% during the forecast period
3.3.7. Per capita defense expenditure expected to increase over the forecast period
3.4. Homeland Security Market Size and Forecast
3.4.1. Sri Lankan homeland security expected to grow steadily over the forecast period
3.4.2. Maritime security, Counterterrorism, and countering violent extremism are expected to drive Sri Lankan homeland security expenditure
3.4.3. Sri Lank falls under “highly affected” terrorism category
3.4.4. Sri Lanka is highly affected by terrorism
3.4.5. Sri Lanka has a terrorism index score of “3.5”
3.5. Benchmarking with Key Global Markets
3.5.1. Sri Lankan defense budget expected to increase over the forecast period
3.5.2. Sri Lankan military expenditure remains limited compared to countries with the largest defense expenditure
3.5.3. Sri Lanka spent over 2.3% of its GDP on defense in 2017
3.6. Market Opportunities: Key Trends and Growth Stimulators
3.6.1. Demand for infrastructure construction expected to increase over the forecast period
3.6.2. Facilities Management
3.6.3. Corvette MRO
4. Defense Procurement Market Dynamics
4.1. Import Market Dynamics
4.1.1. Defense imports are expected to remain low during the forecast period.
4.1.2. Sri Lanka sourced the majority of its arms imports from Russia
4.1.3. Ships and aircraft dominated military hardware imports
4.2. Export Market Dynamics
4.2.1. The country exported negligible defense goods during 2012-2016
5. Industry Dynamics
5.1. Five Forces Analysis
5.1.1. Bargaining power of supplier: low
5.1.2. Bargaining power of buyer: medium
5.1.3. Barrier to entry: medium
5.1.4. Intensity of rivalry: low
5.1.5. Threat of substitution: high
6. Market Entry Strategy
6.1. Market Regulation
6.1.1. Undisclosed FDI policy relating to defense
6.2. Market Entry Route
6.2.1. Budgeting Process
6.2.2. Procurement Policy & Process
6.2.3. Cooperative agreement and partnerships an easier way to access the Sri Lanka defense market
6.2.4. Equipment manufacturers enter the market through direct sales
6.3. Key Challenges
6.3.1. Corruption and lack of transparency pose an obstacle for market entry
6.3.2. Underdeveloped domestic industry and internal instability discourages foreign participation
6.3.3. Limited defense budget deters investors from market entry
7. Competitive Landscape and Strategic Insights
7.1. Competitive Landscape Overview
7.1.1. Colombo Dockyard Plc.: overview
7.1.2. Colombo Dockyard Plc.: products
7.1.3. Colombo Dockyard Plc.: recent announcements and strategic initiatives
7.1.4. Colombo Dockyard Plc: alliances
7.1.5. Colombo Dockyard Plc.: 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 as % of GDP (LCU)
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
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: Sri Lankan Land Forces Strength
Table 2: Sri Lankan Navy Strength
Table 3: Sri Lankan Air Force Strength
Table 4: Sri Lankan Ongoing Procurement Programs
Table 5: Sri Lankan Future Procurement Programs
Table 6: Sri Lankan Defense Expenditure (LKR billion & US$ billion), 2013-2022
Table 7: Sri Lankan GDP Growth vs. Defense Expenditure as a Percentage of GDP, 2013-2022
Table 8: Sri Lankan Defense Budget Split Between Capital and Revenue Expenditure (%), 2013-2022
Table 9: Sri Lankan Defense Capital Expenditure (LKR Billion & US$ Billion), 2013-2022
Table 10: Sri Lankan Defense Capital Expenditure Breakdown (%), 2013-2022
Table 11: Sri Lankan Defense Expenditure for Army (LKR Billion & US$ Billion), 2013-2022
Table 12: Sri Lankan Defense Expenditure for Navy (LKR Billion & US$ Million), 2013-2022
Table 13: Sri Lankan Defense Expenditure for Air Force (LKR Billion & US$ Billion), 2013-2022
Table 14: Sri Lankan Per Capita Defense Expenditure (US$), 2013-2022
Table 15: Sri Lankan Homeland Security Expenditure (LKR Billion & US$ Billion), 2013-2022
Table 16: Terrorism Index, 2017
Table 17: Benchmarking with Key Markets - 2013-2017 vs. 2018-2022
Table 18: Sri Lankan Budget Formation Timetable:
Table 19: Market Entry Strategies by Key Foreign Companies
Table 20: Colombo Dockyard Plc.- Key Products
Table 21: Colombo Dockyard Plc. - Alliances
Table 22: Colombo Dockyard Plc. - Recent Contracts
List of Figures
Figure 1: Sri Lankan Defense Expenditure (LKR Billion), 2013-2022
Figure 2: Sri Lankan Defense Expenditure (US$ Billion), 2013-2022
Figure 3: Sri Lankan GDP Growth vs. Defense Expenditures Percentage of GDP Growth, 2013-2022
Figure 4:Sri Lankan defense Budget Split Between Capital and Revenue Expenditure (%), 2013-2022
Figure 5: Sri Lankan Defense Capital Expenditure (LKR Billion), 2013-2022
Figure 6: Sri Lankan Defense Capital Expenditure (US$ Million), 2013-2022
Figure 7: Sri Lankan Defense Budget Allocation (%), 2013-2022
Figure 8: Sri Lankan Defense Budget Allocation for Army (LKR Billion), 2013-2022
Figure 9: Sri Lankan Defense Budget Allocation for Army (US$ Billion), 2013-2022
Figure 10: Sri Lankan Defense Budget Allocation for Navy (LKR Billion), 2013-2022
Figure 11: Sri Lankan Defense Budget Allocation for Navy (US$ Million), 2013-2022
Figure 12: Sri Lankan Defense Budget Allocation for Air Force (LKR Billion), 2013-2022
Figure 13: Sri Lankan Defense Budget Allocation for Air Force (US$ Million), 2013-2022
Figure 14: Sri Lankan per capita defense expenditure (US$), 2013-2022
Figure 15: Sri Lankan Homeland Security Budget (LKR Billion), 2013-2022
Figure 16: Sri Lankan Homeland Security Budget (US$ Million), 2013-2022
Figure 17: Terrorism Heat Map, 2017
Figure 18: Terrorism Index, 2017
Figure 19: Benchmarking with Key Markets - 2013-2017 vs. 2018-2022
Figure 20: Defense Expenditure of the World’s Largest Military Spenders (US$ Billion), 2017 and 2022
Figure 21: Defense Expenditure as a Percentage of GDP of Largest Military Spenders (%), 2017
Figure 22:Sri Lankan Infrastructure Construction Market Size (US$ Million), 2017-2027
Figure 23:Sri Lankan Facilities Management Market Size (US$ Million), 2017-2027
Figure 24:Sri Lankan Corvette MRO Market Size (US$ Million), 2017-2027
Figure 25: Sri Lankan Defense Import Trend, 2012-2016 (TIV values)
Figure 26: Sri Lankan Defense Imports by Country (%), 2012-2016
Figure 27: Sri Lankan Defense Imports by Category (%), 2012-2016
Figure 28: Industry Dynamics - Porter’s Five Forces Analysis
Figure 29: Sri Lankan GDP per capita, 2016-2025
Figure 30: Sri Lankan Gross Domestic Product (current US$ Bn), 2016-2025
Figure 31: Sri Lankan Exports of goods and services (current LCU Bn), 2005-2010
Figure 32: Sri Lankan Imports of goods and services (current LCU Bn), 2005-2010
Figure 33: Sri Lankan gross national disposable income (US$ Bn), 2005-2014
Figure 34: Sri Lankan LCU per US$, 2015-2024
Figure 35: Sri Lankan Market Capitalization of listed Companies (US$ Bn), 2005-2012
Figure 36: Sri Lankan Market Capitalization of listed companies as a % of GDP, 2005-2012
Figure 37: Sri Lankan Government cash surplus/deficit as % of GDP (LCU), 2005-2012
Figure 38: Sri Lankan Goods Exports as a % of GDP, 2005-2014
Figure 39: Sri Lankan Goods Imports as a % of GDP, 2005-2014
Figure 40: Sri Lankan Services Imports as a % of GDP, 2005-2014
Figure 41: Sri Lankan Services Exports as a % of GDP, 2002-2011
Figure 42: Sri Lankan Net Foreign Direct Investment (current US$ BN), 2005-2014
Figure 43: Sri Lankan Net FDI as a % of GDP, 2005-2014
Figure 44: Sri Lankan Mining, Manufacturing, Utilities Output(LCU Bn), 2005-2014

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