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

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

 Summary

 The Future of the Philippines Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2022, published by Strategic Defence Intelligence, provides readers with detailed analysis of both historic and forecast defense industry values, factors influencing demand, the challenges faced by industry participants, analysis of industry leading companies, and key news.

Synopsis

This report offers detailed analysis of the Philippines 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 -

- The Philippines defense industry market size and drivers: detailed analysis of the Philippines 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 with respect to capital expenditure and revenue expenditure. It also details the key challenges faced by defense market participants within the country

- Porter’s Five Force analysis of the Philippines 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 the Philippines defense industry. It provides an overview of key players, together with insights such as key alliances, strategic initiatives, and a brief financial analysis

Scope

- The defense budget of Philippines for the year 2017 is US$2.9 billion. For the historic period, 2013-2017, the defense budget of the country registered a CAGR of 11.55%. The defense budget is currently being driven by efforts to modernize the army, threats from terrorist organizations, and tensions in the South China Sea.

- During the historic period, the Philippines MoD allocated an average of 38.5% of the total defense budget to capital expenditure, while an average of 61.5% was reserved for revenue expenditure. Over the forecast period, allocation towards capital expenditure is expected to increase at an average of 40.9%.

- The MoD is expected to invest in multi-role aircraft, diesel electric submarines and infrastructure construction.

 Reasons to buy

 - This report will give the user confidence to make the correct business decisions based on a detailed analysis of the Philippines 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 Philippines defense industry covering sections including demand drivers, Porter’s Five Forces Analysis, Key Trends and Growth Stimulators, and latest industry contracts

 Companies Mentioned

 United Defense Manufacturing Corporation (UDMC)

Leonardo

Remington Arms Company

ELTA Systems Ltd

Raytheon"

1. Introduction 7

1.1. What is this Report About? 7

1.2. Definitions 7

1.3. Summary Methodology 9

1.4. About Strategic Defence Intelligence 11

2. Executive Summary 12

3. Market Attractiveness and Emerging Opportunities 13

3.1. Current Market Scenario 14

3.1.1. Primary threat perception 14

3.1.2. Military doctrine and strategy 15

3.1.3. Military fleet size 16

3.1.4. Procurement Programs 22

3.1.5. Social, political and economic environment and support for defense projects 23

3.1.6. Political and strategic alliances 24

3.2. Defense Market Size Historical and Forecast 25

3.2.1. The Philippines’ defense budget to grow at a forecast-period CAGR of 12.49% 25

3.2.2. Tensions in the South China Sea and modernization initiatives to drive the defense industry 27

3.2.3. Defense budget as a percentage of GDP to remain at an average of 0.87% over the forecast period 28

3.3. Analysis of Defense Budget Allocation 30

3.3.1. Share of capital expenditure will increase over the forecast period 30

3.3.2. Capital expenditure is anticipated to record a forecast-period CAGR of 12.94% 32

3.3.3. The army accounted for the largest percentage share of the overall Philippines’ defense budget 34

3.3.4. Army defense expenditure to reach US$2.0 billion in 2022 36

3.3.5. Per capita defense expenditure to rise over the forecast period 40

3.4. Homeland Security Market Size and Forecast 41

3.4.1. The homeland security market will post a forecast-period CAGR of 9.12% 41

3.4.2. Illicit drug trade drives homeland security expenditure 43

3.4.3. The Philippines falls under the “highly affected” category in the terrorism index 44

3.4.4. The Philippines faces threats from terrorist organizations 45

3.4.5. The Philippines has a terrorism index score of 7.1 47

3.5. Benchmarking with Key Global Markets 48

3.5.1. The Philippines ranks among the world’s key global defense markets 48

3.5.2. The Philippines’ defense expenditure is relatively smaller than other Asia countries 50

3.5.3. The defense budget as a percentage of GDP to decline over the forecast period 51

3.6. Market Opportunities: Key Trends and Drivers 52

3.6.1. Multi-role aircraft 52

3.6.2. Diesel electric submarines 53

3.6.3. Infrastructure construction 54

4. Defense Procurement Market Dynamics 55

4.1. Import Market Dynamics 56

4.1.1. Limited domestic defense capabilities to drive the country’s defense imports 56

4.1.2. The US, Indonesia and South Korea are the major suppliers for the Philippines 57

4.1.3. Aircraft and ships accounted for 90.0% of defense imports 58

4.2. Export Market Dynamics 59

4.2.1. No defense exports for the Philippines 59

5. Industry Dynamics 60

5.1. Five Forces Analysis 60

5.1.1. Bargaining power of suppliers: low 61

5.1.2. Bargaining power of buyers: medium 61

5.1.3. Barrier to entry: low to medium 61

5.1.4. Intensity of rivalry: low to medium 61

5.1.5. Threat of substitution: high 61

5.2. Market Regulation 62

5.2.1. Countertrade/offset policy aids the development of the domestic defense industry 62

5.2.2. Government unveils new procurement rules 63

5.3. Market Entry Route 64

5.3.1. Budgeting process 64

5.3.2. Procurement Policy and Process 67

5.3.3. Foreign military sales (FMS) 67

5.3.4. Collaborations provide market entry opportunities 68

5.4. Key Challenges 69

5.4.1. Increase in corruption and lack of transparency impedes industry growth 69

6. Competitive landscape and Strategic Insights 70

6.1. Competitive landscape Overview 70

6.2. Key Companies 70

6.2.1. United Defense Manufacturing Corporation: overview 70

6.2.2. United Defense Manufacturing Corporation: key products 70

6.2.3. United Defense Manufacturing Corporation: recent announcements and strategic initiatives 71

6.2.4. Leonardo: overview 72

6.2.5. Leonardo: products and services 72

6.2.6. Leonardo: recent announcements and strategic initiatives 72

6.2.7. Leonardo-Finmeccanica: recent contract wins 73

6.2.8. Remington Arms Company, LLC: overview 74

6.2.9. Remington Arms Company, LLC: key products and services 74

6.2.10. Remington Arms Company, LLC: Recent Contract Wins 74

6.2.11. ELTA Systems Ltd: overview 75

6.2.12. ELTA Systems Ltd: key products and services 75

6.2.13. ELTA Systems Ltd: Recent Contract Wins 75

6.2.14. Raytheon: overview 76

6.2.15. Raytheon: products 76

6.2.16. Raytheon: Recent Contract Wins 76

7. Business Environment and Country Risk 77

7.1. Economic Performance 77

7.1.1. GDP per capita at constant prices (US$) 77

7.1.2. GDP at current prices (US$) 78

7.1.3. Exports of goods and services 79

7.1.4. Imports of goods and services 80

7.1.5. Gross national disposable income (US$ billions) 81

7.1.6. LCU per US$ (period average) 82

7.1.7. Market capitalization of listed companies (US$ billions) 83

7.1.8. Market capitalization of listed companies (percentage of GDP) 84

7.1.9. Government cash surplus/deficit as a percentage of GDP (LCU) 85

7.1.10. Goods exports as a percentage of GDP 86

7.1.11. Goods imports as a percentage of GDP 87

7.1.12. Service imports as a percentage of GDP 88

7.1.13. Services exports as a percentage of GDP 89

7.1.14. Foreign direct investment (FDI), net (BoP, current US$ billions) 90

7.1.15. Net FDI as a percentage of GDP 91

7.1.16. Mining, manufacturing, utilities output (PHP trillion) 92

8. Appendix 93

8.1. About SDI 93

8.2. Disclaimer 93

List Of Tables

Table 1: The Philippines Ground Forces Strength 16

Table 2: Philippines Air Force Strength 19

Table 3: Philippines Navy Strength 20

Table 4: The Philippines - Ongoing Development and Procurement Programs (US$ Million), 2014-2018 22

Table 5: The Philippines - Future Procurement Programs 22

Table 6: The Philippines - Defense Expenditure (PHP Billion and US$ Billion), 2013-2022 25

Table 7: The Philippines - GDP Growth and Defense Expenditure as Percentage of GDP Growth (%), 2013-2022 28

Table 8: The Philippines - Defense Budget Split Between Capital and Revenue Expenditure (%), 2013-2022 30

Table 9: The Philippines - Defense Capital Expenditure (PHP Billion & US$ Billion), 2013-2022 32

Table 10: The Philippines - Defense Budget Split by Army, Navy, Air Force, and Other Expenditure (%), 2013-2022 34

Table 11: Philippines Defense Budget in PHP Billion - Breakdown by Services (Army, Navy, Air Force and Others) 2013-2022 36

Table 12: The Philippines - Defense Budget by Services (US$ Billion), 2013-2022 38

Table 13: The Philippines - Per Capita Defense Expenditure (US$), 2013-2022 40

Table 14: The Philippines - Homeland Security Expenditure (PHP Billion and US$ Billion), 2013-2022 41

Table 15: Terrorism Index 45

Table 16: The Philippines - Benchmarked Against Key Markets, 2013-2017 vs. 2018-2022 48

Table 17: The Philippines - Countertrade/Offset Regulations 62

Table 18: Philippines Budget Formation Timetable 64

Table 19: FMS deals to Philippines 67

Table 20: Competitive Landscape of the Philippines Defense Industry 70

Table 21: United Defense Manufacturing Corporation - Key Products 70

Table 22: Leonardo - Key Products 72

Table 23: Leonardo-Finmeccanica - Recent Contract Wins 73

Table 24: Remington Arms Company, LLC: Key Products 74

Table 25: Remington Arms Company, LLC. - Recent Contract Wins 74

Table 26: ELTA Systems Ltd: Key Products 75

Table 27: ELTA Systems Ltd - Recent Contract Wins 75

Table 28: Raytheon - Key Products 76

Table 29: Raytheon - Recent Contract Wins 76

List Of Figures

Figure 1: The Philippines - Defense Expenditure (PHP Billion), 2013-2022 26

Figure 2: Philippines Defense Expenditure (US$ Billion), 2013-2022 26

Figure 3: Philippines GDP Growth and Defense Expenditure as Percentage of GDP Growth (%), 2013-2022 29

Figure 4: The Philippines - Defense Budget Split Between Capital and Revenue Expenditure (%), 2013-2022 31

Figure 5: The Philippines - Defense Capital Expenditure (PHP Billion), 2013-2022 33

Figure 6: The Philippines - Defense Capital Expenditure (US$ Billion), 2013-2022 33

Figure 7: The Philippines - Defense Budget Split, Army, Navy, Air Force and Other Expenditure, 2013-2022 35

Figure 8: The Philippines - Defense Budget, by Service (PHP Billion), 2013-2022 37

Figure 9: The Philippines - Defense Budget by Service (US$ Billion), 2013-2022 39

Figure 10: The Philippines - Per Capita Defense Expenditure (US$), 2013-2022 40

Figure 11: The Philippines - Homeland Security Expenditure (PHP Billion), 2013-2022 42

Figure 12: The Philippines - Homeland Security Expenditure (US$ Billion), 2013-2022 42

Figure 13: Terrorism Heat Map, 2017 44

Figure 14: Terrorism Index, 2017 47

Figure 15: The Philippines - Benchmarked Against Key Markets (%), 2013-2017 vs. 2018-2022 49

Figure 16: Defense Expenditure of the World’s Largest Military Spenders (US$ Billion), 2017 and 2022 50

Figure 17: Defense Expenditure as a Percentage of GDP of Largest Military Spenders (%), 2017 51

Figure 18: The Philippines - Multi-Role Aircraft Market Size (US$ Million), 2017-2024 52

Figure 19: The Philippines - Diesel Electric Submarine Market Size (US$ Million), 2017-2027 53

Figure 20: The Philippine - Infrastructure Construction Market Size (US$ Million), 2017-2027 54

Figure 21: The Philippines - Defense Imports (US$ Million), 2012-2016 (TIV values*) 56

Figure 22: The Philippines - Defense Imports by Country (%), 2012-2016 57

Figure 23: The Philippines - Defense Imports by Category (%), 2012-2016 58

Figure 24: Industry Dynamics - Porter’s Five Forces Analysis 60

Figure 25: The Philippines - GDP Per Capita at Constant Prices (US$), 2015-2025 77

Figure 26: The Philippines - GDP at Current Prices (US$ Billion), 2015-2025 78

Figure 27: The Philippines - Exports of Goods and Services (PHP Billion), 2005-2014 79

Figure 28: The Philippines - Imports of Goods and Services (US$), 2005-2014 80

Figure 29: The Philippines - Gross National Disposable Income (US$ Billion), 2009-2012 81

Figure 30: The Philippines - LCU per US$, 2015-2024 82

Figure 31: The Philippines - Market Capitalization of Listed Companies (US$ Billion), 2005-2012 83

Figure 32: The Philippines - Market Capitalization of Listed Companies (Percentage of GDP), 2005-2012 84

Figure 33: The Philippines - Government Cash Surplus/Deficit as a Percentage of GDP (LCU), 2005-2012 85

Figure 34: The Philippines - Goods Exports as a Percentage of GDP (%), 2005-2014 86

Figure 35: The Philippines - Goods Imports as a Percentage of GDP (%), 2005-2014 87

Figure 36: The Philippines - Services Imports as a Percentage of GDP (%), 2005-2014 88

Figure 37: The Philippines - Services Exports as a Percentage of GDP (%), 2005-2014 89

Figure 38: The Philippines - FDI, Net (BoP, Current US$ Billion), 2005-2014 90

Figure 39: The Philippines - Net FDI as a Percentage of GDP, 2005-2014 91

Figure 40: The Philippines - Mining, Manufacturing, Utilities Output (PHP Trillion), 2005-2014 92

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