2013-12-04 14:08:17 - New Defense research report from Business Monitor International is now available from Fast Market Research
The Czech Republic is to continue to benefit from its membership in both NATO and the EU, both in terms in the capability of its armed forces and the breadth and capacity of its defence industry. Budgetary constraints are to keep troop levels and budgetary allocation stagnant for the foreseeable future. This in turn will result in little growth in the domestic arms market, although international sales of training aircraft continue to perform well. As part of the EU and NATO, and with a small international presence, the Czech Republic has few threats to its security, although the rise of the far-right is an issue we continue to monitor.
Our long-held view for the coalition government to continue facing challenges over
the course of its tenure continues to play out strongly. The Czech parliament dissolved itself on August 20 2013 after a dissolution proposal, which was put forth by the centre-left Social Democratic Party (CSSD), the far-left Communist Party (KSCM) and the centre-right TOP09, was supported by 140 votes in the 200-seat Parliament. The collapse of support for the centre-right party of former Prime Minister Petr Necas came not only on the back of the painful austerity measures implemented by his administration that saw value added taxes increase twice and government expenditure reduced during his term. Necas' unpopularity was also due to the bribery and illegal spying scandal involving Necas' chief of staff that triggered his resignation and his party's ouster.
Full Report Details at
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In light of the likely leftist nature of the winners of the upcoming Czech election, we do not expect any significant funding increases or procurement drives for the Czech military. Indeed, the Czech armed forces continue to sell off assets, pre-dating the reforms which significantly cut troop numbers, in an effort to raise funds.
The military said in early 2012 that it was planning to jointly procure defence assets - particularly radar systems - with Slovakia in response to budget constraints. Czech General Vlastimil Picek concluded talks with a Slovak counterpart in March 2012 over the joint acquisition of mobile air defence radar (MADR), airport radar systems and machine guns. Similarly, and indicative of a trend we expect to continue, Czech and Swedish defence firms have agreed to work together on military technology - a good move for the Czechs due to the level of Swedish hardware the armed forces have in use.
The government also reached an agreement with the Iraqi authorities over the sale of 28 aircraft under a US $1bn deal in October 2012. Czech manufacturer Aero Vodochody is behind the deal, which includes 24 new subsonic Aero L-159 light combat aircraft and four existing units that the military said were no longer in use. Aero Vodochody is due to deliver the first unit about six months after the agreement is signed. However, the deal is yet to be signed as technical evaluations continue - although all units are expected to be delivered within four years.
Meanwhile, the government has stated that the country will keep its currently in use SAAB 39 Gripen aircraft, after the current lease was extended.
The Defence Ministry is also upgrading and overhauling its small arms as it looks to expand but consolidate equipment. From mid-2012 the military will procure more than 17,000 attack rifles, pistols and sub-machine guns over a few years in a programme likely to cost some CZK1bn (US$51.64mn).
As part of NATO and after years of reform to turn the Czech military into a professional rather than conscript force, we expect that the Czech forces will continue to be deployed on missions in support roles, such as the missions currently being undertaken in Afghanistan and Mali. We envisage no conflict in the region and as such, the Czech armed forces will continue to be reliant on allies such as the US for much of their logistical requirements, should the need come for troops to be deployed.
* We forecast that defence expenditure will remain stagnant over the 2014 to 2018 period, averaging 0% growth per annum.
* Exports are forecast to grow 8.8% year-on-year (y-o-y) in 2014, rising to 10.1% y-o-y by 2018 - although we highlight that much of this can be attributed to base effects in light of the small nature of the Czech arms industry.
* Imports, largely driven by the accusation of new weapons for Czech soldiers, will grow by 8.3% in 2014.
* The issue of corruption came again into the main discourse of Czech politics over 2013 after the former Prime Minister Petr Necas met with police as part of investigation into Jana Nagyova, a one-time top advisor who had an affairs with Necas. In a series of events that ultimately brought down the centre-right Necas government, Nagyova is alleged to have used state intelligence services to spy on opponents and on Necas' own wife.
* As of October 2013, there were 391 Czech troops stationed in Afghanistan undertaking two separate missions. According to the defence ministry, the worsening security situation occasioned the increase. The troops in Afghanistan are training local military and police and assisting a helicopter unit, chemical specialists and meteorologists at the Kabul airport. In addition, special forces are also thought to be operational.
* In 2012 it was announced that the Czech Republic will keep the Swedish Jas-39 Gripen fighters aircraft even after 2015 when the lease expires.
* Recent arms deals have seen the Czech Defence Ministry acquire 316 Minimi ("Mini Mitrailleuse") machine guns, manufactured in Belgium, for over Kc250mn in a deal up to 2015.
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