Today: February 14, 2016, 11:15 am

Egypt defence market: Budget to grow over 7% CAGR between 2013-18
Future of the Egyptian Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2018 - a new market research report on 2014-03-31 10:52:03
Egypt is a major non-NATO ally of the US and for the past three decades, has been receiving Foreign Military Financing (FMF) from the US, amounting to US$1.3 billion per year. This FMF is used to fund the majority of the country´s capital expenditure and comes with a clause that requires the country to spend the entire amount on purchasing military equipment from American contractors.Egypt has used this financing to replace the majority of its aging Soviet and Chinese equipment with American military hardware and, as a result, the vast majority of its arsenal is produced by US. The preponderance of American military hardware also means that Egypt is reliant on contracts with US companies for the maintenance of its armed forces equipment. However, following the ousting of Egypt´s elected President, Mohammed Morsi, through a military coup in 2013, the US is reviewing its FMF to Egypt. Nevertheless, the country´s own defence budget is expected to increase over the forecast period, growing at a CAGR of 7.47%.Although Egypt is safe from any threat of aggression from its neighbors, the perceived threat from Israel, along with the ongoing volatile political scenario of the country and ammunition modernization, are areas of focus for the military, and these factors are expected to drive and determine the country´s defence expenditure during the forecast period.Egypt is currently undergoing its greatest political change in half a century; a process that began with political protests on January 25 2011, which led to the fall of the country´s authoritarian regime and the promise of democratic presidential elections in November 2011, with a military council ruling the country in the interim period. As a result of this period of dramatic change, the country is currently characterized by political instability; the lack of an organized police force has led to an increase in sectarian violence and human rights violations, while the lack of a long-term government has resulted in a limited ability to formulate and implement long-term plans and has contributed to a lack of policy regarding defence procurement.This uncertainty has discouraged foreign defence companies from continuing to participate in Egypt´s defence sector and deterred new participants from establishing operations in the country. In order to keep the Egyptian defence industry and the country´s armed forces up to date, Egypt´s new government must, in collaboration with the country´s military, undertake substantial coordinated efforts to foster stability and promote foreign participation.After years of revolution, Hosni Mubarak was ousted from the position held for 30 years. Through Egypt´s first democratic elections in 2012, Mohammed Morsi was elected as the president, only to be dismissed from power in July2013. This led to a number of political uprisings across the nation, forcing the military-backed leadership to declare a state of emergency and enforce a night curfew for a month. The vacuum at the highest governmental level has created a power struggle between the military, judiciary, and many other political parties. Although an election is expected to take place in early 2014, the scenario remains highly unpredictable. This vulnerability with the nation has increased the crime rate in the last two years.This is primarily caused by the absence of an adequate police force, due to dismantling of the State Security Investigation service (SSIS), during and after the outbreaks. With the formation of the National Security Force that holds the task of combating terrorism and maintaining internal security, the situation is expected to get better in the coming years. In September, the country´s security forces re-imposed state control over the town of Kerdasa, after arresting dozens of Islamist supporters protesting in favor of President Morsi. In the forecast period this newly established organization will require further restructuring and substantial funding for training and arming purposes.Egypt´s domestic defence industry is able to fulfill the EAF´s low and mid-technology requirements, while the country relies on imports from foreign OEMs to provide technologically advanced equipment and support for its armed forces. The majority of these imports are sourced from the US, which met 70% of Egyptian import requirements during the review period; in the forecast period this situation is expected to continue due to the close diplomatic relationship enjoyed by the two countries. While the US dominates this market, Egypt also has supplier relationships with Chinese, Russian, and European defence manufacturers for a variety of military equipment. In addition, Egypt has a growing domestic defence industry, which manufactures ammunition, rockets, anti-tank missiles, armored vehicles, and other military goods, and exports defence products mainly to markets in the Middle East and North Africa.

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