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Future of the Portuguese Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2018

Portugal defence market: $3 billion industry in 2012


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2014-02-04 03:50:03 - Future of the Portuguese Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2018 - a new market research report on companiesandmarkets.com

The budget in the Portugal defence market reached a value of US$2.9 billion in 2012 and, due difficult fiscal condition, Portugal presents few opportunities for foreign defence companies. Participation in European joint operations and NATO´s peacekeeping operations are expected to drive the country´s military expenditure, which is expected to grow at a CAGR of 0.90% over the forecast period. Portuguese defence imports are expected to remain low over the forecast period due to the country´s focus on reducing the public debt. However, defence exports are estimated to grow over the forecast period as the demand from countries such as Bulgaria and Romania is increasing. The Portuguese government is planning to invite foreign defence companies to partner with domestic companies in

 

 

scientific and technological innovation and research.

Defence expenditure in Portugal is primarily driven by peacekeeping operations and joint operations with the police force for the country´s internal security. Portugal is a member of international organizations such as the EU and the UN, and is a founding member of NATO. As a part of these organizations, Portugal takes part in various peacekeeping missions. As a UN member, the country has contributed to 20 peacekeeping missions around the world and was the first western country to contribute to the UN police force. Portugal has been the major contributor, among western countries, to the UN police, and military contributor to UN operations.

The Portuguese government procures the majority of its defence equipment from foreign companies due to its relatively under-developed domestic defence industry. However, the government is also importing capabilities that its domestic industry is capable of performing itself, and has even been exporting. The import of this hardware poses a challenge for the domestic defence industry, which has been slowly developing through joint ventures and partnership contracts. For example, four of the Portuguese Air Force´s aircraft (two C-130s and two P3 Orions) have been sent to the US for repair and maintenance, even though domestic company OGMA has the experience and capability to carry out the project, and has been performing repair and maintenance work for the military aircraft of France and Belgium. The outsourcing of this work is a concern for the domestic defence industry.

Defence companies catering to the Portuguese market face the challenge of Portugal´s declining military capital expenditure. In 2006, the Portuguese government defined its long-term military funding program (LPM) which outlined procurement expenditure over the 18-year period 2006-2023. However, the government is currently facing economic challenges and has been forced to adopt austerity measures to reduce the country´s high fiscal deficit. These austerity measures are reflected in defence spending with a 45.7% cut in LPM funding in 2013, and also a moratorium in new equipment procurement until 2013. In addition, the Ministry of National Defence is planning to renegotiate its current procurement contracts. The austerity measures mean fewer orders for defence companies and, as most other European governments are also cutting their defence expenditure, the concerns for the affected companies are further increased as they find it difficult to find new markets and opportunities. Due to the LPM budget cuts, some contracts have also been delayed or cancelled. For example, the government terminated the order for 260 Pandur II armored vehicles in 2012 and restricted deliveries to a total of 166 only. Portugal also opted out of the NH-90 transport helicopters program in 2012.

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