2014-04-24 20:13:01 - Future of the Thai Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2018 - a new market research report on companiesandmarkets.com
Expenditure in the Thailand defence market increased at a CAGR of 5.14% during the review period and valued US$6.1 billion in 2013. The focus of the Thai government will be on the modernization of its armed forces, the arms race with other Asian countries, and border security. Key drivers in the industry include the modernization of the armed forces, the arms race with other Asian countries, and border security.
Even though Thailand has an offset policy in order to enhance its domestic defense capabilities, it accepts indirect offsets as an eligible activity. Furthermore, the nation allows counter-purchase, according to which foreign suppliers can buy non-defense related goods such as fruits and rice in exchange for defense equipment. Additionally, a lack of
multipliers within Thailand´s offset policy fails to encourage foreign OEMs to provide technology transfers or jointly develop defense equipment with the country. Consequently, foreign suppliers are not incentivized to invest into the Thai defense sector and, as a result, the domestic defense sector is unable to gain access to military related technology. With the country failing to attract investors into its defense sector, the Thai military industry is unable to be part of the global supply chain for multinational defense companies.
The Thai government fulfills most of its defense needs by importing military equipment from foreign countries such as Ukraine, Russia, Germany, France, and Spain. The overall exports of the country during the period 2008-2012 were negligible, resulting in poor inflow of foreign investment. During the forecast period, defense exports are expected to remain low as a result of less joint development and collaboration programs, and low levels of defense exports are expected to remain the key challenge for the Thai defense industry.
The Thai defense budget, which stands at US$6.1 billion for 2013, is lower than most of its neighbors - the Philippines is one of the few countries with a lower defense budget - and this relatively small defense budget size frequently deters investors from venturing into the country. Moreover, the Thai government has also made offsets mandatory for all defense procurements exceeding US$10.5 million. In an attempt to encourage domestic defense development, the Thai government awards additional significance to direct offsets; however, due to the lack of sufficient investment and a shortage of skilled Thai labor, foreign OEMs are unable to transfer sophisticated technology to domestic defense companies. The combination of the factors outlined above reduces the attractiveness of the Thai defense industry for foreign OEMs.
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