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

Vietnam defence market: Expenditure to reach $4.6 billion by 2018

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2014-04-24 20:23:04 - Future of the Vietnamese Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2018 - a new market research report on

With booming economy and maritime trade, Vietnam finds itself in the middle of an Asian arms race. A looming Chinese threat and the need to replace obsolete military equipment are expected to drive the country´s defense expenditure over the forecast period. Vietnam´s defense budget is valued at US$3.1 billion in 2013, and is expected to grow at a faster pace over the forecast period than during the review period. Vietnam´s military expenditure is expected to grow at a CAGR of 7.84% over the forecast period to reach US$4.6 billion by 2018, compared to the registered growth rate of 6.26% during the review period.The Vietnamese government is estimated to increase its allocation for capital expenditure over the forecast period to an



average of 32.5% of total defense expenditure. The country is expected to procure military equipment to boost its naval strength and maritime security in order to counter the threat from the growing Chinese naval strength in the South China Sea. In addition, Vietnam is also expected to procure military equipment such as aircraft, missiles and armored vehicles as part of its modernization program. Foreign companies may gain from the Vietnamese government´s efforts to open its defense market and look beyond its traditional arms supplier, Russia.Strained relationship with China and military modernization are expected to drive military spending Vietnam is expected to spend US$6.4 billion on the acquisition of weapons and defense systems during the forecast period. Factors such as disputed territorial claims in the South China Sea, Chinese naval build-up, and the acquisition of modern military hardware to replace outdated and aging equipment are anticipated to drive the country´s military expenditure.In March 2011, the Vietnamese government passed legislation that prohibits selling stakes of state-owned defense companies to the private sector. The legislation further stipulates that the state will hold 100% of the charter capital in enterprises which involve national defense, as well as security and military-held commercial enterprises. This legislation prevents private participation and thwarts any foreign direct investment into the country´s defense sector.Vietnam released its third defense whitepaper in 2009 which revealed the country´s defense expenditure for the first time during 2004-2008. This was seen by many as a step towards building confidence with both its neighbors and countries in the west, which is in line with its foreign policy of building cordial relations with other countries. However, the whitepaper does not give any specifics about the budget break-down or the amount spent on procurement. This lack of transparency within the government budget allocation and procurement process may discourage investors from entering the country´s defense market.

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