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Future of the Myanmar Defense Industry –

Market Attractiveness, Competitive Landscape

and Forecasts to 2020

Future of the Myanmarese Defense Industry – Market Attractiveness, Competitive Landscape and Forecasts to 2020

2

Summary

“Future of the Myanmarese Defense Industry – Market Attractiveness, Competitive Landscape and

Forecasts to 2020” report offers the reader detailed analysis of the defense budget over the next five years.

Alongside it offers insights into the market opportunities and entry strategies adopted by foreign OEMs

(original equipment manufacturers) to gain a market share in the Myanmarese defense industry.

The report provides detailed analysis of the current industry size and growth expectations during 2016–

2020, including highlights of the key growth stimulators. It also benchmarks the industry against key global

markets and provides detailed understanding of emerging opportunities in specific areas.

Key Findings

The Myanmarese defense budget values US$XX billion in 2015, registering a CAGR of XX% during the

historic period. The expenditure is expected to reach US$XX billion in 2020, growing at a CAGR of XX%.

Myanmar’s defense budget is mainly driven by the need to ensure a smooth political transition from an

autocratic and authoritarian rule of the army to a more democratic context, the country’s involvement in the

longest running civil war, and its strained relationship with Bangladesh over the control of an abundance of

oil and gas reserves along its maritime boundaries. In addition, capital expenditure is expected to register a

CAGR of XX% during the forecast period to value US$XX billion in 2020. On a cumulative basis, the

country is estimated to spend US$XX billion on the procurement of defense equipment. Over the forecast

period, demand for equipment is expected to mainly revolve around submarines, multi-role aircraft, and

attack helicopters. The remaining budget will be allocated to revenue expenditure, which includes salaries

of personnel, operational expenses, and training and development.

Key Features and Benefits

The report provides detailed analysis of the Myanmarese defense industry during 2011–2020, including the

factors that influence the military expenditure. It provides detailed expectations of growth rates and

projected total expenditure.

It provides the manufacturers with insights on market opportunities along with industry structure and

dynamics prevalent in the country. In addition, the report focuses on the regulations governing the

Myanmarese defense industry and the potential market entry strategies with an expert analysis of the

competitive structure.


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1. Market Attractiveness and Emerging Opportunities

1.1. Defense Market Size Historical and Forecast

1.1.1. Myanmarese defense expenditure expected to register a CAGR of XX% over the forecast period

In 2015, the Myanmarese MoD allocated US$XX billion to its total defense budget, registering a CAGR of

XX% during 2011–2015. During the forecast period, the country’s defense budget is expected to register a

CAGR of XX% to value US$XX billion in 2020. The civil war, which has been going on for decades, and the

strategic role of the military in countering related insurgencies is expected to drive the Myanmarese defense

expenditure during 2016–2020. On a cumulative basis, defense expenditure over the forecast period is

expected to be US$XX billion, compared to US$XX billion spent during 2011–2015.

The following table and figure show the Myanmarese defense expenditure during the historic period:

Table 1: Myanmarese Defense Expenditure ( US$ Billion), 2011–2015

Year Defense expenditure (US$ bn)

Defense growth percentage

2011

2012

2013

2014

2015

CAGR 2011–2015

Source: Ministry of Defense and SDI analysis © SDI

Figure 1: Myanmarese Defense Expenditure (US$ Billion), 2011–2015


-5%

0%

5%

10%

15%

20%

25%

30%

35%

0

1

2

3

4

5

6

2011 2012 2013 2014 2015

Gro

wth

rate

(%)

Def

ense

exp

end

itu

re (U

S$

Bill

ion

)

Defense expenditure (US$ bn) Defense growth percentage


4

The following table and figure show projected defense expenditure of the Myanmarese over the forecast

period:

Table 2: Myanmarese Defense Expenditure (US$ Billion), 2016–2020

Year Defense expenditure (US$ bn)

Defense growth percentage

2016

2017

2018

2019

2020

CAGR 2016–2020


Figure 2: Myanmarese Defense Expenditure (US$ Billion), 2016–2020


0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

0

1

2

3

4

5

6

7

2016 2017 2018 2019 2020G

row

th r

ate

(%

)

De

fen

se

ex

pe

nd

itu

re (

US

$ B

illi

on

)

Defense expenditure (US$ bn) Defense growth percentage


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1.2. Analysis of Defense Budget Allocation

1.2.1. Share of capital expenditure expected to increase over forecast period

During 2011–2015, an average of XX% of the country’s total defense budget was allocated to capital

expenditure, while an average of XX% was reserved for revenue expenditure. Over the forecast period,

capital expenditure is expected to increase marginally at an average of XX%. The increase is primarily due to

the Myanmarese government’s endeavors to expand its weapon arsenal to build the country’s military

deterrence capabilities and to effectively fight the ongoing civil war. The remaining defense budget was

allocated to revenue expenditure, which includes personnel salaries, and the operation and maintenance

costs of equipment and defense facilities.

The following table and chart display the Myanmarese defense budget share of capital and revenue

expenditure during the historic period:

Table 3: Myanmarese Defense Budget Split Between Capital and Revenue Expenditure (%), 2011–2015

Year Capital Expenditure Share Revenue Expenditure Share

2011

2012

2013

2014

2015

Source: Ministry of Defense, Myanmar and SDI analysis © SDI

Figure 3: Myanmarese Defense Budget Split Between Capital and Revenue Expenditure (%), 2011–

2015


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2011 2012 2013 2014 2015

Def

ense

Bud

get

Spl

it (%

)

Capital Expenditure Share Revenue Expenditure Share


6

The following table and chart display the Myanmarese defense budget share of capital and revenue

expenditure over the forecast period:

Table 4: Myanmarese Defense Budget Split Between Capital and Revenue Expenditure (%), 2016–2020

Year Capital Expenditure Share Revenue Expenditure Share

2016

2017

2018

2019

2020

Source: Ministry of Defense, Myanmar and SDI analysis © SDI

Figure 4: Myanmarese Defense Budget Split Between Capital and Revenue Expenditure (%), 2016–

2020


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2016 2017 2018 2019 2020

Defe

nse B

ud

get

Sp

lit

(%)

Capital Expenditure Share Revenue Expenditure Share


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2. Industry Dynamics - Porter’s Five Forces Analysis

Figure 4: Industry Dynamics – Porter’s Five Forces Analysis

Source: SDI analysis © SDI

Intensity of Rivalry Bargaining Power of Supplier

Bargaining Power of Buyer

Barrier to Entry

Threat of Substitute


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Report Methodology

SDI’s dedicated research and analysis teams consist of experienced professionals with a background in

industry research and consulting in the defense sector. The following research methodology is followed for all

databases and reports:

Secondary Research

The research process begins with exhaustive secondary research to source reliable qualitative and

quantitative information related to the defense market. The secondary research sources that are typically

referred to include, but are not limited to:

Industry associations

National government documents and statistical databases

Company websites, annual reports, financial reports, broker reports, investor presentations

Industry trade journals and other literature

Internal and external proprietary databases

News articles, press releases, and webcasts specific to the companies operating in the market

Primary Research

SDI conducts hundreds of primary interviews a year with industry participants and commentators in order to

validate its data and analysis. A typical research interview fulfills the following functions:

Provides first-hand information on market size, market trends, growth trends, competitive landscape,

and future outlook

Helps to validate and strengthen secondary research findings

Further develops the analysis team’s expertise and market understanding

Primary research involves e-mail interactions, telephone interviews, and face-to-face interviews for

each market category, division, and sub-division across geographies

The participants who typically take part in such a process include, but are not limited to:

Industry participants: CEOs, VPs, business development managers, market intelligence managers,

and national sales managers

External experts: investment bankers, valuation experts, research analysts, and key opinion leaders

specializing in defense markets

Conventions

Currency conversions are performed on the basis of average annual conversion rate format

calculations

All the values in tables, with the exception of compounded annual growth rate (CAGR) and

compounded annual rate of change (CARC), are displayed to one decimal place; therefore, due to

this rounding method, growth rates may appear inconsistent with absolute values

The forecasted values are projected on the basis of nominal values; the inflation was not taken into account


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TABLE OF CONTENTS

1. Introduction ........................................................................................................................... 7

1.1. What is this Report About? ........................................................................................................... 7

1.2. Definitions ...................................................................................................................................... 7

1.3. Summary Methodology .................................................................................................................. 9

1.4. SDI Terrorism Index ......................................................................................................................10

1.5. About Strategic Defence Intelligence ..........................................................................................10

2. Executive Summary ............................................................................................................ 11

3. Market Attractiveness and Emerging Opportunities ........................................................ 13

3.1. Defense Market Size Historical and Forecast..............................................................................14

3.1.1. Myanmarese defense expenditure is expected to register a CAGR of XX% over the forecast period .... 14

3.1.2. The need to ensure a smooth political transition, an ongoing civil war, and a threat posed by

Bangladesh expected to drive defense expenditure over the forecast period ...................................................... 18

3.1.3. Myanmar’s defense expenditure as a percentage of GDP expected to decrease ................................... 20

3.2. Analysis of Defense Budget Allocation .......................................................................................22

3.2.1. Share of capital expenditure to average XX% over forecast period ......................................................... 22

3.2.2. Capital expenditure expected to increase at a CAGR of XX% over the forecast period .......................... 24

3.2.3. Myanmarese MoD to spend US$XX billion cumulatively on revenue expenditure over the forecast

period 28

3.2.4. Per capita defense expenditure set to increase over the forecast period ................................................ 32

3.2.5. Myanmar falls under “some risk” of terrorism ........................................................................................... 34

3.3. Benchmarking with Key Global Markets .....................................................................................36

3.3.1. Myanmarese defense budget expected to increase at a slower rate than its neighbors over the

forecast period ...................................................................................................................................................... 36

3.3.2. Myanmarese defense expenditure is low compared to other Asian countries ......................................... 38

3.3.3. Myanmar allocates a higher share of GDP for defense ........................................................................... 39

3.3.4. Myanmar faces a low threat from foreign terrorist organizations ............................................................. 40

3.4. Market Opportunities: Key Trends and Growth Stimulators ......................................................42

3.4.1. Submarines ............................................................................................................................................... 42

3.4.2. Multi-role Aircraft ....................................................................................................................................... 44

3.4.4. Attack Helicopters ..................................................................................................................................... 46

4. Defense Procurement Market Dynamics ........................................................................... 47

4.1. Import Market Dynamics ...............................................................................................................47

4.1.1. Defense imports are expected to recover over the forecast period ......................................................... 47

4.1.2. China and Russia emerged as the largest suppliers of arms ................................................................... 48

4.1.3. Aircraft, ships, and armored vehicles dominate military hardware imports .............................................. 49


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4.2. Export Market Dynamics ..............................................................................................................50

4.2.1. Myanmar’s domestic defense manufacturing is still in a nascent stage ................................................... 50

5. Industry Dynamics .............................................................................................................. 51

5.1. Five Forces Analysis.....................................................................................................................51

5.1.1. Bargaining power of supplier: high ........................................................................................................... 52

5.1.2. Bargaining power of buyer: low ................................................................................................................ 52

5.1.3. Barrier to entry: high ................................................................................................................................. 52

5.1.4. Intensity of rivalry: low to medium ............................................................................................................ 52

5.1.5. Threat of substitution: low to medium ....................................................................................................... 52

6. Market Entry Strategy ......................................................................................................... 53

6.1. Market Regulation .........................................................................................................................53

6.1.1. Myanmar currently does not permit investment in the defense industry .................................................. 53

6.2. Market Entry Route .......................................................................................................................53

6.2.1. Direct government sales ........................................................................................................................... 53

6.2.2. Military co-operations ................................................................................................................................ 53

6.3. Key Challenges .............................................................................................................................54

6.3.1. A closed economy discourages related investment and market growth .................................................. 54

6.3.2. Limited defense budget discourages investors from market entry ........................................................... 54

7. Competitive Landscape and Strategic Insights ................................................................ 55

7.1. Competitive Landscape Overview ...............................................................................................55

7.2. Key Domestic Company ...............................................................................................................55

7.2.1. Myanmar Defense Industries (KaPaSa Industries): overview .................................................................. 55

7.2.2. Myanmar Defense Industries: products and services .............................................................................. 55

7.2.3. Myanmar Defense Industries: recent announcements and strategic initiatives ....................................... 55

8. Business Environment and Country Risk ......................................................................... 56

8.1. Demographics & Social Statistics ................................................................................................56

8.1.1. Population – Number of Households ........................................................................................................ 56

8.2. Economic Performance ................................................................................................................57

8.2.1. Gross Domestic per Capita....................................................................................................................... 57

8.2.2. Gross Domestic Product, current US$ ..................................................................................................... 58

8.2.3. Gross National Disposable Income .......................................................................................................... 59

8.2.4. Manufacturing Output ............................................................................................................................... 60

8.2.5. Consumer Price Index .............................................................................................................................. 61

8.2.6. Local Currency Unit per US$ .................................................................................................................... 62

8.2.7. Local Currency Unit per EUR ................................................................................................................... 63

8.2.8. Lending Rate ............................................................................................................................................ 64

8.2.9. Deposit Rate ............................................................................................................................................. 65


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8.2.10. Net Foreign Direct Investment .................................................................................................................. 66

8.2.11. International reserves, including Gold ...................................................................................................... 67

8.3. Energy and Utilities .......................................................................................................................68

8.3.1. Total Conventional Thermal Electricity Net Generation ........................................................................... 68

8.3.2. Hydroelectricity Net Generation ................................................................................................................ 69

8.3.3. Total Petroleum Consumption .................................................................................................................. 70

8.4. Infrastructure Quality and Availability .........................................................................................71

8.4.1. Air transport, freight .................................................................................................................................. 71

8.4.2. Overall Construction ................................................................................................................................. 72

8.5. Minerals .........................................................................................................................................73

8.5.1. Mining, Manufacturing, Utilities Output ..................................................................................................... 73

8.6. Telecommunication ......................................................................................................................74

8.6.1. Telephone lines ........................................................................................................................................ 74

8.6.2. Telephone lines Penetration Rate ............................................................................................................ 75

9. Appendix .............................................................................................................................. 76

9.1. About SDI .......................................................................................................................................76

9.2. Disclaimer ......................................................................................................................................76


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LIST OF FIGURES

Figure 1: Myanmarese Defense Expenditure (US$ Billion), 2011–2015 .............................................................................................................. 14 Figure 2: Myanmarese Defense Expenditure (US$ Billion), 2016–2020 .............................................................................................................. 15 Figure 3: Myanmarese Defense Expenditure (in MMK Billion), 2011–2015 ......................................................................................................... 16 Figure 4: Myanmarese Defense Expenditure (in MMK Billion), 2016–2020 ......................................................................................................... 17 Figure 5: Myanmarese GDP Growth vs. Defense Expenditure Growth and Defense Expenditures Percentage of GDP Growth, 2011–2015 ..... 20 Figure 6: Myanmarese GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP Growth, 2016–2020 .. 21 Figure 7:Myanmarese Defense Budget Split Between Capital and Revenue Expenditure (%), 2011–2015 ......................................................... 22 Figure 8: Myanmarese Defense Budget Split Between Capital and Revenue Expenditure (%), 2016–2020 ........................................................ 23 Figure 9: Myanmarese Defense Capital Expenditure (US$ billion), 2011–2015 .................................................................................................. 24 Figure 10: Myanmarese Defense Capital Expenditure (US$ billion), 2016–2020 ................................................................................................ 25 Figure 11: Myanmarese Defense Capital Expenditure (in MMK Billion), 2011–2015 ........................................................................................... 26 Figure 12: Myanmarese Defense Capital Expenditure (in MMK Billion), 2016–2020 ........................................................................................... 27 Figure 13:Myanmarese Defense Revenue Expenditure (US$ Billion), 2011–2015 .............................................................................................. 28 Figure 14: Myanmarese Defense Revenue Expenditure (US$ Billion), 2016–2020 ............................................................................................. 29 Figure 15: Myanmarese Defense Revenue Expenditure (in MMK Billion), 2011–2015 ........................................................................................ 30 Figure 16: Myanmarese Defense Revenue Expenditure (in MMK Billion), 2016–2020 ........................................................................................ 31 Figure 17: Myanmarese per capita defense expenditure (US$), 2011–2015 ....................................................................................................... 32 Figure 18: Myanmarese per capita defense expenditure (US$), 2016–2020 ....................................................................................................... 33 Figure 19: SDI Terrorism Heat Map, 2015 .......................................................................................................................................................... 34 Figure 20: SDI Terrorism Index, 2015 ................................................................................................................................................................. 35 Figure 21: Benchmarking with Key Markets – 2011–2015 vs. 2016–2020 .......................................................................................................... 37 Figure 22: Defense Expenditure of the World’s Largest Military Spenders (US$ Billion), 2015 and 2020 ............................................................ 38 Figure 23: Defense Expenditure as a Percentage of GDP of Largest Military Spenders (%), 2015 ..................................................................... 39 Figure 24: Submarines Market Size (US$ Million), 2015–2025 ........................................................................................................................... 43 Figure 25: Multi-role Aircraft Market Size (US$ Million), 2015–2025 ................................................................................................................... 45 Figure 26: Attack Helicopter Market Size (US$ Million), 2015–2025 ................................................................................................................... 46 Figure 27: Myanmarese Defense Import Trend, 2010–2014 (TIV values) ........................................................................................................... 47 Figure 28: Myanmarese Defense Imports by Country (%), 2010–2014 ............................................................................................................... 48 Figure 29: Myanmarese Defense Imports by Category (%), 2010–2014 ............................................................................................................. 49 Figure 30: Industry Dynamics Porter’s Five Forces Analysis ............................................................................................................................... 51 Figure 31: Myanmar Population – Number of Households (In Millions), 2008–2017 ............................................................................................ 56 Figure 32: Myanmar GDP per capita, 2015–2024 ............................................................................................................................................... 57 Figure 33: Myanmar Gross Domestic Product (current US$ Bn), 2015–2024...................................................................................................... 58 Figure 34: Myanmar gross national disposable income (US$ Bn), 2002–2011 .................................................................................................... 59 Figure 35: Myanmar Manufacturing Output (US$ Bn), 2003–2012 ...................................................................................................................... 60 Figure 36: Myanmar Consumer Price Index, 2015–2024 .................................................................................................................................... 61 Figure 37: Myanmar LCU per US$, 2015–2024 .................................................................................................................................................. 62 Figure 38: Myanmar LCU per EUR, 2015–2024 ................................................................................................................................................. 63 Figure 39: Myanmar Lending Rate, 2003–2012 .................................................................................................................................................. 64 Figure 40: Myanmar Deposit Rate, 2003–2012 ................................................................................................................................................... 65 Figure 41: Myanmar Net Foreign Direct Investment (current US$ BN), 2001–2010 ............................................................................................ 66 Figure 42: Myanmar International reserves, including Gold (US$ Bn), 2002–2011 ............................................................................................. 67 Figure 43: Myanmar Total Conventional Thermal Electricity Net Generation (Bn KWH), 2001–2010 .................................................................. 68 Figure 44: Myanmar Hydroelectricity Net Generation (Bn KWH), 2001–2010 ..................................................................................................... 69 Figure 45: Myanmar Total Petroleum Consumption (Thousand Barrels per Day), 2003–2012 ............................................................................ 70 Figure 46: Myanmar Air transport, freight (Million ton-Km), 2002–2011............................................................................................................... 71 Figure 47: Myanmar Overall Construction (US$ Bn), 2007–2016 ........................................................................................................................ 72 Figure 48: Myanmar Mining, Manufacturing, Utilities Output(US$ Bn), 2003–2012 ............................................................................................. 73 Figure 49: Myanmar Telephone lines, 2003–2012 .............................................................................................................................................. 74 Figure 50: Myanmar Telephone lines Penetration Rate (per 100 people), 2003–2012 ........................................................................................ 75


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LIST OF TABLES

Table 1: Myanmarese Defense Expenditure (US$ Billion), 2011–2015 ............................................................................................................... 14 Table 2: Myanmarese Defense Expenditure (US$ Billion), 2016–2020 ............................................................................................................... 15 Table 3: Myanmarese Defense Expenditure (in MMK Billion), 2011–2015 .......................................................................................................... 16 Table 4: Myanmarese Defense Expenditure (in MMK Billion), 2016–2020 .......................................................................................................... 17 Table 5: Myanmarese GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as a Percentage of GDP Growth, 2011–2015 . 20 Table 6: Myanmarese GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP Growth, 2016–2020 .... 21 Table 7: Myanmarese Defense Budget Split Between Capital and Revenue Expenditure (%), 2011–2015 ......................................................... 22 Table 8: Myanmarese Defense Budget Split Between Capital and Revenue Expenditure (%), 2016–2020 ......................................................... 23 Table 9: Myanmarese Defense Capital Expenditure (US$ billion), 2011–2015 .................................................................................................... 24 Table 10: Myanmarese Defense Capital Expenditure (US$ billion), 2016–2020 .................................................................................................. 25 Table 11: Myanmarese Defense Capital Expenditure (in MMK Billion), 2011–2015 ............................................................................................ 26 Table 12: Myanmarese Defense Capital Expenditure (in MMK Billion), 2016–2020 ............................................................................................ 27 Table 13: Myanmarese Defense Revenue Expenditure (US$ Billion), 2011–2015 .............................................................................................. 28 Table 14: Myanmarese Defense Revenue Expenditure (US$ Billion), 2016–2020 .............................................................................................. 29 Table 15: Myanmarese Defense Revenue Expenditure (in MMK Billion), 2011–2015 ......................................................................................... 30 Table 16: Myanmarese Defense Revenue Expenditure (in MMK Billion), 2016–2020 ......................................................................................... 31 Table 17: Myanmarese per capita defense expenditure (US$), 2011–2015 ........................................................................................................ 32 Table 18: Myanmarese per capita defense expenditure (US$), 2016–2020 ........................................................................................................ 33 Table 19: Benchmarking with Key Markets – 2011–2015 vs. 2016–2020............................................................................................................ 36 Table 20: SDI Terrorism Index ............................................................................................................................................................................ 40 Table 21: Myanmar Defense Industries – Product focus ..................................................................................................................................... 55

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