Future of the Kuwaiti Defense Industry – Market Attractiveness, Competitive Landscape and Forecasts to 2023

Table of Contents

1. Introduction 8

1.1. What is this Report About? 8

1.2. Definitions 8

1.3. Summary Methodology 10

1.4. About Strategic Defense Intelligence 11

2. Executive Summary 12

3. Market Attractiveness and Emerging Opportunities 13

3.1.1. Primary Threat Perception 14

3.1.2. Military Doctrine and Strategy 15

3.1.3. Military Fleet Size 17

3.1.4. Procurement Programs 20

3.1.5. Social, Political and Economic Environment and Support for Defense Projects 23

3.1.6. Political and Strategic Alliances 24

3.2. Defense Market Size Historical and Forecast 25

3.2.1. Defense and security expenditure to cumulatively value US$48.3 billion over the forecast period 25

3.2.2. The border dispute with Iraq, coupled with its military modernization program, will be key factors to drive defense expenditure 27

3.2.3. Defense budget as a percentage of GDP to average

6.2% over the forecast period 28

3.3. Analysis of Defense Budget Allocation 30

3.3.1. Capital expenditure allocation to increase over the forecast period 30

3.3.2. Capital expenditure is expected to grow at a CAGR of

7.73% over the forecast period 32

3.3.3. Per capita defense expenditure to increase over the forecast period 34

3.4. Homeland Security Market Size and Forecast 35

3.4.1. Cyber threats, illegal drug trade, and human trafficking will be the key factors to drive homeland security 35

3.4.2. Kuwait is considered at ‘moderate risk’ of terrorist attack 36

3.4.3. Kuwait faces moderate threat from terrorist organizations 37

3.4.4. Kuwait has a terrorism index score of

3.8 39

3.5. Benchmarking with Key Global Markets 40

3.5.1. Kuwaitis a comparatively low defense spender 40

3.5.2. The country has a relatively low defense budget compared to other Middle Eastern nations 42

3.5.3. Kuwaiti defense expenditure as a percentage of GDP is expected to decrease 43

3.6. Market Opportunities: Key Trends and Drivers 44

3.6.1. Top 10 Defense Sectors by Value (US$ Million) – Projections over 2018-2023 44

3.6.2. Multi-Role Aircraft 45

3.6.3. Naval Vessels MRO – Corvettes 46

3.6.4. Airborne C4ISR 47

4. Defense Procurement Market Dynamics 48

4.1. Import Market Dynamics 49

4.1.1. Kuwaiti defense industry is import driven 49

4.1.2. Kuwait imports the majority of its military equipment from the US 50

4.1.3. Air Defense Systems, Aircraft and Missiles to dominate Kuwaiti defense imports 51

4.2. Export Market Dynamics 52

4.2.1. Kuwait’s defense export market is negligible 52

5. Industry Dynamics 53

5.1. Five Forces Analysis 53

5.1.1. Bargaining power of the supplier: high 54

5.1.2. Bargaining power of the buyer: medium to high 54

5.1.3. Barrier to entry: medium 54

5.1.4. Intensity of rivalry: low to medium 54

5.1.5. Threat of substitution: high 54

6. Market Entry Strategy 55

6.1. Market Regulation 55

6.1.1. The Kuwaiti Government does not disclose FDI in the defense industry 55

6.1.2. Offset policy aids the transfer of advanced technologies and integration into the local economy 55

6.2. Market Entry Route 57

6.2.1. Budgeting process 57

6.2.2. Procurement policy and process 57

6.2.3. Foreign military sales (FMS) is the preferred entry route 57

6.2.4. Gulf Co-operation Council (GCC) to form joint Military Command, which could be an alternative entry route for foreign OEM’s 57

6.3. Key Challenges 58

6.3.1. The US and Russia dominate the market, posing challenges to other foreign firms 58

6.3.2. Scarcity of skilled labor 58

7. Competitive Landscape and Strategic Insights 59

7.1. Competitive Landscape Overview 59

7.1.1. The Kuwaiti defense sector is dominated by foreign competitors 59

7.2. Key Foreign Companies 61

7.2.1. Lockheed Martin: Overview 61

7.2.2. Lockheed Martin: Products and services 61

7.2.3. Lockheed Martin: Recent announcements and strategic initiatives 61

7.2.4. Lockheed Martin: Alliances 64

7.2.5. Lockheed Martin: Recent contract wins 65

7.2.6. Lockheed Martin: Financial analysis 66

7.2.7. Raytheon: Overview 68

7.2.8. Raytheon: Major products 68

7.2.9. Raytheon: Recent announcements and strategic initiatives 68

7.2.10. Raytheon: Alliances 71

7.2.11. Raytheon: Contracts 73

7.2.12. Raytheon: Financial analysis 74

7.2.13. Abu Dhabi Ship Building PJSC: Overview 76

7.2.14. Abu Dhabi Ship Building PJSC: Recent announcements and strategic initiatives 76

7.2.15. Abu Dhabi Ship Building PJSC: Contracts 76

7.2.16. Boeing: Overview 77

7.2.17. Boeing: Products 77

7.2.18. Boeing: Recent announcements and strategic initiatives 78

7.2.19. Boeing: Alliances 79

7.2.20. Boeing: Contracts 81

7.2.21. Eurofighter Jagdflugzeug: Overview 82

7.2.22. Eurofighter Jagdflugzeug: Products 82

7.2.23. Eurofighter Jagdflugzeug: Recent Announcements and Strategic Initiatives 82

7.2.24. Eurofighter Jagdflugzeug: Recent contract wins 83

7.2.25. Airbus Helicopters: Overview 84

7.2.26. Airbus Helicopters: Products and services 84

7.2.27. Airbus Helicopters: Recent announcements and strategic initiatives 84

7.2.28. Airbus Helicopters: Alliances 85

7.2.29. Airbus Helicopters: Recent contract wins 85

7.2.30. General Dynamics: Overview 87

7.2.31. General Dynamics: Products 87

7.2.32. General Dynamics: Recent announcements and strategic initiatives 88

7.2.33. General Dynamics: Alliances 90

7.2.34. General Dynamics: Recent contract wins 91

7.2.35. General Dynamics: financial analysis 96

8. Business Environment and Country Risk 98

8.1. Economic Performance 98

8.1.1. GDP per Capita 98

8.1.2. Gross Domestic Product 99

8.1.3. Exports of Goods and Services 100

8.1.4. Imports of Goods and Services 101

8.1.5. Gross National Disposable Income (US$ Billion) 102

8.1.6. LCU per US$ (Period Average) 103

8.1.7. Market Capitalization of Listed Companies 104

8.1.8. Market Capitalization of Listed Companies as a Percentage GDP 105

8.1.9. Total Government Cash Surplus/Deficit as a Percentage of GDP 106

8.1.10. Goods Exports as a Percentage of GDP 107

8.1.11. Goods Imports as a Percentage of GDP 108

8.1.12. Services Imports as a Percentage of GDP 109

8.1.13. Services Exports as a Percentage of GDP 110

8.1.14. Net Foreign Direct Investment 111

8.1.15. Net Foreign Direct Investment as a Percentage of GDP 112

8.1.16. Mining, Manufacturing, Utilities Output 113

9. Appendix 114

9.1. About SDI 114

9.2. Disclaimer 114

List of Tables

Table 1: Kuwait – Army Strength, 2018 17

Table 2: Kuwait – Air Force Strength, 2018 18

Table 3: Kuwait – Navy Strength, 2018 19

Table 4: Kuwaiti – Ongoing Development and Procurement Programs, 2018 20

Table 5: Kuwait – Future Procurement Programs, 2018 21

Table 6: Kuwaiti – Top Defense Procurement Programs by Value (US$ Million), 2018-2023 22

Table 7: Kuwaiti Defense and Security Expenditure (KWD Billion & US$ Billion), 2014-2023 25

Table 8: Kuwaiti GDP Growth vs Defense Expenditure as a Percentage of GDP Growth, 2014-2023 28

Table 9: Kuwaiti Defense Budget Split Between Capital and Revenue Expenditure (%), 2014-2023 30

Table 10: Kuwaiti Defense Capital Expenditure, (KWD Million & US$ Billion), 2014-2023 32

Table 11: Kuwaiti Per Capita Defense Expenditure (US$), 2014-2023 34

Table 12: Terrorism Index, 2018 37

Table 13: Benchmarking with Key Markets – 2014-2018 vs. 2019-2023 40

Table 14: Top Kuwaiti Defense Sectors by Value (US$ Million), 2018-2023 44

Table 15: Offset Regulations in Kuwait 56

Table 16: Competitive Landscape of the Kuwaiti Defense Industry 59

Table 17: Top Defense Suppliers in the Kuwaiti Defense Industry by Value (US$ Million), 2018-2023 60

Table 18: Lockheed Martin – Product Focus 61

Table 19: Lockheed Martin – Alliances 64

Table 20: Lockheed Martin- Recent Contract Wins 65

Table 21: Raytheon – Major Products 68

Table 22: Raytheon – Alliances 71

Table 23: Raytheon – Contracts 73

Table 24: Abu Dhabi Ship Building PJSC – Contracts 76

Table 25: Boeing – Product Focus 77

Table 26: Boeing – Alliances 79

Table 27: Boeing – Contracts 81

Table 28: Eurofighter Jagdflugzeug – Products 82

Table 29: Eurofighter Jagdflugzeug – Recent Contract Wins 83

Table 30: Airbus Helicopters – Products and Services 84

Table 31: Airbus Helicopters – Alliances 85

Table 32: Airbus Helicopters – Contract Wins 85

Table 33: General Dynamics – Product Focus 87

Table 34: General Dynamics – Alliances 90

Table 35: General Dynamics – Recent Contract Wins 91

List of Figures

Figure 1: Kuwaiti Defense and Security Expenditure (KWD Billion), 2014-2023 26

Figure 2: Kuwaiti Defense and Security Expenditure (US$ Billion), 2014-2023 26

Figure 3: Kuwaiti GDP Growth vs Defense Expenditure as a Percentage of GDP Growth, 2014-2023 29

Figure 4: Kuwaiti Defense Budget Split Between Capital and Revenue Expenditure (%), 2014-2023 31

Figure 5: Kuwaiti Defense Capital Expenditure (KWD Million), 2014-2023 33

Figure 6: Kuwaiti Defense Capital Expenditure (US$ Billion), 2014-2023 33

Figure 7: Kuwaiti Per Capita Defense Expenditure (US$), 2014-2023 34

Figure 8: Terrorism Heat Map, 2018 36

Figure 9: Terrorism Index, 2018 39

Figure 10: Benchmarking with Key Markets – 2014-2018 vs. 2019-2023 41

Figure 11: Benchmarking with World’s Largest Defense Spenders (US$ Billion), 2018 and 2023 42

Figure 12: Benchmarking with Large Defense Spenders as a Percentage of GDP, 2018 43

Figure 13: Multi-Role Aircraft Market Size (US$ Million), 2018-2023 45

Figure 14: Naval Vessels MRO-Corvettes Market Size (US$ Million), 2018-2023 46

Figure 15: Airborne C4ISR Market Size (US$ Million), 2018-2023 47

Figure 16: Top Kuwaiti Defense Procurements in Terms of Supplier Relationships 48

Figure 17: Kuwaiti Defense Import Trend, 2013-2017 (TIV values) 49

Figure 18: Kuwaiti Defense Imports by Country (%), 2013-2017 50

Figure 19: Kuwaiti Defense Imports by Weapon Category (%), 2013-2017 51

Figure 20: Industry Dynamics – Porter’s Five Forces Analysis 53

Figure 21: Lockheed Martin – Revenue Trend Analysis (US$ billion), 2013-2017 66

Figure 22: Lockheed Martin – Operating Profit Trend Analysis (US$ billion), 2013-2017 67

Figure 23: Lockheed Martin – Net Profit Trend Analysis (US$ billion), 2013-2017 67

Figure 24: Raytheon – Revenue Trend Analysis (US$ billion), 2013-2017 74

Figure 25: Raytheon – Operating Profit Trend Analysis (US$ billion), 2013-2017 75

Figure 26: Raytheon – Net Profit Trend Analysis (US$ billion), 2013-2017 75

Figure 27: General Dynamics – Revenue Trend Analysis (US$ Billion), 2013-2017 96

Figure 28: General Dynamics – Operating Profit Trend Analysis (US$ Billion), 2013-2017 97

Figure 29: General Dynamics – Net Profit Trend Analysis (US$ Billion), 2013-2017 97

Figure 30: Kuwaiti GDP per Capita (US$), 2015-2025 98

Figure 31: Kuwaiti GDP (current US$ bn), 2015-2025 99

Figure 32: Kuwaiti Exports of Goods and Services (Current LCU Bn), 2005-2014 100

Figure 33: Kuwaiti Imports of Goods and Services (Current LCU Bn), 2005-2014 101

Figure 34: Kuwaiti Gross National Disposable Income (US$ Bn), 2005-2013 102

Figure 35: Kuwaiti LCU per US$, 2015-2024 103

Figure 36: Kuwaiti Market Capitalization of Listed Companies (US$ Bn), 2005-2012 104

Figure 37: Kuwaiti Market Capitalization of Listed Companies (% of GDP), 2005-2012 105

Figure 38: Kuwaiti Total Government cash surplus/deficit as a Percentage of GDP, 2005-2012 106

Figure 39: Kuwaiti Goods Exports as a Percentage of GDP, 2005-2014 107

Figure 40: Kuwaiti Goods Imports as a Percentage of GDP, 2005-2014 108

Figure 41: Kuwaiti Services Imports as a Percentage of GDP, 2005-2014 109

Figure 42: Kuwaiti Services Exports as a Percentage of GDP, 2005-2014 110

Figure 43: Kuwaiti Net Foreign Direct Investment (US$ Bn), 2005-2014 111

Figure 44: Kuwaiti Net Foreign Direct Investment as a Percentage of GDP, 2005-2014 112

Figure 45: Mining, Manufacturing, Utilities Output (in LCU Billions), 2005-2014 113