Future of the Myanmar Defense Industry – Market Attractiveness, Competitive Landscape and Forecasts to 2022

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. About Strategic Defense Intelligence 10

2. Executive Summary 11

3. Market Attractiveness and Emerging Opportunities 13

3.1. Current Market Scenario 14

3.1.1. Primary threat perception 14

3.1.2. Military Doctrine & Strategy 15

3.1.3. Military Fleet Size 17

3.1.4. Procurement Programs 20

3.1.5. Social, Political and Economic Environment & Support for Defense Projects 21

3.1.6. Political & Strategic Alliances 22

3.2. Defense Market Size Historical and Forecast 24

3.2.1. Myanmar defense expenditure is expected to grow at CAGR of

4.84% over 2018-2022 24

3.2.2. Modernization of Myanmar Navy, an ongoing insurgencies and ethnic conflicts expected to drive defense expenditure over the forecast period 26

3.2.3. Myanmar’s defense expenditure as a percentage of GDP expected to decrease marginally over the forecast period 28

3.3. Analysis of Defense Budget Allocation 30

3.3.1. Share of capital & revenue expenditure is anticipated to remain steady over forecast period 30

3.3.2. Capital expenditure expected to increase at CAGR of

5.25% over the forecast period 32

3.3.3. Myanmar to spend US$1.66 billion cumulatively on revenue expenditure over the forecast period 34

3.3.4. Per capita defense expenditure set to increase over the forecast period 36

3.3.5. Myanmar faces significant risk from insurgent groups and ethnic conflicts 38

3.3.6. Myanmar falls under “highly affected” terrorism category 39

3.3.7. Myanmar has a terrorism index score of “4.2” 41

3.4. Benchmarking with Key Global Markets 42

3.4.1. Myanmar’s defense budget expected to grow at a slower rate than its neighbors over the forecast period ……………………………………………………………………………………………………………………42

3.4.2. Myanmarese defense expenditure is low compared to other Asian countries 44

3.4.3. Myanmar allocates a higher share of GDP for defense compared to other Asian Countries 45

3.5. Market Opportunities: Key Trends and Growth Stimulators 46

3.5.1. Submarines 46

3.5.2. Multi-role Aircraft 47

3.5.3. Corvette 48

4. Defense Procurement Market Dynamics 49

4.1. Import Market Dynamics 50

4.1.1. Defense imports are expected to recover over the forecast period 50

4.1.2. China and Russia emerged as the largest suppliers of arms 51

4.1.3. Armoured vehicles and aircraft dominate military hardware imports 52

4.2. Export Market Dynamics 53

4.2.1. Myanmar’s domestic defense manufacturing is still in a nascent stage 53

5. Industry Dynamics 54

5.1. Five Forces Analysis 54

5.1.1. Bargaining power of supplier: high 55

5.1.2. Bargaining power of buyer: low 55

5.1.3. Barrier to entry: high 55

5.1.4. Intensity of rivalry: low to medium 55

5.1.5. Threat of substitution: low to medium 55

6. Market Entry Strategy 56

6.1. Market Regulation 56

6.1.1. Myanmar currently does not permit investment in the defense industry 56

6.2. Market Entry Route 56

6.2.1. Budget process 56

6.2.2. Procurement Policy & Process 58

6.2.3. Government-to-government contracts are the preferred market entry route for equipment manufacturers 58

6.2.4. Closer military co-operation provides opportunity to enter into defense market 58

6.3. Key Challenges 59

6.3.1. A closed economy discourages related investment and market growth 59

6.3.2. Limited defense budget discourages investors from market entry 59

7. Competitive Landscape and Strategic Insights 60

7.1. Competitive Landscape Overview 60

7.2. Key Domestic Company 60

7.2.1. Myanmar Defense Industries (KaPaSa Industries): overview 60

7.2.2. Myanmar Defense Industries: products and services 60

7.2.3. Myanmar Defense Industries: recent announcements and strategic initiatives 61

8. Business Environment and Country Risk 62

8.1. Economic Performance 62

8.1.1. GDP Per Capita 62

8.1.2. GDP, Current Prices 63

8.1.3. Gross National disposable income (USD Billion) 64

8.1.4. Local Currency Unit per US Dollar 65

8.1.5. Goods exports as a percentage of GDP 66

8.1.6. Goods imports as a percentage of GDP 67

8.1.7. Service Imports as a percentage of GDP 68

8.1.8. Service exports as a percentage of GDP 69

8.1.9. Net Foreign direct investment (BoP, current US$ Bn) 70

8.1.10. Net foreign direct investment as % of GDP 71

8.1.11. Mining, Manufacturing, Utilities Output (LCU Billion) 72

9. Appendix 73

9.1. About SDI 73

9.2. Disclaimer 73

List of Tables

Table 1: Myanmar Land Forces Strength 17

Table 2: Myanmar Navy Strength 18

Table 3: Myanmar Air Force Strength 19

Table 4: Myanmar Ongoing Procurement Programs 20

Table 5: Myanmar Future Procurement Programs 20

Table 6: Myanmar Defense Expenditure (MMK billion& US$ billion), 2013-2022 24

Table 7: Myanmar GDP Growth vs. Defense Expenditure as a Percentage of GDP, 2013-2022 28

Table 8: Myanmar Defense Budget Split Between Capital and Revenue Expenditure (%), 2013-2022 30

Table 9: Myanmar Defense Capital Expenditure (MMK Billion & US$ Billion), 2013-2022 32

Table 10: Myanmar Defense Revenue Expenditure (MMK Billion & US$ Billion), 2013-2022 34

Table 11: Myanmar Per-Capita Defense Expenditure (US$), 2013-2022 36

Table 12: Terrorism Index, 2017 39

Table 13: Benchmarking with Key Markets – 2013-2017vs. 2018-2022 42

Table 14: State/Region Budget Preparation Process 57

Table 15: Parliament budget reviewing process 57

Table 16: Myanmar Defense Industries – Product focus 60

List of Figures

Figure 1: Myanmar Defense Expenditure (MMK Billion), 2013-2022 25

Figure 2: Myanmar Defense Expenditure (US$ Billion), 2013-2022 25

Figure 3: Myanmar GDP Growth vs. Defense Expenditure as Percentage of GDP, 2013-2022 29

Figure 4: Myanmar Budget Split Between Capital and Revenue Expenditure (%), 2013-2022 31

Figure 5: Myanmar Defense Capital Expenditure (MMK Billion), 2013-2022 33

Figure 6: Myanmar Defense Capital Expenditure (US$ Billion), 2013-2022 33

Figure 7: Myanmar Defense Revenue Expenditure (MMK Billion), 2013-2022 35

Figure 8: Myanmar Defense Revenue Expenditure (US$ Billion), 2013-2022 35

Figure 9: Myanmar Per-Capita Expenditure (US$), 2013-2022 37

Figure 10: Terrorism Heat Map, 2017 38

Figure 11: Terrorism Index, 2017 41

Figure 12: Benchmarking with Key Markets – 2013-2017 vs. 2018-2022 43

Figure 13: Defense Expenditure of the World’s Largest Military Spenders (US$ Billion), 2017 and 2022 44

Figure 14: Defense Expenditure as a Percentage of GDP of Largest Military Spenders (%),2017 45

Figure 15: Submarines Market Size (US$ Million), 2017-2027 46

Figure 16: Multi-role Aircraft Market Size (US$ Million), 2017-2027 47

Figure 17: Corvette Market Size (US$ Million), 2017-2021 48

Figure 18: Myanmar Defense Imports (US$ Million), 2012-2016 50

Figure 19: Myanmar Defense Imports by Country (%), 2012-2016 51

Figure 20: Myanmar Defense Imports by Weapon Category (%), 2012-2016 52

Figure 21: Industry Dynamics Porter’s Five Forces Analysis 54

Figure 22: Myanmar GDP Per Capita, 2015-2025 62

Figure 23: Myanmar GDP, Current Prices (In US$ Billions), 2015-2025 63

Figure 24: Myanmar Gross Domestic Product (current US$ Bn), 2005-2013 64

Figure 25: Local Currency Unit per US$- Exchange Rate , 2015-2024 65

Figure 26: Myanmar Goods Exports as a percentage of GDP, 2005-2013 66

Figure 27: Myanmar Goods Imports as a percentage of GDP, 2005-2013 67

Figure 28: Myanmar Service Imports as a percentage of GDP, 2005-2013 68

Figure 29: Myanmar Service exports as a percentage of GDP, 2005-2013 69

Figure 30: Myanmar Foreign Direct Investment, Net (current US$ BN), 2005-2013 70

Figure 31: Myanmar Net foreign direct investment as % of GDP, 2005-2013 71

Figure 32: Myanmar Mining, Manufacturing, Utilities Output(US$ Bn), 2005-2014 72