Ukraine Defense Market – Attractiveness, Competitive Landscape and Forecast 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 GlobalData 11

2. Executive Summary 12

3. Market Attractiveness and Emerging Opportunities 14

3.1. Current Market Scenario 15

3.1.1. Primary threat perception 15

3.1.2. Military Doctrine & Strategy 18

3.1.3. Military Fleet Size 21

3.1.4. Procurement Programs 27

3.1.5. Social, Political and Economic Environment & Support for Defense Projects 29

3.1.6. Political and Strategic Alliances 30

3.1.7. Ukraine’s defense expenditure to register a CAGR of

19.53% over 2019-2023 31

3.1.8. Threat from Russia, coupled with threats of protracted insurgency in Donbass, will continue to drive Ukrainian defense expenditure 33

3.1.9. The defense budget as a percentage of GDP is expected to be 5% over the forecast period 37

3.2. Analysis of Defense Budget Allocation 39

3.2.1. The majority of Ukraine’s defense budget is earmarked for revenue expenditure 39

3.2.2. Capital expenditure forecast to increase at a CAGR of

23.61% over 2019-2023 41

3.2.3. Per capita defense expenditure expected to increase over the forecast period 43

3.3. Homeland Security Market Size and Forecast 45

3.3.1. Ukrainian homeland security market expected to grow at a CAGR of

18.06% over the forecast period 45

3.3.2. Measures to curb illegal activities such as drug trafficking, human trafficking, and organized crime to drive homeland security expenditure over the forecast period 47

3.3.3. Ukraine is “highly affected” by terrorism 49

3.3.4. Ukraine faces a high level of threat from terrorist organizations 50

3.3.5. Ukraine has a terrorism index score of

6.6 52

3.4. Benchmarking with Key Global Markets 53

3.4.1. Ukraine to be one of the largest defense spenders in the Eastern Europe 53

3.4.2. The US has the largest defense expenditure in the world 55

3.4.3. Ukrainian defense expenditure expected to reach

4.4% of GDP by 2023 56

3.5. Market Opportunities: Key Trends and Growth Stimulators 57

3.5.1. Top 10 Defense Sectors by Value (US$ Million) – Projections over 2018-2023 57

3.5.2. Transport Aircraft 58

3.5.3. Land-based C4ISR 59

3.5.4. Critical Infrastructure Protection – Physical Security 60

4. Defense Procurement Market Dynamics 61

4.1. Import Market Dynamics 63

4.1.1. A relatively small defense budget limits Ukraine’s defense imports 63

4.1.2. Canada accounted for

47.4% of Ukrainian defense imports during 2013-2017 64

4.1.3. Armored vehicles accounted for the majority of Ukrainian defense imports 65

4.2. Export Market Dynamics 66

4.2.1. Ukraine exports a major portion of its domestic defense production 66

4.2.2. Russia, China, and Thailand emerged as the largest importers of Ukrainian defense equipment 67

4.2.3. Missiles, sensors and air defense systems were the most exported defense goods 68

5. Industry Dynamics 69

5.1. Five Forces Analysis 69

5.1.1. Bargaining Power of Supplier: Low-Medium 70

5.1.2. Bargaining Power of Buyer: Low 70

5.1.3. Barrier to Entry: Medium to High 70

5.1.4. Intensity of Rivalry: Low to Medium 70

5.1.5. Threat of Substitution: High 70

6. Market Entry Strategy 71

6.1. Market Regulation 71

6.1.1. Defense sector liberalization bodes well for domestic defense industry 71

6.2. Market Entry Route 72

6.2.1. Budgeting Process 72

6.2.2. Procurement Policy and Process 73

6.2.3. Joint development of defense goods provides investors with a market entry opportunity 73

6.2.4. Foreign investors can enter the industry through direct sales 73

6.3. Key Challenges 74

6.3.1. Small defense budget offers equipment manufacturers limited investment potential 74

6.3.2. Lack of necessary infrastructure impedes growth of domestic defense industry 74

6.3.3. Corruption and a lack of transparency discourages investors from entering the market 75

7. Competitive Landscape and Strategic Insights 76

7.1. Competitive Landscape Overview 76

7.1.1. Domestic companies fulfill the majority of Ukrainian defense requirements 78

8. Competitive Landscape and Strategic Insights 79

8.1. Key Foreign Companies 79

8.1.1. Raytheon: Overview 79

8.1.2. Raytheon: Products 79

8.1.3. Raytheon: Recent Announcements and Strategic Initiatives 80

8.1.4. Raytheon: Alliances 80

8.2. Key Public Companies 81

8.2.1. Antonov ASTC: overview 81

8.2.2. Antonov ASTC: products and services 81

8.2.3. Antonov ASTC: recent announcements and strategic initiatives 82

8.2.4. Antonov ASTC: alliances 83

8.2.5. Antonov ASTC: recent contract wins 83

8.2.6. RPC Fort: overview 84

8.2.7. RPC Fort: products 84

8.2.8. RPC Fort: alliances 85

8.2.9. RPC Fort: recent contract wins 85

8.2.10. KMDB: overview 86

8.2.11. KMDB: products 86

8.2.12. KMDB: recent announcements and strategic initiatives 86

8.2.13. KMDB: recent contract wins 87

8.2.14. Malyshev Plant: overview 88

8.2.15. Malyshev Plant: products 88

8.2.16. Malyshev Plant: recent announcements and strategic initiatives 88

8.2.17. Malyshev Plant: recent contract wins 89

8.2.18. AvtoKrAZ Holding Company: overview 90

8.2.19. AvtoKrAZ Holding Company: products 90

8.2.20. AvtoKrAZ Holding Company: recent announcements and strategic initiatives 90

8.2.21. AvtoKrAZ Holding Company: recent contract wins 91

8.2.22. Motor Sich: overview 92

8.2.23. Motor Sich: products and services 92

8.2.24. Motor Sich: recent announcements and strategic initiatives 94

8.2.25. Motor Sich: alliances 94

8.2.26. Motor Sich: recent contract wins 95

9. Business Environment and Country Risk 96

9.1. Economic Performance 96

9.1.1. GDP Per Capita 96

9.1.2. GDP, Current Prices 97

9.1.3. Export of Goods and Services (LCU Billion) 98

9.1.4. Import of Goods and Services (LCU Billion) 99

9.1.5. Local Currency Unit per US Dollar 100

9.1.6. Market Capitalization of Listed Companies 101

9.1.7. Market Capitalization of Listed Companies (% of GDP) 102

9.1.8. Government Cash Surplus/Deficit as a Percentage of GDP 103

9.1.9. Goods exports as a Percentage of GDP 104

9.1.10. Goods imports as a Percentage of GDP 105

9.1.11. Service Imports as a Percentage of GDP 106

9.1.12. Service Exports as a Percentage of GDP 107

9.1.13. Foreign Direct Investment 108

9.1.14. Net Foreign Direct Investment as a Percentage of GDP 109

9.1.15. Mining, Manufacturing, Utilities Output (LCU Bn) 110

10. Appendix 111

10.1. About GlobalData 111

10.2. Disclaimer 111

List of Tables

Table 1: Ukrainian – Army Strength 21

Table 2: Ukrainian – Air Force Strength 24

Table 3: Ukrainian – Navy Strength 25

Table 4: Ukrainian – Ongoing Development and Procurement Programs, 2018 27

Table 5: Ukrainian – Future Procurement Programs, 2018 27

Table 6: Ukrainian Top Defense Procurement Programs by Value (US$ Million), 2018-2023 28

Table 7: Ukrainian Defense Expenditure (UAH Billion & US$ Billion), 2014-2023 31

Table 8: Ukrainian State Procurement of New and Refurbished Weapons and Military Equipment 2014-2017 35

Table 9: Ukrainian Restoration and Repairs of Basic Weapons and Military Equipment in Number of Items 2015-2017 36

Table 10: Ukrainian GDP Growth vs Defense Expenditure as a Percentage of GDP Growth, 2014-2023 37

Table 11: Ukrainian Defense Budget Split Between Capital and Revenue Expenditure (%), 2014-2023 39

Table 12: Ukrainian Defense Capital Expenditure, (UAH Million & US$ Billion), 2014-2023 41

Table 13: Ukrainian Per-Capita Defense Expenditure (US$), 2014-2023 43

Table 14: Ukrainian Homeland Security Expenditure, (UAH Billion & US$ Billion), 2014-2023 45

Table 15: Terrorism Index, 2018 50

Table 16: Benchmarking with Key Markets – 2014-2018 vs 2019-2023 53

Table 17: Top Ukrainian Defense Sectors by Value (US$ Million), 2018-2023 57

Table 18: Ukrainian Budget Formation Timetable 72

Table 19: Top Defense Suppliers in the Ukrainian Defense Industry By Value (US$ Million), 2018-2023 77

Table 20: Raytheon – Products 79

Table 21: Raytheon – Alliances 80

List of Figures

Figure 1: Ukrainian Defense Expenditure (UAH Billion), 2014-2023 32

Figure 2: Ukrainian Defense Expenditure (US$ Billion), 2014-2023 32

Figure 3: Ukrainian GDP Growth vs Defense Expenditure as a Percentage of GDP, 2014-2023 38

Figure 4: Ukrainian Defense Budget Split Between Capital and Revenue Expenditure (%), 2014-2023 40

Figure 5: Ukrainian Capital Budget Allocation (UAH Billion), 2014-2023 42

Figure 6: Ukrainian Capital Budget Allocation (US$ Billion), 2014-2023 42

Figure 7: Ukrainian Per Capita Defense Expenditure (US$), 2014-2023 44

Figure 8: Ukrainian Homeland Security Budget (UAH Billion), 2014-2023 46

Figure 9: Ukrainian Homeland Security Budget (US$ billion), 2014-2023 46

Figure 10: Terrorism Heat Map, 2018 49

Figure 11: Terrorism Index, 2018 52

Figure 12: Benchmarking with Key Markets – 2014-2018 vs 2019-2023 54

Figure 13: Defense Expenditure of the World’s Largest Military Spenders (US$ Billion), 2018 and 2023 55

Figure 14: Defense Expenditure as a Percentage of GDP of Largest Military Spenders (%), 2018 56

Figure 15: Ukraine’s Transport Aircraft Market Size (US$ Million), 2018-2023 58

Figure 16: Ukraine’s Land Based C4ISR Market Size (US$ Million), 2018-2023 59

Figure 17: Ukraine’s Physical Security Market Size (US$ Million), 2018-2023 60

Figure 18: Top Ukrainian Defense Procurements in Terms of Their Supplier Relationships 62

Figure 19 : Ukrainian Arms Imports by Country, 2013-2017 64

Figure 20: Ukrainian Defense Imports by Category (%), 2013-2017 65

Figure 21 : Ukrainian Defense Exports TIV Value (US$ million), 2013-2017 66

Figure 22 : Ukrainian Defense Exports by Country (%), 2013-2017 67

Figure 23 : Ukrainian Defense Exports by Category (%), 2013-2017 68

Figure 24: Industry Dynamics – Porter’s Five Forces Analysis 69

Figure 25: Ukrainian GDP Per Capita, 2015-2025 96

Figure 26: Ukrainian GDP, Current Prices (US$ Billion), 2015-2025 97

Figure 27: Ukrainian Export of Goods and Services (LCU Billion), 2005-2014 98

Figure 28: Ukrainian Import of Goods and Services (LCU Billion), 2005-2014 99

Figure 29: Local Currency per US$, 2015-2024 100

Figure 30: Ukrainian Market Capitalization of Listed Companies (US$ Billion), 2005-2012 101

Figure 31: Ukrainian Market Capitalization of Listed Companies (% of GDP), 2005-2012 102

Figure 32: Ukrainian Government Cash Surplus/Deficit as a Percentage of GDP, 2005-2012 103

Figure 33: Ukrainian Goods Exports as a Percentage of GDP, 2005-2014 104

Figure 34: Ukrainian Goods Imports as a Percentage of GDP, 2005-2014 105

Figure 35: Ukrainian Service Imports as a Percentage of GDP, 2005-2014 106

Figure 36: Ukrainian Service Exports as a Percentage of GDP, 2005-2014 107

Figure 37: Ukrainian Foreign Direct Investment (US$ Billion), 2005-2014 108

Figure 38: Ukrainian Net Foreign Direct Investment as a Percentage of GDP, 2005-2014 109

Figure 39: Ukrainian Mining, Manufacturing, Utilities Output (LCU Bn), 2005-2014 110