Future of the Yemeni 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 12

3.1. Current Market Scenario 13

3.1.1. Primary Threat Perception 13

3.1.2. Military Doctrine & Strategy 14

3.1.3. Military Fleet Size 15

3.1.4. Procurement Programs 18

3.1.5. Social, Political, and Economic Environment & Support for Defense Projects 19

3.1.6. Political and Strategic Alliances 19

3.2. Defense Market Size Historical and Forecast 20

3.2.1. Defense expenditure expected to grow at a CAGR of

1.60% over the forecast period 20

3.2.2. Threat from Al-Qaeda, rise of local insurgent groups, and military modernization program are expected to be key factors driving defense expenditure 22

3.2.3. Yemeni Defense expenditure as a percentage of GDP is expected to decline over the forecast period 24

3.3. Analysis of Defense Budget Allocation 26

3.3.1. Capital expenditure allocation to average

21.4% of the total budget over the forecast period 26

3.3.2. Capital expenditure is anticipated to record a CAGR of

3.27% over the forecast period 28

3.3.3. Per capita defense expenditure expected to decrease over the forecast period 30

3.4. Homeland Security Market Size and Forecast 32

3.4.1. Homeland security budget expected to increase over the forecast period 32

3.4.2. Illegal drug trade, human trafficking, and civil war and local insurgencies will be the key factors driving homeland security 34

3.4.3. Yemen considered as ‘Worst Affected’ of terrorist attack 35

3.4.4. Yemen faces significant terrorist threat from terrorist organizations 36

3.4.5. Yemen has a terrorism index score of

8.1 38

3.5. Benchmarking with Key Global Markets 39

3.5.1. Yemen to remain at the bottom of the top defense spenders list 39

3.5.2. The country’s defense budget is low compared to other Middle Eastern countries 41

3.5.3. Yemeni defense expenditure as a percentage of GDP expected to decrease 42

3.6. Market Opportunities: Key Trends and Drivers 43

3.6.1. Fingerprint Recognition Biometric Technology 43

3.6.2. Demand for unmanned aerial vehicles (UAV’s) to increase 43

4. Defense Procurement Market Dynamics 44

4.1. Import Market Dynamics 45

4.1.1. Defense industry heavily relies on imports from foreign countries 45

4.1.2. Belarus and South Africa were the key defense suppliers to Yemen 46

4.1.3. Armored Vehicles and Aircraft to dominate the Yemeni defense imports 47

4.2. Export Market Dynamics 48

4.2.1. Yemen’s defense export market is negligible 48

5. Industry Dynamics 49

5.1. Five Forces Analysis 49

5.1.1. Bargaining power of supplier: high 50

5.1.2. Bargaining power of buyer: medium to low 50

5.1.3. Barrier to entry: medium 50

5.1.4. Intensity of rivalry: low to medium 50

5.1.5. Threat of substitution: high 50

6. Market Entry Strategy 51

6.1. Market Regulation 51

6.1.1. The Yemeni government does not disclose FDI in the defense industry: 51

6.1.2. Yemen does not disclose any offset obligations imposed by the country 51

6.2. Market Entry Route 52

6.2.1. Budgeting Process 52

6.2.2. Procurement Policy and Process 52

6.2.3. Foreign Military Sales (FMS) being the preferred entry route 52

6.3. Key Challenges 53

6.3.1. Belarus and Russia dominate the market, posing challenges to other foreign firms 53

6.3.2. Scarcity of Skilled labor 53

7. Competitive Landscape and Strategic Insights 54

7.1. Competitive Landscape Overview 54

7.2. Key Companies 55

7.2.1. Boeing: overview 55

7.2.2. Boeing: products and services 55

7.2.3. Boeing: recent contract wins 56

7.2.4. L-3 Communications Corp.: overview 57

7.2.5. L-3 Communications Corp.: products and services 57

7.2.6. L-3 Communications Corp.: recent contract wins 57

8. Business Environment and Country Risk 58

8.1. Economic Performance 58

8.1.1. Gross Domestic Product per Capita (US$) 58

8.1.2. Gross Domestic Product current US$ 59

8.1.3. Local Currency Unit per US$ 60

8.1.4. Goods Exports as a % of GDP 61

8.1.5. Goods Imports as a % of GDP 62

8.1.6. Services Imports as a % of GDP 63

8.1.7. Services Exports as a % of GDP 64

8.1.8. Gross National Disposable Income 65

8.1.9. Net Foreign Direct Investment 66

8.1.10. Net FDI as % of GDP 67

8.1.11. Mining, Manufacturing, Utilities Output 68

9. Appendix 69

9.1. About SDI 69

9.2. Disclaimer 69

List of Tables

Table 1: Yemen Ground Forces Strength 15

Table 2: Yemen Navy Strength 16

Table 3: Yemen Air Force Strength 17

Table 4: Yemen – Past Development and Procurement Programs 18

Table 5: Yemeni Defense Expenditure (YER & US$ Billion), 2013-2022 20

Table 6: Yemeni GDP Growth and Defense Expenditure as Percentage of GDP, 2013-2022 24

Table 7: Yemeni Defense Budget Split Between Capital and Revenue Expenditure (%), 2013-2022 26

Table 8: Yemeni Defense Capital Expenditure (YER Billion &US$ Million), 2013-2022 28

Table 9: Yemeni Per Capita Defense Expenditure (US$), 2013-2022 30

Table 10: Yemeni Defense Expenditure for Homeland Security (YER billion & US$ Million), 2013-2022 32

Table 11: Terrorism Index, 2017 36

Table 12: Benchmarking with Key Markets – 2013-2017 vs. 2018-2022 39

Table 13: Competitive Landscape of the Yemeni Defense Industry 54

Table14: Boeing – Product focus 55

Table15: Boeing – Recent Contract Wins 56

Table16: L-3 Communications Corp.- Product focus 57

Table17: L-3 Communications Corp. – Recent Contract Wins 57

List of Figures

Figure 1: Yemeni Defense Expenditure (YER Billion), 2013-2022 21

Figure 2: Yemeni Defense Expenditure (US$ Billion), 2013-2022 21

Figure 3: Yemeni GDP Growth and Defense Expenditure as Percentage of GDP, 2013-2022 25

Figure 4: Yemeni Defense Budget Split Between Capital and Revenue Expenditure (%), 2013-2022 27

Figure 5: Yemeni Defense Capital Expenditure (YER Billion), 2013-2022 29

Figure 6: Yemeni Defense Capital Expenditure (US$ Million), 2013-2022 29

Figure 7: Yemeni Per Capita Defense Expenditure (US$), 2013-2022 31

Figure 8: Yemeni Homeland Security Budget (US$ Million), 2013-2022 33

Figure 9: Yemeni Homeland Security Budget (US$ Million), 2013-2022 33

Figure 10: Terrorism Heat Map, 2017 35

Figure 11: Terrorism Index, 2017 38

Figure 12: Benchmarking with World’s Largest and Top Regional Defense Spenders (US$ Billion), 2013-2017 vs. 2018-2022 40

Figure 13: Defense Expenditure of the World’s Largest Military Spenders (US$ Billion), 2017 and 2022 41

Figure 14: : Defense Expenditure as a Percentage of GDP of Largest Military Spenders (%), 2017 42

Figure 15: Yemeni Defense Import Trend, 2012-2016 (TIV values) 45

Figure 16: Yemeni Defense Imports by Country (%), 2012-2016 46

Figure 17: Yemeni Defense Imports by Weapon Category (%), 2012-2016 47

Figure 18: Industry Dynamics – Porter’s Five Forces Analysis 49

Figure 19: Yemeni GDP per Capita (US$), 2015-2025 58

Figure 20: Yemeni Gross Domestic Product (current US$ Billion), 2015-2025 59

Figure 21: Yemeni LCU per US$, 2015-2024 60

Figure 22: Yemeni Goods Exports as a % of GDP, 2005-2013 61

Figure 23: Yemeni Goods Imports as a % of GDP, 2005-2013 62

Figure 24: Yemeni Services Imports as a % of GDP, 2005-2013 63

Figure 25: Yemeni Services Exports as a % of GDP, 2005-2013 64

Figure 26: Yemeni gross national disposable income (US$ Billion), 2005- 2012 65

Figure 27: Yemeni Net Foreign Direct Investment (current US$ Billion), 2005-2013 66

Figure 28: Yemeni Net Foreign Direct Investment as % of GDP, 2005-2013 67

Figure 29: Mining, Manufacturing, Utilities Output (US$ Billion), 2005-2014 68