Report Price: US$ 1250 (Single User) Future of the Colombian Defense Industry Market Attractiveness, Competitive Landscape and Forecasts to 2019

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1 Report Price: US$ 1250 (Single User) Future of the Colombian Defense Industry Market Attractiveness, Competitive Landscape and Forecasts to 2019

2 Summary Future of the Colombian Defense Industry Market Attractiveness, Competitive Landscape and Forecasts to 2019 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 Colombian defense industry. The report provides detailed analysis of the current industry size and growth expectations during , 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 Colombia assigned a budget of US$XX billion in 2014 for its defense sector, reflecting a CAGR of XX% from US$XX billion in The growth can be attributed to the internal threats from rebel groups and strained relationship with Venezuela along with the development of domestic industry. As per the white paper by Colombian Ministry of Defense (MoD), the country is expected to undertake a number of modernization and procurement programs in coming 10 years, giving an impetus to the overall defense expenditure. In addition, the increasing need for combating the narcotic trade is expected to drive the defense spending. This is expected to push the defense budget to reach US$XX billion by 2019 from US$XX billion in 2015, registering a CAGR of XX%. Key Features and Benefits The report provides detailed analysis of the Colombian defense industry during , 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 Colombian defense industry and the potential market entry strategies with an expert analysis of the competitive structure. 2

3 Defense budget (US$ Billion) Defense expenditure growth rate (%) 3 1. Market Attractiveness and Emerging Opportunities 1.1. Defense Market Size Historical and Forecast The Colombian defense budget is expected to grow at an estimated CAGR of XX% during the forecast period, to reach US$XX billion in 2019 Colombian defense expenditure increased from XXX billion in 2010 to XXX billion in 2014, at a CAGR of XXX%. Threats from Venezuela over political issues, and internal insurgencies from rebel groups such as FARC have been driving growth in the country s military expenditure during the review period. In addition, the country s ongoing military modernization program is also expected to propel Colombian defense expenditure over the forecast period to reach XXX billion in 2019 growing at a CAGR of XXX%. Cumulatively, Colombia will allocate an estimated XXX billion on defense over the forecast period, compared to XXX billion during the review period. The following table and figure show the Colombian defense expenditure during the review period: Table 1: Colombian Defense Expenditure, Year Defense expenditure (US$ bn) Defense growth percentage Source: Ministry of Defense and SDI analysis CAGR Figure 1: Colombian Defense Expenditure, % % 10% 5% 0% -5% % Defense Expenditure (US$ bn) Defense Growth Percentage Source: Ministry of Defense and SDI analysis

4 Defense budget (US$ Billion) Defense expenditure growth rate (%) 4 The following table and figure show projected defense expenditure of the Colombian over the forecast period: Table 2: Colombian Defense Expenditure, Year Defense expenditure (US$ bn) Defense growth percentage Source: Ministry of Defense and SDI analysis CAGR Figure 2: Colombian Defense Expenditure, Defence Expenditure (US$ bn) Defense expenditure growth % 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% Source: Ministry of Defense and SDI analysis

5 Defense Budget Share (%) Analysis of Defense Budget Allocation Capital expenditure allocation in the overall defense budget set to increase over the forecast period The Colombian MoD allocated an average of XX% of the total defense budget towards capital expenditure during the review period, which is expected to increase over the forecast period to be XX%. This is predominantly due to Colombia s planned armed force modernization program and procurement plans along with the increasing nuclear threat from North Korea as outlined in the recently published defense white paper. The country s revenue expenditure, which can be attributed to the additional recruitment, training, and development programs for military personnel, is expected to decline from an average of XX% between 2010 and 2014 to XX% during the forecast period. The following table and chart display Colombia s defense budget share of capital, revenue and other expenditure during the review period: Table 3: Colombian Defense Budget Split Between Capital and Revenue Expenditure (%), Year Capital Expenditure Share Revenue Expenditure Share Source: Ministry of Finance, Colombia and SDI analysis Figure 3: Colombian Defense Budget Split Between Capital and Revenue Expenditure (%), % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Capital Expenditure Revenue Expenditure Source: Ministry of Defense and SDI analysis

6 Defense Budget Share (%) 6 The following table and chart display Colombia s defense budget share of capital, revenue and other expenditure over the forecast period: Table 4: Colombian Defense Budget Split Between Capital and Revenue Expenditure (%), Year Capital Expenditure Share Revenue Expenditure Share Source: Ministry of Finance, Colombia and SDI analysis Figure 4: Colombian Defense Budget Split Between Capital, Revenue and Other Expenditure (%), % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Capital Expenditure Revenue Expenditure Source: Ministry of Defense and SDI analysis

7 7 2. Industry Dynamics - Porter s Five Forces Analysis Figure 4: Industry Dynamics Porter s Five Forces Analysis Barrier to Entry Bargaining Power of Supplier Intensity of Rivalry Bargaining Power of Buyer Threat of Substitute Source: SDI analysis

8 8 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 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: Conventions 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 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

9 9 TABLE OF CONTENTS 1. Introduction What is this Report About? Definitions Summary Methodology SDI Terrorism Index About Strategic Defense Intelligence Executive Summary Market Attractiveness and Emerging Opportunities Defense Market Size Historical and Forecast Colombian defense expenditure expected to reach US$10.2 billion by Internal threats from rebel groups, strained relationship with Venezuela and development of domestic industry set to increase defense expenditure Defense expenditure as a percentage of GDP expected to be 1.8% by Analysis of Defense Budget Allocation Majority of defense budget allocated for revenue expenditure Army accounts for majority of defense budget Budget allocation for army higher than remaining military divisions The country s expenditure on its Navy to reach US$1.3 billion by Expenditure on Air Force estimated to increase at a CAGR of 6.61% over the forecast period Other expenses constitute a substantial amount of the total defense budget Homeland Security Market Size and Forecast Homeland security market to grow considerably during High crime levels and drug trafficking expected to increase homeland security expenditure SDI Terrorism Index rates Colombia to be a highly affected region Colombia scores 1.9 on the terrorism index Benchmarking with Key Global Markets Colombian defense expenditure forecast to grow faster than the majority of the largest global defense budgets Colombian defense expenditure is one of the highest in South America Colombia spends 1.8% of its GDP on defense Colombia is highly affected by acts of terrorism Market Opportunities: Key Trends and Drivers Fighters & Multi-Role Aircraft Police Modernization... 60

10 Transport &Utility Aircraft Main Battle Tank Infantry Fighting Vehicles Armored Personnel Carriers Defense Procurement Market Dynamics Import Market Dynamics Limitations of the domestic defense industry will support arms imports Defense imports have grown significantly over the last five years Aircraft account for majority of defense imports US and Israel continue to be major arms suppliers Export Market Dynamics Colombia is not a major defense exporting country Industry Dynamics Five Forces Analysis Bargaining power of the supplier: low to medium Bargaining power of the Buyer: high to medium Barrier to entry: medium to high Intensity of rivalry: low Threat of Substitution: medium Market Entry Strategy Market Regulation Offset guidelines are channeled to benefit industrial and social sectors FDI in defense sector is closed Market Entry Route Direct selling is the preferred market entry route for foreign OEMs Key Challenges Corruption, bribery, and influence of anti-state elements damages the credibility of the military Low capital expenditure discourages both foreign and domestic firms Competitive landscape and Strategic Insights Competitive landscape Overview Key Public Sector Companies Industria Militar: Overview Industria Militar: Major Products and Services Industria Militar: Recent Announcements and Strategic Initiatives Industria Militar: Alliances Industria Militar: Recent Contract Wins Key Private Sector Companies...80

11 Sudamin Aeronautica y Defensa S.A.: Overview Sudamin Aeronautica y Defensa S.A.: Major Products and Services Sudamin Aeronautica y Defensa S.A.: Recent Announcements and Strategic Initiatives Sudamin Aeronautica y Defensa S.A.: Alliances Cotecmar: Overview Cotecmar: Major Products and Services Cotecmar: Recent Announcements and Strategic Initiatives Cotecmar: Alliances Cotecmar: Recent Contract Wins Business Environment and Country Risk Total Rural Population Total Urban Population Number of Households Economic Performance GDP Per Capita (In US$) GDP, Current Prices (US$ Billion) Exports of Goods and Services, Current Prices (US$ billion) Imports of goods and services, current prices (US$ billion) Gross National Disposable Income Manufacturing Output (US$ Billion) Consumer Price Index Wholesale Price Index Local Currency Unit Per US$ (period average) Local Currency Unit Per EUR (period average) Lending Rate (%) Deposit Rate (%) Real Interest Rate (%) Market Capitalization of Listed Companies (US$ Billion) Market Capitalization of Listed Companies (% of GDP) Total Government Cash Surplus/ Deficit (LCU Billion) Government Cash Surplus/ Deficit as % of GDP (LCU) Goods Exports as a % of GDP Goods Imports as % of GDP Goods Balance as a % of GDP Services Imports as a % of GDP Services Exports as a % of GDP Services Balance as % of GDP Foreign Direct Investment, net (BoP, current US$ Billion)

12 Net Foreign Direct Investment as % of GDP International Reserves, Including Gold (US$ Billion) External Debt as % of GDP Energy and Utilities Total Conventional Thermal Electricity Net Generation (Billion Kilowatt Hours) Hydroelectricity Net Generation (Billion Kilowatt Hours) Total Conventional Thermal Electricity Installed Capacity (Million Kilowatts) Total Electricity Exports (Billion Kilowatt Hours) Proved Reserves of Natural Gas (Trillion Cubic Feet) Total Petroleum Consumption Crude Oil Proved Reserves Total Non-Hydro Renewable Electricity Net Generation (Billion Kilowatts) Infrastructure Quality and Availability Roads, total network Air Transport (freight) Overall Construction Minerals Mining, Manufacturing, Utilities Output Technology Research and Development Expenditure Patents Granted Telecommunication Telephone Lines Telephone Lines Penetration Rate Appendix About SDI Disclaimer

13 13 LIST OF FIGURES Figure 1: Colombian Defense Expenditure (US$ Billion), Figure 2: Colombian Defense Expenditure (US$ Billion), Figure 3: Colombian Defense Expenditure (COP Billion), Figure 4: Colombian Defense Expenditure(COP Billion), Figure 5: Colombian GDP Growth vs. Defense Expenditure Growth, and Defense Expenditures Percentage of GDP Growth, Figure 6: Colombian GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP Growth, Figure 7: Colombian GDP Growth vs. Defense Expenditure Growth, and Defense Expenditures Percentage of GDP Growth, Figure 8: Colombian GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP Growth, Figure 9: Colombian Defense Budget Split Between Capital and Revenue Expenditure (%), Figure 10: Colombian Defense Budget Split Between Capital and Revenue Expenditure (%), Figure 11: Colombian Defense Expenditure Breakdown (%), Figure 12: Colombian Defense Expenditure Breakdown (%), Figure 13: Colombian Defense Expenditure for the Army(US$ billion), Figure 14: Colombian Defense Expenditure for the Army (US$ billion), Figure 15: Colombian Defense Expenditure for the Army (COP billion), Figure 16: Colombian Defense Expenditure for the Army (COP billion), Figure 17: Colombian Defense Expenditure for the Navy (US$ billion), Figure 18: Colombian Defense Expenditure for the Navy (US$ billion), Figure 19: Colombian Defense Expenditure for the Navy (COP billion), Figure 20: Colombian Defense Expenditure for the Navy (COP billion), Figure 21: Colombian Defense Expenditure for the Air Force (US$ billion), Figure 22: Colombian Defense Expenditure for the Air Force (US$ billion), Figure 23: Colombian Defense Expenditure for the Air Force (COP billion), Figure 24: Colombian Defense Expenditure for the Air Force (COP billion), Figure 25: Colombian Defense Expenditure for Other Expenses (US$ billion), Figure 26: Colombian Defense Expenditure for the Other Expenses (US$ billion), Figure 27: Colombian Defense Expenditure for Others (COP billion), Figure 28: Colombian Defense Expenditure for Others (COP billion), Figure 29: Colombian Homeland Security Expenditure (US$ Billion), Figure 30: Colombian Homeland Security Expenditure (US$ Billion), Figure 31: Colombian Homeland Security Expenditure (COP Billion), Figure 32: Colombian Homeland Security Expenditure (COP Billion), Figure 33: SDI Terrorism Heat Map, Figure 34: SDI Terrorism Index, Figure 35: Benchmarking with Key Markets vs Figure 36: Defense Expenditure of the World s Largest Military Spenders (US$ Billion), 2014 and Figure 37: Defense Expenditure as a Percentage of GDP of Largest Military Spenders (%), Figure 38: Colombia s Fighters & Multi-Role Aircraft Market Size (US$ Million), Figure 39: Colombia s Police Modernization Market Size (US$ Million), Figure 40: Colombia s Transport & Utility Aircraft Market Size (US$ Billion), Figure 41: Colombia s Main Battle Tank Market Size (US$ Billion), Figure 42: Colombia s Infantry Fighting Vehicle Market Size (US$ Million), Figure 43: Colombia s Armored Personnel Carriers Market Size (US$ Million), Figure 44: Colombian Defense Import TIV value (US$ Million), Figure 45: Colombian Defense Imports by Category (%), Figure 46: Colombian Defense Imports by Country (%), Figure 47: Industry Dynamics Porter s Five Forces Analysis Figure 48: Total Rural Population (In Millions), Figure 49: Colombian Urban Population (In Millions), Figure 50: Number of Households (In Millions), Figure 51: Colombian GDP Per Capita, Figure 52: Colombian GDP at Current Prices (US$ Billion), Figure 53: Colombian Exports of Goods and Services, Current Prices (US$ Billion), Figure 54: Colombian Imports of Goods and Services, Current Prices (US$ billion), Figure 55: Colombian Gross National Disposable Income (USD Billion),

14 14 Figure 56: Colombian Manufacturing Output (US$ Billion), Figure 57: Colombian Consumer Price Index, Figure 58: Colombian Wholesale Price Index, Figure 59: Colombian Local Currency Unit Per US$ (period average), Figure 60: Colombian Local Currency Unit Per EUR (period average), Figure 61: Colombian Lending Rate (%), Figure 62: Colombian Deposit Rate (%), Figure 63: Colombian Real Interest Rate (%), Figure 64: Market Capitalization of Listed Companies in Colombia (US$ Billion), Figure 65: Market Capitalization of Listed Companies in Colombia (% of GDP), Figure 66: Total Government Cash Surplus/ Deficit (LCU Billion), Figure 67: Government Cash Surplus/ Deficit as % of GDP (LCU), Figure 68: Colombian Goods Exports as % of GDP, Figure 69: Colombian Goods Imports as % of GDP, Figure 70: Colombian Goods Balance a % of GDP, Figure 71: Colombian Services Imports as % of GDP, Figure 72: Colombian Services Exports as a % of GDP, Figure 73: Colombian Services Balance as % of GDP, Figure 74: Colombian Foreign Direct Investment, net (BoP, current US$ Billion), Figure 75: Colombian Net Foreign Direct Investment as % of GDP, Figure 76: Colombian International Reserves, including Gold (US$ Billion), Figure 77: Colombian External Debt as % of GDP, Figure 78: Total Conventional Thermal Electricity Net Generation (Billion Kilowatt Hours), Figure 79: Colombian Hydroelectricity Net Generation (Billion Kilowatt Hours), Figure 80: Total Conventional Thermal Electricity Installed Capacity (Million Kilowatts), Figure 81: Colombian Total Electricity Exports (Billion Kilowatt Hours), Figure 82: Colombia s Proved Reserves of Natural Gas (Trillion Cubic Feet), Figure 83: Colombian Total Petroleum Consumption (Thousand Barrels Per Day), Figure 84: Colombian Crude Oil Proved Reserves (Million Barrels), Figure 85: Colombian Non-Hydro Renewable Electricity Net Generation (Billion Kilowatts), Figure 86: Roads, Total Network (Km), Figure 87: Air Transport (Freight), Million ton-km, Figure 88: Overall Construction (US$ Billion), Figure 89: Mining, Manufacturing, Utilities Output (USD Billion), Figure 90: Colombian Research and Development Expenditure (Local Currency Thousands), Figure 91: Patents Granted, Figure 92:Telephone Lines in Colombia (in Millions), Figure 93: Telephone Lines Penetration Rate in Colombia (per 100 people),

15 15 LIST OF TABLES Table 1: Colombian Defense Expenditure (US$ Billion), Table 2: Colombian Defense Expenditure (US$ Billion), Table 3: Colombian Defense Expenditure (COP Billion), Table 4: Colombian Defense Expenditure (COP Billion), Table 5: Colombian GDP Growth vs. Defense Expenditure Growth, and Defense Expenditure as Percentage of GDP Growth, Table 6: Colombian GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP Growth, Table 7: Colombian GDP Growth vs. Defense Expenditure Growth, and Defense Expenditure as Percentage of GDP Growth, Table 8: Colombian GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP Growth, Table 9: Colombian Defense Budget split between Capital and Revenue Expenditure (%), Table 10: Colombian Defense Budget Split Between Capital and Revenue Expenditure (%), Table 11: Colombian Defense Expenditure Breakdown (%), Table 12: Colombian Defense Expenditure Breakdown (%), Table 13: Colombian Defense Expenditure for the Army(US$ billion), Table 14: Colombian Defense Expenditure for the Army (US$ billion), Table 15: Colombian Defense Expenditure for the Army (COP billion), Table 16: Colombian Defense Expenditure for the Army (COP billion), Table 17: Colombian Defense Expenditure for the Navy (US$ billion), Table 18: Colombian Defense Expenditure for the Navy (US$ billion), Table 19: Colombian Defense Expenditure for the Navy (COP billion), Table 20: Colombian Defense Expenditure for the Navy (COP billion), Table 21: Colombian Defense Expenditure for the Air Force (US$ billion), Table 22: Colombian Defense Expenditure for the Air Force (US$ billion), Table 23: Colombian Defense Expenditure for the Air Force (COP billion), Table 24: Colombian Defense Expenditure for the Air Force (COP billion), Table 25: Colombian Defense Expenditure for Other Expenses (US$ billion), Table 26: Colombian Defense Expenditure for Other Expenses (US$ billion), Table 27: Colombian Defense Expenditure for Others (COP billion), Table 28: Colombian Defense Expenditure for the Others (COP billion), Table 29: Colombian Homeland Security Expenditure (US$ Billion), Table 30: Colombian Homeland Security Expenditure (US$ Billion), Table 31: Colombian Homeland Security Expenditure (COP Billion), Table 32: Colombian Homeland Security Expenditure (COP Billion), Table 33: Benchmarking with Key Markets vs Table 34: SDI Terrorism Index Table 35: Offset Regulations in Colombia Table 36: Industria Militar Major Products & Services Table 37: Industria Militar Alliances Table 38: Industria Militar Recent Contract Wins Table 39: Sudamin Aeronautica y Defensa S.A. Major Products & Services Table 40: Sudamin Aeronautica y Defensa S.A. Alliances Table 41: Cotecmar Major Products & Services Table 42: Cotecmar Alliances Table 43: Cotecmar Recent Contract Wins... 85