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The Ukranian Defense Industry Market Opportunities and Entry Strategies, Analyses and Forecasts to 2017

The Ukranian Defense Industry

The Ukranian Defense Industry

Ukraine expected to invest US$4.0 billion in its air force over the forecast period

London, August, 2012 – Ukrainian defense expenditure recorded a CAGR of 1.5% during the review period (2008-2012), reaching US$2.08 billion in 2012 and, over the forecast period (2013-2017), it is expected to grow at a CAGR of 6.4%, to reach an estimated value of US$2.86 billion in 2017. Ukrainian defense expenditure is primarily driven by the country’s ongoing tensions with Russia, the acquisition of new military hardware systems and participation in international peacekeeping missions. Despite an anticipated increase in the overall defense budget, military expenditure as a percentage of GDP is expected to decrease over the forecast period, from an average of 1.2%, to an average of 1.1% (reference graph below).

Although the Ukraine is expected to invest a total of US$12.78 billion in its armed forces over the forecast period, on average, only 14.6% of this total is expected to be invested in the modernization of the country’s defense equipment, limiting the opportunities available for both foreign OEMs and domestic defense companies. Additionally, despite Ukraine offering skilled labor at a lower cost than the majority of European countries, foreign OEMs are unable to make significant investments in the country’s defense industry due to the prohibition of FDI in defense.

Despite possessing both a strong technological base and skilled labor, the Ukrainian defense industry has so far been unable to produce modern technological hardware such as advanced fighter planes, submarines and warships. Instead, the growth of the country’s domestic defense industry has stalled as the majority of reforms to modernize the country’s defense industry have been postponed, while only 20% of state-run programs for the development of the country’s defense complex were implemented in 2010. As a result of these factors, Ukraine’s domestic defense industry is unable to improve its infrastructure and enhance its capabilities.

The growth of Ukraine’s domestic defense industry is also limited by excessive corruption and a lack of transparency in the country’s military procurement process. Corruption in the country frequently involves bribery of high level officials with discretionary authority over government policy and the sale of government assets or large government contracts, while lower level officials responsible for enforcing regulations are also often bribed. In addition, the country’s licensing and registration processes are so complex and time consuming that the costs of entering into the Ukrainian defense industry are significantly increased.

About Strategic Defence Intelligence
This report is one of a series available to subscribers of our premium research platform, Strategic Defence Intelligence. Strategic Defence Intelligence provides a stream of continuously updated customer and competitor intelligence, as well as detailed research reports providing an unrivalled source of global information on the latest developments in the defence industry.
Strategic Defence Intelligence's unique monitoring platform tracks global defence activity for over 2,500 companies and 65 product categories in real time and in a highly structured manner, giving a comprehensive and easily-searchable picture of all defence industry activity. The site features: daily updated analysis, comment and news, company and customer profiles, defence spending, tenders and contracts, product and technology intelligence, a research and analysis database providing access to industry and competitor reports to enable business and market planning, and fully customizable tools, including instant personalized report generation and custom alerts.

About GlobalDefence.net
For more than a decade GlobalDefence.net provides information from the field of foreign and security policy. It all started in the year 2001. After 911 the founder and current editor in chief Holger Paletschek started to create a German-speaking website with an overview about the armed forces of the world.
Today GlobalDefence.net stands for current news, background articles, geopolitical analyses, network of experts, industry leaders, political decision makers, as well as information about the armed forces of the world provided in German and English.

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