Future of the Algerian Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2017
Published Date » 2013-03-16
No. Of Pages » 84
This report is the result of SDI’s extensive market and company research covering the Algerian defense industry, and provides detailed analysis of both historic and forecast defense industry values including key growth stimulators, analysis of the leading companies in the industry, and key news.
Introduction and Landscape
Why was the report written?
The Future of the Algerian Defense Industry – Market Attractiveness, Competitive Landscape and Forecasts to 2017 offers the reader an insight into the market opportunities and entry strategies adopted by foreign original equipment manufacturers (OEMs) to gain a market share in the Algerian defense industry.
What is the current market landscape and what is changing?
Despite its challenges, Algeria remains one of Africa’s most attractive defense markets, with a defense spending capability that is expected to increase in the forecast period primarily owing to increased energy exports and an arms race in the North African region. The country’s defense spending, which increased at a significant CAGR of 21.4% during the review period, is expected to stabilize during the forecast period, growing at a steady CAGR of 6.2% with the main aim of replacing most of its outdated military equipment. Furthermore, the opening up of Algeria’s market to suppliers other than those in Russia is expected to make it an exciting proposition for foreign companies looking to enter the market either through direct government-to-government deals or by establishing joint ventures and partnerships. During the forecast period, the Algerian government is expected to spend the majority of its capital expenditure on modernizing its army, navy and air force.
What are the key drivers behind recent market changes?
Counter-terrorism and counter-insurgency initiatives, and an urgent need to modernize outdated defense equipment are expected to drive Algeria’s defense expenditure. Algeria has witnessed growing instances of terrorism from Al-Qaeda and other Islamic militant organizations in the past. The recent attack on the In Amenas gas facility left 37 foreign workers dead and many more injured. This is seen as an attempt by Al-Qaeda affiliates and other jihadist outfits to render parts of Northern and Western Africa uninhabitable for westerners and create a political and economic impact on the region. Another factor driving Algeria’s defense procurements is the neglect the industry faced for many years. Historically, South Africa was the only major defense spender in the African region but in recent years, Algeria has assumed top position. The government has embarked on an intense modernization drive that is expected to benefit the army, navy, and air force.
What makes this report unique and essential to read?
The Future of the Algerian Defense Industry – Market Attractiveness, Competitive Landscape and Forecasts to 2017 provides detailed analysis of the current industry size and growth expectations from 2013 to 2017, including highlights of key growth stimulators. It also benchmarks the industry against key global markets and provides a detailed understanding of emerging opportunities in specific areas.
Key Features & Benefits
- The report provides detailed analysis of the current industry size and growth expectations from 2013 to 2017, including highlights of key growth stimulators, and also benchmarks the industry against key global markets and provides a detailed understanding of emerging opportunities in specific areas.
- The report includes trend analysis of imports and exports, together with their implications and impact on the Algerian defense industry.
- The report covers five forces analysis to identify various power centers in the industry and how these are expected to develop in the future.
- The report allows readers to identify possible ways to enter the market, together with detailed descriptions of how existing companies have entered the market, including key contracts, alliances, and strategic initiatives.
- The report helps the reader to understand the competitive landscape of the defense industry in Algeria. It provides an overview of key defense companies, both domestic and foreign, together with insights such as key alliances, strategic initiatives, and a brief financial analysis.
Key Market Issues
- Algeria is prone to high levels of corruption in virtually all sectors of business activity. In December 2012 Sapiem, Europe's biggest oil services group came under investigation for alleged corruption in Algeria and faced massive fines for its dealings in the country. The Algerian defense industry is also marred by a lack of transparency in awarding defense contracts. While procurement is supposedly conducted as open competition, in reality personal relations and the country from which the supplier is from are considered to be influential in decision making. The Algerian government does not publicly announce its future procurement plans. All defense tenders are closed and are sent only to a few specific companies.
- Over the last decade, Algeria has become an important country in the global defense market due to many factors one of which is its strategic location as a transit point from North Africa to Europe. Even though European contractors have an advantage in securing contracts due to legacy relationships and shared national requirements, the sheer lack of transparency makes it difficult for any supplier to strategically target the Algerian market. The process of weapons acquisitions poses a challenge to both the political and technical systems in Algeria. Moreover, until now, the government has not defined a formal offset policy which makes it increasingly difficult to develop the country’s indigenous manufacturing capabilities.
- Algeria’s defense industry is currently undergoing a phase of rapid and radical modernization. With over US$200 billion in foreign exchange reserves and burgeoning energy exports, the country is now the 9th largest importer of weapons globally. Its domination of the African defense imports market is highlighted by the fact that during 2006-2010, Algeria accounted for 46% of total weapons imports into Africa. For 2013, Algeria has budgeted US$10.3 billion for defense spending out of which a significant amount is expected to be spent on procuring new equipment for its army, navy, and air force. Algeria has recently fallen victim to many instances of terrorism. In early 2013, terrorists calling themselves the Signatories in Blood launched an attack on a British Petroleum (BP) plant in the Algerian Sahara, leading to the deaths of over 80 people. This, along with other such incidences, has prompted Algeria to increase the portion of capital expenditure in its defense budget and since its indigenous defense manufacturing is still in a nascent stage, imports from other countries are on the upswing.
- Algeria is currently in the process of forming a defense offset policy primarily to increase its indigenous manufacturing prowess. The country is in dialogue with certain countries of the Gulf Co-operation Council (GCC) Directorate, to set up a formal offset program which is expected to be implemented in upcoming defense procurements. Algeria’s sudden rise as a major defense spending nation at a time when the traditional heavy spenders are cutting back on their defense procurements, has given it a significant advantage to form an offset policy heavily favoring its domestic defense industry. Moreover, Algeria is a major country in the international security environment due to its strategic location as a transit point from North Africa to Europe. Therefore, future policies are expected to focus on enhancing strategic sectors and national objectives, instead of just technology transfers.
- Over the last two decades an increase in globalization has resulted in robust growth of global business activity including FDI. Algeria, which has received lower levels of FDI so far, is poised for robust growth in the coming years owing to booming hydrocarbon exports and vast foreign exchange reserves. The National Agency for Investment Development (ANDI) is actively promoting Algeria as a favored FDI location for foreign investment, claiming that it has been a major contributor to Algeria’s recent economic growth. During the period 2006-2011, the amount of realized FDI into Algeria exceeded US$25 billion. Even though this amount is not significant when compared to some of the other developing nations such as India and China, the average during this period far exceeds the US$1.8 billion that was invested in the country in 2006. The increase in FDI flows to Algeria have been largely due to the government’s liberalization policies with the privatization of various sectors (mainly mining and energy), reforms, and new measures to attract more FDI inflows with the aim of developing the country.
Table of Content
1.1. What is this Report About?
1.3. Summary Methodology
1.4. SDI Terrorism Index
1.5. About Strategic Defence Intelligence
2 Executive Summary
3 Market Attractiveness and Emerging Opportunities
3.1. Defense Market Size Historical and Forecast
3.1.1. Algerian annual defense expenditure to reach US$XX billion by 2017
3.1.2. Counter-terrorism and counter-insurgency initiatives and an urgent need to modernize outdated defense equipment to drive Algeria's defense expenditure
3.2. Analysis of Defense Budget Allocation
3.2.1. Capital expenditure share expected to reach an average of XX% during the forecast period
3.2.2. Budget allocation to focus primarily on naval modernization during the forecast period
3.2.3. The country's defense expenditure as a percentage of GDP increased during the review period
3.2.4. Per capita defense expenditure expected to further increase during the forecast period
3.3. Homeland Security Market Size and Forecast
3.3.1. Allocation for police, border security and infrastructure development form the major components of homeland security expenditure
3.3.2. Algeria is at a significant risk from external and internal threats
3.4. Benchmarking with Key Global Markets
3.4.1. Algerian defense expenditure expected to increase at a CAGR of XX% over the forecast period
3.4.2. Algeria ranks twenty-third in global defense spend
3.4.3. Algeria's defense expenditure expected to reach XX% of GDP by 2017
3.4.4. Algeria is significantly affected by terrorism
3.5. Market Opportunities: Key Trends and Growth Stimulators
3.5.1. Border Security
3.5.3. Naval surface combatants
3.5.4. Armored Vehicles
4 Defense Procurement Market Dynamics
4.1. Import Market Dynamics
4.1.1. Previous neglect, current need to modernize its armed forces and counter-terrorism initiatives to increase defense imports
4.1.2. Russia and France were the leading suppliers of arms to Algeria during the review period with Germany expected to make a foray into the market during the forecast period
4.2. Export Market Dynamics
4.2.1. Algeria's domestic defense manufacturing is still in its nascent stage and therefore the country doesn't export weapons to other countries
5 Industry Dynamics
5.1. Five Forces Analysis
5.1.1. Bargaining power of the supplier: low
5.1.2. Bargaining power of the buyer: high
5.1.3. Barriers to entry: high
5.1.4. Intensity of rivalry: low to medium
5.1.5. Threat of substitution: high
6 Market Entry Strategy
6.1. Market Regulation
6.1.1. Offset policy to be formed soon to ensure growth of the country's domestic defense manufacturing industry
6.1.2. Foreign direct investment (FDI) is channeled to benefit local business
6.2. Market Entry Route
6.2.1. Foreign firms enter the Algerian defense industry through JVs or government-to-government deals
6.3. Key Challenges
6.3.1. Corruption and lack of transparency characterize the Algerian defense industry
6.3.2. Lack of relevant defense procurement policy
7 Competitive Landscape and Strategic Insights
7.1. Competitive Landscape Overview
7.1.1. Foreign suppliers manufacture defense systems overseas and deliver to Algeria
7.2. Key Domestic Companies
7.2.1. Entreprise Nationale des Véhicules Industriels: overview
7.2.2. Entreprise Nationale des Véhicules Industriels Vehicles: products and services
7.2.3. Entreprise Nationale des Véhicules Industriels: recent announcements and strategic initiatives
7.2.4. Entreprise Nationale des Véhicules Industriels: alliances
7.2.5. NIMR-Algerie Joint Stock Company: overview
7.2.6. NIMR-Algerie Joint Stock Company: products and services
7.2.7. Khenchela Mechanical Constructions Establishment (ECMK): overview
7.2.8. Khenchela Mechanical Constructions Establishment: products and services
7.2.9. Khenchela Mechanical Constructions Establishment: recent announcements and strategic initiatives
7.2.10. Khenchela Mechanical Constructions Establishment: alliances
7.2.11. Seriana Company of Industrial Achievements (ERIS): overview
7.2.12. Seriana Company of Industrial Achievements: products and services
7.2.13. National office of Explosive substances, EPE (ONEX): overview
7.2.14. National Office of Explosive Substances: products and services
8 Business Environment and Country Risk
8.1. Demographics and Social Statistics
8.1.1. Total Rural Population
8.1.2. Total Urban Population
8.1.3. Number of households
8.2. Economic Performance
8.2.1. GDP Per Capita
8.2.2. GDP, Current Prices
8.2.3. Consumer Price Index
8.2.4. Wholesale Price Index
8.2.5. Local Currency Unit per US Dollars
8.2.6. Local Currency Unit per Euro
8.2.7. Lending Rate
8.2.8. Deposit Rate
8.2.9. Real Interest Rate
8.2.10. International reserves, including gold
8.2.11. External Debt
8.2.12. External Debt as % of GDP
8.3. Energy and Utilities
8.3.1. Conventional Thermal Electricity Net Generation
8.3.2. Hydroelectricity Net Generation
8.3.3. Nuclear Electricity Net Generation
8.3.4. Conventional Thermal Electricity Installed Capacity
8.3.5. Electricity Exports
8.3.6. Electricity Imports
8.3.7. Proved Natural Gas Reserves
8.3.8. Petroleum Consumption
8.3.9. Crude Oil Proved Reserves
8.4.1. Air transport, freight
8.5.1. Mining, Manufacturing, Utilities Output
8.6.1. Telephone Lines
8.6.2. Telephone Lines Penetration Rate
9.1. About SDI
List of Tables
Table 1: Algerian Defense Expenditure, 2008-2012
Table 2: Algerian Defense Expenditure, 2013-2017
Table 3: Algerian Defense Budget Split Between Capital and Revenue Expenditure (%), 2008-2012
Table 4: Algerian Defense Budget Split Between Capital and Revenue Expenditure (%), 2013-2017
Table 5: Algerian GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP Growth, 2008-2012
Table 6: Algerian GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP Growth, 2013-2017
Table 7: Algerian Per Capita Defense Expenditure (US$), 2008-2012
Table 8: Algerian Per Capita Defense Expenditure (US$), 2013-2017
Table 9: Algerian Homeland Security Budget (US$ million), 2008-2012
Table 10: Algerian Homeland Security Budget (US$ billion), 2013-2017
Table 11: Benchmarking with Key Markets - 2008-2012 vs. 2013-2017
Table 12: SDI Terrorism Index
Table 13: Entreprise Nationale des Véhicules Industriels - Product Focus
Table 14: Entreprise Nationale des Véhicules Industriels - Alliances
Table 15: NIMR-Algerie Joint Stock Company- product focus
Table 16: Khenchela Mechanical Constructions Establishment (ECMK)- Product Focus
Table 17: Khenchela Mechanical Constructions Establishment (ECMK)- Alliances
Table 18: Seriana Company of Industrial Achievements- Product Focus
Table 19: National Office of Explosive Substances- Product Focus
List of Figures
Figure 1: Algerian Defense Expenditure, 2008-2012
Figure 2: Algerian Defense Expenditure, 2013-2017
Figure 3: Algerian Defense Budget Split Between Capital and Revenue Expenditure (%), 2008-2012
Figure 4: Algerian Defense Budget Split Between Capital and Revenue Expenditure (%), 2013-2017
Figure 5: Algerian GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP Growth, 2008-2012
Figure 6: Algerian GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP Growth, 2013-2017
Figure 7: Algerian Per Capita Defense Expenditure (US$), 2008-2012
Figure 8: Algerian Per Capita Defense Expenditure (US$), 2013-2017
Figure 9: Algerian Homeland Security Budget (US$ million), 2008-2012
Figure 10: Algerian Homeland Security Budget (US$ billion), 2013-2017
Figure 11: SDI Terrorism Heat Map, 2012
Figure 12: Benchmarking with Key Markets - 2008-2012 vs. 2013-2017
Figure 13: Defense Expenditure of the World's Largest Military Spenders (US$ Billion), 2012 and 2017
Figure 14: Defense Expenditure as a Percentage of GDP of Largest Military Spenders (%), 2012
Figure 15: SDI Terrorism Index, 2012
Figure 16: Algeria's Border Security Market Size (US$ Million), 2012-2022
Figure 17: Algeria's Counter-Terrorism Market Size (US$ Million), 2012-2022
Figure 18: Algeria's Frigates Market Size (US$ Million), 2012-2022
Figure 19: Algeria's Armored Personnel Carrier Market Size (US$ Million), 2012-2022
Figure 20: Algerian Defense Imports by Country and by equipment (%), 2007-2011
Figure 21: Industry Dynamics Porter's Five Forces Analysis
Figure 22: Algerian Rural Population (In Millions), 2008-2017
Figure 23: Algerian Urban Population (In Millions), 2008-2017
Figure 24: Algerian Number of Households (In Millions), 2008-2017
Figure 25: Algerian GDP Per Capita, 2008-2017
Figure 26: Algerian GDP, Current Prices (US$ Billion), 2008-2017
Figure 27: Algerian Consumer Price Index, 2008-2017
Figure 28: Algerian Wholesale Price Index, 2003-2012
Figure 29: Local Currency per USD, 2008-2017
Figure 30: Local Currency per Euro, 2008-2017
Figure 31: Lending Rate (%), 2004-2013
Figure 32: Deposit Rate (%), 2003-2012
Figure 33: Real Interest Rate (%), 2004-2013
Figure 34: Algerian International reserves, including gold (US$ Billion), 2004-2013
Figure 35: Algerian External Debt (US$ Billion), 2003-2012
Figure 36: Algerian External Debt as % of GDP (%), 2003-2012
Figure 37: Algerian Conventional Thermal Electricity Net Generation (Billion Kilowatt hours), 2003-2012
Figure 38: Algerian Hydroelectricity Net Generation (Billion Kilowatt hours), 2003-2012
Figure 39: Algerian Nuclear Electricity Net Generation (Billion Kilowatt hours), 2003-2012
Figure 40: Algerian Conventional Thermal Electricity Installed Capacity (Million Kilowatts), 2003-2012
Figure 41: Algerian Electricity Exports (Billion Kilowatt hours), 2003-2012
Figure 42: Algerian Electricity Imports (Billion Kilowatt hours), 2003-2012
Figure 43: Algerian Proved Natural Gas Reserves (Trillion Cubic Feet), 2004-2013
Figure 44: Algerian Petroleum Consumption (Thousand Barrels Per Day), 2004-2013
Figure 45: Algerian Crude Oil Proved Reserves (Billion Barrels), 2004-2013
Figure 46: Algerian Air transport freight (million ton-km), 2003-2012
Figure 47: Algerian Mining, Manufacturing, Utilities Output (US$ Billion), 2003-2012
Figure 48: Algerian Telephone Lines (In Million), 2003-2012
Figure 49: Algerian Telephone Lines Penetration Rate (Per 100 People), 2004-2013
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