The Ukrainian Defense Sector – Market Opportunities and Entry Strategies, Analyses and Forecasts to 2015 by ICDResearch

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"• Top level overview of the Ukraine defense industry
• A breakdown of the Ukrainian defense industry by spend pattern valued from 2004 through 2009 and forecasted from 2010 through 2015
• A breakdown of the markets by segment valued from 2004 through 2009 and forecasted from 2010 through 2015
•Details of top companies active across the Ukraininan defense industry
•Emerging trends and opportunities in the Ukraininan defense industry in the last 12 months"

More Info
									The Ukrainian Defense Industry -
Market Opportunities and Entry
Strategies, Analyses and Forecasts
to 2015
Market Intelligence Report


Reference code: ICDDF0023MR10

Published: December 2010

www.icd-research.com


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© ICD Research. This report is a licensed product and is not to be photocopied
TABLE OF CONTENTS


LIST OF TABLES .......................................................................................................................... 8
LIST OF FIGURES......................................................................................................................... 9
1 Introduction .......................................................................................................................... 11
1.1       About this Report .......................................................................................................................... 11
1.2       Definitions ..................................................................................................................................... 11
1.3       Methodology.................................................................................................................................. 13
1.3.1 Secondary research......................................................................................................................................13
1.3.2 Primary research ..........................................................................................................................................13
1.3.3 Conventions .................................................................................................................................................14
1.4       ICD Research Terrorism Index ..................................................................................................... 14
1.5       About ICD Research Defense Intelligence Center ...................................................................... 14
1.6       About Strategic Defence Intelligence (www.strategicdefenceintelligence.com) ...................... 14
2      Executive Summary ............................................................................................................. 16
3      Market Attractiveness and Emerging Opportunities ........................................................ 18
3.1       Defense Market Size - Historical and Forecast ........................................................................... 19
3.1.1 Ukrainian defense expenditure expected to increase at a CAGR of 8.37% during the forecast
      period ...........................................................................................................................................................19
3.1.2 Tensions with Russia, acquisition of new military hardware systems and involvement in
      peacekeeping missions expected to stimulate Ukrainian defense expenditure ...............................................20
3.1.3 Defense expenditure closely linked to overall economic growth .....................................................................21
3.2       Analysis of Defense Budget Allocation ....................................................................................... 23
3.2.1 Capital expenditure allocation of overall defense budget expected to increase during the forecast
      period ...........................................................................................................................................................23
3.2.2 Air force accounts for the majority of defense expenditure .............................................................................24
3.2.3 Ukrainian Army expenditure expected to register a CAGR of 8.22% during the forecast period .....................25
3.2.4 Ukrainian Navy allocation of overall defense budget expected to increase.....................................................26
3.2.5 The Ukraine anticipated to invest US$4.5 billion in its air force during the forecast period..............................27
3.2.6 DSU expenditure expected to grow at a CAGR of 8.02% throughout the forecast period ...............................28
3.3       Homeland Security Market Size and Forecast ............................................................................ 29
3.3.1 Homeland security expenditure expected to grow at a CAGR of 9.42% during the forecast period.................29
3.3.2 Organized crime, maritime security threats and ethnic tensions anticipated to encourage
      investment in the procurement of homeland security equipment ....................................................................30
3.4       Benchmarking with Key Global Markets ..................................................................................... 34
3.4.1 During the forecast period the Ukraine will continue to exercise limited influence in the international
      arms market .................................................................................................................................................34
3.4.2 Ukrainian military expenditure is limited compared to countries with leading global defense
      expenditure ..................................................................................................................................................35
3.4.3 During the review period, the Ukraine emerged as the eleventh largest global arms exporter ........................36
3.4.4 In comparison with countries with the highest global defense expenditure Ukrainian defense
      expenditure, as a percentage of GDP, is moderate .......................................................................................37

The Ukrainian Defense Sector - Market Opportunities and Entry Strategy, Analyses and Forecasts to2015                     Published August 2010
© ICD Research. This report is a licensed product and is not to be photocopied                                                             Page 2
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3.4.5 According to the ICD Research Terrorism Index the Ukraine faces some risk of terrorist threat .....................38
3.5       Market Opportunities: Key Trends and Growth Stimulators ...................................................... 41
3.5.1 Maritime defense equipment expected to experience increased demand in the forecast period .....................41
3.5.2 Market opportunities for air defense systems expected to increase ...............................................................41
3.5.3 Border security and critical infrastructure protection equipment will experience increased demand ................42
4      Defense Procurement Market Dynamics ........................................................................... 43
4.1       Import Market Dynamics............................................................................................................... 44
4.1.1 A relatively small defense budget limits defense imports ...............................................................................44
4.2       Export Market Dynamics .............................................................................................................. 44
4.2.1 Ukrainian arms exports registered a decline in 2009 .....................................................................................44
4.2.2 Ukrainian defense sector has diverse consumer base ...................................................................................45
4.2.3 The majority of Ukrainian defense exports consist of armored vehicles and aircraft .......................................46
5      Industry Dynamics ............................................................................................................... 47
5.1       Five Forces Analysis .................................................................................................................... 47
5.1.1 Bargaining power of supplier: low to high ......................................................................................................48
5.1.2 Bargaining power of buyer: low .....................................................................................................................48
5.1.3 Barrier to entry: high .....................................................................................................................................48
5.1.4 Intensity of rivalry: low to high .......................................................................................................................48
5.1.5 Threat of substitution: high............................................................................................................................49
6      Market Entry Strategy .......................................................................................................... 50
6.1       Market Regulation ......................................................................................................................... 50
6.1.1 The Ukraine follows prohibitive defense industry FDI policy...........................................................................50
6.2       Market Entry Route ....................................................................................................................... 50
6.2.1 Joint development of defense goods provides investors with a market entry opportunity ...............................50
6.2.2 Foreign investors can enter the industry through direct sales ........................................................................50
6.3       Key Challenges ............................................................................................................................. 51
6.3.1 Small defense budget offers equipment manufacturers a limited investment potential ...................................51
6.3.2 Lack of proper infrastructure impedes the domestic defense industry growth .................................................51
6.3.3 Corruption and a lack of transparency discourages investors from entering the market .................................51
7      Competitive Landscape and Strategic Insights ................................................................ 52
7.1       Competitive Landscape Overview ............................................................................................... 52
7.2       Key Public Sector Companies...................................................................................................... 54
7.2.1 Antonov ASTC: overview ..............................................................................................................................54
7.2.2 Antonov ASTC: products and services ..........................................................................................................54
7.2.3 Antonov ASTC: recent announcements and strategic initiatives ....................................................................55
7.2.4 Antonov ASTC: alliances ..............................................................................................................................56
7.2.5 Antonov ASTC: recent contract wins .............................................................................................................57
7.2.6 Antonov ASTC: financial analysis .................................................................................................................57


The Ukrainian Defense Sector - Market Opportunities and Entry Strategy, Analyses and Forecasts to2015                Published August 2010
© ICD Research. This report is a licensed product and is not to be photocopied                                                        Page 3
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7.2.7 RPC Fort: overview.......................................................................................................................................57
7.2.8 RPC Fort: products and services ..................................................................................................................57
7.2.9 RPC Fort: recent announcements and strategic initiatives .............................................................................58
7.2.10 RPC Fort: alliances .......................................................................................................................................59
7.2.11 RPC Fort: recent contract wins .....................................................................................................................59
7.2.12 RPC Fort: financial analysis ..........................................................................................................................59
7.2.13 KMDB: overview ...........................................................................................................................................59
7.2.14 KMDB: products and services .......................................................................................................................59
7.2.15 KMDB: recent announcements and strategic initiatives .................................................................................60
7.2.16 KMDB: alliances ...........................................................................................................................................60
7.2.17 KMDB: recent contract wins ..........................................................................................................................60
7.2.18 KMDB: financial analysis ..............................................................................................................................60
7.2.19 Malyshev Plant: overview .............................................................................................................................60
7.2.20 Malyshev Plant: products and services .........................................................................................................61
7.2.21 Malyshev Plant: recent announcements and strategic initiatives ....................................................................61
7.2.22 Malyshev Plant: alliances..............................................................................................................................62
7.2.23 Malyshev Plant: recent contract wins ............................................................................................................62
7.2.24 Malyshev Plant: financial analysis .................................................................................................................62
7.2.25 AvtoKrAZ Holding Company: overview..........................................................................................................62
7.2.26 AvtoKrAZ Holding Company: products and services......................................................................................62
7.2.27 AvtoKrAZ Holding Company: recent announcements and strategic initiatives ................................................63
7.2.28 AvtoKrAZ Holding Company: alliances ..........................................................................................................63
7.2.29 AvtoKrAZ Holding Company: recent contract wins ........................................................................................64
7.2.30 AvtoKrAZ Holding Company: financial analysis .............................................................................................64
7.2.31 Motor Sich: overview ....................................................................................................................................64
7.2.32 Motor Sich: products and services ................................................................................................................64
7.2.33 Motor Sich: recent announcements and strategic initiatives ...........................................................................66
7.2.34 Motor Sich: alliances.....................................................................................................................................66
7.2.35 Motor Sich: recent contract wins ...................................................................................................................66
7.2.36 Motor Sich: financial analysis ........................................................................................................................67
7.2.37 Aviant State Enterprise Kyiv Aviation Plant: overview ....................................................................................69
7.2.38 Aviant State Enterprise Kyiv Aviation Plant: products and services ................................................................69
7.2.39 Aviant State Enterprise Kyiv Aviation Plant: recent announcements and strategic initiatives ..........................69
7.2.40 Aviant State Enterprise Kyiv Aviation Plant: alliances ....................................................................................70
7.2.41 Aviant State Enterprise Kyiv Aviation Plant: recent contract wins...................................................................70
7.2.42 Aviant State Enterprise Kyiv Aviation Plant: financial analysis .......................................................................70
8      Business Environment and Country Risk ......................................................................... 71
8.1       Business Confidence.................................................................................................................... 71
8.1.1 Market capitalization trend - The PFTS* Stock Exchange, the Ukraine ..........................................................71


The Ukrainian Defense Sector - Market Opportunities and Entry Strategy, Analyses and Forecasts to2015                Published August 2010
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8.1.2 FDI inflows by sector ....................................................................................................................................73
8.1.3 Deployment of credit by sector ......................................................................................................................74
8.2       Economic Performance ................................................................................................................ 75
8.2.1 GDP at constant prices .................................................................................................................................75
8.2.2 GDP per capita at constant prices .................................................................................................................76
8.2.3 GDP at current prices ...................................................................................................................................77
8.2.4 GDP per capita at current prices ...................................................................................................................78
8.2.5 GDP split by key sectors ...............................................................................................................................79
8.2.6 Agricultural output value at current prices (Ukrainian Hryvnia) .......................................................................80
8.2.7 Agricultural output value at current prices (US Dollar) ...................................................................................81
8.2.8 Agricultural output at current prices as a percentage of GDP.........................................................................82
8.2.9 Manufacturing net output at current prices (Ukraine Hryvnia) ........................................................................83
8.2.10 Manufacturing net output at current prices (US Dollar) ..................................................................................84
8.2.11 Manufacturing net output at current prices as a percentage of GDP ..............................................................85
8.2.12 Mining, manufacturing and utilities net output at current prices (Ukraine Hryvnia) ..........................................86
8.2.13 Mining, manufacturing and utilities net output at current prices (US Dollars) ..................................................87
8.2.14 Mining, manufacturing and utilities net output at current prices as a percentage of GDP ................................88
8.2.15 Construction net output at current prices (Ukraine Hryvnia) ...........................................................................89
8.2.16 Construction net output at current prices (US Dollar) .....................................................................................90
8.2.17 Construction net output at current prices as a percentage of GDP.................................................................91
8.2.18 Crude steel production..................................................................................................................................92
8.2.19 Crude oil consumption ..................................................................................................................................93
8.2.20 Inflation rate..................................................................................................................................................94
8.2.21 Fiscal balance as a percentage of GDP ........................................................................................................95
8.2.22 Trade balance as a percentage of GDP ........................................................................................................96
8.2.23 Exports as a percentage of GDP...................................................................................................................97
8.2.24 Imports as a percentage of GDP ...................................................................................................................98
8.2.25 Exports growth .............................................................................................................................................99
8.2.26 Imports growth ............................................................................................................................................100
8.2.27 External debt as a percentage of GDP ........................................................................................................101
8.2.28 Annual average exchange rate US$–UAH ..................................................................................................102
8.2.29 End of period exchange rate US$–UAH ......................................................................................................103
8.3       Infrastructure Quality and Availability ....................................................................................... 104
8.3.1 Total airports and ports ...............................................................................................................................104
8.3.2 Railways and highways...............................................................................................................................105
8.3.3 Passenger vehicle production volume .........................................................................................................106
8.3.4 Commercial vehicle production volume .......................................................................................................107
8.3.5 Automotive components export trend ..........................................................................................................108
8.3.6 Automotive products import trend ...............................................................................................................109


The Ukrainian Defense Sector - Market Opportunities and Entry Strategy, Analyses and Forecasts to2015                    Published August 2010
© ICD Research. This report is a licensed product and is not to be photocopied                                                            Page 5
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8.3.7 Passenger car penetration ..........................................................................................................................110
8.3.8 Total installed capacity for electricity generation..........................................................................................111
8.3.9 Installed capacity for the generation of conventional thermal electricity........................................................112
8.3.10 Electricity production...................................................................................................................................113
8.3.11 Installed capacity for the generation of hydro-electricity...............................................................................114
8.3.12 Installed capacity for the generation of renewable electricity........................................................................115
8.3.13 Electricity consumption .............
								
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