This report is the result of SDI's extensive market and company research covering the Norwegian 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 Norwegian Defense Industry - Market Attractiveness, Competitive Landscape, and Forecasts to 2019offers the reader an insight into the market opportunities and entry strategies adopted by foreign original equipment manufacturers (OEMs) to gain market share in the Norwegian defense industry.
What is the current market landscape and what is changing?
Norway's total defense expenditure stands at US$7 billion in 2014 and is expected to grow at a CAGR of 5.50% over the forecast period, to reach US$9.1 billion in 2019; this increase in defense expenditure can be attributed to the modernization and training programs that are expected to be executed during the forecast period. Norwegian defense expenditure is further driven by participation in peacekeeping initiatives, the procurement of military aircraft such as the F-35 fighter aircraft, the Norwegian All Weather Search and Rescue Helicopter (NAWSARH) program, Advanced Medium Range Air-to-Air Missiles (AMRAAM), upgrade and support for C-130J aircraft the soldier modernization program, cyber security and the procurement of advanced technology equipment. The country's defense budget stands at 1.33% of GDP in 2014 and is expected to increase marginally to 1.42% of GDP by 2019. During 2010-2014, the average capital expenditure allocation stood at 31.6% of the total defense budget, and this is expected to grow at the same average during the forecast period.
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What are the key drivers behind recent market changes?
Modernization of the armed forces and international peacekeeping operations
What makes this report unique and essential to read?
The Future of the Norwegian Defense Industry - Market Attractiveness, Competitive Landscape, and Forecasts to 2019 provides detailed analysis of the current industry size and growth expectations from 2015 to 2019, 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 and Benefits
- The report provides detailed analysis of the current industry size and growth expectations from 2015 to 2019, 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 Norwegian 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 Norway. 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.
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Key Market Issues
- The Norwegian defense industry favors Scandinavian and European countries for defense trade, as it is a member of the European Defense Agency, which limits the scope for foreign companies to enter the Norwegian defense industry. Furthermore, the country follows a strict offset policy, according to which, offsets are mandatory for all transactions exceeding NOK50 million, and investors are required to reinvest 100% of the value of the contract into the Norwegian economy. Moreover, if the investor is unable to meet the offset obligation, a penalty is issued of a minimum of 10% of the outstanding amount. Finally, the relatively high cost of labor in the country may be an additional deterrent for potential investors.
- The Norwegian Government has adopted a new set of rules for defense exports after the Iraq war massacre in 2012; these rules further tighten the export policy of Norway, affecting the country's budget deficit, and forbid Norwegian exports to nations engaged in warfare. In addition, new laws also ban export to countries that are not part of the NATO agreement. The following factors are listed in new laws adopted by the Norwegian defense industry, which determine where weapons can be exported:
- Attitudes to international human rights instruments, and respect for humanitarian law; respect for civil and political rights
- Reports by competent organizations of serious violations of human rights, including the use of torture or other inhuman and degrading treatment or punishment in the receiving state, or the arbitrary deprivation of liberty
- The risk that the exported items could be used for the violation of basic human rights, e.g., using military equipment to crack down on peaceful demonstrations.
- The Norwegian MoD is in the process of modernizing its armed forces with advanced equipment; in 2010, the country passed a long term defense plan, which was again revised in 2012. It outlined modernization plans, including the procurement of 48 F-35 fighter jets, additional funding for the home guard, advanced training for the armed forces and home guard, and a special allocation for cyber security. Furthermore, in early 2013 the Norwegian Defence Logistics Organization (NDLO) has contracted with Iveco Defense Vehicles for a tranche of 60 light armored vehicles and this procurement is expected to increase the total fleet to 170 units. In 2012, the country finalized on modernizing its land forces and proposed to spend US$750 million to upgrade and manufacture 146 CV90 armored combat vehicles which will significantly enhance army's operational capabilities. The program is expected to complete in 2017 after adding 41 new CV90 armored fighting vehicles (AFVs) and upgrading 103 current CV90s. The prime contractors include BAE Systems manufacturing new vehicles and Kongsberg Defence and Aerospace, who will supply the integrated data and information system, installation of weapon systems, sensors, communication and security systems.
- The Norwegian government is increasing its efforts to strengthen its position on cyber security and has drafted a new National Cyber Defense Strategy (NCDS) in this regard. The initiative will be run under the Ministry of Defense's (MoD's) jurisdiction with an objective to create a common situational understanding of the cyber threat, secure information and communication systems, fortify the ability to detect, investigate and combat incidents. The Norwegian Armed Forces have established the Norwegian Cyber Defence in September 2012 with 1500 force employee and the unit will be responsible for counter-cyber warfare in Norway. Furthermore, cyber security is one of the main priorities in the 2014 defence budget and the National Security Authority has been sanctioned an additional contribution of 20.2 million NOK in preserving national cyber security.
- Overall, defense imports decreased during the review period; however, due to the modernization and procurement plans of the Norwegian MoD, Norwegian defense imports are expected to increase over the forecast period. European countries such as France, Germany, Italy, and the UK are expected to remain the key suppliers during the forecast period. Norway was the world's fifteenth-largest arms exporter during 2008-2012, with the country contributing a share of 0.6% of all global arms exports during the same period. During the forecast period, the country's defense exports are expected to grow significantly as a result of expansion into Thailand, Singapore, and South Africa, in which, demand for defense equipment is expected to be strong. Furthermore, new collaboration programs with foreign OEMs are also expected to drive Norwegian defense exports over the forecast period.
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