This report is the result of SDI's extensive market and company research covering the Lebanese 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 Lebanese Defense Industry - Market Attractiveness, Competitive Landscape, and Forecasts to 2018 offers the reader an insight into the market opportunities and entry strategies adopted by foreign original equipment manufacturers (OEMs) to gain market share in the Lebanese defense industry.
What is the current market landscape and what is changing?
Lebanon, one of the poorer countries in the Middle East region in terms of natural resources, is mired by cross border violence, internal extremism, and hostile neighbors. The country's weak economic condition affected its defense capabilities, resulting in a volatile security situation for the past two years. Spillover of violence across its borders has put pressure on its government to prioritize military modernization during the review. Consequently, the Lebanese military expenditure registered a growth rate of 12.46% in the last five years and expected to grow at a CAGR of 5.66% over the forecast period. The country's capital expenditure, which values US$110 million in 2013, is projected to reach US$150 million by 2018. In the last five years, Lebanon focused on importing armored vehicles, aircraft, missiles, and artillery, which are expected to continue to be primary imported weapon categories over the forecast period as well.
What are the key drivers behind recent market changes?
Cross border violence expected to be a key factor driving defense expenditure
What makes this report unique and essential to read?
The Future of the Lebanese Defense Industry - Market Attractiveness, Competitive Landscape, and Forecasts to 2018 provides detailed analysis of the current industry size and growth expectations from 2014 to 2018, 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 2014 to 2018, 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 Lebanese 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 Lebanon. 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
- Lebanon's defense budget is small, reaching its peak of US$1.2 million in 2013, and does not attract many foreign companies. During the review period, an average of 19.2% of the defense budget was allocated for capital expenditure on defense equipment, and this small amount of the budget does not attract many companies to supply arms to, or invest in, the country. Restrictions by the US and other major nations on supply of advanced weapons to Lebanon further increases the challenges, as defense contractors might not find it feasible to violate the embargo to cater for a small market.
- Hezbollah, the Lebanese militant group has been classified as a terrorist organization by the US and prohibits sale of arms for fear of them being used against Israel and its supporting nations. UN Security Council imposed an open ended embargo on arms transfers to Lebanon not authorized by the UNIFIL, the UN peacekeeping force. In addition, the US and European countries restrict sale of modern weaponry to the Lebanese government, fearing that Hezbollah may take control of these arms and use them for its terrorist activities. Moreover, ongoing Syrian conflict complicates the security situation in Lebanon affecting its market attractiveness.
- Cross border violence: Lebanon, which shares borders with Israel and Syria, is mired by the cross border violence on both sides. It maintains an open border policy with Syria, which is undergoing through a political turmoil, resulting in an increased burden of one million Syrian refugees on its economy and security forces. Lebanon had a long history of sectarian violence, which is now being fuelled again by the cross border insurgency. Recent bomb attacks on Iran's embassy in Beirut in retaliation of Lebanese extremist group Hezbollah's alleged intervention in Syrian conflict epitomize its security concerns. Hezbollah, a powerful Shiite military group in Lebanon with political representation in the country's Parliament, is alleged of supporting Syrian government fight its opposition, primarily consisting Sunni rebels and extremists. The Syrian war reignited sectarian violence in northern parts of Lebanon, which are dominated by the Sunni population.
- Sectarian violence: Lebanon is still recuperating from long civil war and Israeli occupation. The country's population consists of four major religious groups, Christians, Druze, Sunni Muslims and Shia Muslims. Conflicts between these groups over the political power and government formation led to 15 year long civil war in the country lasting from 1975 to 1990. In addition, southern parts of the country are home for large groups of Palestinian refugees, who fled its neighbouring territories controlled by Israel. Moreover, Israeli occupation of South Lebanon until 2000 has resulted in emergence of political armed group Hezbollah, which has its political representatives in Lebanon's Parliament. Moreover, huge influx of refugees fleeing the neighbouring country Syria have added to the complexity of Lebanon's internal security challenges and fuelled the sectarian violence. These factions have pose serious threats to the government's control on its territories and contributed to the troubled security situation in the country.
- The lack of a well-established infrastructure to produce defense equipment domestically has made Lebanon rely on imports from foreign companies. During the review period, the country's defense imports peaked in 2010. Armored vehicles and Aircraft dominated the imports during this period, with the US and France being the preferred sources. Major contracts signed during 2012-2013 will drive the country's imports over the forecast period, which is expected to see substantial growth.