Algerian Defense Industry Research Report to 2017

The Algerian defense industry, which valued US$9.4 billion in 2012, is expected to grow at a CAGR of 6.2% over the forecast period (2013-18) and value US$13.6 billion by 2017. Recent terrorist attacks in the country have necessitated the increased spending on counter-terrorism and counter-insurgency efforts. Another factor driving the country’s defense spending is Algeria’s involvement in an arms race with neighboring countries such as Morocco, Libya, and Tunisia, which is further fuelled by Russia’s eagerness to supply weapons to these countries. An arms race between countries often sparks reactive defense procurements and this is a trend that has been seen in many North African defense procurements over the last decade. For example, Morocco’s purchase of 24 F-16 Block fighter jets from Lockheed Martin in 2008 was in response to Algeria’s previous US$8 billion military and technical cooperation agreement with Russia, US$1.3 billion of which was allotted for the purchase of 29 MiG-29SMT fighters and six MiG-29UB fighters. As North African countries look to establish military superiority in the region, these types of procurements are expected to continue during the forecast period.

Algeria has borne the brunt of sustained terror attacks for many years and the recent attack on the In Amenas gas facility, that left 37 workers dead, has further strengthened the government’s resolve to enhance its defense capabilities. The Defense Ministry’s recent takeover of the Municipal Guard which was previously under the control of the Ministry of Interior has also warranted large scale defense procurements, with a prime motive to counter terror.

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Over the forecast period Algeria is expected to make procurements in areas such as C4ISR systems, drones for attack-grade unmanned aerial vehicles (UAVs), surveillance equipment for ground monitoring, submarines, amphibious ships, naval dockyard infrastructure, fighter jets and associated support systems, armored vehicles, and attack helicopters.

Historically, Russian defense firms have entered the Algerian defense industry through government initiated foreign military sales. However, the forming of various joint ventures with other countries has been witnessed in recent years in an effort to develop Algeria’s domestic manufacturing industry. Furthermore, Algeria promotes the joint development of defense systems, which has resulted in a number of JVs with Taiwanese, Russian, French, and Serbian companies in areas such as armored vehicles, unmanned aircraft, military healthcare, and counter-terrorism equipment.

Algeria’s sudden rise as a major military force in Africa can be attributed to its burgeoning economy and a desire to establish its military superiority in the region. Moreover, an arms race with its neighbors such as Morocco, Libya, and Tunisia is further fuelling relatively large scale defense procurements. Algeria’s domestic defense manufacturing, though developing through joint ventures with other countries, is currently not capable of fulfilling most of the country’s military requirements and this has led to an increase in weapons imports. Historically, Algeria has imported weapons and

related systems primarily from Russia but this trend is gradually changing as it opens its market to other countries, making way for healthy competition in the country’s robust defense market. Even though Russia still accounts for the majority of Algerian defense imports, the value has shown a steady decrease during the period 2007-2011. Conversely, countries such as Ukraine, Italy and the US, which had no exports to Algeria in 2007, have increased their share significantly during the same period. One of the most important developments expected to have a strong impact on the Algerian defense industry is the expected supply of defense equipment worth over US$13 billion by Germany over the next 10 years. Algeria’s weapons exports are negligible and this is also expected to be the case over the forecast period (2013-2017).

Reasons to buy

-Understand the historical performance of the defense industry in this key North African market, alongside future industry projections.

- Gain insight into the key challenges and opportunities identified by influential suppliers and buyers involved in Algeria, enabling industry stakeholders to understand the business sentiment prevailing in the industry.

- Promote your capacity for growth by aligning your capabilities and business practices with the changing needs of the Algerian market.

- Predict how Algeria’s national defense industry will grow, consolidate, and where it will stagnate.

- Gain access to primary survey research conducted by Strategic Defence Intelligence across its B2B panels comprised of senior purchase decision makers and leading supplier organizations.

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Table of Content

1 Introduction
1.1. What is this Report About?
1.2. Definitions
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
3.5.2. Counter-terrorism
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
9 Appendix
9.1. About SDI
9.2. Disclaimer