Monday 23 September 2013, Amsterdam
Its security and defense force transformation strategy, in addition to growing tension with Russia, is set to see Ukraine’s defense expenditure exhibit explosive growth at a CAGR of 20% between 2013 and 2018, according to this new report: Future of the Ukrainian Defense Industry – Market Attractiveness, Competitive Landscape and Forecasts to 2018.
This report provides in depth analysis of the Ukrainian defense market, with identification of market drivers augmenting its provision of data on the current industry size and growth expectations to 2018. Together with its investigation of the industry structure and procurement dynamics, with analysis of the competitive landscape of the Ukrainian defense industry, and its assessment of the business environment, Future of the Ukrainian Defense Industry – Market Attractiveness, Competitive Landscape and Forecasts to 2018 should be considered the definitive guide to the Ukrainian defense market, and required reading for those serious about capitalizing on the significant opportunities it holds.
KEY DEFENSE DRIVERS
Over the next five years, Ukraine is expected to invest US$22.7 billion for the fulfillment of its defense requirements. A proper understanding of the factors driving this spending is crucial for those seeking to make the most of the opportunities presented by this rapidly expanding market.
Relationship with Russia
Ukraine and Russia have been involved in a dispute over territorial rights to the Crimean peninsula (Crimea) – situated in the Black Sea – that dates back to the early 1990s, when it became a Ukrainian territory following the disintegration of the USSR. Following the ethnic cleansing and deportation of other ethnic groups in 1944, the majority of the region’s population is currently Russian, and as such, a significant proportion of the region’s inhabitants favor integration with Russia.
Furthermore, as Moscow does not accept Crimea as a part of the Ukraine, the constant threat of military invasion by the Russian navy looms over Crimea; indeed, tensions rose significantly in 2008 following the Russian invasion of Georgia. More recently, the Russian Customs Agency disrupted the import of Ukrainian goods into Russia in an attempt to prevent the Ukraine from entering into a free trade accord with the European Union, and coercing it to instead join a Customs Union dominated by Russia. These tensions are further strained by energy issues between the two nations.
This multi-faceted tension between the Ukraine and Russia is expected to be a major driver of Ukrainian defense expenditure to 2018.
Reform & Development Program
Much of Ukraine’s weaponry is outdated, with many of its aircraft and tanks dating back to the Soviet era; the country has not bought new artillery cannons for 20 years as a result of financial constraints, but such cannons only have a useful life of 15 years. Consequently, the reform and development of its armed forces, including the acquisition of new military hardware systems, is a high priority for Ukraine, especially in light of its increasingly strained relationships with Russia.
The transformation of Ukraine’s security and defense sector will be implemented in two stages – the first up to 2017, and the second to 2023. The former stage is designed to transform its defense forces into a fully professional Army, similar to the modern European armed forces that are small in number but well-trained and well-equipped, and is expected to cost UAH131 billion (US$16.3 billion).
KEY HOMELAND SECURITY DRIVERS
Despite financial constraints, Ukraine’s Homeland Security budget is expected to increase in the coming years as a result of an increase in criminal activity – such as the illegal drugs trade, human trafficking, robbery, thefts, murders, street crime, and cybercrime – an upturn that is being worsened by government corruption and inadequate law enforcement.
Drug Trafficking
Although Ukraine is not a major consumer or producer of drugs, a large number of illegal substances are trafficked through the country to Central and Western European countries such as Germany, France, Spain, and the UK. Before entering Ukraine, these drugs are trafficked from Afghanistan, and pass through Russia, the Caucasus, Turkey, Romania, Moldova, and Poland.
Drug traffickers utilize Ukraine’s seaports and rivers to smuggle drugs to Western Europe, and to combat this, the government is expected to invest in explosive detection systems, including trace chemical detectors capable of tracing drug residue, and machines with the capability to screen items through the use of X-rays or millimetric wave imaging.
Human Trafficking
Ukraine has seen a recent upsurge in human trafficking – especially amongst women. Ukrainians are trafficked to all parts of Europe, with 84% of those trafficked used for the commercial sex trade, whilst other are used for forced labor.
In order to combat human trafficking, Ukraine is expected to increase its investment in surveillance and intelligence technologies, such as electronic identification documents, e-passports, automated border crossing systems, and closed circuit television systems.
Cybercrime
Cybercrime is another growing problem for Ukraine, with an increasing number of criminals using the internet to hack into the computer networks of government and financial institutions in order to steal both data and funds. A prime example of such criminal activity took place in October 2010, when the Ukrainian authorities arrested five individuals allegedly involved in an attempt to steal funds worth US$70 million from US bank accounts, using a version of the Zeus Trojan computer virus.
To counter the increasing volume and sophistication of cyber-attacks, Ukraine is expected to invest in:
- Firewalls
- Biometric security systems
- Smart tokens
- Digital signatures and certificates
- Virtual private networks
- Intrusion detection systems
- Intrusion prevention systems
- Computer forensic tools
Its efforts to tackle cybercrime will be assisted by the US, who provided modern forensics equipment for the analysis of cyber threats in July 2013.
This report is the result of Strategic Defence Intelligence’s extensive research covering the defense industry. It offers in-depth analysis of:
- Market opportunity and attractiveness: detailed analysis of the current industry size, and growth expectations during 2014-2018, including highlights of key growth stimulators. It also benchmarks the industry against key global markets and provides detailed understanding of emerging opportunities in specific areas.
- Procurement dynamics: trend analysis of imports and exports, together with their implications and impact on the Ukrainian defense industry.
- Industry structure: five forces analysis of imports and exports, together with their implications and impact on the Ukrainian defense industry.
- Market entry strategy: analysis of the 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.
- Competitive landscape and strategic insights: analysis of the competitive landscape of the defense industry in Ukraine, providing an overview of key defense companies (both domestic and foreign), together with insights such as key alliances, strategic initiatives, and a brief financial analysis.
- Business environment and country risk: a range of drivers at country level, assessing business environment and country risk. It covers historical and forecast values for a range of indicators, evaluating business confidence, economic performance, infrastructure quality and availability, labor force, demographics, and political and social risk.
This will facilitate:
- Clear identification of market opportunities and entry strategies to gain or grow market share in the Ukrainian defense industry.
- Proper understanding of the competitive landscape of the defense industry in Ukrainian, including key domestic and foreign defense companies, key alliances and strategic initiatives.
- A clear understanding of forces operating on the market, and actionable insight on forthcoming developments that will shape the landscape of opportunity in the foreseeable future.
Target Audience
- Defense Companies
- Suppliers to Defense companies
- Defense researchers
- Contractor research organizations
- Trade body, academia or other industry observers
- Marketing and advertising executives
