The Thai Defense Industry Market Will To Reach US$3.72B In 2016

Tuesday 3 April 2012, Amsterdam

The Thai defense budget stood at US$5.6 billion in 2011, the country’s military expenditure is modest compared to other leading spenders such as the US, Germany, France and Italy. However, the country’s military budget is higher than some ASEAN member countries such as Indonesia, Malaysia and Vietnam. Thai defense expenditure is expected to grow at a CAGR of 14.12% during the forecast period, thereby making it one of the fastest growing defense markets in the world.

Thai defense expenditure is expected to be driven by modernization initiatives in addition to border disputes, security threats and an arms race with neighboring countries. Moreover, years of defense budget underfunding has created the need for a comprehensive modernization program for equipment including fighter aircraft, military helicopters, armored carrier vehicles and diesel submarines. To enable this, Thailand is aiming to increase defense expenditure as a percentage of GDP from 1.5% in 2011 to 1.8% in 2016. During the review period an average of 69% of the nation’s defense spending was earmarked for revenue expenses while an average of 31% was spent on capital expenditure. However, during the forecast period the share of capital expenditure in the overall defense budget is expected to increase to an average of 35% as the country focuses on replacing the existing fleet of obsolete military hardware. As a result of this increase in capital expenditure, defense equipment suppliers will witness a surge in demand for advance defense systems such as fighter aircraft, military helicopters, armored vehicles, surveillance equipment, warships and submarines.

The country’s Homeland Security (HLS) spending recorded a CAGR of 7.89% during the review period and is expected to witness a CAGR of 7.44% during the forecast period to reach an estimated US$3.72 billion in 2016. On a cumulative basis,Thailand is expected to spend US$16.21 billion on HLSover the forecast period,driven by an increase in terrorist activities, mass protests and domestic instability. Significant investment is expected, during the forecast period, in equipment capable of countering maritime security threats and controlling riots. Suppliers of HLS products will also witness a surge in demand for surveillance equipment such as CCTVs and biometric identification systems.

The defense industrial base of Thailand is largely undeveloped and as a result the country is highly dependent on foreign suppliers to meet its military needs. Modernization of Thailand’s armed forces increased imports substantially during the review period. Additionally, the US emerged as the largest suppliers of defense equipment to the country. While aircraft were the most imported military hardware in 2010, it is anticipated that, during the forecast period, the country will follow a more balanced procurement pattern.