Wednesday, 26 October 2011

The Swedish Defence Industry Forecast Until 2015

Despite a marginal increase in the Sweden’s total defense budget, military expenditure as a percentage of GDP is predicted to decrease, as the country’s defense expenditure is not expected to grow at the same pace as the Swedish economy.

LondonOctober 26, 2011 – Swedish defence expenditure is expected to be influenced by tensions with Russia, the procurement of new defense systems and the country’s participation in international peacekeeping missions. Sweden is the fifth largest country in Europe, and throughout 2010–15, is expected to invest US$32.5 billion in strengthening its armed forces.

Military expenditure as a percentage of GDP expected to decline
On average, Sweden allocated 1.4% of its GDP (gross domestic product) for defense expenditure during the review period (2005–09). However, military expenditure as a percentage of GDP is expected to decrease during the forecast period (2010–15), as the country’s annual GDP growth rate is higher than the predicted growth rate of the Swedish defense budget.

Due to a strained external relationship with Russia, internal security threats, and the deployment of troops in overseas peacekeeping missions, the country is expected to focus on the procurement of land defense systems, advanced defense communication systems and sophisticated air defense systems.

In addition, the country’s homeland security expenditure is expected to increase during the forecast period, primarily due to a rise in organized crime and the threat from global terrorist organizations such as al-Qaeda.

Sweden is tenth largest global arms exporter
Despite the economic crisis and the resultant decline in the country’s defense imports and exports in 2009, Sweden emerged as the tenth largest global exporter of arms during the review period. During the same period, the US emerged as the largest arms supplier to the country followed by Canada and Italy; however Germany was the largest supplier of defense equipment to Sweden in 2009 alone. Missiles accounted for the majority of the country’s defense imports during the review period.

As a result of Sweden’s highly developed domestic defense industry, the country emerged as a leading arms supplier in the global defense market. The country’s defense industry is a key exporter of aircraft, and during the review period European countries emerged as the largest consumers of Swedish defense goods. However, the majority of European countries are currently reducing defense budgets and therefore the country is attempting to diversify arms exports to Asian and African markets.

Stringent offset policy
Despite possessing a well-developed domestic defense industry, the Swedish government encourages defense offsets in order to establish long-term cooperation between Sweden and foreign defense industries. The Swedish defense offset policy, which has been in practice since 1983, is a requirement for all defense procurements exceeding US$13.9 million. Foreign suppliers are obliged to invest 100% of the contract value into the country’s defense industry, which provides Sweden with an opportunity to gain access to advanced defense technology, and provides the country with employment opportunities.

Preferred market entry routes
In order to establish long-term relationships with foreign defense firms, the government encourages foreign investors to enter the Swedish defense industry through either the acquisition of a domestic defense company, or via collaboration on a joint research and development program.

Key challenges include project delays and preference for direct sales
In 2015, the country’s total defense expenditure is expected to be less than that recorded in 2008, and already the reduction has led to both project delays and cancellations. In addition, Sweden plans to reduce costs through the procurement of reasonably priced foreign defense equipment, a factor which restricts the growth of small and medium sized Swedish defense companies.

To purchase the full version of ‘The Swedish Defense Industry – Market Opportunities and Entry Strategies, Analyses and Forecasts to 2015’, please click here.

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For more information on the article, please contact:

Shelly Wills
Tel: +44 (0) 20 7936 6671

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