The Vietnamese Defense Industry Market Opportunities and Entry Strategies, Analyses and Forecasts to 2016

Tuesday 22 May 2012, Amsterdam

Vietnamese defense expenditure registered a CAGR of 12.25% during the review period and is estimated at US3 billion in 2012. It is expected to grow at a CAGR of 12.52% during the forecast period to reach an estimated US$5 billion in 2016. Defense expenditure as a percentage of GDP is expected to decrease from 2.2% in 2011 to 1.8% in 2016. Overall, the country is expected to spend an estimated US$18 billion on its armed forces during the forecast period, of which approximately US$6 billion will be allocated for capital expenditure (reference see graph).

In March 2011, the Vietnamese government passed legislation that prohibits selling stakes of state-owned defense companies to the private sector. The legislation further stipulates that the state will hold 100% of the charter capital in enterprises involving national defense and security, and military held commercial enterprises. This legislation prevents private participation and thwarts any foreign direct investment into the country’s defense sector.

Vietnam released its third defense whitepaper in 2009 which revealed the country’s defense expenditure for the first time during 2004–2008. This was seen by many as a step towards building confidence with both its neighbours and countries in the west, which is in line with its foreign policy of building cordial relations with other countries.

Vietnam’s military industrial base is still in a nascent stage of development. The country’s defense companies are predominantly government-owned and are operated by the military, which has prevented foreign investment into the defense sector and limited technological innovation. As a result, the country’s domestic companies are unable to develop and manufacture technologically advanced defense systems.