The Egyptian Defense Industry Valued US$3.9 Bn in 2012

Monday 10 December 2012, Amsterdam

The Egyptian defense industry, which valued US$3.9 bn in 2012, is anticipated to record a CAGR of 1.78% over the forecast period 2013-2017 and value US$4.15 bn by 2017. This growth is expected to be driven by the increased internal stability of the country following the political unrest and resultant need for modern military hardware, maintenance, and support. Egypt is expected to allocate 1.3% of its GDP for defense expenditure during the forecast period, despite its relatively small economy. However, it is also expected that the recent downturn in the country‘s economy, due to the political uprising, may bring about a change in the percentage of GDP the armed forces will spend across the forecast period.

Egypt is expected to procure equipment to strengthen all branches of its armed forces. Procurements expected to be made during the forecast period include attack, transport, and maritime patrol aircraft, attack and cargo helicopters, various weapon systems, including anti-tank, anti-ship, air-to-air missiles and rockets, unmanned systems, command, control, communications, computers, intelligence, surveillance and reconnaissance (C4ISR) equipment, and engines, maintenance, and support for the country‘s existing aircraft fleet. The navy has recently signed contracts for fleet  maintenance and support, and a procurement contract for the delivery of four patrol boats called Fast Missile Craft (FMC). The air force has also been vigorously modernizing its Soviet air defense systems during the review period 2008-2012. As most of these systems are old, a fleet wide upgrade and new procurements are expected to continue in the forecast period.

Egypt‘s domestic defense industry is completely controlled by the military through the Ministry of Military Production, and the presence of private and foreign companies is seen as a threat to the country‘s national interest and security. The main customer of Egyptian defense manufacturers is the country‘s armed forces, due to the limitations placed on the industry by a lack of advanced weapons manufacturing capabilities and international export sanctions placed on former customers such as Iraq. Egypt‘s defense industry is also characterized by low R&D spending and a focus on labor-intensive manufacturing products. Egypt‘s military industry base aims to develop the country‘s defense industry by agreeing license and technology transfer agreements with foreign companies, meaning that non-domestic firms often enter the market through government-to-government deals.