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Norwegian Annual Defense Expenditure Expected to Reach US$7.8bn by 2017

The Norwegian defense industry recorded a CAGR of 5.03% during the review period (2008-2012), to reach a value of US$6.9 bn in 2012, a growth expected to slow to a CAGR of 2.55% over the forecast period (2013-2017) to reach a projected value of US$7.8 billion in 2017. Furthermore, the country is in the process of modernizing its armed forces and home guard under the new long-term plan for the armed forces and is therefore expected to spend a cumulative total of US$37.2 bn on defense during the forecast period, including US$9.9 bn on capital expenditure (reference graph). 

Although Norway allows foreign investors to enter its defense industry, and foreign and domestic investments are treated equally by law, regulations, standards, and practices within the industry often favor Norwegian, Scandinavian, and EEA investors. Furthermore, as the country is a member of the European Defense Agency, preference is given to European defense companies, which increases the barrier to entry for non-European defense companies. Additionally, the country follows a strict offset policy, according to which, offsets are mandatory for all transactions exceeding US$82.2 million and investors are required to reinvest 100% of the value of the contract into the Norwegian economy.

During the review period, Norway increased its defense expenditure due to a number of programs to modernize its armed forces. Consequently, the country is not expected to embark on any major new defense acquisition programs over the forecast period, a reluctance exacerbated by the fact that Norway’s GDP growth is expected to slow from its review period CAGR of 5.45%, to a forecast period CAGR of 2.44%. As a result, Norway is expected to reduce its defense procurements, offering limited market opportunities to foreign OEMS keen to enter the country’s defense industry.

Source : ASDReports - Market Research

Published on ASDNews: Sep 5, 2012

 

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