Bangladesh government has developed a well-defined military modernisation plan and over the period 2014 to 2018, the expenditure on defence is forecast to increase by 6.5% CAGR. The continued active participation of the Bangladesh military in peace keeping roles especially for the UN combined with this newly defined modernisation plan is expected to drive increased investment in defence over the next few years.
In June 2013, the Bangladesh government announced a defence budget of US$1.87 billion which represented an increase of 12% compared to the previous year. However, foreign companies seeking an opportunity to sell their new hardware are faced with only a small percentage of this budget being assigned to the investment of new defence hardware. The majority of investment is to be allocation to salaries, maintenance and non-development activities. This budget represents 6.5% of the total government expenditure and approximately 1.3% of total GDP. Out of the total fund, the majority or BTD140 billion is allocated to non-development activities such as salaries, maintenance costs and military operations. The remaining budget is allocated for defence procurement and expenses.
Bangladesh military is focused on updating their defences to meet the challenges of the 21st century and as a result has established a new air force airbase in addition to new aircraft and helicopters. In addition, expenditure has been targeted on procuring sophisticated logistics solutions.
In 2010, the Bangladeshi government outlined a 10 year defence modernisation plan and it is the focused strategy of the Bangladeshi government to modernise their defences which is forecast to drive continued growth in this market. A new report titled “Future of the Bangladeshi Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2018” has reported that the Bangladeshi government is forecast to invest US$11.1 billion in its armed forces of which US$2.7 billion is forecast to be assigned to military hardware. This investment on hardware represents a relatively small expenditure of the overall total presenting foreign OEMs limited opportunities for investment. However, on the upside, investment in hardware has increased compared to the last review period which only totalled US$2.2 billion.
The Bangladesh government are currently focused on improving the economy and bringing wealth and prosperity for its people and as a result, the Bangladesh defence market represents a less attractive prospect for foreign companies seeking to find new contracts for their high-tech defence systems.
In terms of the Transparency International’s Corruption Perceptions Index 2012, Bangladesh is regarded as a highly corrupt country. Recent incidents of malpractices within the Bangladeshi military industrial base may limit the growth potential and inward investment in their defence sector. In addition, the report stated that recent incidence in the failure to exercise adequate control over defence procurement and proceedings has led to a high corruption score.
For more information on the Bangladesh defence market, see the latest research: Bangladesh Defnce Market
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