The military infrastructure and logistics market is anticipated to grow at a CAGR of over 8% during the forecast period.
- The global military expenditure has experienced solid growth over the last decade to reach USD 1.92 trillion in 2019. The defense expenditure is driven by the ongoing regional and global conflicts, external and internal security threats, and the growing influence of radicalism leading to violence. Thus, several countries are investing in the construction of new military bases and the provisional upgrade and maintenance of defense assets, driving the military infrastructure and logistics sector.
- The military infrastructure is driven by the need to establish well-connected strongholds across the borders of a country to effectively protect against several types of imminent and unknown threats, while the logistics segment is driven by the need to effectively manage the military supply chain for food, weapons, and other essential and non-essential requirements.
Key Market Trends
Infrastructure Construction Segment to Witness the Highest CAGR During the Forecast Period
On account of the profound changes in the international strategic landscape, the configuration of the international security system has been undermined by the growing hegemonism, unilateralism, and power politics that has fueled several ongoing regional conflicts. The defense spending was directly influenced by the ongoing geopolitical rift in the region and was majorly driven by the race for achieving technological superiority over other countries. To address the evolving threats, major countries in the region are realigning their military strategies and organizational structures. Hence, several countries are actively constructing new military bases to maximize their extent of control over a strategically viable area. On this note, in April 2020, the Naval Facilities Engineering Command Europe, Africa, Southwest Asia (NAVFAC EURAFSWA) awarded a USD 15 million contract to KBR Inc. to perform engineering, design, new construction, renovation, repairs, maintenance, replacement, alterations, demolition and other construction tasks at Camp Lemonnier and its associated Chabelley Air Field. Such developments are envisioned to bolster the growth prospects of the infrastructure segment during the forecast period.
North America to Continue its Dominance in the Market
The United States, one of the leading defense spenders, globally, is focusing on increasing its defense expenditure every year. Currently, it spends about 3.2% of its GDP on defense. In July 2018, the US government instructed the NATO leaders to increase their defense spending, to meet 2% of the country's economic output, and further increase it up to 4%, higher than the group's goal of 2%. Following this, in November 2019, NATO announced that in 2019, the defense spending across European Allies and Canada increased in real terms by 4.6%, marking the fifth consecutive year of growth. Several contracts have been awarded lately to develop an effective and efficient military infrastructure layout and logistics system. For instance, in April 2020, the US Army awarded a USD 4.5 million contract to DynCorp International to provide resources and management for operations and maintenance support services at the US Army Office of the Program Manager (OPM) Saudi Arabian National Guard (SANG) Modernization Program within Riyadh, Saudi Arabia. Also, in light of the current COVID-19 outbreak, in April 2020, the US Army Contracting Command-Rock Island issued a USD 15 million contract modification under DynCorp International’s Logistics Civil Augmentation Program (LOGCAP IV). As per the terms of the new contract, DynCorp International would assemble a temporary triage facility for 100 ambulatory non-acute care, COVID -19 patients at the Bergen New Bridge Medical Center, Paramus, New Jersey. Dispersal of similar contracts is envisioned in the future, driving the North American segment of the market in focus during the forecast period.
The military infrastructure and logistics market is highly competitive and is marked by the presence of many prominent players competing for the market share. The stringent safety and regulatory policies in the defense sector are expected to restrict the entry of new players. Furthermore, the market is primarily influenced by the prevalent economic conditions in dominant markets like the US. Hence, during an economic downturn, contracts may be subjected to deferral or cancelation and lead to a relatively slower growth rate, which, in turn, can adversely affect the market dynamics. Moreover, business uncertainty may be enhanced by failures or delays in obtaining required permits to operate in a foreign country can have an adverse effect on the businesses and operating results of market players.
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