Procurement of Weapons and Equipment Set to Modernize Italian Defense Industry : Ken Research


According to study, “Future of the Italian Defense Industry – Market Attractiveness, Competitive Landscape and Forecasts to 2023” some of the major companies that are currently working in the Italian defense industry are Leonardo, Fincantieri, MBDA, Elettronica.

The Italian Armed Forces encompass the Italian Army, the Italian Navy and the Italian Air Force. Some branches of armed forces are marina militare, esercitoItaliano, aeronauticamilitare and carabinieri. The Ministry of Defense (MoD) plays a major supporting role in the Italian Armed Forces: itpromotes domestic weapons production and manufacturing. Stockholm International Peace Research Institute (SIPRI) and The North Atlantic Treaty Organization (NATO) are two organizations under the MOD.

The Italian defense industry is structured as a pyramid, featuring at the top four big corporations: Finmeccanica, Fincantieri, Avio and Iveco. These corporations act as contractors, so that their output is made of complex weapon systems. Second layer defines handful of smaller companies, those output consists of high-tech sub-systems or single components like sensors, space and communication systems etc. In addition the base of the pyramid is made by a hundred of small and medium companies that work as subcontractors for services or components to major companies.

Italy holds a disproportionate amount of emerging market debt. Protecting from the external threats and maintaining the internal stability, the government allocated also recently allocated 1.1% of its GDP towards defense purposes The Italy Fiscal Year 2018 budget included US$18.1 billion in defense and security related expenditures.

Italy is the eighth-largest exporter of major weapons in the world. These weapons are regulated in an ad hoc process that favors the military and defense industrialists. There are much of the military equipments are produced under European or US license. Italian designed equipment face stiff competition from superior foreign weapons system. Some of the defense weapons included are battle tanks, reconnaissance, armored infantry fighting vehicles, armored personnel carriers, artillery and howitzer systems, air defense systems, fighter and attack aircraft, communication platforms, anti-tank systems, mortars, multiple rocket launchers, army aviation, small arms and some rotor wings aircraft etc.

The major advantage of Italian defense industry in the global market is it’s ability to produce a wide variety of weapon systems and subsystems at lower prices than most of other producers. In addition, key weakness is its technological base, weapons generally are not at the leading edge of technology.

Different Italian military requirements and standards have led to the development of systems that require their own logistic infrastructure and a unique supply of spare parts whose cost has increased substantially as weapon systems have grown increasingly sophisticated.

Country is also planning to buy 60 NH-90s for the Army and 56 for the Navy at a total cost of €4 billion, with the procurement due to wind up in 2023. The Italian defense industry expected to focus on modernization of the armed forces by implementing various procurement programs that include F-35 joint strike fighter project, FREMM frigates, Typhoon multirole combat aircraft, NH 90 helicopters and Medium Extended Air Defense System (MEADS) programs. It is anticipated that defense budget reach USD 18.9 billion by 2023, with a cumulative value of USD 90.7 billion over the forecast period.It is predicted that the defense budget will record a relatively flat CAGR of 1.4% over the forecast period in contrast to the negative CAGR of 1.8% registered during the historic period. This is primarily due to the need of replacingan aging military hardware and equipment, in addition to defending against domestic insurgencies such as organized crimes.

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