BMI View: We expect Jordan ' s defence budget to continue increasing both in absolute terms and as a share of GDP over the next five years. This will be driven primarily by the country ' s need to increase its armed forces ' capabilities, in order to be able to efficiently contribute to the US-led international coalition ' s efforts against IS. Thus, whilst little investment will be focused on the development of the domestic defence manufacturing sector, much of the spending will open up opportunities for countries and new defence trade partners to contribute to Jordan ' s efforts to increase its capabilities.
Jordan's defence manufacturing sector remains characterized by a lack of opportunities and development. Although the country presents a significant number of positive characteristics that create the potential for a good business environment, such as economic and investment openness, a skilled labour force and low corruption levels, this sector has benefitted from very little investment. This is the result, primarily, of a defence strategy that has so far been essentially focused on the development of a small but very well trained and equipped army. Whilst some of the equipment has been provided through the domestic defence sector, most have been imported from the country's main defence trade partner - the US.
Historically considered a haven of peace in the middle of a conflict-prone zone (Jordan shares borders with Israel, Syria and Iraq), Jordan has been an important ally for the US foreign policy in the region in these past decades. As such, the US has significantly contributed to the development of the well-equipped army through financial support, as well as through selling and donating capacities such as aircraft. Therefore, there has been little incentive for Jordan, even when the economy was growing at a healthy rate, to invest in the defence sector.
As the situation in Iraq and Syria - with IS advancing on territories - continues to escalate, Jordan has found itself in the middle of an international crisis it cannot remain on the sideline of. Firstly, the beginning of the crisis in Syria, in 2011, already brought with it a mass influx of refugees across the Jordan border. This has put strains not only on the asylum system of the country, both administratively and in terms of refugee camps capacity, but as over 80% of the refugees live in host communities, tensions have started arising between refugees and communities that feel disenfranchised. Secondly, with the mass influx of refugees, the risk of terrorist sleeper cells at the borders has increased the likelihood that terrorists may cross the border and establish themselves in Jordan.
Given such circumstances, Jordan has been significantly stepping up its participation in the US-led coalition's bombing of Syria, in the hope of keeping at bay, initially, and neutralising in the longer term, the threat that IS constitutes right at the country's doors. In this context, Jordan has been increasing its defence budget since the beginning of 2015 and we expect will continue to do so over the next five years. This will be driven primarily by a need to increase its air force's capabilities to be able to efficiently fight the IS threat alongside other coalition allies. In the past year, it has also been multiplying the number of defence cooperation agreements (for example with India, Italy, Tunisia) to increase the availability of different capabilities. It has also been stepping up in terms of strategic international alliances (for instance, it is seeking relations with Russia in the face of the IS crisis) in order to ensure a comprehensive defence and security strategy. Consequently, we expect that Jordan will continue to increase its defence spending in the coming years, which may not open up opportunities for the development of the domestic defence sector, but will certainly provide new opportunities for international companies seeking to contribute to Jordan's military modernisation efforts.
Key BMI Forecasts:
We forecast Jordan's defence spending to reach USD2.2bn by 2016, which would signify a 9.3% y-o-y increase.
We forecast Jordan's defence spending to continue increasing as a share of the country's GDP, reaching 5.2% in 2016 (up from 5.1% in 2015).
As the country continues to focus its efforts on increasing the armed forces' capabilities, little investment will be made to development the domestic defence market, thus leading to imports continuing to far outweigh exports.
The Jordan Defence & Security Report features BMI Research's independent forecasts for national and international security, the defence industry, military expenditure, employment in arms production, and arms imports and exports, as well as examining industry trends and prospects, national and multinational arms producers and the regulatory environment.
BMI's Jordan Defence & Security Report provides professionals, consultancies, government departments, regulatory bodies and researchers with independent forecasts and regional competitive intelligence on the Jordanian defence and security industry.
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- Defence Expenditure: Defence expenditure (local currency and USDbn); defence expenditure (% of total budget); defence expenditure per capita (USD); defence budget (local currency and USDbn).
- Armed Forces (to 2012): Manpower available for military service, manpower fit for militaryservice, army personnel, navy personnel,air force personnel, total armed forces, (‘000) (% population).
- Arms Trade: Arms and ammunition exports and imports (USDmn); bombs, grenades and missiles exports and imports (USDmn); revolver and pistol exports and imports (USDmn); weapons excluding guns and swords exports and imports (USDmn).
Political Risk Assessment
Drawing on BMI’s heritage of more than 25 years of Country Risk analysis, this comprehensively evaluates the key risks to domestic politics and foreign relations, focusing on issues most likely to affect either domestic security or the defence sector.
Security Risk Analysis
BMI’s proprietary Security Risk Indices provide investors with a reliable and country-comparable guide to conflict, terrorism and criminal risk, backed up by our analyst’s latest assessment of each component. Furthermore, drawing on our Country Risk expertise, we assess the state’s vulnerability to a serious, or prolonged, terrorist campaign.
Armed Forces Spending/ Expenditure
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