With no prospect of a ceasefire in Ukraine and with other hotbeds of tension around the world, such as China’s threats to Taiwan, several countries have set higher defense budgets in 2023.
The United States plans to spend US$ 857 billion in the area, an increase of 7.6% compared to 2022. In France, 43.9 billion euros are foreseen, an increase of 3 billion euros, the largest increase in almost 15 years old. Russia plans for 2023 defense spending of US$ 84 billion, more than 40% higher than what it had preliminarily forecast in 2021 for next year.
This increase in budgets, of course, should represent a huge increase in demand for the defense industry: although consultancies such as Deloitte emphasize the challenges of inflation and supply chain bottlenecks for the sector, it should have a significant global growth in 2023.
For security and defense analyst Alessandro Visacro, great power competition (a concept that refers to the dispute between great powers) encourages the arms race, but there are two main points that need to be considered by these actors.
The first is investing in the right weapons: the expert cited naval warfare as an example, which has aircraft carriers as the protagonist, where the main squadrons in the world are centered.
“But this conception of naval warfare is being challenged by the development of fires with greater range and precision, that is, missiles, especially cruise missiles, tend to engage the fleets of aircraft carriers before they can be engaged by the aircraft on board. . If that happens, in the same way that between the First and Second World War the aircraft carrier made the cruiser and the battleship obsolete, these fires with greater range and precision can do the same with the aircraft carriers”, explained Visacro.
The second point to be considered, according to the analyst, is to seek a certain independence of inputs that guarantees production sustainability.
“It’s no use developing an excellent aircraft if there is dependence on a critical input or technology, on a raw material, a superconductor, a microchip… even though I have the production line, the know-how of systems integration, I can having my production compromised by a technological or economic embargo, for example”, he highlighted.
Among the technologies that are greatly impacting the design of defense products in the short and medium term, Visacro highlighted 3D printing, which will lower costs for the war industry, and hypersonic speed.
However, the future points to the fusion of four technologies: Artificial Intelligence, Big Data, quantum computing and 5G communication networks.
“When they are effectively integrated, the impact on the conduct of war will be very significant, because it will drastically increase the automation of the armed forces. Much of what is now done by men on the battlefield, including the decision-making process, will start to be done by machines, which, of course, raises an ethical discussion, but that will not prevent the incorporation of new systems”, he justified visacro.
The analyst agreed that the defense budget increase movements indicate that peace is far away, but considered that due to other factors and not due to the development of the defense industry itself (“there are even those who argue that this is an important component for peace”, pointed). In this sense, Visacro repudiated the argument that artificial crises are designed to feed this sector.
“Artificial crises are a myth that arose before the First World War. It is logical that the big industries that live off the defense market will make more profits and try to push their products when there are more conflicts, but they don’t need to create artificial crises to feed this market. Unfortunately, there is no shortage of crises, conflicts, wars in the world”, argued the specialist.
new protagonists
While the largest producers and exporters of war products (United States, Russia, China, France) project growth in their industries in the sector in 2023, supporting players also plan to grab slices of this market.
“Taking into account the realities of the ongoing war in Ukraine and the visible attitude of many countries towards increasing spending in the field of defense budgets, there is a real chance to enter new markets and increase export earnings in the coming years”, Sebastian Chwalek, CEO of Polish state-owned company PGZ, told Reuters.
He said the company plans to invest more than double the target it had set before the war in Ukraine in the coming years.
South Korea is another country that intends to benefit from geopolitical tensions: a recent report by CNN pointed out that, from 2012 to 2016, the Asian country had only 1% of the global defense market and in the following five years its share reached 2 .8%, the highest increase among the 25 largest exporters of war products in the world. The country, now ranked eighth, plans to become fourth on the list within the next few years.
For Alessandro Visacro, due to its profitability, the defense industry can leverage a country’s economy, but investments in the sector must be made in a balanced way, “so that the development and promotion of this industry does not take place through subsidies and incentives that in the medium and long term compromise the economy as a whole”.
“The best example of this was the Cold War. The arms and space races imposed by the United States on the Soviet Union exhausted the resources of the Russian economy, because Moscow was forced to prioritize this too much to the detriment of other important sectors and legitimate social demands. This imbalance is dangerous, ”she warned.
Among the countries that are identifying possible market niches, Visacro highlighted Turkey.
“Turkey had the intention of buying American drones and the United States refused to sell, especially armed drones, to the Turks, who were forced to develop their own drones. And they say that this was the best thing that could have happened to them, because today Turkey is one of the main producers and exporters of drones, especially loitering munitions, kamizake drones, and armed drones as well”, reported the expert, who also mentioned Brazil.
“Embraer, with the project for the [avião militar] The KC-390 also goes in that direction, it is a very daring project with a very astute vision, which aims to occupy the market niche that today still has the Lockheed Martin C-130 as its protagonist. [Hercules] and its dozens of variants”, he pointed out.
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