Western defense companies now need to look outside their core markets for growth. In the aftermath of the global economic crisis and over a decade of engagement in southwest Asia, many Western countries have scaled back their defense budgets, favoring instead more targeted spending and austerity plans. In Europe, ministries of defense are downsizing their military operations and procurement programs, and in the United States, the effects of the Budget Control Act of 2011 and sequestration will restrict defense spending through 2021 absent congressional action. By contrast, many countries representing addressable markets in Asia, the Middle East, and South America are investing in defense-modernization programs and over the past few years have increased their defense spending at compound annual growth rates of between 5 and 10 percent.

The value of international deals for Western contractors can be significant. Recent competitions to supply fighter aircraft to the nations of Brazil, India, Japan, and South Korea have represented a combined $33 billion sales opportunity—equivalent to one or two decades of full-rate production for the entire fighter industry. India’s competition for more than 120 multi-role combat aircraft was the largest contract opportunity of its kind since the early 1990s, valued at around $12 billion.