Table of Contents 1. Introduction 7 1.1. What is this Report About? 7 1.2. Definitions 7 1.3. Summary Methodology 9 1.4. About Strategic Defence Intelligence 10 2. Executive Summary 11 3. Market Attractiveness and Emerging Opportunities 12 3.1. Current Market Scenario 13 3.1.1. Primary Threat Perception 13 3.1.2. Military Doctrine and Strategy 15 3.1.3. Military Fleet Size 16 3.1.4. Procurement Programs 18 3.1.5. Social, Political and Economic Environment and Support for Defense Projects 20 3.1.6. Political and Strategic Alliances 21 3.2. Defense Market Size Historical and Forecast 23 3.2.1. Afghanistan’s defense expenditure is expected to grow at a CAGR of 3.03% over 2019-2023 23 3.2.2. US aid to Afghanistan is expected to increase over the forecast period 25 3.2.3. The resurgence of the Taliban, the ongoing war against terrorism and the capacity building of Afghan forces is expected to fuel defense expenditure over the forecast period 27 3.2.4. Afghan defense expenditure as a percentage of GDP expected to decrease considerably over the forecast period 29 3.3. Analysis of Defense Budget Allocation 31 3.3.1. Capital expenditure’s share is anticipated to decrease over forecast period 31 3.3.2. Capital expenditure expected to increase at a CAGR of 0.58% over the forecast period 33 3.3.3. Per capita defense expenditure anticipated to remain steady over the forecast period 35 3.4. Homeland Security Market Size and Forecast 37 3.4.1. Afghanistan’s homeland security budget is set to increase at a CAGR of 3.11% over the forecast period 37 3.4.2. Homeland security expenditure to be triggered by the country’s efforts to counter drug trade and human trafficking 39 3.4.3. Afghanistan is one of the most terror prone countries in the world 41 3.4.4. Afghanistan falls under “worst affected” terrorism category 42 3.4.5. Afghanistan has a terrorism index score of “9.4” 44 3.5. Benchmarking Against Key Global Markets 45 3.5.1. Afghanistan defense expenditure expected to grow significantly over forecast period 45 3.5.2. Afghanistan’s defense expenditure is low compared to other Asian countries 47 3.5.3. Afghanistan allocates a higher share of GDP to defense compared to other Asian countries 48 3.6. Market Opportunities: Key Trends and Growth Stimulators 49 3.6.1. Top 10 Defense Market Sectors by Value (US$ Million) - Projections over 2018-2023 49 3.6.2. Land-based C4ISR 50 3.6.3. Man-Portable Tactical Communications 51 3.6.4. Vehicular Tactical Communications 52 4. Defense Procurement Market Dynamics 53 4.1. Import Market Dynamics 55 4.1.1. Afghanistan relies on defense imports from foreign countries 55 4.1.2. The US emerged as the largest suppliers of arms 56 4.1.3. Armored vehicles and aircraft dominate Afghanistan’s military imports 57 4.2. Export Market Dynamics 58 4.2.1. Afghanistan’s domestic defense manufacturing is expected to be nil over the forecast period 58 5. Industry Dynamics 59 5.1. Five Forces Analysis 59 5.1.1. Bargaining Power of Supplier: Medium 60 5.1.2. Bargaining Power of Buyer: Medium 60 5.1.3. Barrier to Entry: Low 60 5.1.4. Intensity of Rivalry: Medium 60 5.1.5. Threat of Substitution: High 60 6. Market Entry Strategy 61 6.1. Budget process 61 6.2. Procurement Policy and Process 62 6.3. Market Regulation 63 6.3.1. Afghanistan has not disclosed an FDI policy or investment regulations 63 6.3.2. Offset obligation not disclosed by the government 63 6.4. Market Entry Route 64 6.4.1. Equipment manufacturers can enter the market through government-to-government deals 64 6.5. Key Challenges 65 6.5.1. Corruption and malpractices 65 6.5.2. Lack of skilled labor 65 6.5.3. Limited defense budget 65 7. Competitive Landscape and Strategic Insights 66 7.1. Competitive Landscape Overview 66 7.2. Key Companies 68 7.2.1. General Dynamics: Overview 68 7.2.2. General Dynamics: Products 68 7.2.3. General Dynamics: Recent Contract Wins 69 7.2.4. Sierra Nevada Corporation: Overview 70 7.2.5. Sierra Nevada Corporation: Products 70 7.2.6. Sierra Nevada Corporation: Recent Announcements and Strategic Initiatives 70 7.2.7. Sierra Nevada Corporation: Alliances 70 7.2.8. Sierra Nevada Corporation: Recent contract Wins 71 7.2.9. Lockheed Martin Corp.: Overview 72 7.2.10. Lockheed Martin Corp.: Products and Services 72 7.2.11. Lockheed Martin Corp.: Recent Announcements and Strategic Initiatives 72 7.2.12. Lockheed Martin Corp.: Recent Contract Wins 73 7.2.13. MD Helicopters: Overview 74 7.2.14. MD Helicopters: Products and Services 74 7.2.15. MD Helicopters: Recent Announcements and Strategic Initiatives 74 7.2.16. MD Helicopters: Recent Contract Wins 75 8. Business Environment and Country Risk 76 8.1. Economic Performance 76 8.1.1. GDP Per Capita 76 8.1.2. GDP, Current Prices (US$ Billion) 77 8.1.3. Local Currency Unit per US Dollar 78 8.1.4. Exports of Goods and Services (LCU) 79 8.1.5. Imports of Goods and Services (LCU) 80 8.1.6. Goods Exports as a Percentage of GDP 81 8.1.7. Goods Imports as a Percentage of GDP 82 8.1.8. Service Imports as a Percentage of GDP 83 8.1.9. Service Exports as a Percentage of GDP 84 8.1.10. Government Cash Surplus/Deficit as a Percentage of GDP 85 8.1.11. Net Foreign Direct Investment 86 8.1.12. Net Foreign Direct Investment as a Percentage of GDP 87 8.1.13. Mining, Manufacturing, Utilities Output 88 9. Appendix 89 9.1. About SDI 89 9.2. Disclaimer 89

List of Tables Table 1: Afghanistan National Army (ANA) Strength 16 Table 2: Afghanistan Air Force (AAF) Strength 17 Table 3: Afghanistan Ongoing Procurement Programs 18 Table 4: Afghanistan Future Procurement Programs 18 Table 5: Top Afghan Defense Procurement Programs by Value (US$ Million) 2018-2023 19 Table 6: Afghanistan Defense Expenditure (AFN billion & US$ billion), 2014-2023 23 Table 7: US aid to Afghanistan (US$ Billion), 2014-2023 25 Table 8: Afghanistan GDP Growth vs. Defense Expenditure as a Percentage of GDP, 2014-2023 29 Table 9: Afghanistan Defense Budget Split Between Capital and Revenue Expenditure (%), 2014-2023 31 Table 10: Afghanistan Defense Capital Expenditure (AFN Billion and US$ Million), 2014-2023 33 Table 11: Afghanistan Per-Capita Defense Expenditure (US$), 2014-2023 35 Table 12: Afghanistan Defense Homeland Security Expenditure (AFN Billion and US$ Billion), 2014-2023 37 Table 13: Terrorism Index, 2018 42 Table 14: Benchmarking with Key Markets - 2014-2018 vs. 2019-2023 45 Table 15: Top Afghan Defense Market Sectors by Value (US$ Million) - 2018-2023 49 Table 16: Afghanistan Budget Preparation Process 61 Table 17: Top Defense Suppliers in the Afghan Defense Industry - By Value (US$ Million) 2018-2023 66 Table 18: Competitive Landscape of the Afghan Defense Market 67 Table 19: General Dynamics - Products 68 Table 20: General Dynamics - Recent Contract Wins 69 Table 21: Sierra Nevada Corporation - Products 70 Table 22: Sierra Nevada Corporation - Alliances 70 Table 23: Sierra Nevada Corporation - Recent Contract Wins 71 Table 24: Lockheed Martin Corp. - Products and Services 72 Table 25: Lockheed Martin Corp. - Recent Contract Wins 73 Table 26: MD Helicopters - Products and Services 74 Table 27: MD Helicopters - Recent Contract Wins 75List of Figures Figure 1: Afghanistan Defense Expenditure (AFN Billion), 2014-2023 24 Figure 2: Afghanistan Defense Expenditure (US$ Billion), 2014-2023 24 Figure 3: US Aid to Afghanistan (US$ Billion), 2014-2023 26 Figure 4: Afghanistan GDP Growth vs. Defense Expenditure as Percentage of GDP, 2014-2023 30 Figure 5: Afghanistan Budget Split Between Capital and Revenue Expenditure (%), 2014-2023 32 Figure 6: Afghanistan Defense Capital Expenditure (AFN Billion), 2014-2023 34 Figure 7: Afghanistan Defense Capital Expenditure (US$ Million), 2014-2023 34 Figure 8: Afghanistan Per-Capita Expenditure (US$), 2014-2023 36 Figure 9: Afghanistan Defense Homeland Security Expenditure (AFN Billion), 2014-2023 38 Figure 10: Afghanistan Defense Homeland Security Expenditure (US$ Billion), 2014-2023 38 Figure 11: Terrorism Heat Map, 2018 41 Figure 12: Terrorism Index, 2018 44 Figure 13: Benchmarking with Key Markets - 2014-2018 vs. 2019-2023 46 Figure 14: Defense Expenditure of the World’s Largest Military Spenders (US$ Billion), 2018 and 2023 47 Figure 15: Defense Expenditure as a Percentage of GDP of Largest Military Spenders (%), 2018 48 Figure 16: Land-based C4ISR Market Size (US$ Million), 2018-2023 50 Figure 17: Man-Portable Tactical Communications Market Size (US$ Million), 2018-2023 51 Figure 18: Vehicular Tactical Communications Market Size (US$ Million), 2018-2023 52 Figure 19: Top Afghan Defense Procurements in Terms of Their Supplier Relationships 54 Figure 20: Afghanistan Defense Imports (US$ Million), 2013-2017 55 Figure 21: Afghanistan Defense Imports by Country (%), 2013-2017 56 Figure 22: Afghanistan Defense Imports by Weapon Category (%), 2013-2017 57 Figure 23: Industry Dynamics Porter’s Five Forces Analysis 59 Figure 24: Afghanistan GDP Per Capita, 2015-2025 (US$) 76 Figure 25: Afghanistan GDP, Current Prices (In US$ Billion), 2015-2025 77 Figure 26: Local Currency Unit per US$ - Exchange Rate, 2015-2024 78 Figure 27: Afghanistan Exports of Goods and Services (in LCU Billion), 2005-2014 79 Figure 28: Afghanistan Imports of Goods and Services (in LCU Billion), 2005-2014 80 Figure 29: Afghanistan Goods Exports as a Percentage of GDP, 2008-2013 81 Figure 30: Afghanistan Goods Imports as a Percentage of GDP, 2008-2013 82 Figure 31: Afghanistan Service Imports as a Percentage of GDP, 2008-2013 83 Figure 32: Afghanistan Service Exports as a Percentage of GDP, 2008-2013 84 Figure 33: Government Cash Surplus/Deficit as a Percentage of GDP (LCU), 2008-2012 85 Figure 34: Afghanistan Foreign Direct Investment, Net (current US$ Billion), 2008-2013 86 Figure 35: Afghanistan Net Foreign Direct Investment as a Percentage of GDP, 2008-2013 87 Figure 36: Afghanistan Mining, Manufacturing, Utilities Output (US$ Billion), 2005-2014 88

General Dynamics Corporation Sierra Nevada Corporation (SNC) Lockheed Martin MD Helicopters