KPMG in Romania publishes report on the defense sector

In the present times of geopolitical tension, attention in NATO countries has naturally focused on the state of the armed forces, and their preparedness to face a potential aggressor. There is a growing debate about the level of public spending which should be directed towards defense. In Romania, as a country bordering Ukraine, the importance of the armed services in defending our country is especially apparent.

KPMG in Romania has published a detailed analysis, "The Romanian Defense Market – Opportunities and Challenges", assessing the current state of the Romanian armed forces and the defense sector, including analysis of the role of the private sector. The report focuses on the current growth opportunities and the key challenges faced by defense contractors, policymakers, and industry stakeholders. We examine the Romanian government’s plans to modernize the armed forces, enhance capabilities to meet NATO commitments, and to address domestic and foreign security challenges. We consider the Strategic Defense Review (SDR, 2020), as detailed in the press release issued by the Supreme Council of Defense (CSAT) in October 2020, which outlines the country's approach to security, focusing on territorial defense, cyber security, and multinational cooperation. According to the SDR, Army 2040 will be a flexible, multi-domain force structure with a broad spectrum of capabilities specific to the 21st century.

The Romanian Government’s defense objectives seek to ensure the security of citizens and the defense of our territory, values, and national interests. The Defense report is designed in a new strategic paradigm, with the goal of strengthening the defense and deterrence posture, based on five essential elements: high-tech capabilities, highly educated and trained human resources, a strong domestic defense industry, developing an institutional culture centered on knowledge and innovation, and resilience.

Our report examines the recently approved National Defense Industry Strategy 2024 –2030, which outlines Romania's ambitions to bolster its defense sector's capabilities, as well as the endowment plan for the Romanian Army 2025-2034, approved by the Romanian Supreme Defense Council in September 2024. We also look at opportunities for defense equipment and service providers resulting from increased spending on the armed forces, including supporting the strategic objective of deepening sovereign capability, acquisition of domestic companies, defense modernization programs, technological advancements, digital transformations and cybersecurity capabilities development, as well as foreign direct investment. The international defense cooperation and NATO/EU frameworks provide many funding and technological opportunities. We also examine some of the challenges faced by the Romanian defense market such as various constraints on defense spending, lack of transparency and bureaucratic hurdles. 

With the aim of maximizing opportunities and addressing potential challenges, in this report we try to expand on strategic recommendations for defense market participants in Romania, delving deeper into each of the key areas: developing local partnerships, transfer of technology, focus on R&D and system integration as well as advocacy and engagement. By focusing on these strategies, defense market participants in Romania can establish a strong presence, develop sustainably, and foster long-term partnerships that benefit both companies and the local defense ecosystem. To support this section of our report, we follow up by presenting several case studies of successful engagement, examining partnerships involving a number of companies.  Finally, we wrap up with a set of key takeaways, summarizing insights and strategic directions for Romania’s defense sector.

As Tudor Grecu, Partner and Head of Advisory at KPMG in Romania says: “This report reflects the dedication and expertise of our team of specialists, who collaborated with KPMG's coordinating global team in the defense industry to identify and address the essential challenges of a critical sector. Through this initiative, we aim to support not only the development of this strategic sector but also to make an active contribution to strengthening our country's defense, in line with Romania's international commitments.” 

As Ramona Jurubiță, Country Managing Partner, KPMG in Romania, concludes: “The primary duty of the state is to provide security against external threats. On the other hand, the costs of maintaining a military force should be proportional, so as not to hinder the freedom of the economy and individual initiative. I trust that our document will be useful in encouraging debates around some recommendations on how the public and private sectors can collaborate to contribute to the proportional development of Romania's defense sector and the fulfillment of our NATO commitments, while balancing economic freedoms and the resources of Romanian society.”