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This report is the result of SDI's extensive market and company research covering the UAE defense industry, and provides detailed analysis of both historic and forecast defense industry values including key growth stimulators, analysis of the leading companies in the industry, and key news.
Introduction and Landscape
Why was the report written?
The Future of the UAE Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2017 offers the reader an insight into the market opportunities and entry strategies adopted by foreign original equipment manufacturers (OEMs) to gain market share in the UAE defense industry.
What is the current market landscape and what is changing?
The UAE defense expenditure increased at a CAGR of 3.4% during the review period and valued US$9.3 billion in 2012. The modernization initiatives of the UAE are reflected in the growth of its defense budget over the review period. The multitude of deals signed with foreign OEMs at its biennial international defense expositions proves the attractiveness of the UAE's defense market. With substantial financial resources, minimal indigenous defense capabilities and a growing threat from Iran's advances in ballistic missile technology, the UAE is investing heavily in defense, with a particular focus on fighter jets, anti-missile systems and homeland security. The country is expected to spend US$52.5 billion on defense during the forecast period.
What are the key drivers behind recent market changes?
The UAE's defense expenditure is primarily driven by its focus on the protection of critical infrastructure, its territorial dispute with Iran, and its peacekeeping initiatives in the Gulf. Oil and gas industries contribute a third of the country's GDP, making it of the highest priority for the UAE to protect its reserves which in turn are expected to drive the demand for homeland security systems in the forecast period, such as border patrol and surveillance systems.
What makes this report unique and essential to read?
The Future of the UAE Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2017 provides detailed analysis of the current industry size and growth expectations from 2013 to 2017, including highlights of key growth stimulators. It also benchmarks the industry against key global markets and provides a detailed understanding of emerging opportunities in specific areas.
Key Features and Benefits
- The report provides detailed analysis of the current industry size and growth expectations from 2013 to 2017, including highlights of key growth stimulators, and also benchmarks the industry against key global markets and provides a detailed understanding of emerging opportunities in specific areas.
- The report includes trend analysis of imports and exports, together with their implications and impact on the UAE defense industry.
- The report covers five forces analysis to identify various power centers in the industry and how these are expected to develop in the future.
- The report allows readers to identify possible ways to enter the market, together with detailed descriptions of how existing companies have entered the market, including key contracts, alliances, and strategic initiatives.
- The report helps the reader to understand the competitive landscape of the defense industry in the UAE. It provides an overview of key defense companies, both domestic and foreign, together with insights such as key alliances, strategic initiatives, and a brief financial analysis.
Key Market Issues
- The ability to comply with the UAE's stringent offset requirements is one of the key challenges faced by foreign OEMs. The offset obligation, which can be the equivalent of to up to 60% of the contract value, must be invested in the form of a profitable and sustainable non-oil related joint venture in which the foreign OEM can own a maximum of 49%. However, to minimize the difficulties faced by foreign OEMs, the UAE has established Abu Dhabi Investment Company (ADIC), which facilitates offset participation.
- The UAE's preference for the transfer of technology as part of defense deals poses another significant challenge to foreign OEMs wishing to enter the market. To enhance its indigenous capabilities, the UAE often requests external firms to share proprietary information with domestic defense firms. Although a small number of OEMs that complied with these requests, the majority of firms remain reluctant to share this information, especially as these companies are not permitted to hold a majority share in the joint venture.
- The UAE's defense expenditure is primarily driven by its focus on the protection of critical infrastructure, its territorial dispute with Iran and its peacekeeping initiatives in the Gulf. In order to ensure the protection of the country's most important infrastructures, the UAE has established the Critical National Infrastructure Authority (CNIA), which is forecast to spend approximately US$11 billion by 2021 in order to achieve this goal. In addition, the UAE fears that issues over the territorial claim on the Strait of Hormuz could lead to attacks from Iran. This fear led the country to increase its defense procurement. With limited indigenous capabilities, the UAE was actively importing fighter jets and anti-missile systems in the review period, and this procurement is expected to continue during the forecast period. Furthermore, the active participation of the country in international peacekeeping missions is also expected to drive defense expenditure during the forecast period. Since 2007, the UAE has committed its military forces to international peacekeeping missions, with a particular focus on the Middle East. The UAE has also participated in peacekeeping operations in Somalia, Lebanon and Kosovo, where it is assisting in de-mining initiatives.
- During 2007-2011, the UAE's defense imports primarily comprised aircraft, which held a share of 60% of the country's total defense imports. Other major categories of defense imports include missiles, air defense systems, sensors and ships. In 2011, the share of aircraft in UAE defense imports increased to 61% with missiles, air defense systems, sensors and ships accounting for 36%. This was the result of the government's military modernization program, which aims to improve the country's air defense capabilities.
- During the review period, the UAE experienced rapid development in its infrastructure in both the public and private sectors, a development that increased the country's already significant expatriate population to 80% of the total population. An increased focus on the protection of corporate employees, combined with the UAE's commitment towards homeland security, is expected to stimulate significant growth in the market over the forecast period. Additionally, defense agencies are in the process of procuring identification and access control equipment, perimeter security, monitoring and control devices, video monitors, CCTV cameras, warning and signaling devices, personal protection devices and accessories, armored and emergency response vehicles, and checking, searching and investigation equipment, including x-ray inspection equipment. Therefore, the market opportunities in this sector are expected to attract foreign security consultants, system integrators and security equipment suppliers.