The UAE, currently the world’s fourth-largest defence importer, looks set to continue its high spend on imports during the forecast period, due to its minimal domestic defence production capabilities. Furthermore, with 33% of all defence imports to the Middle East procured by the UAE, and a forecast increase in its defence budget, the UAE defence market is set to become even more attractive for foreign OEMs (reference see figure 11 below).
Figure 11: Benchmarking with Key Markets – (2005–2010) vs (2011–2016)
As a result of its rapidly growing defence expenditure, the UAE is one of the most attractive defence markets for foreign OEMs (original equipment manufacturers). With its domestic companies only having basic production capacities, the UAE is reliant on imports to fulfil the vast majority of its defence needs and this market has traditionally been dominated by the US, due to the strong diplomatic relationship between the two countries. From 2005 to 2010 (the review period) however, the UAE sought to diversify its arms procurement, increasing its purchases from France and Germany, amongst others.
From 2011 to 2016 (the forecast period), the UAE defence industry is expected to continue its rapid growth due to its ongoing military modernization program. The major barrier to companies wishing to enter the UAE defence industry is the country’s stringent offset requirements.
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 in the next ten years in order to achieve this goal. The UAE’s critical infrastructure includes its oil and gas industries, which contribute a third of the country’s GDP. With two million barrels of oil produced each day, it is of paramount importance that the UAE protects its reserves and the infrastructure associated with extraction, refining and transportation processes. These developments are expected to drive the demand for homeland security systems in the forecast period, such as border patrol and surveillance systems.
In 2008, the UAE signed a US$6.5 billion deal to buy a PAC-3 anti-ballistic missile system from the US. This move highlighted its intentions to strengthen its air defence systems, in order to protect itself from a potential attack from Iran. 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.
The UAE defence ministry aims to equip its military with advanced defence systems that will allow it to participate in peacekeeping and humanitarian missions, an initiative set to increase the country’s military expenditure. Since 2007, the UAE government has committed its military forces to international peacekeeping missions, with a particular focus on the Middle East. In 2010, the UAE signed a deal with Boeing for the acquisition of six C-17 military aircraft, which will enhance its ability to perform a variety of humanitarian and strategic lift operations on both national and international missions. Recently, UAE specialist armed forces, equipped with armoured vehicles, supported the UN’s mission to provide protection for relief workers in Afghanistan. The UAE has also participated in peacekeeping operations in Somalia, Lebanon and Kosovo, where it assisting in de-mining initiatives.
Over the forecast period, the UAE is expected to increase its spending on missile defence systems, which already accounted for 22% of the country’s total capital expenditure during 2004–2009, in order to protect itself against possible attacks on its critical infrastructure. Already, the country has begun to develop a layered defence against ballistic missile attacks, procuring the Patriot missile defence system from Raytheon and Lockheed Martin in 2008.
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