GCC defence spending ‘to rise due to security situation’09 Feb 2017
DUBAI: The Gulf will continue to be a key market for defence suppliers in 2017, according to several senior industry figures.
This activity will be spurred by a “security environment that is as challenging as we have ever known,” with countries around the region facing “unprecedented challenges,” according to Robert S. Harward, Chief Executive of Lockheed Martin United Arab Emirates.
With rising global tensions, international demand for defence and military products is increasing across the Gulf Cooperation Council (GCC) countries, according to a report released by Deloitte in January.
As a result of this increasing insecurity, many countries have hiked their spending on next generation military equipment, with the UAE and Saudi Arabia leading the field in the GCC.
“International sales currently represent roughly 30 per cent of Boeing Defence, Space & Security’s business, and we see continued opportunities for growth, particularly in the Middle East and the Asia Pacific regions,” said Scott Day, Boeing Defence, Space & Security Communications, in an email to Gulf News.
According to Theodore Karasik, a senior adviser to Gulf State Analytics, a geo-strategic consultancy based in Washington, DC, current industry trends show an increase in multiple markets, including not only aerospace but also cybersecurity, communications and riot control equipment.
That being said, Karasik also noted that “America’s ITAR restrictions (International Traffic in Arms Regulations) still hurt Washington’s sales in the MENA region, especially to the GCC.”
It is unclear what president Donald Trump intends to do with the existing regulations governing the export of arms, although analysts expect him to loosen restrictions in favour of a home build approach.
One of the key challenges facing defence suppliers in 2017 is the reduction in spending by governments in the region, hurt by low oil prices.
“Our focus remains on delivering the most affordable advanced technology solutions to provide our partners with critical full spectrum capabilities to help solve some of the most difficult security challenges,” noted Harward.
Karasik also cited budgetary constraints as one of the key issues in defence this year.
“The MENA countries, particularly the GCC, are undergoing transformations of their economies and thus are seeking to procure the best possible deals,” Karasik said, adding that the UAE’s domestic industry has helped “offset suppliers from outside of the region.”
Matthew Cochran, Chairman of Defence Services Marketing Council, agrees with this sentiment about home-grown defence suppliers.
“Having more “Made in the UAE” type defence and security companies that have capabilities with export potential, like Tawazun Dynamics and NIMR, will provide for a suitable future for regional GCC allied militaries,” said Cochran.
For Karasik, in 2017 the opportunities for suppliers lie in “areas of technological issues.”
“While there is increasing specialisation by arms sellers, there are requirements for unmanned systems, cyber tools, and communications that continue to be in the MENA region’s highest interest,” he added.
“Today, we are working together with the UAE to support everything from aerospace to outer space,” noted Harward.
According to Deloitte’s report, several Middle Eastern countries spend a significant percentage of their GDP on defence costs, with Oman and Saudi Arabia being two of the top three. With $85.4 billion in military expenditure in 2015, Saudi Arabia was also the fourth largest defence spender globally.