Why this is important to Wisconsin businesses: This is expected to be one of the most lucrative defense markets for foreign manufacturers during the next few years.
The United Arab Emirates (UAE) is one of the most lucrative markets for foreign defense original equipment manufacturers (OEMs) and is expected to spend $52.5 billion during the period 2013-2017.
The UAE is located on the south side of the Strait of Hormuz, a waterway through which 40 percent of the world’s oil is exported. This waterway is shared with neighboring Iran. Territorial disputes with Iran, combined with recurring civil unrest, the war against terrorism, and geopolitical instability in the wider Middle East region all remain significant and growing sources of real and perceived risk for the UAE. Though the UAE itself is stable, the conflicts in Iraq, Syria, and Yemen are perceived to transcend borders and negatively affect foreign business operations, thus driving the UAE government to focus on the development of defense facilities for naval, aircraft and missile systems. These developments accounted for 96 percent of the country’s total defense procurements from 2004 to 2009. The country’s lack of indigenous defense capabilities and trained manpower have led it to seek technologically advanced, high-quality defense systems from foreign OEMs, in order to provide sufficient protection to its strategic assets and critical infrastructure, commercial and government operations and planned large-scale global event such as Expo 2020.
The UAE accounts for 4.9 percent of global arms imports, making it the fourth-largest defense importer in the world. The country has managed to support and initiate its defense programs through international joint ventures, acquisitions and mergers with the U.S., Russia, France and other militarily equipped nations. The UAE’s annual defense expenditure is expected to record a compound annual growth rate (CAGR) of 12.09 percent during the period 2016-2020, of which $58.3 billion will be spent on arms procurements. An equivalent amount will be spent on the training of its armed forces and on the maintenance, repair and overhaul of existing defense systems. During the forecast period, attractive opportunities are expected to emerge in multi-layered missile defense systems, armored vehicles, unmanned aerial vehicles, early warning systems and satellite communication systems.
As part of its strategic initiatives, the UAE launched Tawazun Holdings in 1992, and has built all of its defense manufacturing capabilities under this umbrella. Over the years, Tawazun has been the primary base for the UAE defense industry, with an advanced manufacturing facility covering sectors such as aerospace, defense, metals and precision-based manufacturing. These initiatives laid the foundation for other national investment programs that would later merge into a single integrated company. In 2014, an agreement between three of the UAE’s major defense investment companies: Tawazun, Emirates Advanced Investments Group (EAIG) and Mubadala Development Company resulted in the formation of a single integrated body – Emirates Defense Industries (EDIC). EDIC will be the region’s premier national defense platform, comprising a cluster of subsidiary companies. These companies will cover all areas of defense manufacturing; autonomous systems; mapping; maintenance, repair and overhaul; communications; logistics and technology development.