Future of the UAE Defense Industry Attractiveness ...Future of the UAE Defense Industry – Market Attractiveness, Competitive Landscape and Forecasts to 2020

Future of the UAE Defense Industry – Market

Attractiveness, Competitive Landscape and

Forecasts to 2020

Future of the UAE Defense Industry – Market Attractiveness, Competitive Landscape and Forecasts to 2020

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TABLE OF CONTENTS

1. Introduction ........................................................................................................................... 9

1.1. What is this Report About? ........................................................................................................... 9

1.2. Definitions ...................................................................................................................................... 9

1.3. Summary Methodology .................................................................................................................11

1.4. SDI Terrorism Index ......................................................................................................................12

1.5. About Strategic Defence Intelligence ..........................................................................................12

2. Executive Summary ............................................................................................................ 13

3. Market Attractiveness and Emerging Opportunities ........................................................ 15

3.1. Defense Market Size Historical and Forecast..............................................................................16

3.1.1. The defense budget of the UAE to record a CAGR of XX% over the forecast period ............................. 16

3.1.2. Military modernization initiatives, territorial dispute with Iran, and peace keeping missions to drive

defense expenditure .............................................................................................................................................. 20

3.1.3. The defense budget as a percentage of GDP is expected to increase during the forecast period .......... 22

3.2. Analysis of Defense Budget Allocation .......................................................................................26

3.2.1. Capital expenditure allocation is expected to increase during the forecast period .................................. 26

3.2.2. Defense capital expenditure expected to increase at a CAGR of XX% over the forecast period. ........... 28

3.2.3. Revenue expenditure to be US$XX billion over the forecast period ........................................................ 32

3.2.4. Per capita defense expenditure expected to increase during the forecast period ................................... 36

3.3. Homeland Security Market Size and Forecast ............................................................................38

3.3.1. UAE homeland security is expected to increase at a CAGR of XX% over the forecast period ............... 38

3.3.2. Investment in the protection of infrastructure and cyber security are expected to drive the UAE

homeland security market ..................................................................................................................................... 42

3.3.3. The UAE faces minimal threat from terrorists........................................................................................... 44

3.4. Benchmarking with Key Global Markets .....................................................................................46

3.4.1. The UAE’s defense budget expected to register rapid growth over the forecast period .......................... 46

3.4.2. UAE defense expenditure is low compared to the largest defense spenders in the world ...................... 48

3.4.3. UAE allocates moderate percentage of its GDP towards defense expenditure ....................................... 49

3.4.4. The UAE faces “low risk” from acts of terrorism ....................................................................................... 50

3.5. Market Opportunities: Key Trends and Growth Stimulators ......................................................52

3.5.1. Multi-role Aircraft ....................................................................................................................................... 52

3.5.2. C4ISR – land based .................................................................................................................................. 53

3.5.3. Infrastructure ............................................................................................................................................. 55

3.5.4. Attack Helicopters: .................................................................................................................................... 56

4. Defense Procurement Market Dynamics ........................................................................... 57

4.1. Import Market Dynamics ...............................................................................................................58


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4.1.1. Limitations of the domestic defense industry to encourage arms imports ............................................... 58

4.1.2. The UAE stood as the world’s fourth-largest arms importer over the review period ................................ 58

4.1.3. Over the review period, aircraft accounted for the majority of the UAE’s defense imports ...................... 59

4.1.4. US continues to be the major arms supplier to the UAE .......................................................................... 60

4.2. Export Market Dynamics ..............................................................................................................61

4.2.1. The UAE has minimal defense exports .................................................................................................... 61

5. Industry Dynamics .............................................................................................................. 62

5.1. Five Forces Analysis.....................................................................................................................62

5.1.1. Bargaining power of supplier: low to medium ........................................................................................... 63

5.1.2. Bargaining power of buyer: medium to high ............................................................................................. 63

5.1.3. Barrier to entry: medium to high ............................................................................................................... 63

5.1.4. Intensity of rivalry: high ............................................................................................................................. 64

5.1.5. Threat of Substitution: low to medium ...................................................................................................... 64

6. Market Entry Strategy ......................................................................................................... 65

6.1. Market Regulation .........................................................................................................................65

6.1.1. Defense deals are settled through direct negotiation or competitive bidding ........................................... 65

6.1.2. Foreign OEMs prefer indirect offsets to meet the obligations associated with defense deals ................. 65

6.2. Market Entry Route .......................................................................................................................67

6.2.1. Foreign OEMs use proxy representatives to enter the market ................................................................. 67

6.2.2. Defense expositions hosted by the UAE serve as an entry route for foreign OEMs ................................ 67

6.3. Key Challenges .............................................................................................................................69

6.3.1. Complying with the UAE’s stringent offset requirements a concern for OEMs ........................................ 69

6.3.2. UAE demands technology transfer in defense deals ............................................................................... 69

7. Competitive Landscape and Strategic Insights ................................................................ 70

7.1. Competitive landscape Overview .................................................................................................70

7.1.1. A diverse range of foreign OEMs dominate the UAE defense sector ...................................................... 70

7.1.2. Indigenous ship building drives domestic market growth ......................................................................... 71

7.2. Key Foreign Companies ...............................................................................................................71

7.2.1. Lockheed Martin – overview ..................................................................................................................... 71

7.2.2. Lockheed Martin – Major Products and Services ..................................................................................... 71

7.2.3. Lockheed Martin – recent announcements and strategic initiatives ......................................................... 72

7.2.4. Lockheed Martin – alliances ..................................................................................................................... 72

7.2.5. Lockheed Martin – recent contract wins ................................................................................................... 73

7.2.6. BAE Systems Plc. – overview .................................................................................................................. 74

7.2.7. BAE Systems Plc. – Major Products and Services .................................................................................. 74

7.2.8. BAE Systems Plc. – recent announcements and strategic initiatives ...................................................... 74

7.2.9. BAE Systems Plc. – alliances ................................................................................................................... 75


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7.2.10. BAE Systems Plc. – recent contract wins ................................................................................................. 75

7.2.11. Raytheon Company – overview ................................................................................................................ 76

7.2.12. Raytheon Company – Major Products and Services ................................................................................ 76

7.2.13. Raytheon Company – recent announcements and strategic initiatives ................................................... 76

7.2.14. Raytheon Company – alliances ................................................................................................................ 77

7.2.15. Raytheon Company – recent contract wins .............................................................................................. 77

7.2.16. Rolls-Royce Plc. – overview ..................................................................................................................... 79

7.2.17. Rolls-Royce Plc. – Major Products and Services ..................................................................................... 79

7.2.18. Rolls-Royce Plc. – recent announcements and strategic initiatives ......................................................... 79

7.2.19. Rolls-Royce Plc. – alliances ..................................................................................................................... 79

7.2.20. Rolls-Royce Plc. – recent contract wins ................................................................................................... 80

7.2.21. Northrop Grumman Corporation – overview............................................................................................. 81

7.2.22. Northrop Grumman Corporation – Major Products and Services ............................................................ 81

7.2.23. Northrop Grumman Corporation – recent announcements and strategic initiatives ................................ 81

7.2.24. Northrop Grumman Corporation – alliances ............................................................................................. 82

7.2.25. Thales – overview ..................................................................................................................................... 83

7.2.26. Thales – Major Products and Services ..................................................................................................... 83

7.2.27. Thales – recent announcements and strategic initiatives ......................................................................... 83

7.2.28. Thales – alliances ..................................................................................................................................... 84

7.2.29. Thales – recent contract wins ................................................................................................................... 84

7.2.30. The Boeing Company – overview ............................................................................................................. 85

7.2.31. The Boeing Company – Major Products and Services ............................................................................. 85

7.2.32. The Boeing Company – recent announcements and strategic initiatives ................................................ 85

7.2.33. The Boeing Company – alliances ............................................................................................................. 86

7.2.34. The Boeing Company – recent contract wins ........................................................................................... 86

7.3. Key Public Sector Companies ......................................................................................................87

7.3.1. Abu Dhabi Ship Building – overview ......................................................................................................... 87

7.3.2. Abu Dhabi Ship Building – Major Products and Services ......................................................................... 87

7.3.3. Abu Dhabi Ship Building – recent announcements and strategic initiatives ............................................ 87

7.3.4. Abu Dhabi Ship Building – alliances ......................................................................................................... 88

7.3.5. Abu Dhabi Ship Building – recent contract wins ....................................................................................... 88

7.3.6. Abu Dhabi Ship Building – financial analysis ........................................................................................... 89

7.3.7. Gulf Logistics and Naval Support – overview ........................................................................................... 91

7.3.8. Gulf Logistics and Naval Support – Major Products and Services ........................................................... 91

7.3.9. Gulf Logistics and Naval Support – recent announcements and strategic initiatives ............................... 92

7.3.10. Abu Dhabi Systems Integration – overview .............................................................................................. 93

7.3.11. Abu Dhabi Systems Integration – Major Products and Services .............................................................. 93

7.3.12. Abu Dhabi Systems Integration – recent announcements and strategic initiatives.................................. 93


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7.3.13. Abu Dhabi Systems Integration – alliances .............................................................................................. 94

8. Business Environment and Country Risk ......................................................................... 95

8.1. Demographics & Social Statistics ................................................................................................95

8.1.1. Total Rural Population .............................................................................................................................. 95

8.1.2. Total Urban Population ............................................................................................................................. 96

8.1.3. Number of Households (In million) ........................................................................................................... 97

8.2. Economic Performance ................................................................................................................98

8.2.1. GDP Per Capita ........................................................................................................................................ 98

8.2.2. GDP, Current Prices ................................................................................................................................. 99

8.2.3. Exports of goods and services, current prices ....................................................................................... 100

8.2.4. Imports of goods and services, current prices ........................................................................................ 101

8.2.5. Manufacturing Output, Current Prices (US$ Billions) ............................................................................. 102

8.2.6. Consumer Price Index ............................................................................................................................ 103

8.2.7. Local Currency Unit per US Dollar ......................................................................................................... 104

8.2.8. Local Currency Unit per Euro ................................................................................................................. 105

8.2.9. Market Capitalization of Listed Companies ............................................................................................ 106

8.2.10. Market Capitalization of Listed Companies (% of GDP) ......................................................................... 107

8.2.11. International reserves, including gold ..................................................................................................... 108

8.3. Energy and Utilities ..................................................................................................................... 109

8.3.1. Conventional Thermal Electricity Net Generation .................................................................................. 109

8.3.2. Conventional Thermal Electricity Installed Capacity .............................................................................. 110

8.3.3. Proved Natural Gas Reserves ................................................................................................................ 111

8.3.4. Petroleum Consumption ......................................................................................................................... 112

8.3.5. UAE Crude Oil Proved Reserves (Billion Barrels) .................................................................................. 113

8.4. Infrastructure ............................................................................................................................... 114

8.4.1. Overall Construction (US$ Million) ......................................................................................................... 114

8.5. Minerals ....................................................................................................................................... 115

8.5.1. Mining, Manufacturing, Utilities Output (USD Bn) .................................................................................. 115

8.6. Technology .................................................................................................................................. 116

8.6.1. Patents Granted ...................................................................................................................................... 116

8.7. Telecommunication .................................................................................................................... 117

8.7.1. Telephone Lines ..................................................................................................................................... 117

8.7.2. Telephone Lines Penetration Rate ......................................................................................................... 118

9. Appendix ............................................................................................................................ 119

9.1. About SDI ..................................................................................................................................... 119

9.2. Disclaimer .................................................................................................................................... 119


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LIST OF FIGURES

Figure 1:UAE Defense Expenditure, 2011-2015 ................................................................................................................................................. 16 Figure 2: UAE Defense Expenditure, 2016-2020 ................................................................................................................................................ 17 Figure 3: UAE Defense Expenditure (in AED Billion), 2011–2015 ....................................................................................................................... 18 Figure 4: UAE Defense Expenditure (in AED Billion), 2016–2020 ....................................................................................................................... 19 Figure 5: UAE GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP (US$), 2011-2015 ................... 22 Figure 6: UAE GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP (US$), 2016-2020 ................... 23 Figure 7: UAE GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP (in AED terms), 2011–2015 .... 24 Figure 8: UAE GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP (in AED), 2016–2020 .............. 25 Figure 9:UAE Defense Budget Split Between Capital and Revenue Expenditure (%),2011-2015 ....................................................................... 26 Figure 10: UAE Defense Budget Split Between Capital and Revenue Expenditure (%), 2016-2020 .................................................................... 27 Figure 11: UAE Capital Expenditure (US$ Billion), 2011-2015 ............................................................................................................................ 28 Figure 12: UAE Capital Expenditure (US$ Billion), 2016-2020 ............................................................................................................................ 29 Figure 13: UAE Capital Expenditure (in AED Billion), 2011–2015 ....................................................................................................................... 30 Figure 14: UAE Capital Expenditure (in AED Billion), 2016–2020 ....................................................................................................................... 31 Figure 15: UAE Revenue Expenditure (US$ Billion), 2011-2015 ......................................................................................................................... 32 Figure 16: UAE Revenue Expenditure (US$ Billion), 2016-2020 ......................................................................................................................... 33 Figure 17: UAE Revenue Expenditure (in AED Billion), 2011–2015 .................................................................................................................... 34 Figure 18: UAE Revenue Expenditure (in AED Billion), 2016–2020 .................................................................................................................... 35 Figure 19: UAE Per Capita Expenditure (US$), 2011-2015 ................................................................................................................................. 36 Figure 20: UAE Per Capita Expenditure (US$), 2016-2020 ................................................................................................................................. 37 Figure 21: UAE Homeland Security Budget (US$ billion), 2011-2015 ................................................................................................................. 38 Figure 22: UAE Homeland Security Budget (US$ billion), 2016-2020 ................................................................................................................. 39 Figure 23: UAE Homeland Security Budget (AED Billion), 2011–2015 ................................................................................................................ 40 Figure 24: UAE Homeland Security Budget (AED Billion), 2016–2020 ................................................................................................................ 41 Figure 25: SDI Terrorism Heat Map .................................................................................................................................................................... 44 Figure 26: SDI Terrorism Heat Index, 2015 ........................................................................................................................................................ 45 Figure 27: Benchmarking with Key Markets – 2011-2015 vs. 2016-2020 ............................................................................................................ 47 Figure 28: Defense Expenditure of the World’s Largest Military Spenders (US$ Billion), 2015 and 2020 ........................................................... 48 Figure 29: Defense Expenditure as a Percentage of GDP of Largest Military Spenders (%), 2015 ..................................................................... 49 Figure 30: UAE’s Multi-role Aircraft Market Size (US$ Billion), 2015–2025 ......................................................................................................... 52 Figure 31: UAE Land-based C4ISR Market Size (US$ Billion), 2015–2025 ........................................................................................................ 54 Figure 32: UAE Infrastructure Market Size (US$ Million), 2015–2025 ................................................................................................................. 55 Figure 33: UAE’s Attack Helicopters Market Size (US$ Million), 2015–2025 ....................................................................................................... 56 Figure 34: UAE Defense imports TIV value (US$ Million), 2009–2013 ................................................................................................................ 58 Figure 35: UAE Defense Imports by Category (%), 2009–2013 (TIV values) ...................................................................................................... 59 Figure 36: UAE Defense Imports by Region (%), 2009–2013 ............................................................................................................................. 60 Figure 37: Industry Dynamics – Porter’s Five Forces Analysis ............................................................................................................................ 62 Figure 38: Abu Dhabi Ship Building – Revenue Trend Analysis (AED Million), 2009–2013 ................................................................................. 89 Figure 39: Abu Dhabi Ship Building – Operating Profit (AED Million), 2009–2013 ............................................................................................... 90 Figure 40: Abu Dhabi Ship Building – Net Profit Trend Analysis (AED Million), 2009–2013 ................................................................................ 90 Figure 41: UAE Rural Population (In Millions), 2016–2025 ................................................................................................................................. 95 Figure 42: UAE Urban Population (In Millions), 2016–2025 ................................................................................................................................ 96 Figure 43: UAE Number of Households (In Millions), 2008–2017 ....................................................................................................................... 97 Figure 44: UAE GDP Per Capita, 2011–2020 ..................................................................................................................................................... 98 Figure 45: UAE GDP, Current Prices (In US$ Billions), 2011–2020 .................................................................................................................... 99 Figure 46: UAE Exports of goods and services, current prices (US$ Billion), 2002– 2011 ..................................................................................100 Figure 47: UAE Imports of goods and services, current prices (US$ Billion), 2002– 2011 ..................................................................................101 Figure 48: UAE Manufacturing Output (US$ Billion), 2004–2012 .......................................................................................................................102 Figure 49: UAE Consumer Price Index, 2010–2019 ...........................................................................................................................................103 Figure 50: Local Currency Unit per US$ - Exchange Rate , 2010–2019 .............................................................................................................104 Figure 51: Local Currency Unit per Euro, 2010–2019 ........................................................................................................................................105 Figure 52: UAE Market Capitalization of Listed Companies (US$ Billion), 2003–2012 .......................................................................................106 Figure 53: UAE Market Capitalization of Listed Companies (% of GDP), 2002–2011 .........................................................................................107 Figure 54: UAE’s International reserves, including gold (US$ Billion), 2002–2011 .............................................................................................108 Figure 55: UAE Conventional Thermal Electricity Net Generation (Billion Kilowatt hours), 2002–2011 .............................................................109 Figure 56: UAE Conventional Thermal Electricity Installed Capacity (Million Kilowatt hours), 2001–2010 ..........................................................110


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Figure 57: UAE’s Proved Natural Gas Reserves (Trillion Cubic Feet), 2004–2013 ............................................................................................111 Figure 58: UAE’s Petroleum Consumption (Thousand Barrels Per Day), 2003–2012 ........................................................................................112 Figure 59: UAE’s Crude Oil Proved Reserves (Billion Barrels), 2004–2013 .......................................................................................................113 Figure 60: UAE’s Overall Construction (US$ Million), 2007–2016 ......................................................................................................................114 Figure 61: UAE’s Mining, Manufacturing, Utilities Output (USD Billion), 2002–2011 ..........................................................................................115 Figure 62: UAE Patents Granted, 2003–2012 ....................................................................................................................................................116 Figure 63: UAE’s Telephone Lines (In Million), 2003–2012 ................................................................................................................................117 Figure 64: UAE’s Telephone Lines Penetration Rate (Per 100 People), 2003–2012 ..........................................................................................118


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LIST OF TABLES

Table 1: UAE Defense Expenditure (US$ Billion), 2011–2015 ............................................................................................................................ 18 Table 2: UAE Defense Expenditure (US$ Billion),2016–2020 ............................................................................................................................. 19 Table 3: UAE Defense Expenditure (in EUR Billion), 2011–2015 ........................................................................................................................ 20 Table 4: UAE Defense Expenditure (in EUR Billion), 2016–2020 ........................................................................................................................ 21 Table 5: UAE GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as a Percentage of GDP Growth (US$), 2011-2015 ..... 23 Table 6: UAE GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as a Percentage of GDP Growth (US$), 2016–2020 .... 24 Table 7: UAE GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as a Percentage of GDP (EUR), 2011–2015 ................ 25 Table 8: UAE GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as a Percentage of GDP (EUR), 2016–2020 ................ 26 Table 9: UAE Defense Budget Split Between Capital and Revenue Expenditure (%), 2011–2015 ...................................................................... 27 Table 10: UAE Defense Budget Split Between Capital and Revenue Expenditure (%), 2016–2020 .................................................................... 28 Table 11: UAE Defense Capital Expenditure (US$ billion), 2011–2015 ............................................................................................................... 29 Table 12: UAE Defense Capital Expenditure (US$ billion), 2016–2020 ............................................................................................................... 30 Table 13: UAE Capital Expenditure (in EUR Billion), 2011–2015 ........................................................................................................................ 31 Table 14: UAE Capital Expenditure (in EUR Billion), 2016–2020 ........................................................................................................................ 32 Table 15: UAE Revenue Budget Allocation (US$ billion), 2011–2015 ................................................................................................................. 33 Table 16: UAE Revenue Budget Allocation (US$ billion), 2016–2020 ................................................................................................................. 34 Table 17: UAE Revenue Expenditure (in EUR Billion), 2011–2015 ..................................................................................................................... 35 Table 18: UAE Revenue Expenditure (in EUR Billion), 2016–2020 ..................................................................................................................... 36 Table 19: UAE Per Capita Defense Expenditure (US$), 2011–2015 ................................................................................................................... 37 Table 20: UAE Per Capita Defense Expenditure (US$), 2016–2020 ................................................................................................................... 38 Table 21: UAE Homeland Security Budget (US$ Billion),2011–2015 .................................................................................................................. 39 Table 22: UAE Homeland Security Budget (US$ Billion), 2016–2020 ................................................................................................................. 40 Table 23: UAE Homeland Security Budget (EUR Billion), 2011–2015 ................................................................................................................. 41 Table 24: UAE Homeland Security Budget (EUR Billion), 2016–2020 ................................................................................................................. 42 Table 25: Benchmarking with Key Markets – 2011–2015 vs. 2016–2020............................................................................................................ 46 Table 26: SDI Terrorism Index ............................................................................................................................................................................ 50 Table 27: Key Foreign Players and Operations in the UAE Defense Industry ..................................................................................................... 69 Table 28:Heckler &Koch – Product focus............................................................................................................................................................ 70 Table 29:Heckler and Koch – Recent Contract Wins .......................................................................................................................................... 71 Table 30:MAN Truck & Bus AG – Product focus ................................................................................................................................................. 73 Table 31:MAN Truck & Bus AG – Alliances ........................................................................................................................................................ 74 Table 32:MAN Truck & Bus AG – Alliances ........................................................................................................................................................ 74 Table 33:Airbus Helicopters– Product focus ....................................................................................................................................................... 75 Table 34:Airbus Helicopters – Alliances .............................................................................................................................................................. 76 Table 35:Airbus Helicopters – Recent Contract Wins .......................................................................................................................................... 76 Table 36:ESG Elektroniksystem- und Logistik – Product focus ........................................................................................................................... 78 Table 37:ESG Elektroniksystem-und Logistik – Alliances ................................................................................................................................... 79 Table 38:ESG Elektroniksystem-und Logistik – Recent Contract Wins ............................................................................................................... 79 Table 39:Diehl Stiftung – Product focus .............................................................................................................................................................. 80 Table 40:Diehl Stiftung– Alliances ...................................................................................................................................................................... 81 Table 41:Diehl Stiftung– Recent Contract Wins .................................................................................................................................................. 81 Table 42:ThyssenKrupp Marine Systems – Product focus .................................................................................................................................. 82 Table 43:ThyssenKrupp Marine Systems – Alliances ......................................................................................................................................... 83 Table 44:ThyssenKrupp Marine Systems – Recent Contract Wins ..................................................................................................................... 83 Table 45:Thales Deutschland – Product focus .................................................................................................................................................... 84 Table 46:Thales Deutschland – Alliances ........................................................................................................................................................... 86 Table 47:Thales Deutschland – Recent Contract Wins ....................................................................................................................................... 87 Table 48:Airbus Group– Product focus ............................................................................................................................................................... 88 Table 49: Airbus Group– Alliances ..................................................................................................................................................................... 89 Table 50:Airbus Group– Recent Contract Wins .................................................................................................................................................. 90 Table 51:MBDA – Product focus ......................................................................................................................................................................... 93 Table 52:MBDA – Alliances ................................................................................................................................................................................ 95 Table 53:MBDA – Recent Contract Wins ............................................................................................................................................................ 96 Table 54:Eurofighter Jagdflugzeug – Product focus ............................................................................................................................................ 97


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Table 55:Eurofighter Jagdflugzeug – Recent Contract Wins ............................................................................................................................... 98 Table 56:Rheinmetall – Product focus ................................................................................................................................................................ 99 Table 57:Rheinmetall – Alliances .......................................................................................................................................................................104 Table 58:Rheinmetall – Recent Contract Wins ...................................................................................................................................................104


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1. Executive Summary

The United Arab Emirates (UAE), the world’s fourth largest arms importer, is expected to spend

US$XX billion on the defense sector during the forecast period

Located on the south side of the Strait of Hormuz, the UAE is currently experiencing rapid expansion

owing to burgeoning oil and gas exports. The country is fast becoming one of the most important financial

and trading centres in the Middle East, and is in the process of diversifying its revenue streams through

non-energy sectors such as tourism, infrastructure, and technology. This fast economic progression has

called for higher levels of protection and security for the country from both internal and external sources.

Leveraging the country’s substantial financial resources, the UAE government has initiated a set of military

modernization programs to improve the country’s defense capabilities. These initiatives are reflected in the

consistent growth of the country’s defense budget and the multiple deals signed with foreign defense

manufacturers.

Between 2011 and 2015, the UAE’s annual defense expenditure stood at an average of US$XX billion

every year, which is expected to increase to US$XX billion over the forecast period. On a cumulative

basis, the country is expected to invest US$XX billion for defense purposes, of which US$XX billion will be

spent on arms procurements. The protection of vital infrastructure, the territorial dispute with Iran, and the

ongoing domestic defense industry building initiatives are expected to drive the country’s future defense

spending. The UAE is also projected to spend an average of XX% of its GDP on defense during the

forecast period, with an average per-capita defense expenditure of US$XX over this period.

.


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2. Market Attractiveness and Emerging Opportunities

Between 2011 and 2015, the UAE’s defense expenditure grew significantly, making it one of the most

sought-after markets for foreign defense OEMs. 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 with a particular focus on fighter jets,

anti-missile systems, and homeland security.

The UAE’s defense budget recorded a CAGR of XX% over the review period, with expenditure driven by

armoury modernization programs, protection of infrastructure, territorial disputes, and participation in

peacekeeping initiatives. The defense budget, which stood at XX% of GDP in 2015, is expected to

increase to XX% of GDP by 2020, as the country’s defense budget growth rate is expected to outpace its

GDP growth rate. In addition, the defense budget is expected to increase further during the forecast period

due to the country’s aim to develop its own domestic defense industry.


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2.1. Defense Market Size Historical and Forecast

2.1.1. The defense budget of the UAE to record a CAGR of XX% over the forecast period

The modernization initiatives of the UAE are reflected in the growth of its defense budget over the

review period. In 2011, the country’s defense budget stood at US$XX billion, and grew at a CAGR of

XX% to reach US$XX billion by 2015. During the review period, the government signed numerous large-

scale deals for the purchase of THAAD missile defense systems, AH-64D Apache helicopters, UH-60M

Blackhawk VIP helicopters, Oshkosh 750 MRAP-All Terrain Vehicles (M-ATV), NIMR armored

personnel carriers (APCs), Thales-Astrium satellites, and Lockheed Martin’s F-16 fighter aircraft. Over

the forecast period the country is anticipated to continue with its procurement plans, leading to a

defense budget allocation of US$XX billion in 2016, which is expected to be increased to US$XX billion

by 2020.

The following table and figure show the UAE defense expenditure during the review period:

Table 1: UAE Defense Expenditure, 2011–2015

Year Defense expenditure (US$ bn)

Defense growth percentage

2011 XX XX

2012 XX XX

2013 XX XX

2014 XX XX

2015 XX XX

CAGR 2011-2015 XX%

Source: UAE Ministry of National Defense and SDI analysis © SDI

Figure 1: UAE Defense Expenditure, 2011–2015


-5%

0%

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(%)

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Defense expenditure (US$ bn) Defense growth percentage


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The following table and figure show projected defense expenditure of the UAE over the forecast period:

Table 2: UAE Defense Expenditure, 2016–2020

Year Defense expenditure (US$ bn)

Defense growth percentage

2016 XX XX

2017 XX XX

2018 XX XX

2019 XX XX

2020 XX XX

CAGR 2016-2020 XX%


Figure 2: UAE Defense Expenditure, 2016–2020


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Defense expenditure (US$ bn) Defense growth percentage


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2.2. Analysis of Defense Budget Allocation

2.2.1. Capital expenditure allocation is expected to increase during the forecast period

Throughout the review period, the average capital expenditure allocation of the total UAE defense

budget was XX%. The capital expenditure allocation is expected to increase to an average of XX%

during the forecast period, as the UAE is modernizing its armed forces. In the coming years, the country

is expected to invest in the procurement of multi-role aircraft, helicopters, armored vehicles, and missile

defense systems as well as enhance C4ISR capabilities. For revenue expenditure, the country’s

allocation is expected to decrease from XX% in 2016 to XX% in 2020.

The following table and chart display the UAE defense budget share of capital and revenue expenditure

during the review period:

Table 3: UAE Defense Budget Split Between Capital and Revenue Expenditure (%), 2011–2015

Year Capital Expenditure Share Revenue Expenditure Share

2011 XX XX

2012 XX XX

2013 XX XX

2014 XX XX

2015 XX XX


Figure 3: UAE Defense Budget Split Between Capital and Revenue Expenditure (%), 2011–2015


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2011 2012 2013 2014 2015

Defe

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Capital Expenditure Share Revenue Expenditure Share


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The following table and chart display the UAE defense budget share of capital and revenue expenditure

over the forecast period:

Table 4: UAE Defense Budget Split Between Capital and Revenue Expenditure (%), 2016–2020

Year Capital Expenditure Share Revenue Expenditure Share

2016 XX XX

2017 XX XX

2018 XX XX

2019 XX XX

2020 XX XX


Figure 4: UAE Defense Budget Split Between Capital and Revenue Expenditure (%), 2016–2020


0%

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30%

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2016 2017 2018 2019 2020

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Capital Expenditure Share Revenue Expenditure Share


16

2.3. Homeland Security Market Size and Forecast

2.3.1. UAE homeland security is expected to increase at a CAGR of XX% over the forecast period

The main authorities ensuring internal security of the country are the Ministry of Defense and the

Ministry of Internal Affairs, including the Civil Defense Department, Border Guard, and Coast Guard.The

country’s homeland security budget increased from US$XX billion in 2011 to US$XX billion in 2015,

registering a CAGR of XX%. Over the forecast period, the country is expected to increase its spending

on homeland security from US$XX billion in 2016 to US$XX billion in 2020, primarily investing in

weapons, telecommunications and surveillance systems. The primary areas of focus are towards the

establishment of police stations and civil defense stations and enhancing the country’s infrastructure

and, border security and counter terrorism efforts.

The following table and figure show the UAE HLS budget during the review period:

Table 5: UAE HLS Budget (US$ Billion), 2011–2015

Year HLS budget (US$ bn)

2011 XX

2012 XX

2013 XX

2014 XX

2015 XX

Source: Ministry of Public Safety, UAE and SDI analysis © SDI

Figure 5: UAE HLS Budget (US$ Billion), 2011–2015


-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

0

1

2

3

4

5

6

7

2011 2012 2013 2014 2015

Gro

wth

ra

te (

%)

Ho

me

lan

d S

ec

uri

ty e

xp

en

dit

ure

(US

$ B

illi

on

)

Homeland Security Budget (US$ bn) Growth rate (%)


17

The following table and figure show the UAE HLS budget over the forecast period:

Table 6: UAE HLS Budget (US$ Billion), 2016–2020

Year HLS budget (US$ bn)

2016 XX

2017 XX

2018 XX

2019 XX

2020 XX


Figure 6: UAE HLS Budget (US$ Billion), 2016–2020


-4.5%

-4.0%

-3.5%

-3.0%

-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0

2

4

6

8

10

12

14

2016 2017 2018 2019 2020

Gro

wth

rate

(%

)

Ho

mela

nd

Secu

rity

Exp

en

dit

ure

(U

S$ b

n)

Homeland Security Expenditure (US$ bn) Growth Rate (%)

Documents

Future of the UAE Defense Industry Attractiveness ...Future of the UAE Defense Industry – Market Attractiveness, Competitive Landscape and Forecasts to 2020