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The UAE Defense Industry – Market Opportunities, Entry Strategies, Analyses and Forecasts to 2016

Defense
www.icd-research.com
The UAE Defense Industry - Market Opportunities, Entry Strategies, Analyses and Forecasts to 2016 Reference code: DF0067MR Published: October 2011
TABLE OF CONTENTS
The UAE Defense Industry - Market Opportunities, Entry Strategies, Analyses and Forecasts to 2016 Page 2
© ICD Research. This product is licensed and is not to be photocopied Published: September 2011
TABLE OF CONTENTS
1 Introduction ......................................................................................................................... 11
1.1 What is this Report About? ..............................................................................................................11
1.2 Definitions ......................................................................................................................................11
1.3 Summary Methodology ...................................................................................................................13
1.4 ICD Research Terrorism Index ........................................................................................................14
1.5 About ICD Research .......................................................................................................................14
1.6 About Strategic Defence Intelligence ...............................................................................................14
2 Executive Summary ............................................................................................................ 15
3 Market Attractiveness and Emerging Opportunities ........................................................ 17
3.1 Defense Market Size Historical and Forecast ..................................................................................17
3.1.1 The defense budget of the UAE recorded a CAGR of 12.48% over the review period ........................... 17
3.1.2 Protection of critical infrastructure and territorial dispute with Iran to drive defense expenditure ............ 20
3.1.3 Defense expenditure as a percentage of GDP expected to rise to 6.7% by 2016 ................................... 21
3.2 Analysis of Defense Budget Allocation ............................................................................................23
3.2.1 Majority of defense budget allocated for revenue expenditure................................................................. 23
3.2.2 Expenditure on weapons acquisition to reach US$12.4 billion by 2016 ................................................... 25
3.2.3 Revenue expenditure expected to record a CAGR of 12.47% over the forecast period .......................... 27
3.3 Homeland Security Market Size and Forecast .................................................................................30
3.3.1 UAE homeland security spending to double from 2009 to 2019 .............................................................. 30
3.3.2 Investment in protection of infrastructure and expatriates is expected to drive the UAE homeland security market ..................................................................................................................................................... 30
3.3.3 Critical National Infrastructure Authority to drive homeland security procurement in the UAE ................ 30
3.3.4 ICD Research Intelligence Terrorism Index considers the UAE a ―some risk‖ region.............................. 32
3.3.5 UAE faces minimal threat from terrorists .................................................................................................. 33
3.4 Benchmarking with Key Global Markets ..........................................................................................34
3.4.1 UAE defense budget expected to have the highest growth rate among the leading defense spenders globally 34
3.4.2 UAE set to continue its high defense expenditure .................................................................................... 36
3.4.3 UAE spent over 5% of its GDP on defense in 2010 ................................................................................. 38
3.4.4 UAE faces ―some risk‖ from acts of terrorism ........................................................................................... 39
3.5 Market Opportunities: Key Trends and Drivers ................................................................................41
3.5.1 UAE to invest heavily in missile defense systems .................................................................................... 41
3.5.2 UAE seeks long-term solution to Airborne Early Warning and Control capability .................................... 41
3.5.3 Drive to enhance UAE's air capability to result in upgrade of helicopter fleet .......................................... 41
3.5.4 UAE domestically developing unmanned aerial vehicles technology ...................................................... 42
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The UAE Defense Industry - Market Opportunities, Entry Strategies, Analyses and Forecasts to 2016 Page 3
© ICD Research. This product is licensed and is not to be photocopied Published: September 2011
3.5.5 Demand for satellite communication and homeland security to drive command, control and communication market ......................................................................................................................................... 42
3.5.6 Demand for surface combatants expected to increase over the forecast period ..................................... 42
4 Defense Procurement Market Dynamics ........................................................................... 43
4.1 Import Market Dynamics .................................................................................................................43
4.1.1 Limitations of the domestic defense industry to encourage arms imports ............................................... 43
4.1.2 Over the review period, the UAE was the world's fourth-largest arms importer ....................................... 43
4.1.3 Aircraft account for the majority of the UAE's defense imports ................................................................ 44
4.1.4 US to continue to be major arms suppliers to the UAE ............................................................................ 45
4.2 Export Market Dynamics .................................................................................................................46
4.2.1 The UAE has minimal defense exports .................................................................................................... 46
5 Industry Dynamics .............................................................................................................. 47
5.1 Five Forces Analysis .......................................................................................................................47
5.1.1 Bargaining power of supplier: low to medium ........................................................................................... 48
5.1.2 Bargaining power of buyer: high ............................................................................................................... 48
5.1.3 Barrier to entry: medium to high ............................................................................................................... 48
5.1.4 Intensity of rivalry: high ............................................................................................................................. 48
5.1.5 Threat of Substitution: low to medium ...................................................................................................... 49
6 Market Entry Strategy ......................................................................................................... 50
6.1 Market Regulation ...........................................................................................................................50
6.1.1 Defense deals are settled through direct negotiation or competitive bidding ........................................... 50
6.1.2 Foreign OEMs prefer indirect offsets to meet the obligations associated with defense deals ................. 50
6.2 Market Entry Route .........................................................................................................................52
6.2.1 Foreign OEMs use proxy representatives to enter the market ................................................................. 52
6.2.2 Defense expositions hosted by the UAE serve as an entry route for foreign OEMs ................................ 52
6.3 Key Challenges ...............................................................................................................................53
6.3.1 Complying with the UAE's stringent offset requirements a concern for OEMs ........................................ 53
6.3.2 UAE demands technology transfer in defense deals ............................................................................... 53
7 Competitive Landscape and Strategic Insights ................................................................ 54
7.1 Competitive landscape Overview ....................................................................................................54
7.1.1 A diverse range of foreign OEMs dominate the UAE defense sector ...................................................... 54
7.1.2 Indigenous ship building drives domestic market growth ......................................................................... 55
7.2 Key Foreign Companies ..................................................................................................................55
7.2.1 Lockheed Martin - overview ..................................................................................................................... 55
7.2.2 Lockheed Martin - Major Products and Services ..................................................................................... 55
7.2.3 Lockheed Martin - recent announcements and strategic initiatives ......................................................... 56
7.2.4 Lockheed Martin - alliances ..................................................................................................................... 56
7.2.5 Lockheed Martin - recent contract wins ................................................................................................... 57
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© ICD Research. This product is licensed and is not to be photocopied Published: September 2011
7.2.6 Lockheed Martin - financial analysis ........................................................................................................ 57
7.2.7 BAE Systems Plc - overview ................................................................................................................... 57
7.2.8 BAE Systems Plc - Major Products and Services ................................................................................... 58
7.2.9 BAE Systems Plc - recent announcements and strategic initiatives ....................................................... 58
7.2.10 BAE Systems Plc - alliances .................................................................................................................... 59
7.2.11 BAE Systems Plc - recent contract wins .................................................................................................. 59
7.2.12 BAE Systems Plc - financial analysis ...................................................................................................... 59
7.2.13 Raytheon Company - overview ................................................................................................................ 59
7.2.14 Raytheon Company - Major Products and Services ................................................................................ 60
7.2.15 Raytheon Company - recent announcements and strategic initiatives ................................................... 60
7.2.16 Raytheon Company - alliances ................................................................................................................ 60
7.2.17 Raytheon Company - recent contract wins .............................................................................................. 60
7.2.18 Raytheon Company - financial analysis ................................................................................................... 61
7.2.19 Rolls-Royce Plc - overview ...................................................................................................................... 61
7.2.20 Rolls-Royce Plc - Major Products and Services ...................................................................................... 61
7.2.21 Rolls-Royce Plc - recent announcements and strategic initiatives .......................................................... 62
7.2.22 Rolls-Royce Plc - alliances ...................................................................................................................... 62
7.2.23 Rolls-Royce Plc - recent contract wins .................................................................................................... 62
7.2.24 Rolls-Royce Plc - financial analysis ......................................................................................................... 62
7.2.25 Northrop Grumman Corporation - overview............................................................................................. 63
7.2.26 Northrop Grumman Corporation - Major Products and Services ............................................................ 63
7.2.27 Northrop Grumman Corporation - recent announcements and strategic initiatives ................................ 63
7.2.28 Northrop Grumman Corporation - alliances ............................................................................................. 64
7.2.29 Northrop Grumman Corporation - recent contract wins ........................................................................... 64
7.2.30 Northrop Grumman Corporation - financial analysis ............................................................................... 64
7.2.31 Thales - overview .................................................................................................................................... 65
7.2.32 Thales - Major Products and Services ..................................................................................................... 65
7.2.33 Thales - recent announcements and strategic initiatives ......................................................................... 65
7.2.34 Thales - alliances .................................................................................................................................... 65
7.2.35 Thales - recent contract wins ................................................................................................................... 66
7.2.36 Thales - financial analysis ........................................................................................................................ 66
7.2.37 The Boeing Company - overview ............................................................................................................. 66
7.2.38 The Boeing Company - Major Products and Services ............................................................................. 67
7.2.39 The Boeing Company - recent announcements and strategic initiatives ................................................ 67
7.2.40 The Boeing Company - alliances ............................................................................................................. 67
7.2.41 The Boeing Company - recent contract wins ........................................................................................... 68
7.2.42 The Boeing Company - financial analysis................................................................................................ 68
7.3 Key Public Sector Companies .........................................................................................................68
7.3.1 Abu Dhabi Ship Building - overview ......................................................................................................... 68
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© ICD Research. This product is licensed and is not to be photocopied Published: September 2011
7.3.2 Abu Dhabi Ship Building - Major Products and Services ......................................................................... 68
7.3.3 Abu Dhabi Ship Building - recent announcements and strategic initiatives ............................................ 68
7.3.4 Abu Dhabi Ship Building - alliances ......................................................................................................... 69
7.3.5 Abu Dhabi Ship Building - recent contract wins ....................................................................................... 69
7.3.6 Abu Dhabi Ship Building - financial analysis ........................................................................................... 70
7.3.7 Gulf Logistics and Naval Support - overview ........................................................................................... 72
7.3.8 Gulf Logistics and Naval Support - Major Products and Services ........................................................... 73
7.3.9 Gulf Logistics and Naval Support - recent announcements and strategic initiatives ............................... 74
7.3.10 Gulf Logistics and Naval Support - alliances ........................................................................................... 74
7.3.11 Gulf Logistics and Naval Support - recent contract wins ......................................................................... 74
7.3.12 Gulf Logistics and Naval Support - financial analysis .............................................................................. 74
7.3.13 Abu Dhabi Systems Integration - overview .............................................................................................. 74
7.3.14 Abu Dhabi Systems Integration - Major Products and Services .............................................................. 74
7.3.15 Abu Dhabi Systems Integration - recent announcements and strategic initiatives.................................. 75
7.3.16 Abu Dhabi Systems Integration - alliances .............................................................................................. 75
7.3.17 Abu Dhabi Systems Integration - recent contract wins ............................................................................ 75
7.3.18 Abu Dhabi Systems Integration - financial analysis ................................................................................. 75
8 Business Environment and Country Risk ......................................................................... 76
8.1 Business Confidence ......................................................................................................................76
8.1.1 Business confidence index ....................................................................................................................... 76
8.1.2 Market capitalization trend - Abu Dhabi Stock Exchange, UAE .............................................................. 77
8.1.3 Market capitalization trend - Dubai Financial Market, UAE ..................................................................... 78
8.1.4 Deployment of credit by sector ................................................................................................................. 79
8.2 Economic Performance ...................................................................................................................80
8.2.1 GDP at constant prices ............................................................................................................................. 80
8.2.2 GDP per capita at constant prices ............................................................................................................ 81
8.2.3 GDP at current prices ............................................................................................................................... 82
8.2.4 GDP per capita at current prices .............................................................................................................. 83
8.2.5 GDP split by key segments....................................................................................................................... 84
8.2.6 Agriculture - agriculture output value at current prices (local currency) .................................................. 85
8.2.7 Agriculture - agriculture output value at current prices (US$).................................................................. 86
8.2.8 Agriculture - agriculture output at current prices as percentage of GDP ................................................. 87
8.2.9 Manufacturing - manufacturing output at current prices (local currency) ................................................ 88
8.2.10 Manufacturing - manufacturing output at current prices (US$)................................................................ 89
8.2.11 Manufacturing - manufacturing output at current prices as percentage of GDP ..................................... 90
8.2.12 Manufacturing - mining, manufacturing and utilities at current prices (local currency) ........................... 91
8.2.13 Manufacturing - mining, manufacturing and utilities at current prices (US$) ........................................... 92
8.2.14 Manufacturing - mining, manufacturing and utilities at current prices as percentage of GDP ................ 93
8.2.15 Construction - construction output at current prices (local currency) ...................................................... 94
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© ICD Research. This product is licensed and is not to be photocopied Published: September 2011
8.2.16 Construction - construction output at current prices (US$)...................................................................... 95
8.2.17 Construction - construction output at current prices as a percentage of GDP ........................................ 96
8.2.18 Industry - crude steel production ............................................................................................................. 97
8.2.19 Industry - crude oil consumption ............................................................................................................... 98
8.2.20 Inflation rate ............................................................................................................................................. 99
8.2.21 Fiscal deficit as a percentage of GDP .................................................................................................... 100
8.2.22 Exports as a percentage of GDP ............................................................................................................ 101
8.2.23 Imports as a percentage of GDP ............................................................................................................ 102
8.2.24 Exports growth ....................................................................................................................................... 103
8.2.25 Imports growth ....................................................................................................................................... 104
8.2.26 External debt as percentage of GDP ...................................................................................................... 105
8.2.27 Exchange rate US$-AED (annual average)............................................................................................ 106
8.2.28 Exchange rate US$-AED (end of fiscal) ................................................................................................. 107
8.2.29 Debt service ratio ................................................................................................................................... 108
8.3 Infrastructure Quality and Availability ............................................................................................ 109
8.3.1 Transport - automotive component exports trend .................................................................................. 109
8.3.2 Transport - automotive product imports trend ....................................................................................... 110
8.3.3 Transport - passenger car penetration .................................................................................................. 111
8.3.4 Utilities - total installed capacity for electricity generation ..................................................................... 112
8.3.5 Utilities - installed capacity for conventional thermal electricity generation ........................................... 113
8.3.6 Utilities - electricity production ............................................................................................................... 114
8.3.7 Utilities - electric power consumption .................................................................................................... 115
8.3.8 Healthcare - healthcare expenditure ...................................................................................................... 116
8.3.9 Healthcare - healthcare expenditure as percentage of GDP ................................................................. 117
8.3.10 Healthcare - healthcare expenditure per capita ..................................................................................... 118
8.3.11 Communication - total internet subscribers ........................................................................................... 119
8.3.12 Communication - broadband internet subscribers ................................................................................. 120
8.3.13 Communication - personal computer penetration .................................................................................. 121
8.3.14 Communication - mobile phone penetration rate ................................................................................... 122
8.4 Labor Force .................................................................................................................................. 123
8.4.1 Labor force count ................................................................................................................................... 123
8.4.2 Unemployment rate ............................................................................................................................... 124
8.5 Demographics ............................................................................................................................... 125
8.5.1 Annual disposable income ...................................................................................................................... 125
8.5.2 Annual per-capita disposable income ..................................................................................................... 126
8.5.3 Annual consumer expenditure on food ................................................................................................... 127
8.5.4 Annual per-capita consumer expenditure on food .................................................................................. 128
8.5.5 Urban and rural population ..................................................................................................................... 129
8.5.6 Females as percentage of population .................................................................................................... 130
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© ICD Research. This product is licensed and is not to be photocopied Published: September 2011
8.5.7 Males as percentage of population ......................................................................................................... 131
8.5.8 Mean age of population .......................................................................................................................... 132
8.5.9 Median age of population ....................................................................................................................... 133
8.5.10 Population density ................................................................................................................................. 134
8.5.11 Age distribution - total population .......................................................................................................... 135
8.5.12 Age distribution - male population ......................................................................................................... 136
8.5.13 Age distribution - female population ...................................................................................................... 137
8.5.14 Number of households........................................................................................................................... 138
8.6 Political and Social Risk ................................................................................................................ 139
8.6.1 Political stability ..................................................................................................................................... 139
8.6.2 Terrorism index ...................................................................................................................................... 139
8.6.3 Transparency index ............................................................................................................................... 140
9 Appendix ............................................................................................................................ 141
9.1 Methodology ................................................................................................................................ 141
9.2 Contact us .................................................................................................................................... 141
9.3 About ICD Research ..................................................................................................................... 141
9.4 Disclaimer .................................................................................................................................... 141
LIST OF FIGURES
The UAE Defense Industry - Market Opportunities, Entry Strategies, Analyses and Forecasts to 2016 Page 8
© ICD Research. This product is licensed and is not to be photocopied Published: September 2011
LIST OF FIGURES
Figure 1: UAE Defense Expenditure (2005-2010) ............................................................................................................................................. 18
Figure 2: UAE Defense Expenditure (2011-2016) ............................................................................................................................................. 19
Figure 3: UAE Defense Expenditure as % of GDP (2011-2016) ......................................................................................................................... 22
Figure 4: UAE Defense budget Split between Capital and Revenue Expenditure (2005-2010) ........................................................................... 24
Figure 5: UAE Defense budget Split between Capital and Revenue Expenditure (2011-2016) ........................................................................... 25
Figure 6: UAE Capital Expenditure (2005-2010) ............................................................................................................................................... 25
Figure 7: UAE Capital Expenditure (2011-2016) ............................................................................................................................................... 27
Figure 8: UAE Revenue Expenditure (2005-2010) ............................................................................................................................................ 28
Figure 9: UAE Revenue Expenditure (2011-2016) ............................................................................................................................................ 29
Figure 10: ICD Research Terrorism Heat Map ................................................................................................................................................... 32
Figure 11: Benchmarking with Key Markets - (2005-2010) vs (2011-2016) ....................................................................................................... 35
Figure 12: Benchmarking with World's Largest Defense Spenders - 2010 and 2016 .......................................................................................... 37
Figure 13: Benchmarking with Large Defense Spenders as % of GDP - 2010 ................................................................................................... 38
Figure 14: UAE Defense imports TIV value (US$ Million), (2005-2010).............................................................................................................. 44
Figure 15: UAE Defense Imports by Category (%), (2005-2010) and 2010 (TIV values) .................................................................................... 45
Figure 16: UAE Defense Imports by Region (%), (2005-2010) and 2010 ........................................................................................................... 46
Figure 17: Industry Dynamics - Porter's Five Forces Analysis ............................................................................................................................ 47
Figure 18: Abu Dhabi Ship Building - Revenue Trend Analysis (AED Million), 2007-2010 ................................................................................. 70
Figure 19: Abu Dhabi Ship Building - Operating Profit (AED Million), 2007-2010 ............................................................................................... 71
Figure 20: Abu Dhabi Ship Building - Net Profit Trend Analysis (AED Million), 2007-2010 ................................................................................ 71
Figure 21: UAE Business Confidence Index, Q3 2009 -- Q1 2010 ....................................................................................................................... 76
Figure 22: Abu Dhabi Stock Exchange Market Capitalization (US$ Billion), 2005-2010...................................................................................... 77
Figure 23: Dubai Financial Market, Market Capitalization (US$ Billion), 2005-2010 ........................................................................................... 78
Figure 24: UAE Deployment of Credit by Sector (US$ billion), 2005-2010 ......................................................................................................... 79
Figure 25: UAE GDP Value at Constant Prices (US$ Billion), 2005-2016 ........................................................................................................... 80
Figure 26: UAE GDP per Capita at Constant Prices (US$), 2005-2016 .............................................................................................................. 81
Figure 27: UAE GDP at Current Prices (US$ Billion), 2005-2016 ....................................................................................................................... 82
Figure 28: UAE GDP per Capita at Current Prices (US$), 2005-2016 ................................................................................................................ 83
Figure 29: UAE GDP Split by Key Segments (%), 2005 vs. 2010 ....................................................................................................................... 84
Figure 30: UAE Agriculture Output Value at Current Prices (AED Billion), 2005-2016 ........................................................................................ 85
Figure 31: UAE Agriculture Output Value at Current Prices (US$ Billion), 2005-2016 ........................................................................................ 86
Figure 32: UAE Agriculture Output at Current Prices (% of GDP), 2005-2016 .................................................................................................... 87
Figure 33: UAE Manufacturing Output at Current Prices (AED Billion), 2005-2016 ............................................................................................ 88
Figure 34: UAE Manufacturing Output at Current Prices (US$ Billion), 2005-2016 ............................................................................................. 89
Figure 35: UAE Manufacturing Output at Current Prices (% of GDP), 2005-2016 .............................................................................................. 90
Figure 36: UAE Mining, Manufacturing and Utilities Output at Current Prices (AED Billion) 2005-2016 .............................................................. 91
Figure 37: UAE Mining, Manufacturing and Utilities Output at Current Prices (US$ Billion), 2005-2016 ............................................................. 92
Figure 38: UAE Mining, Manufacturing and Utilities Output at Current Prices (% of GDP), 2005-2016 ............................................................... 93
Figure 39: UAE Construction Output at Current Prices (AED Billion), 2005-2016 ............................................................................................... 94
Figure 40: UAE Construction Output at Current Prices (US$ Billion), 2005-2016 ............................................................................................... 95
Figure 41: UAE Construction Output at Current Prices (% of GDP), 2005-2016 ................................................................................................. 96
Figure 42: UAE Crude Steel Production (thousand metric Tons), 2005-2016 ..................................................................................................... 97
Figure 43: UAE Crude Oil Consumption (Million Tons), 2005-2016 .................................................................................................................... 98
Figure 44: UAE Inflation Rate (%), 2005-2016 .................................................................................................................................................. 99
Figure 45: UAE Fiscal Deficit (% of GDP), 2005-2016 .....................................................................................................................................100
Figure 46: UAE Exports (% of GDP), 2005-2016 .............................................................................................................................................101
Figure 47: UAE Imports (% of GDP), 2005-2016 ..............................................................................................................................................102
Figure 48: UAE Exports Growth (%), 2005-2016 ..............................................................................................................................................103
Figure 49: UAE Imports Growth (%), 2005-2016 ..............................................................................................................................................104
Figure 50: UAE External Debt (% of GDP) 2005-2010 .....................................................................................................................................105
Figure 51: UAE Exchange Rate US$-AED (Annual Average), 2005-2010 .........................................................................................................106
Figure 52: UAE Exchange Rate (End of Fiscal), 2005-2010 ..............................................................................................................................107
Figure 53: UAE Debt Service Ratio, 2005-2010 ...............................................................................................................................................108
Figure 54: UAE Automotive Component Exports (US$ Billion), 2005-2016 .......................................................................................................109
Figure 55: UAE Automotive Component Imports (US$ Billion), 2005-2016 .......................................................................................................110
Figure 56: UAE Passenger Car Penetration (per 1000 people), 2005-2016 ......................................................................................................111
LIST OF FIGURES
The UAE Defense Industry - Market Opportunities, Entry Strategies, Analyses and Forecasts to 2016 Page 9
© ICD Research. This product is licensed and is not to be photocopied Published: September 2011
Figure 57: UAE Total Installed Capacity for Electricity Generation (Million Kilowatts), 2005-2016 .....................................................................112
Figure 58: UAE Installed Capacity for Conventional Thermal Electricity Generation (Million Kilowatts), 2005-2016 ...........................................113
Figure 59: UAE Electricity Production (Billion Kilowatt Hours), 2005-2016 ........................................................................................................114
Figure 60: UAE Electric Power Consumption (Billion Kilowatt Hours), 2005-2016 .............................................................................................115
Figure 61: UAE Healthcare Expenditure (US$ Billion), 2005-2016 ....................................................................................................................116
Figure 62: UAE Healthcare Expenditure (% of GDP), 2005-2016 ......................................................................................................................117
Figure 63: UAE per Capita Healthcare Expenditure (US$), 2005-2016 .............................................................................................................118
Figure 64: UAE Internet Subscribers (Million), 2005-2016 ................................................................................................................................119
Figure 65: UAE Broadband Internet Subscribers (Million), 2005-2016 ..............................................................................................................120
Figure 66: UAE Personal Computer Usage (per 100 people), 2005-2016 .........................................................................................................121
Figure 67: UAE Mobile Phone Penetration (%) 2005-2016 ...............................................................................................................................122
Figure 68: UAE Size of Labor Force in 15-59 Age Group (million), 2005-2016 .................................................................................................123
Figure 69: UAE Unemployment Rate (%), 2005-2016 ......................................................................................................................................124
Figure 70: UAE Annual Disposable Income (US$ Billion), 2005-2016 ...............................................................................................................125
Figure 71: UAE Annual per-Capita Disposable Income (US$), 2005-2016 ........................................................................................................126
Figure 72: UAE Consumer Expenditure on Food (US$ Billion), 2005-2016 .......................................................................................................127
Figure 73: UAE Annual per-Capita Consumer Expenditure on Food (US$), 2005-2016 ....................................................................................128
Figure 74: UAE Urban and Rural Population (% of Total Population), 2005-2016 .............................................................................................129
Figure 75: UAE Females (% of Population), 2005-2016 ...................................................................................................................................130
Figure 76: UAE Males (% of Population), 2005-2016 .......................................................................................................................................131
Figure 77: UAE Mean Age of Population, 2005-2016 .......................................................................................................................................132
Figure 78: UAE Median Age of Population, 2005-2016 ....................................................................................................................................133
Figure 79: UAE Population Density (People per Square Kilometer), 2005-2016 ................................................................................................134
Figure 80: UAE Age Distribution (% of Population), 2005-2016 .........................................................................................................................135
Figure 81: UAE Age Distribution (% of Male Population), 2005-2016 ................................................................................................................136
Figure 82: UAE Age Distribution (% of Female Population), 2005-2016 ............................................................................................................137
Figure 83: UAE Number of Households (Million), 2005-2016 ............................................................................................................................138
Figure 84: Global Terrorism Heat Map, 2010 ....................................................................................................................................................139
Figure 85: UAE Transparency Index, the review period ....................................................................................................................................140
LIST OF TABLES
The UAE Defense Industry - Market Opportunities, Entry Strategies, Analyses and Forecasts to 2016 Page 10
© ICD Research. This product is licensed and is not to be photocopied Published: September 2011
LIST OF TABLES
Table 1: UAE Defense Expenditure (2005-2010) .............................................................................................................................................. 17
Table 2: UAE Defense Expenditure (2011-2016) .............................................................................................................................................. 18
Table 3: UAE Defense Expenditure as % of GDP (2005-2010) .......................................................................................................................... 21
Table 4: UAE Defense Expenditure as % of GDP (2011-2016) .......................................................................................................................... 22
Table 5: UAE Defense budget Split between Capital and Revenue Expenditure (2005-2010) ............................................................................ 23
Table 6: UAE Defense budget Split between Capital and Revenue Expenditure (2011-2016) ............................................................................ 24
Table 7: UAE Capital Expenditure (2005-2010) ................................................................................................................................................ 25
Table 8: UAE Capital Expenditure (2011-2016) ................................................................................................................................................ 26
Table 9: UAE Revenue Expenditure (2005-2010) ............................................................................................................................................. 27
Table 10: UAE Revenue Expenditure (2011-2016) ........................................................................................................................................... 28
Table 11: Benchmarking with Key Markets - 2005-2010 vs 2011-2016............................................................................................................. 34
Table 12: Benchmarking with World's Largest Defense Spenders - 2010 and 2016 ........................................................................................... 36
Table 13: ICD Research Terrorism Index........................................................................................................................................................... 39
Table 14: UAE - Offset Guidelines and Agreements ......................................................................................................................................... 51
Table 15: Key Foreign Players and Operations in the UAE Defense Sector ........................................................................................................ 54
Table 16: Lockheed Martin - Major Products & Services ................................................................................................................................... 55
Table 17: Lockheed Martin - Alliances .............................................................................................................................................................. 56
Table 18: Lockheed Martin - recent contract wins ............................................................................................................................................. 57
Table 19: BAE Systems Plc - Major Products & Services .................................................................................................................................. 58
Table 20: BAE Systems Plc - Alliances ............................................................................................................................................................. 59
Table 21: BAE Systems Plc - recent contract wins ............................................................................................................................................ 59
Table 22: Raytheon Company - Major Products & Services ............................................................................................................................... 60
Table 23: Raytheon Company - Alliances ......................................................................................................................................................... 60
Table 24: Raytheon Company - recent contract wins ........................................................................................................................................ 61
Table 25: Rolls-Royce Plc - Major Products & Services .................................................................................................................................... 62
Table 26: Rolls-Royce Plc - Alliances ............................................................................................................................................................... 62
Table 27: Rolls-Royce Plc - recent contract wins .............................................................................................................................................. 62
Table 28: Northrop Grumman Corporation - Major Products & Services ............................................................................................................ 63
Table 29: Northrop Grumman Corporation - Alliances ....................................................................................................................................... 64
Table 30: Thales - Major Products & Services .................................................................................................................................................. 65
Table 31: Thales - Alliances .............................................................................................................................................................................. 66
Table 32: Thales - recent contract wins ............................................................................................................................................................ 66
Table 33: The Boeing Company - Major Products & Services ............................................................................................................................ 67
Table 34: The Boeing Company - recent contract wins ..................................................................................................................................... 68
Table 35: Abu Dhabi Ship Building - Major Products & Services ........................................................................................................................ 68
Table 36: Abu Dhabi Ship Building - Alliances .................................................................................................................................................. 69
Table 37: Abu Dhabi Ship Building - recent contract wins ................................................................................................................................. 69
Table 38: Gulf Logistics and Naval Support - Major Products & Services ........................................................................................................... 73
Table 39: Abu Dhabi Systems Integration - Major Products & Services.............................................................................................................. 74
INTRODUCTION
The UAE Defense Industry - Market Opportunities, Entry Strategies, Analyses and Forecasts to 2016 Page 11
© ICD Research. This product is licensed and is not to be photocopied Published: September 2011
1 Introduction
1.1 What is this Report About?
This report offers insights into the market opportunities and entry strategies adopted by foreign OEMs (original equipment manufacturers) to gain a market share in the UAE defense industry. In particular, it offers in-depth analysis of the following: Market opportunity and attractiveness: detailed analysis of the current industry size and growth expectations during 2011-2016, including highlights of the key growth stimulators. It also benchmarks the industry against key global markets and provides detailed understanding of emerging opportunities in specific areas Procurement dynamics: trend analysis of imports and exports, together with their implications and impact on the UAE defense industry. Industry structure: five forces analysis to identify various power centers in the industry and how these are expected to develop in the future. Market entry strategy: analysis of 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. Competitive landscape and strategic insights: analysis of 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. Business environment and country risk: a range of drivers at country level, assessing business environment and country risk. It covers historical and forecast values for a range of indicators, evaluating business confidence, economic performance, infrastructure quality and availability, labor force, demographics, and political and social risk.
1.2 Definitions
For the purposes of this report, the following timeframes apply: Review Period: 2005 to 2010 Forecast Period: 2011 to 2016
The following are definitions of military expenditure: Revenue expenditure includes troop training, institutional education, construction and maintenance of various undertakings. It also covers the salaries, allowances, pensions, transportation, food, insurance, welfare benefits and miscellaneous expenditures pertaining to all unit allowances for training, contingency and other grants for officers, non-commissioned officers, enlisted men and contracted civilians. Capital expenditure (capex) covers research and development (R&D), procurement, maintenance, transportation and storage of weaponry and other equipment. It also includes expenditure on aircraft and aero engines, heavy and medium vehicles, naval equipment and expenditure on the purchase of land, construction, plants and machinery
INTRODUCTION
The UAE Defense Industry - Market Opportunities, Entry Strategies, Analyses and Forecasts to 2016 Page 12
© ICD Research. This product is licensed and is not to be photocopied Published: September 2011
The following are definitions of defense categories: Military hardware refers to the broad range of machinery, systems, equipment and weapons used by defense forces. Air defense systems are defined as all measures designed to nullify or reduce the effectiveness of hostile air action. They include ground- and air-based weapon systems, associated sensor systems, command and control arrangements and passive measures. This may be to protect naval, ground and air forces wherever they are positioned, but does not include missile defense systems. Missile defense systems are systems, weapons, or technologies involved in the detection, tracking, interception and destruction of attacking missiles. Naval defense systems are used to protect sea lanes, ferry troops, or attack other navies, ports, or shore installations. They include surface ships, amphibious ships, submarines, and seaborne aviation. Homeland security (HLS) involves the protection of a country's civilians and critical infrastructure from natural or man-made disaster. Its margins extend to border and maritime patrol, customs checks in ports and airports, search and rescue operations, disaster recovery, combating terrorism and cyber attacks.
The following are miscellaneous definitions: Indirect offsets involve both barter and counter trade deals, investment in the buying country, or the transfer of technology unrelated to the weapons being sold. Direct offsets is defined as an arrangement wherein the purchaser receives work or technology directly related to the weapons sale, typically by producing the weapon system or its components under license. Multipliers are additional credits assigned over and above the market value provided to offsets for a technology, product or service being offered. Command, control and communications and intelligence system (C3I) refers to an information system employed by a military's top command to direct its forces. This system provides the military with information on various parameters associated with executing a strategy during a military exercise. The parameters include reconnaissance and surveillance, troop positions, inventory levels and weather conditions. The communication system enables the transfer of images and videos captured by surveillance systems and data and voice between the command and control center. In addition, the system aids in joint operations between the army, navy and air force. Maintenance, repair and overhaul (MRO) involves the servicing of a defense system with the objective of restoring it to a state where it can perform its intended function. It could be routine maintenance, replacement of faulty spare parts or checking the entire system to ensure smooth functioning. Airborne early warning and control systems (AEW&C) are airborne radar systems used by the military to detect the movement of aircraft in its airspace. Used at high altitudes, they are used in both defensive and offensive air operations and have the ability to help distinguish between civilian and military aircraft.
INTRODUCTION
The UAE Defense Industry - Market Opportunities, Entry Strategies, Analyses and Forecasts to 2016 Page 13
© ICD Research. This product is licensed and is not to be photocopied Published: September 2011
1.3 Summary Methodology
ICD Research's dedicated research and analysis teams consist of experienced professionals with a background in industry research, and consulting in the defense sector. The following research methodology is followed for all databases and reports
1) Secondary Research
The research process begins with exhaustive secondary research to source reliable qualitative and quantitative information related to the defense market. The secondary research sources that are typically referred to include, but are not limited to: Industry associations National government documents and statistical databases Company websites, annual reports, financial reports, broker reports, investor presentations Industry trade journals and other literature Internal and external proprietary databases News articles, press releases and webcasts specific to the companies operating in the market
2) Primary Research
ICD Research conducts hundreds of primary interviews a year with industry participants and commentators in order to validate its data and analysis. A typical research interview fulfils the following functions: Provides first-hand information on market size, market trends, growth trends, competitive landscape, and future outlook Helps to validate and strengthen secondary research findings. Further develops the analysis team's expertise and market understanding. Primary research involves e-mail interactions, telephonic interviews and face-to-face interviews for each market category, division and sub-division across geographies.
The participants who typically take part in such a process include, but are not limited to: Industry participants: CEOs, VPs, business development managers, market intelligence managers and national sales managers. External experts: investment bankers, valuation experts, research analysts and key opinion leaders specializing in defense markets
3) Conventions
Currency conversions are performed on the basis of average annual conversion rate format calculations. All the values in tables, with the exception of compounded annual growth rate (CAGR) and compounded annual rate of change (CARC) are displayed to one decimal place; therefore, growth rates may appear inconsistent with absolute values due to this rounding method.
INTRODUCTION
The UAE Defense Industry - Market Opportunities, Entry Strategies, Analyses and Forecasts to 2016 Page 14
© ICD Research. This product is licensed and is not to be photocopied Published: September 2011
1.4 ICD Research Terrorism Index
The ICD Research Terrorism Index classifies countries across the world into one of the following categories based on the risk of terrorism: Worst affected Highly affected Moderately affected Some risk Low risk
It takes into account the total number of terrorist incidents, the total number of people affected by these attacks, and the presence of foreign terrorist organizations in a country. Based on these parameters, the terrorism index is developed using a weighted average scorecard.
1.5 About ICD Research
ICD Research is a full-service market research agency and premium business information provider, specializing in industry analysis in a broad set of B2B and B2C markets. Our products and services help companies make better decisions, win business and position themselves more effectively. ICD Research's areas of expertise include online research, qualitative and quantitative research, industry analysis, custom approaches, and actionable insights. ICD Research has access to over 500 in-house analysts and journalists, and a global media presence in over 30 professional markets, enabling us to conduct unique and insightful research via our trusted business communities.
1.6 About Strategic Defence Intelligence
This report is one of a series that is available to subscribers of our premium research platform -- Strategic Defence Intelligence. Strategic Defence Intelligence provides a stream of continuously updated customer and competitor intelligence as well as detailed research reports providing an unrivalled source of global information on the latest developments in the defence industry. Strategic Defence Intelligence's unique monitoring platform tracks global defence activity for over 2,500 companies and 65 product categories in real-time in a highly structured manner - giving a comprehensive and easily-searchable picture of all defence industry activity. The site features: daily updated analysis, comment and news; company and customer profiles; defence spending, tenders and contracts; product and technology intelligence; a research and analysis database giving you access to industry and competitor reports to inform your business and market planning as well as fully customisable tools, including instant personalised report generation and custom alerts. For a free demonstration please contact us at sales@strategicdefenceintelligence.com
MARKET ATTRACTIVENESS AND EMERGING OPPORTUNITIES
The UAE Defense Industry - Market Opportunities, Entry Strategies, Analyses and Forecasts to 2016 Page 15
© ICD Research. This product is licensed and is not to be photocopied Published: September 2011
2 Executive Summary
The United Arab Emirates (UAE), one of the world's most lucrative markets for foreign defense OEMs, is expected to spend US$142.7 billion on defense during the forecast period The United Arab Emirates is located on the south side of the Strait of Hormuz, a waterway through which 40% of the world's oil is exported and which also shares a border with Iran. Territorial disputes with Iran, combined with its recent advances in ballistic missile technology, have driven the UAE to focus on the development of its own aircraft and missile systems, which accounted for 96% of the country's total defense procurements during 2004-2009. Indeed, the country's lack of indigenous defense capabilities and trained manpower has led the UAE to seek technologically advanced, high quality defense systems from foreign OEMs, in order to provide effective protection to its strategic assets and critical infrastructure. Currently the UAE accounts for 4.9% of global arms imports, making it the world's fourth-largest defense importer. Furthermore, its annual defense expenditure is expected to record a CAGR of 12.09% during the forecast period, of which US$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 (MRO) of existing defense systems. The country is also projected to spend an average of 5.8% of its GDP on defense during the forecast period, with an average per-capita defense expenditure of US$4,076 over this period, in accordance with its commitment to the protection of its civilians and critical infrastructure. During the forecast period, attractive opportunities are expected to emerge in multi-layered missile defense systems, unmanned aerial vehicles (UAVs), early warning systems and satellite communication systems. Additionally, opportunities in geographic systems are expected to arise, as a result of the governmental focus to map critical infrastructure with surveillance systems, in order to plan for disaster prevention and recovery. While the US remains the largest defense supplier to the UAE, efforts to diversify arms procurement is increasing imports from Europe The US is the largest supplier of arms to the UAE, accounting for 59% of the country's arms imports during the review period. In return for highly sophisticated defense systems, the UAE allows the US to use its ports as a base for its military operations in the Gulf. However, in an effort to reduce its dependence on a single supplier and diversify its defense systems, the UAE also increased its purchases from France, Germany, Russia and Romania during the review period. Indeed, France also shares a strong strategic relationship with the UAE and is its second-largest supplier, accounting for 41% of its arms imports during the review period. Defense deals come attached to an offset obligation equivalent to 60% of the contract value The UAE has a stringent offset policy, which requires defense contractors to either transfer technology or establish joint ventures with local firms in non-oil sectors. These obligations have contributed to significant growth in the domestic defense sector in the fields of shipbuilding, systems integration, naval logistics and MRO activities. The UAE Offset Program Bureau oversees the fulfilment of these obligations and has established various investment vehicles to assist their completion.
MARKET ATTRACTIVENESS AND EMERGING OPPORTUNITIES
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© ICD Research. This product is licensed and is not to be photocopied Published: September 2011
Foreign OEMs explore alternative routes to enter the UAE's defense market With the exception of naval systems, which are built in the UAE with foreign technology and components, foreign OEMs have historically preferred to manufacture defense systems outside of the UAE. Instead, foreign OEMs normally choose to establish a branch office or appoint a commercial agent to represent their business interests in the country, both of which involve minimal participation of UAE nationals. However, many foreign companies with a long-term strategy for participation in the country's defense market have recently begun to establish limited liability companies (LLCs) within the country, which require at least a 51% ownership from UAE nationals and a significant presence in the management of the firm. In addition, defense expositions hosted by the country can also serve as an entry route for foreign OEMs, as the UAE often makes significant purchases at such events. Key challenges for foreign OEMs are the stringent offset obligations set by the government and the requests for technology transfers in defense deals Although investment vehicles have been established to assist foreign contractors in meeting their offset obligations, meeting the profitability requirements of such obligations remains a key challenge. Indeed, many foreign OEMs have found it difficult to identify worthwhile projects, and considerable time is often lost in assembling and implementing an acceptable offset venture. Additionally, in order to enhance its indigenous capabilities, the UAE often requests foreign OEMs to share proprietary information with domestic defense firms. Although some foreign OEMs have been part of successful joint ventures with domestic firms, the majority are still reluctant to share proprietary information, especially when they are unable to command a majority share in the venture.



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