$20 billion of defence contracts up for grabs

Idex Special Report: UAE firms will headline this year's IDEX defence expo as part of plans to create an indigenous aerospace and defence industry.

The country is aiming to build a local military industry as regional governments move to outsource services to the private sector.

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The UAE Armed Forces is in talks for more than US$20 billion (Dh73.46bn) of defence contracts as the region's largest arms expo begins today in Abu Dhabi.

The negotiations include possible deals for French fighter jets, Italian training jets, as well as US transport aircraft, attack helicopters, early-warning aircraft and missile shields.

Some of these deals could be signed during the International Defence Exhibition and Conference (Idex), which has in the past been the chosen forum to announce major purchases.

While international defence giants will hope to be part of these deals, the UAE's own fast-growing aerospace and defence industry will also make an unprecedented showing at Idex this year.

The growing list of UAE companies engaged in military outsourcing, manufacturing and training is being driven by initiatives from state-backed players including Mubadala Development, Tawazun Holding and Emirates Advanced Investments.

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A total of 169 UAE exhibitors will occupy an area of 12,200 square metres. Tawazun, which is linked to the country's offsets system, is the headline sponsor.

Mubadala, a strategic investment company owned by the Abu Dhabi Government, and eight of its subsidiaries will have the largest stand, at 1,900 sq metres, among the show's 1,060 exhibitors.

The drive to build a local military industry comes as regional governments have moved to outsource services such as maintenance, support and supply-chain management to the private sector.

The latest such venture is Bayanat, a project of Mubadala.

Bayanat will manage the military's mapping and terrain data and provide services to private industry.

Gulf states are also seeking to leverage their immense purchasing power in the arms field by directing suppliers to establish local joint ventures.

"The UAE is on the lookout for industrial partners that have the capabilities and skills to assist them developing a truly state-of-the-art industrial system," said Dr Paolo Pozzessere, a senior vice president and commercial director of the Italian industrial group Finmeccanica.

Aviation, aerospace and defence are central to Abu Dhabi's 2030 development plan, the first steps of which are being taken in Al Ain, where Mubadala and Abu Dhabi Airports Company are building an aerospace cluster, and at Zayed Military City, where Tawazun is developing its Tawazun Industrial Park focused on the arms industry.

"This country will change its nature in the next 20 years from a pure defence consumer to a producer-consumer market," said Gianluca Trezza, the UAE resident manager of Elettronica, an Italian electronic warfare specialist.

"There is a real will to set up the aerospace and defence industry here."

In Al Ain, a mid-summer groundbreaking is expected for the Advanced Military Maintenance and Repair, Overhaul Centre (Ammroc), with the facility opening in 2013 as the region's most sophisticated military aircraft repair depot, said Colonel Fahad al Shamsi, the chief executive.

Ammroc is owned by Mubadala and two US companies, Sikorsky and Lockheed Martin.

The new company is gearing up to take over maintenance from the UAE Armed Forces for its attack and transport helicopters, trainer and fighter jets and transport planes.

"It was very obvious we needed some capabilities to help the Armed Forces, and at the same time align ourselves with the aerospace industry and Mubadala's vision," Col al Shamsi said.

The three companies will invest nearly $800 million in building the 800,000 sq metre plant, which is targeting $1bn of revenue and a quadrupling of its staff to 4,000 by 2015.

"This will take aircraft support in the UAE and, in some point in the future, to the region to a new level," said Willy Moore, the UAE chief executive for Lockheed Martin Global.

Ammroc's joint-holding model is being replicated across the UAE's burgeoning aerospace and defence industry. In Taweelah, the locally based Al Fattan Ship Industry is creating Etihad Ship Building in partnership with Fincantieri and Melara Middle East.

Other link-ups are expected to be announced next week, among them a partnership between Northrop Grumman of the US and Abu Dhabi Autonomous Systems Investments.