The UAE, the 14th largest military spender in the world in 2016, has a comparative advantage to create a local defense industry as it seeks to meet security needs, diversify its economy, boost employment and enhance its knowledge base, experts and officials said on Wednesday.
The UAE, the second biggest Arab economy, is developing a domestic defence industry to help lower its military expenditure, which reached US$22.8 billion last year or 5.7 per cent of GDP, according to the Stockholm International Peace Research Institute.
There needs to be some level of independence when it comes to the security forces' defence needs, said Fahad Al Yafei, chief programs officer at Tawazun Economi Council, the Abu Dhabi body spearheading the development of the emirate’s defence industry.
“And again it is a well known fact that the defence industry is a catalyst for innovation. The defence industry plays a big role in the knowledge-based economy,” Mr Yafei said at a defence conference in Abu Dhabi.
The UAE, particularly Abu Dhabi, is beefing up efforts to create employment and innovation through its defence industry.
For example, Mubadala Investment Company, Abu Dhabi’s strategic investment firm, and Tawazun Holding are shareholders in Emirates Defence Industries Company (Edic).
Edic has around 15 companies under its umbrella, including Nimr Automotive armoured vehicles maker, which is exporting its products.
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“There is a vision: the end result is definitely a unique UAE product that is 100 per cent owned, operated, designed and whole Intellectual Property is ours that is also exportable with demand from international markets,” said Mr Al Yafei.
The UAE’s comparative advantage includes its respect for intellectual property and security, according to David Des Roches, senior military fellow at the National Defense University.
The UAE and the wider Arabian Gulf region can also develop niche industries such as making bomb fuses that have a lower failure rate and naval counter-mine capabilities, he added. The UAE’s other advantage is its offsets programme that requires companies procuring military equipment and arms to set up ventures that bring economic value to the country.
According to the Tawazun Economic Programme, a foreign defence contractor supplier to the UAE with over $10 million contract value over a five-year period, must participate in the programme.
US defence company Raytheon, the maker of Patriot missiles, has a number of programmes in the UAE, including a partnership with Abu Dhabi Ship Building, the prime contractor for the six-ship Baynunah corvette programme, to provide the self-defence weapon fit for the vessels.
John Harris, chief executive of Raytheon International, said the company is keen to expand its partnership with the UAE.
“We are actually having meaningful discussions with the Emirates government to further our partnership and grow it,” said Mr Harris. “Our intention is to create capacity that not only can support a programme but can also be part of the global supply chain.”
But challenges linger for the development of the industry, including US restrictions on transfer of technology for security reasons.
“It is always hard to re-export American technology,” said Mr Des Roches. “An objective observer would conclude the United States leases weapons. It does not sell them because they have so many conditions.”