Abu Dhabi's defence sector positions itself in a global context

While the UAE remains a net importer of military equipment, the federal government has been pushing to reduce its dependency on imports through the development of its own defence manufacturing capability. At the same time an increase in defence spending across the region, linked to multiple ongoing conflicts, is leading many UAE-based defence firms to look at additional opportunities across the Gulf and even further afield.

The Middle East as a whole saw defence-related imports grow 103% between 2013 and 2017, with the region accounting for 32% of global arms imports, according to the Stockholm International Peace Research Institute (SIPRI). And while the UAE itself is one of the largest importers of arms, that still leaves plenty of opportunities for domestic defence firms to expand their businesses abroad.

Connected to this trend is the government of Abu Dhabi’s decision to put commercial development of its aerospace, defence and security industries as one of the priorities of the Abu Dhabi Economic Vision 2030 development plan. This could push the involvement of domestic defence firms overseas, and help Abu Dhabi-based companies grow in scale and ambition.

The local defence industry has multiple areas that it can capitalise on to improve its export potential, particularly in the cyber field. “There are three areas of possible cyberbusiness growth in the UAE market: managed security services, particularly as government e-services grow to help control cost and provide the agility that digital services demand; cybersecurity applications for industrial controls, a demand that may not be realised near term, but one that is on the horizon as the UAE economy diversifies and indigenous manufacturing matures in new areas such as aerospace and defence; and lastly, cybersecurity for air traffic management and unmanned aircraft,” Alan Davis, chief executive of Raytheon Emirates, told OBG.

Regional Focus

Saudi Arabia imports a large amount of military hardware and was the world’s second-largest arms importer between 2013 and 2017, according to the SIPRI. In June 2018 the inaugural meeting of the Saudi-Emirati Coordination Council took place. This body focuses on three main areas of cooperation: economic; human and knowledge-based; and political and security-related.

In November 2018, 20 of the UAE’s most prominent firms specialising in national security-related products and services, including those involved in armoured vehicles, naval vessels, aerospace, ammunition systems, telecommunications, maintenance and repair operations, cybersecurity, and logistical support and technical development, took part in the Saudi National Security and Risk Prevention Expo in Riyadh. Many of these are based in Abu Dhabi, among them Abu Dhabi Autonomous Systems Investments, Advanced Pyrotechnics, Emirates Defence Industries Company (EDIC) and NIMR Automotive.

Defence industry players from Abu Dhabi also attended the Defence and Security Equipment International exhibition held in London in September 2017, as they looked towards clients in more distant continents.

NIMR

Perhaps the biggest opportunities for expansion for a UAE arms company in the short term lie with NIMR Automotive. In November 2017 NIMR, a subsidiary of EDIC, announced that it was planning to increase exports of its “Made in the UAE” military-grade vehicles to the international market over the next five years. This followed the company delivering its first batch of vehicles outside the MENA region in October 2017, with the vehicles going to Turkmenistan. Further exports, to Thailand and Malaysia, were slated to take place in 2018.

NIMR Automotive is already a leading military vehicles manufacturer in MENA, with its medium and lightweight models used by militaries across the Middle East. The company produces multi-purpose vehicles, available in armoured or non-armoured varieties, with modular configurable crew capacity and payloads. The company’s first commercially available vehicles were launched in 2005. In June 2015 NIMR broke ground on a new integrated production facility in Tawazun Industrial Park, with the plant doubling its production capacity of 4x4 and 6x6 vehicles. According to media reports, the company has recently struck deals with Algeria and the Czech Republic to deliver light armoured vehicles, and is looking to secure deals in Slovakia, Poland and Romania. A NIMR spokesperson told The National newspaper in November 2017 that the firm is aiming to manufacture more than 1000 armoured cars for the European market alone over the next three to five years.

Caracal International

Another Abu Dhabi-based company that is pushing to extend its international footprint is Caracal International, considered the region’s leading original equipment manufacturer (OEM) for small arms. Its portfolio includes 9-mm striker-fired combat pistols, 9-mm sub-machine guns, three tactical rifles and three modular sniper rifles. In an early move to grow internationally, in 2007 the company, which was initially acquired by Tawazun Holding before being absorbed into EDIC, bought German light arms manufacturer Merkel, and now benefits from its German and US production facilities and distribution networks in Europe and America. In 2018 Caracal International opened a subsidiary in Brazil. As well as producing weapons, Caracal offers full technical support for the maintenance and repair of weapons systems.

In April 2018 Caracal International signed a memorandum of understanding (MoU) with Indian defence company MKU for the manufacture of its CAR 817AR rifle in India, which was the largest importer of major arms between 2013 and 2017. The MoU also covers mutual cooperation in promoting MKU’s electro optical devices and armour to the UAE’s armed forces.

ADSB

The UAE’s naval capacities are also in a process of expansion, with Abu Dhabi Ship Building (ADSB) at the forefront. The company, which was formed in 1996, initially began with a focus on refitting and repairs before expanding offerings to also specialise in the construction of commercial, naval and military seacraft such as the Baynunah 70-metre Corvette. In March 2018 the firm signed a strategic collaboration agreement with Abu Dhabi-based ADD Military Supplies and Chantier Naval Couach, a major French marine services provider and shipbuilder of defence and rescue vessels, as well as luxury yachts. The agreement was heralded as the beginning of a collaboration that would primarily serve the GCC, but would also target other strategic global markets, and highlighted ADSB’s commitment to increasing its global reach. In April 2018 ADSB launched two 64-metre landing ships for the Kuwait Naval Force, part of a contract to build eight ships to support the country’s naval strength and capabilities. In January 2018 ADSB also signed an MoU with Rolls-Royce, aimed at improving the quality and efficiency of its naval shipbuilding, repair and refit services across the GCC region, with the companies moving towards integrated engineering and supply chain services for military vessels. The agreement is expected to enable ADSB to expand its operations beyond the emirate’s borders.

AMMROC

Abu Dhabi is additionally investing in building its aviation and aerospace industries (see analysis). While a large amount of this effort is focused on developments to increase the emirate’s portfolio of OEM activities and aircraft maintenance, repair and overhaul (MRO) facilities, some moves are also aimed at facilitating the expansion of Abu Dhabi’s defence sector operations outside of the country.

In 2015 Mubadala Investment Company, a government-owned entity and one of the emirate’s principle vehicles for economic diversification, completed its purchase of 100% of AMMROC, an industry leader in business aviation and defence and security. In an industrial plan unveiled in 2016 the firm announced that it would re-focus its manufacturing and research and development resources towards medium-altitude, long-endurance unmanned aerial vehicles, targeting markets around the world. In December 2017 Mubadala said that it would inject a further €255m into AMMROC, which would cover a complete buyback of the group’s debt from banks and fund a new production strategy for its P180 turbojet. It has also been announced that AMMROC would be selling its MRO business.

Training

In addition to pushing the sale of its military equipment abroad, Abu Dhabi is growing its capacity to supply training solutions to other countries in the region, especially related to the commercial aviation sector. In March 2018 Etihad Aviation Training, part of Etihad Aviation Group, announced that it had relaunched its aviation training organisation, based at two locations in Abu Dhabi.

The business targets external customers and aims to provide airline cabin crew safety and instructor training, cadet programmes, and aircraft maintenance education. It is one of the largest aviation training facilities in the Middle East, with 10 full-flight simulators. Two more simulators were scheduled to arrive by the end of 2018, including their first Airbus A350-900 and third Boeing 787-9, helping to meet demand from across the region and in Europe, Africa and South-east Asia.