Future of the UAE Defense Industry Market Attractiveness, Competitive Landscape and Forecasts to 2019

Transcription

1 Future of the UAE Defense Industry Market Attractiveness, Competitive Landscape and Forecasts to 2019

2 TABLE OF CONTENTS 1. Introduction What is this Report About? Definitions Summary Methodology SDI Terrorism Index About Strategic Defence Intelligence Executive Summary Market Attractiveness and Emerging Opportunities Defense Market Size Historical and Forecast The defense budget of the UAE to record a CAGR of % over the forecast period Military modernization initiatives, territorial dispute with Iran, and peace keeping missions to drive defense expenditure The defense budget as a percentage of GDP is expected to increase during the forecast period Analysis of Defense Budget Allocation Capital expenditure allocation is expected to increase during the forecast period Defense capital expenditure expected to increase at a CAGR of % over the forecast period Revenue expenditure to be US$ billion over the forecast period Per capita defense expenditure expected to increase during the forecast period Homeland Security Market Size and Forecast UAE homeland security is expected to increase at a CAGR of % over the forecast period Investment in the protection of infrastructure and cyber security are expected to drive the UAE homeland security market The UAE faces minimal threat from terrorists Benchmarking with Key Global Markets The UAE s defense budget expected to register rapid growth over the forecast period UAE defense expenditure is low compared to the largest defense spenders in the world UAE allocates moderate percentage of its GDP towards defense expenditure The UAE faces low risk from acts of terrorism Market Opportunities: Key Trends and Growth Stimulators Multi-role Aircraft C4ISR land based Infrastructure Attack Helicopters: Defense Procurement Market Dynamics Import Market Dynamics

3 Limitations of the domestic defense industry to encourage arms imports The UAE stood as the world s fourth-largest arms importer over the review period Over the review period, aircraft accounted for the majority of the UAE s defense imports US continues to be the major arms supplier to the UAE Export Market Dynamics The UAE has minimal defense exports Industry Dynamics Five Forces Analysis Bargaining power of supplier: low to medium Bargaining power of buyer: medium to high Barrier to entry: medium to high Intensity of rivalry: high Threat of Substitution: low to medium Market Entry Strategy Market Regulation Defense deals are settled through direct negotiation or competitive bidding Foreign OEMs prefer indirect offsets to meet the obligations associated with defense deals Market Entry Route Foreign OEMs use proxy representatives to enter the market Defense expositions hosted by the UAE serve as an entry route for foreign OEMs Key Challenges Complying with the UAE s stringent offset requirements a concern for OEMs UAE demands technology transfer in defense deals Competitive Landscape and Strategic Insights Competitive landscape Overview A diverse range of foreign OEMs dominate the UAE defense sector Indigenous ship building drives domestic market growth Key Foreign Companies Lockheed Martin overview Lockheed Martin Major Products and Services Lockheed Martin recent announcements and strategic initiatives Lockheed Martin alliances Lockheed Martin recent contract wins BAE Systems Plc. overview BAE Systems Plc. Major Products and Services BAE Systems Plc. recent announcements and strategic initiatives BAE Systems Plc. alliances

4 BAE Systems Plc. recent contract wins Raytheon Company overview Raytheon Company Major Products and Services Raytheon Company recent announcements and strategic initiatives Raytheon Company alliances Raytheon Company recent contract wins Rolls-Royce Plc. overview Rolls-Royce Plc. Major Products and Services Rolls-Royce Plc. recent announcements and strategic initiatives Rolls-Royce Plc. alliances Rolls-Royce Plc. recent contract wins Northrop Grumman Corporation overview Northrop Grumman Corporation Major Products and Services Northrop Grumman Corporation recent announcements and strategic initiatives Northrop Grumman Corporation alliances Thales overview Thales Major Products and Services Thales recent announcements and strategic initiatives Thales alliances Thales recent contract wins The Boeing Company overview The Boeing Company Major Products and Services The Boeing Company recent announcements and strategic initiatives The Boeing Company alliances The Boeing Company recent contract wins Key Public Sector Companies Abu Dhabi Ship Building overview Abu Dhabi Ship Building Major Products and Services Abu Dhabi Ship Building recent announcements and strategic initiatives Abu Dhabi Ship Building alliances Abu Dhabi Ship Building recent contract wins Abu Dhabi Ship Building financial analysis Gulf Logistics and Naval Support overview Gulf Logistics and Naval Support Major Products and Services Gulf Logistics and Naval Support recent announcements and strategic initiatives Abu Dhabi Systems Integration overview Abu Dhabi Systems Integration Major Products and Services Abu Dhabi Systems Integration recent announcements and strategic initiatives

5 Abu Dhabi Systems Integration alliances Business Environment and Country Risk Demographics & Social Statistics Total Rural Population Total Urban Population Number of Households (In million) Economic Performance GDP Per Capita GDP, Current Prices Exports of goods and services, current prices Imports of goods and services, current prices Manufacturing Output, Current Prices (US$ Billions) Consumer Price Index Local Currency Unit per US Dollar Local Currency Unit per Euro Market Capitalization of Listed Companies Market Capitalization of Listed Companies (% of GDP) International reserves, including gold Energy and Utilities Conventional Thermal Electricity Net Generation Conventional Thermal Electricity Installed Capacity Proved Natural Gas Reserves Petroleum Consumption UAE Crude Oil Proved Reserves (Billion Barrels) Infrastructure Overall Construction (US$ Million) Minerals Mining, Manufacturing, Utilities Output (USD Bn) Technology Patents Granted Telecommunication Telephone Lines Telephone Lines Penetration Rate Appendix About SDI Disclaimer

6 LIST OF FIGURES Figure 1:UAE Defense Expenditure, Figure 2: UAE Defense Expenditure, Figure 3: UAE Defense Expenditure (in AED Billion), Figure 4: UAE Defense Expenditure (in AED Billion), Figure 5: UAE GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP (US$), Figure 6: UAE GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP (US$), Figure 7: UAE GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP (in AED terms), Figure 8: UAE GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP (in AED), Figure 9:UAE Defense Budget Split Between Capital and Revenue Expenditure (%), Figure 10: UAE Defense Budget Split Between Capital and Revenue Expenditure (%), Figure 11: UAE Capital Expenditure (US$ Billion), Figure 12: UAE Capital Expenditure (US$ Billion), Figure 13: UAE Capital Expenditure (in AED Billion), Figure 14: UAE Capital Expenditure (in AED Billion), Figure 15: UAE Revenue Expenditure (US$ Billion), Figure 16: UAE Revenue Expenditure (US$ Billion), Figure 17: UAE Revenue Expenditure (in AED Billion), Figure 18: UAE Revenue Expenditure (in AED Billion), Figure 19: UAE Per Capita Expenditure (US$), Figure 20: UAE Per Capita Expenditure (US$), Figure 21: UAE Homeland Security Budget (US$ billion), Figure 22: UAE Homeland Security Budget (US$ billion), Figure 23: UAE Homeland Security Budget (AED Billion), Figure 24: UAE Homeland Security Budget (AED Billion), Figure 25: SDI Terrorism Heat Map Figure 26: SDI Terrorism Heat Index, Figure 27: Benchmarking with Key Markets vs Figure 28: Defense Expenditure of the World s Largest Military Spenders (US$ Billion), 2014 and Figure 29: Defense Expenditure as a Percentage of GDP of Largest Military Spenders (%), Figure 30: UAE s Multi-role Aircraft Market Size (US$ Billion), Figure 31: UAE Land-based C4ISR Market Size (US$ Billion), Figure 32: UAE Infrastructure Market Size (US$ Million), Figure 33: UAE s Attack Helicopters Market Size (US$ Million), Figure 34: UAE Defense imports TIV value (US$ Million), Figure 35: UAE Defense Imports by Category (%), (TIV values) Figure 36: UAE Defense Imports by Region (%), Figure 37: Industry Dynamics Porter s Five Forces Analysis Figure 38: Abu Dhabi Ship Building Revenue Trend Analysis (AED Million), Figure 39: Abu Dhabi Ship Building Operating Profit (AED Million), Figure 40: Abu Dhabi Ship Building Net Profit Trend Analysis (AED Million), Figure 41: UAE Rural Population (In Millions), Figure 42: UAE Urban Population (In Millions), Figure 43: UAE Number of Households (In Millions), Figure 44: UAE GDP Per Capita, Figure 45: UAE GDP, Current Prices (In US$ Billions), Figure 46: UAE Exports of goods and services, current prices (US$ Billion), Figure 47: UAE Imports of goods and services, current prices (US$ Billion), Figure 48: UAE Manufacturing Output (US$ Billion), Figure 49: UAE Consumer Price Index, Figure 50: Local Currency Unit per US$ - Exchange Rate, Figure 51: Local Currency Unit per Euro, Figure 52: UAE Market Capitalization of Listed Companies (US$ Billion), Figure 53: UAE Market Capitalization of Listed Companies (% of GDP), Figure 54: UAE s International reserves, including gold (US$ Billion), Figure 55: UAE Conventional Thermal Electricity Net Generation (Billion Kilowatt hours), Figure 56: UAE Conventional Thermal Electricity Installed Capacity (Million Kilowatt hours),

7 Figure 57: UAE s Proved Natural Gas Reserves (Trillion Cubic Feet), Figure 58: UAE s Petroleum Consumption (Thousand Barrels Per Day), Figure 59: UAE s Crude Oil Proved Reserves (Billion Barrels), Figure 60: UAE s Overall Construction (US$ Million), Figure 61: UAE s Mining, Manufacturing, Utilities Output (USD Billion), Figure 62: UAE Patents Granted, Figure 63: UAE s Telephone Lines (In Million), Figure 64: UAE s Telephone Lines Penetration Rate (Per 100 People),

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

9 Table 55:Eurofighter Jagdflugzeug Recent Contract Wins Table 56:Rheinmetall Product focus Table 57:Rheinmetall Alliances Table 58:Rheinmetall Recent Contract Wins

10 1. Executive Summary The United Arab Emirates (UAE), the world s fourth largest arms importer, is expected to spend US$ 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 2010 and 2014, the UAE s annual defense expenditure stood at an average of US$ billion every year, which is expected to increase to US$ billion over the forecast period. On a cumulative basis, the country is expected to invest US$ billion for defense purposes, of which US$ 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 % of its GDP on defense during the forecast period, with an average per-capita defense expenditure of US$ over this period.. 10

11 2. Market Attractiveness and Emerging Opportunities Between 2010 and 2014, 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 % 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 % of GDP in 2014, is expected to increase to % of GDP by 2019, 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. 11

12 Defense Expenditure Future of the UAE Defense Industry Market Attractiveness, Competitive Landscape and Forecasts to Defense Market Size Historical and Forecast The defense budget of the UAE to record a CAGR of % over the forecast period The modernization initiatives of the UAE are reflected in the growth of its defense budget over the review period. In 2010, the country s defense budget stood at US$ billion, and grew at a CAGR of % to reach US$ billion by During the review period, the government signed numerous largescale 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$ billion in 2015, which is expected to be increased to US$ billion by The following table and figure show the UAE defense expenditure during the review period: Table 1: UAE Defense Expenditure, Year Defense expenditure (US$ bn) Defense growth percentage CAGR % Source: UAE Ministry of National Defense and SDI analysis Figure 1: UAE Defense Expenditure, Defense Expenditure Growth Rate (%) Source: UAE Ministry of National Defense and SDI analysis 12

13 Defense Expenditure Future of the UAE Defense Industry Market Attractiveness, Competitive Landscape and Forecasts to 2019 The following table and figure show projected defense expenditure of the UAE over the forecast period: Table 2: UAE Defense Expenditure, Year Defense expenditure (US$ bn) Defense growth percentage CAGR % Source: UAE Ministry of National Defense and SDI analysis Figure 2: UAE Defense Expenditure, Defense Expenditure Growth Rate (%) Source: UAE Ministry of National Defense and SDI analysis 13

14 2.2. Analysis of Defense Budget Allocation 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 %. The capital expenditure allocation is expected to increase to an average of % 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 % in 2015 to % in 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 (%), Year Capital Expenditure Share Revenue Expenditure Share Source: UAE Ministry of National Defense and SDI analysis Figure 3: UAE Defense Budget Split Between Capital and Revenue Expenditure (%), %Percentage of Defense Expenditure 100% 80% 60% 40% 20% 0% Revenue Expenditure Capital Expenditure Source: UAE Ministry of National Defense and SDI analysis 14

15 Percentage of Defense Expenditure % Future of the UAE Defense Industry Market Attractiveness, Competitive Landscape and Forecasts to 2019 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 (%), Year Capital Expenditure Share Revenue Expenditure Share Source: UAE Ministry of National Defense and SDI analysis Figure 4: UAE Defense Budget Split Between Capital and Revenue Expenditure (%), % 80% 60% 40% 20% 0% Revenue Expenditure Capital Expenditure Source: UAE Ministry of National Defense and SDI analysis 15

16 Homeland Security Expenditure Future of the UAE Defense Industry Market Attractiveness, Competitive Landscape and Forecasts to Homeland Security Market Size and Forecast UAE homeland security is expected to increase at a CAGR of % 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$ billion in 2010 to US$ billion in 2014, registering a CAGR of %. Over the forecast period, the country is expected to increase its spending on homeland security from US$ billion in 2015 to US$ billion in 2019, 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 (UAE$ Billion), Year HLS budget (US$ bn) Source: Ministry of Public Safety, UAE and SDI analysis Figure 5: UAE HLS Budget (UAE$ Billion), Source: Ministry of Public Safety, UAE and SDI analysis 16

17 Homeland Security Expenditure Future of the UAE Defense Industry Market Attractiveness, Competitive Landscape and Forecasts to 2019 The following table and figure show the UAE HLS budget over the forecast period: Table 6: UAE HLS Budget (UAE$ Billion), Year HLS budget (US$ bn) Source: Ministry of Public Safety, UAE and SDI analysis Figure 6: UAE HLS Budget (UAE$ Billion), Source: Ministry of Public Safety, UAE and SDI analysis 17