In 2008, the country’s defense budget stood at US$8.1 billion, before growing at a CAGR of 3.4% to reach US$9.2 billion by 2012. The modernization initiatives of the UAE are reflected in the growth of its defense budget over the review period 2008-2012). During the review period, numerous large-scale procurements such as THAAD missile defense systems, Apache fighter helicopters, and Lockheed Martin’s F-16 fighter aircraft from the US were completed. During the forecast period (2013-2017), defense expenditure is expected to grow from US$9.6 billion in 2013 to US$11.4 billion in 2017, registering a CAGR of 4.35%. As a percentage of GDP, it is expected to decline from an average of 2.7% during the review period to an average of 2.5% over the forecast period (see graph).
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 a significant share of the country’s total defense procurements during 2008–2012. 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.
The UAE currently 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 4.35% during the forecast period, of which US$21.3 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 2.5% of its GDP on defense during the forecast period, with an average per-capita defense.
Source: ASDReports - Market Research
Date: Feb 22, 2013