Middle East defence market worth US$73 billion this year; aerospace market worth US$63 billion over next decade


The Middle East’s military air market will generate US$62.9 billion worth of revenue between 2010 and 2020, according to a new report by Frost & Sullivan, while overall defence spending in the Middle East will rise from US$73.4 billion this year to US$82.5 billion by 2015, Forecast International predicts.

Forecast International, in a report released in January, said it projects defence investment in the Middle East region to expand by 14% over the next five years, mainly led by growth from Saudi Arabia and the United Arab Emirates. Saudi Arabia spends the most on defence in the Middle East, followed by Israel, Iraq, the UAE and Iran.

Saudi Arabia is buying US$60 billion worth of equipment from the United States under the Foreign Military Sales system and aims to upgrade its aerospace capabilities with refurbished F-15s and new helicopters, including up to 70 Boeing AH-64D Apaches, 36 Boeing AH-6i Little Birds, and 72 Sikorsky UH-60M Black Hawks, Forecast International reports. A Royal Saudi Navy upgrade could be worth US$30 billion.

Similarly, the United Arab Emirates is modernising its air force with the purchase of 60 AH-64Ds and could replace its Mirage 2000s with 60 new fighters.

Iraq is another country spending heavily on defence, and the Iraqi Air Force (IQAF) plans to field 500 fixed and rotary wing aircraft by 2020. Baghdad will invest US$12.5 billion every year through 2015 on its defence needs, Forecast International said.

The Frost and Sullivan report, published last week, says that Middle East countries are increasing spending on defensive air capabilities and spending in the regional market will rise from US$1.28 billion last year to US$3.906 billion per year by 2020. “The solid rise could be attributed to growing recognition of air assets as a force multiplier across all regional defence communities,” the report said.
“The Gulf Cooperation Council (GCC) countries are moving towards an integrated air defence network to include air platforms, air defence batteries and air surveillance systems under the Peninsula Shield initiative, but the progress has been slow,” a Frost & Sullivan aerospace analyst said. “The use of networked force by the US and European forces in the Gulf War and the latest Iraq and Afghanistan wars have been a startling revelation for Middle Eastern MODs who are now keen on acquiring these capabilities.”

Due to political considerations, most of these acquisitions come from the United States under the Foreign Military Sales (FMS) system, but there have been efforts to balance procurement by acquiring from Europe and Russia, such as Saudi Arabia purchasing Eurofighter Typhoons. However, China is also becoming a bigger supplier in the region.
“The US and European arms regulations (such as ITAR and End User Monitoring) often restrain the export of sensitive defence technology and capability such as UAVs to the Middle East market,” states the Frost & Sullivan analyst. This has hampered Western defence companies sales drives in the region.

Sabbir Ahmad, an industry analyst in Aerospace and Defence Practice at Frost & Sullivan, told Gulf News that the integrated air defence network that Gulf Cooperation Council states are working on would start with a shared air defence and air missile system, and could in the future include a whole different range of platforms.

However, he cautioned that the current political unrest in the Middle East may be a reason to possibly put new contracts on hold.

Forecast International said defence spending in the Middle East remains ‘robust’, representing 10-20% of total state expenditure per year. Last year, GCC defence investment amounted to US$68.3 billion and this could rise to US$73.4 billion this year and grow to US$82.5 billion by 2015.
“Fearing Iran’s regional strength, the GCC states continue to seek a distinct qualitative military-technological edge over Tehran,” Forecast International Middle East Defence Analyst Dan Darling said. “But Iran’s manpower and missile strengths camouflage some serious weaknesses, such as command-and-control shortcomings, a combat aircraft fleet falling into disrepair, and an armoured vehicle inventory of questionable capability. Other than its long-range missiles, Iran is limited for now in its ability to project conventional military power across the Gulf. In other words, some GCC countries may be susceptible to over-buying for a certain kind of threat that is not readily apparent.”

Tehran spends around US$9.3-9.5 billion per year, something Forecast International expects will continue in the near future. It estimates Egyptian defence spending will reach US$16 billion over the next five years, with Israeli spending coming to over US$64 billion during the same timeframe.