Oil revenues mean Gulf Cooperation Council governments have money to spend on upgrading their defences. Who is best placed to take advantage?
The oil-rich states of the Gulf are rapidly waking up to the fact that the aerospace and defence industry is about more than Western suppliers providing equipment and services to protect their interests; it is crucial to them diversifying their oil-dependent economies by providing high-tech jobs and in-country expertise.
Partnership is now the watchword for any European or US manufacturer hoping to do business in the region. “Most of these countries are pushing to develop indigenous capabilities. It’s a growing trend and creates employment opportunities and an industrial and revenue base,” says Marcus Hurley, Middle East regional director for Boeing’s Integrated Defence and Space arm.
The United Arab Emirates is making that transition fast. It is investing in infrastructure to support pilot training and maintenance of its Lockheed Martin F-16 Block 60 fighters, which are currently going into service with the air force. It is also developing its own unmanned air vehicle capabilities: it has built its own mini UAV and is in talks with several potential partners to design a tactical and medium-altitude high-endurance version in the country. “We are not interested in heavy industry,” says air force commander Maj Gen Khalid Bin Abdullah. “But we want to develop our own indigenous capability in UAVs.”
BAE Systems is one of the biggest global players in the Gulf, and aftersales and helping states build their aerospace infrastructure is becoming as important as bidding for procurement contests. The UK company expects to shortly announce joint venture deals with local companies in Oman, Bahrain and Kuwait to outsource aircraft maintenance back to local companies. The benefits for BAE include not having to rely on expensive expatriate staff but instead use cheaper local labour. But there is also a wider interest in that it solidifies the long-term partnership between BAE and its customer, says Simon Keith, regional managing director for the Middle East, India and Africa. “If we conclude a contract, we’d expect to be there on the ground in some way: if not local assembly or manufacturing then support or training,” he says.
In Saudi Arabia, BAE is striving to extend its long-term Al Yamamah arms and support contract, with a sale of the Eurofighter Typhoon the target. A push towards Saudi-isation – 70% of all new hires must be Saudis – means the company is involved in a programme to encourage youngsters to take up a career in aeronautical engineering. It can be a challenge: in Saudi Arabia and in the other Gulf states, with small populations and abundant personal wealth, it is difficult to persuade educated youngsters to take up careers in the military or in industry.
EADS, which is building a research and development centre in Qatar as part of that country’s efforts to develop a technology hub in the capital Doha, says helping to educate and train locals is one of the biggest priorities for any aerospace company seeking influence in the region. Like Boeing, it sees tremendous opportunities in the region, but says its approach differs from its US rival which tends to offer off-the-shelf, proven equipment which has seen service with the US military. “We are more prepared to tailor a solution than arrive with a ready-made package,” it says.
Because of cultural traditions stretching back to the days of empire, European companies are also better placed to build relationships with decision-makers. “There is a political advantage to not being American,” it says.
Not surprisingly, Boeing’s Hurley disagrees. “We have had a footprint in the region for 65 years in some cases,” he says. Opportunities include tankers, transports, weapon systems and “connectivity of these weapon systems to enhance missions”, as well as training. Working with local partners to “improve the capability and the maintainability” of defence assets is key, says Hurley, who expects current rising oil revenues to feed through into bigger defence budgets in the next three years.
MURDO MORRISON & JUSTIN WASTNAGE/ABU DHABI & LONDON
Source: Flight International