United Arab Emirates

The state defence budget is not publicly announced officially, according to analysts it is estimated that in 2014 the UAE had spent 22.76 Billion U.S Dollars or 5.64% of the GDP for its defence, while the following years till 2017 the defence budget stood at an average of 23.4 Billion U.S Dollars per year.

The UAE defence budget covers not only the operational and procurement expenses of the Armed Forces of the country but also the expenses of the military operations in Yemen and the maintenance of the military bases of the UAE abroad. Finally, the Government of the country decided several years ago to invest significant amount of money to the development of the local defence industry.

Defence Industry

Part of the ambitious program of the Government of the UAE to diversify the economy of the country and increase the self-sufficiency of the Armed Forces of the country in weapon systems, was the strategy to develop of an indigenous defence industry. The policy to create an indigenous defence industry started 20 years ago and it was based on OFFSET programs and the establishment of joint venture companies between foreign and local defence industries.

The UAE defence industry is focused in five sectors, a) armored wheeled vehicles, b) aviation components, c) PGM (Precision Guided Munitions) and munitions, d) MRO and e) shipbuilding of small and medium size boats. The evolution of the establishment and the development of the defence industry of the UAE can be divided into three phases. The first one covers the period 1992-2014, when the UAE authorities established the state owned organizations tasked to create an indigenous defence industry.

More specifically, the “UAE Offset Program Bureau” which later was rebranded to “Tawazun Economic Council-TEC”, the “Tawazun Holding LLC” (part of TEC), and “Mubadala Investment Company” accompanied by the private-owned company “Emirates Advanced Investments Group (EAIG)” which Mubadala owns a 60% share (on 1st of January 2018, it became “Yas Holding LLC”).

The second phase started in 2014 when “Mubadala”, “EIAG” and “Tawazun” signed a MoU to create “EDIC (Emirates Defence Industries Company)” that gradually absorbed 11 subsidiary companies that belong to them. Finally, the third phase started in November 2019 when the UAE authorities announced the establishment of an even bigger defence industry conglomerate, the “EDGE Group” which will consolidate 23 entities including subsidiaries from the “EDIC”, “EAIG”, “Tawazun Holding LLC” and other independent organizations in the UAE.

The first step for the establishment of a local defence industry started in 1992 with the establishment of the “UAE Offset Program Bureau” which was rebranded in 2007 to become “Tawazun Economic Council-TEC”.

“TEC” is responsible for the implementation of the “Tawazun Economic Program-TEP”, formerly known as the “UAE Offset Program”, an industrial participation program that awards credits to foreign investors operating in the sectors for aerospace, defence, autonomous systems and cyber security. The liaison mechanism between “TEC” and the UAE Armed Forces General Headquarters (GHQ) is the “Tawazun Economic Committee”. Besides TEC the UAE authorities launched in 2004 “Mubadala Investment Company” and in 2007 “Tawazun Holding LLC” an entity which functions as a Strategic Defence Manufacturing Arm and develops business ventures through industrial partnerships and strategic investments in areas such as defence, aerospace and munitions.

Following its establishment, “TEC” created two councils, the “National Defence Contractors Council (NDCC)” and the “National Defence Companies Council”. Furthermore, on February 2019 “TEC” launched the “Defence and Security Development Fund” with a capital of 680 million U.S Dollars (AED 2.5 billion), and a new Tawazun Economic Program Policy. “TEC’s” mission is to facilitate investments to the UAE and help defense contractors meet their contractual obligations, while its role is both a regulator and business developer for offset opportunities. Through the implementation of its economic program initiatives, “TEC” acts as a key factor for the development of the local defence and security industry, creating new capabilities with technology transfer and the adoption of new technologies.

During the first period of the development of the defence industry of the UAE, the three large companies that dominated the local industry, the state-owned “Mubadala Investment Company”, “Tawazun Holding LLC” and the private-owned “EAIG” had in total 31 subsidiaries in the fields of defence industry and services.

“Mubadala Investment Company”, had 9 subsidiaries:

• Advanced Military Maintenance Repair Overhauling Centre (AMMROC)

• Al Taif Technical Services

• Bayanat for Mapping and Surveying Services

• Horizon International Flight Academy

• Yahsat

• Nibras Al Air Aerospace Park

• Emirates Defence Technology

• Abu Dhabi Aircraft Technologies

• UAV Research and Technology Centre

“Tawazun Holding LLC” had 15 subsidiaries:

• Abu Dhabi Autonomous Systems Investment (ADASI)

• Caracal Light Ammunitions & Burkan Munitions Systems (later in 2017 the two companies merged and created Barij Munitions company)

• NIMR Automotive

• Caracal International (firearms)

• Tawazun Precision Industries (TPI)

• Tawazun Training Centre

• Tawazun Industrial Park

• Tawazun Dynamics (later rebranded to Basij Dynamics)

• Jaheziya

• Rabdan Academy

• Remaya International

• Abu Dhabi Advanced Radar Systems

• Heavy Vehicle Industries

• Al Jasoor

“Emirates Advanced Investments Group (EAIG)” (later Yas Holding LLC) had 7 subsidiaries:

• C4 Advanced Solutions

• Global Aerospace Logistics LLC

• Naval Advanced Solutions

• Secure Communications

• Thales Advanced Solutions

• International Golden Group (IGG)

• Emirates Advanced Research and Technology Holding (EARTH)

Furthermore, “Mubadala Investment Company”, owned partially (40%) Abu Dhabi Ship Building, as well as its subsidiaries “Abu Dhabi Systems Integration” and “Gulf Logistics and Naval Support”.

Besides these three large companies, there were at least five more private-owned companies: Melara Middle East with its three subsidiaries/associated companies, a) Etihad Ship Building, b) Siham Al Khaleej Technology and c) Al Fattah ship Industry Group, Adcom Systems, Baynunah Aviation Technology with its four subsidiaries a) Snecbat Engine Technologies, b) Sagembat Defence, c) Dasbat Aviation, d) Thalbat and finally the private owned Prininvest. This structure changed in April 2014 when “Mubadala Investment Company”, “EIAG” and “Tawazun” signed a MoU to establish the large conglomerate “EDIC” which absorbed initially at least 11 subsidiary companies that belong to them.

The partial merger of the defence portfolios of “Tawazun Holding LLC”, “EIAG” (now known as Yas Holding) and “Mubadala Investment Company”, was the most important development in the UAE’s security and defence industry at that time and created a new large company with 10,000 employees.

When the establishment of “EDIC” was completed in 2016 (the company was founded in the 2nd of December 2014), it owned the following 15 companies:

• Advanced Military Maintenance Repair Overhauling Centre (AMMROC)

• Al Taif Technical Services

• Bayanat for Mapping and Surveying Services

• Horizon International Flight Academy

• Abu Dhabi Autonomous Systems Investment (ADASI)

• Barij Munitions Systems (previously Burkan Munitions merged in 2017 with Caracal Light Ammunition)

• Barij Dynamics (previously Tawazun Dynamics)

• Caracal International (firearms)

• NIMR

• Tawazun Precision Industries (TPI) (later rebranded to Emirates Precision Industries-EPI)

• C4 Advanced Solutions

• Naval Advanced Solutions

• Emirates Systems

• Thales Advanced Solutions

• Secure Communications

Only few years after the establishment of “EDIC” the authorities of the UAE inaugurated a new “advanced technology conglomerate” which brought together 23 existing companies and two centres of excellence from the security and defence sector.

The new company called “EDGE Group PJSC” was announced officially on the 5th of November 2019 and will include the following 23 companies:

• AMMROC (Advanced Military Maintenance Repair Overhauling Centre)

• Al Taif (Technical Services)

• ADASI (Autonomous Systems for air, land and sea)

• LAHAB (previously Barij Munitions)

• Caracal International (firearms)

• NIMR (manufactures wheeled military vehicles)

• EPI (previously EDIC Precision Industries)

• SIGN4I (Electronic warfare services and solutions)

• ADSB (Shipyard)

• Al Tariq (previously Basij Dynamics, high-precision long-range guided munitions)

• EARTH (R&D engineering manufacturing technology integration and project management solutions for defence and security)

• Al Hosn (Designs, manufactures blast and ballistic protection systems)

• Al Jasoor (Manufactures Rabdan 8x8 AIFV)

• APT (Manufactures smoke grenades, low velocity projectiles)

• Beacon Red (End-to-end training to the UAE security establishment)

• ERS (Emergency response services for both military and commercial customers)

• ETS (Sophisticated IT, technology, engineering simulation and manpower augmentation solutions in marine technology which absorbed Thales C4 Advanced Solutions)

• GAL (Fleet readiness for rotary and fixed-wing platforms through maintenance)

• HALCON (Manufacturer of precision-guided missile systems)

• Jaheziya (Fire and emergency response services, training and certification),

• Knowledge Point (Organization and mission assessments, training and education services to government and military)

• Remaya (Shooting ranges and live-fire training solutions)

• Horizon (Helicopter training)

According to the CEO of “EDGE Group PJSC” Al Bannai, “EDIC” will eventually disappear, as all its companies will fall under the control of “EDGE”. These companies will be grouped in five different clusters, “increasing synergies, accelerating the capability building, and avoiding duplications” according to Al Bannai.

The 5 clusters of “EDGE Group PJSC” are:

• Platforms and Systems (ADASI, ADSB, Al Taif, AMMROC, EARTH, GAL, Al Jasoor, NIMR),

• Missiles and Weapons (APT, Al Tariq, Caracal International, HALCON, LAHAB),

• Cyber Defence,

• Electronic Warfare and Intelligence (Beacon Red, SIGN4I)

• Mission Support (Al Hosn, EPI, ERS, ETS, Horizon, Jaheziya, Knowledge Point, Remaya).

The new company will employ approximately 12.000 people and will have estimated revenues of $5 billion.

The most recent development in the UAE defence industry is the announcement of the Poland of TEC to open four new defence centers. These new defence centers are a) a missile engineering facility to be established with the French missile manufacturer MBDA, b) an Aviation Training Center in Abu Dhabi, in cooperation with Leonardo, equipped with AW169 and AW139 pilot training simulators, c) a new Flight-Testing Center in Abu Dhabi, in cooperation with Dassault Aviation and d) the development of Data Fusion capabilities in the UAE from the local company EDIC Bayanat.

The first investment of the newly established Defence and Security Development Fund (DSDF) was the procurement in February 2019 of 36% equity stake in Russian automotive brand Aurus. The new development fund invested AED460 million (125 million USD) in Aurus. The money will be used to develop the manufacturing facilities and capabilities of Aurus. A company that manufactures a range of armored vehicles, primarily for the Russian market.

Several months later, on November 2019, DSDF which was rebranded to Tawazun Strategic Development Fund (TSDF), announced the launch of a AED700 million (190.5 million USD) Venture Debt Program in order to provide to Emirate-owned SMEs with an annual turnover between AED10-250 million (2.7-68 million USD) in the defence and security sector, financial options to support the expansion of their operations. The Program is set up in partnership with First Abu Dhabi Bank, Commercial Bank of Dubai and National Bank of Fujairah.