x Abu Dhabi, UAEFriday 28 July 2017

Rising arms budget is double-edged sword

While military hardware may boost Gulf support businesses and provide increased capabilities, it also expends capital that may prove useful elsewhere.

Military budget outlays can be overdone unless due care is exercised and it may not pay off as well as anticipated in the long run, critics claim.
Military budget outlays can be overdone unless due care is exercised and it may not pay off as well as anticipated in the long run, critics claim.

Increased military spending is a boon to industrial development in Gulf states as well as an investment in security, according to the Abu Dhabi-based representative for a big arms company. Still, those budgetary outlays can be overdone unless due care is exercised and it may not pay off as well as anticipated in the long run, critics claim.

The UAE's military spending surged between 2004 and the end of last year against a background of regional instability. Buying new equipment means lucrative contracts for local firms to maintain and repair it, says Martin Bennett, the regional vice president for BAE Systems, who this year moved to Abu Dhabi from Qatar to boost his company's activities in the Emirates. The extra expertise gained in handling the new technology also increases the potential for developing innovative spin-off products, he says.

"This is the non-strategic side of it, particularly in the case of the UAE where there are real add-on benefits in terms of who will look after the equipment, the industrial participatory side," says Mr Bennett. "So defence can be a means to an end rather than an end in itself." While BAE is a big player in Saudi Arabia, it has not enjoyed the same success in the UAE, which has recently bought armaments from US companies such as Lockheed Martin, Raytheon and Northrop Grumman as well as France's Dassault. BAE suffered another blow earlier this month after an announcement by the UK's Serious Fraud Office that the agency was pursuing corruption charges against it over alleged bribes in Africa and eastern Europe.

BAE's attempt to break into the UAE is easy to understand: recent years have been profitable for the arms industry in the Middle East. Regional military spending rose 34 per cent between 1999 and last year, driven by economic growth, high oil prices and growing instability, according to a July report by the Stockholm International Peace Research Institute (SIPRI). The UAE was the region's largest purchaser of conventional weaponry between 2004 and the end of last year, the study showed, making it the third-biggest buyer worldwide after China and India. Just over half of all arms purchased in the region over the same period were bought from the US, with 16 per cent from France, 8 per cent from Germany and 7 per cent from Russia.

Of the Gulf states, the UAE is particularly keen to gain from the knock-on effect of defence spending boosting knowledge of technology as a force for development, Mr Bennett says, and has a 40 per cent "offset requirement" for some deals involving military hardware. That means at least 40 per cent of the contract value must be reinvested into the wider economy, for example through maintenance contracts.

However, Dr Sam Perlo-Freeman, a senior researcher on SIPRI's Military Expenditure and Arms Production Programme, says regional countries are wasting money on expensive weaponry. While buying arms could spur an indigenous arms industry, it is not a good method of catalysing broader economic development, he says. "The Middle East as a region spends highly excessive sums on the military and on imported arms that is both a waste of resources and potentially destabilising," Dr Perlo-Freeman says. "Such purchases can in some circumstances be used as a means of developing an indigenous arms industry, but is not in general a good way of spurring broader economic development. An arms industry tends to be highly capital intensive and so is an inefficient way of creating jobs. The skill levels required typically means it tends to benefit those who are already at the high end of the earnings spectrum and whose skills may be much in demand for civil industries."

Nevertheless, the UAE, along with Saudi Arabia and Jordan, is leading the Middle East in the development of national arms industries. They tend to focus on manufacturing armoured vehicles, naval vessels and unmanned aerial vehicles (UAVs) as well as developing capacity in maintaining, repairing and overhauling heavy military vehicles and equipment, according to a report by Jane's Defence Weekly earlier this year.

Mubadala Development, the investment vehicle of the Abu Dhabi Government, has invested in several companies that maintain military vehicles and hardware. A spokesman told The National Mubadala had nothing to do with arms purchases. "We invest in maintenance, repair and overhaul capabilities in line with the UAE's long-term social and economic goals. We have nothing to do with weapons purchases," said the spokesman.

Still, the nascent efforts of Arab nations are dwarfed by Israel's defence industry, which leads the Middle East and was the 11th biggest arms exporter worldwide between 2004 and the end of last year. Turkey was the region's second-biggest arms exporter over the same period, with 10 per cent of Israel's output, according to SIPRI. "The UAE is aiming to be a provider of services and equipment from ship repair to unmanned aerial vehicles," says Dr Theodore Karasik, the director of research at the Institute for Near East and Gulf Military Analysis (INEGMA) in Dubai. "As such, I do not see it as being a rival of Israel or Turkey, but a niche provider." While the UAE has just about completed revamping its own military, analysts expect overall Middle East military spending to continue apace. Iraq, which had a UN arms embargo slapped on it before the US-led invasion in 2003, needs weapons to battle internal strife. It is set to begin importing large quantities of armoured vehicles, helicopters and transport aircraft, helped by US aid money, which also funds significant arms purchases for Israel and Egypt. Qatar is also set to embark on its own spending spree, Mr Bennett says.

"Qatar had also spent hardly anything for the previous 12 years - they were waiting until they had begun to pump gas and are now looking at refurbishing their armed forces," he says. The upgrading of Gulf militaries comes against the background of a shift in US policy for the region. Abu Dhabi in June hosted the first Air and Missile Defence Summit, a conference concentrating on missile defence that brought together US missile experts and Gulf military chiefs. US officials told The National the summit formed part of a push for greater defence co-operation between GCC states in the face of common threats such as ballistic missile attack.

"It's also no secret that there is a large country across the water that is seen as a catalyst," says Mr Bennett. "Until now, Gulf states have relied on the US. Now they have cottoned on that they need more defence. There's a genuine desire for better co-operation in the GCC and we are starting to see this in some areas. It will not be as extreme as a GCC military force, but we are seeing co-operation in maritime security, disaster relief and co-ordination centres. Why should every country spend money on the same individual programme when it is all relevant to the same piece of land?"

While the volume and value of weaponry crossing the region soars, the traffic's lack of transparency leaves much to be desired, according to SIPRI. "There are strong and persistent suspicions of major corruption in many deals," says Dr Perlo-Freeman. "In some cases, such as Israel and the occupied Palestinian territories, arms sales directly fuel human rights abuses and war crimes." Since 1998, only Israel, Jordan and Turkey have regularly submitted substantive reports to the UN Register of Conventional Arms, detailing their imports and exports of major conventional weapons. Turkey is the only country to have submitted additional information on transfers of small arms and light weapons, as well as information on holdings and production.

Only four Middle-Eastern states - Jordan, Lebanon, Oman and Turkey - voted in favour of a UN General Assembly resolution in December of last year proposing an arms trade treaty for better controls on international arms transfers. Such a treaty would be valuable because it would create an international standard against which states could be held accountable by their public, media and parliament. @Email:business@thenational.ae