Abu Dhabi establishing itself as a key regional player in defence and security

Amidst an increasingly complex geopolitical backdrop, Abu Dhabi’s security, aerospace and defence industries have become a critical component of the emirate’s ongoing push to both protect critical national infrastructure and its interests abroad, as well as transform itself into a knowledge-based, diversified economy. In the aerospace segment, years of targeted investment in manufacturing, research and human resources are driving the emirate to become a leading global aerospace centre, with emerging trends expected to further underpin robust expansion. Furthermore, the security and defence sectors have benefitted from a host of recent initiatives aimed at protecting UAE residents, building a highly-trained domestic workforce, and expanding manufacturing and innovation capacity. A newly established umbrella company for the emirate’s major defence companies is expected to significantly further its defence development agenda.

Defence

A number of significant geopolitical developments have driven security and defence to become critical issues for the government of Abu Dhabi and the broader UAE in 2014-15; regional security threats underscored ongoing efforts within all GCC governments to enhance domestic security measures, while the UAE’s participation in military campaigns in Libya, Bahrain, Syria, Iraq and Yemen has seen the UAE Armed Forces General Headquarters (GHQ) – which oversees the UAE’s land, naval and air forces – play a much more prominent and public role in recent years.

Defence spending as a percentage of GDP has also been rising, with statistics from the World Bank showing that total military spending in the UAE stood at 5.1% of GDP in 2012 before rising to 6.1% in 2013 and then moderating to 5.7% in 2014. Data published by the Stockholm International Peace Research Institute showed that the UAE had the 15th-highest military expenditure globally in 2013, and military spending nearly doubled between 2004 and 2014, according to a report by Business Insider, while its defence budget is the second largest in the GCC behind Saudi Arabia, at more than $14bn. Private sector participation and investment are also rising: a February 2014 report in local daily The National projected the UAE would stand as the world’s third-largest military importer in 2015, with an estimated $3.13bn in imports expected, compared to $1.4bn in 2009.

ADSB

Shipbuilding and ship repair for both commercial and naval vessels is also emerging as a major activity for the emirate, with a number of significant developments on the horizon in the coming years. Abu Dhabi Ship Building (ADSB) was established to provide facilities in Abu Dhabi to support the UAE navy as well as commercial shipbuilders. Inaugurated in 1996, ADSB initially focused on naval repairs and refits and gradually expanded its expertise to include building sophisticated war ships like the Baynunah class naval corvette and patrol vessels for the UAE and GCC countries. “Due to the additional security requirements in the region, we foresee new business opportunities to build naval ships to meet future challenges. We are collaborating with other shipyards that can build state-of-the-art naval ships, which will in turn transfer new technologies to the region,” Khaled Al Mazrouei, CEO of ADSB, told OBG.

The company, which is 40% owned by Mubadala Development Company, an Abu Dhabi-based investment and development company, signed a support services contract with the UAE navy in early 2014. ADSB has announced it will expand its maintenance services to ships that are built by other companies in both the military and commercial sectors, and has signed deals with the French firms Thales and Constructions Mecaniques de Normandie, Spain’s Navantia, India’s Reliance Group and other GCC country naval forces. ADSB is enlarging its facilities to expand production in the coming years. “Currently we can drydock ships only up to 2000 tonnes and a maximum length of 80 metres,” Al Mazrouei told OBG. “We will be setting up a new facility with a floating dock that can drydock vessels up to 10,000 tonnes and a length of 180 metres, which will be the largest drydocking facility in Abu Dhabi. This will enhance the market share of ADSB in the services sector.”

National Service

A new national service requirement, officially enacted with Law No. 6 of 2014, stipulates that every male Emirati between the ages of 18 and 30 must complete one year of military service. The move has been welcomed by many stakeholders and is viewed as an indicator of the high potential for future expansion of the UAE’s defence and security industries. Mandatory military service is expected to triple the nation’s military capabilities, in addition to providing training for Emirati youth prior to enrolment in post-secondary education, with the estimated military enrolment rising from 51,000 in 2014, according to the International Institute of Strategic Studies, to 65,000 as of October 2015, according to Global Fire Power (GFP), a military data analytics firm.

GFP reports that the nation’s land systems include 545 tanks, 2204 armoured fighting vehicles, 177 self-propelled guns, 105 towed-artillery pieces and 54 multiple-launch rocket systems. The firm also states that the air fleet comprises 497 aircraft, including 96 fighter/interceptor jets, 114 fixed-wing aircraft, 183 transport aircraft, 160 trainer aircraft, 185 helicopters and 30 attack helicopters. According to GFP, the navy consists of 11 corvettes, 34 coastal defence craft and two mine warfare vessels.

Security

At the national level, the Ministry of Interior (MoI) oversees a number of security-related directorates and departments including civil defence, citizenship and residence, port affairs, traffic and licensing, crime security, policing – including the Abu Dhabi Police (ADP) and other local police forces – and the punitive and reformatory department.

Kaspersky Lab has stated that, in the Middle East, the UAE has the second highest local and online malware detections, and this has sharpened the government’s focus on innovation and technology in the development of domestic security policies, with the newly established National Electronic Surveillance Authority set to play an increasingly central role in protection of critical national infrastructure.

One of the largest local police forces under the jurisdiction of the MoI is ADP, and they have also emphasised digital security and technological innovation in their day-to-day activities, deploying a wide array of advanced technology, including facial recognition programmes, closed-circuit television monitoring and geographic information systems.

With a growing mandate to improve technological innovation and operate as a service-oriented body, ADP has been increasingly active in rolling out new digital platforms to both combat crime and enhance online service provision. The MoI provides smart phone services for both individuals and businesses relating to traffic and licensing issues, civil defence or police matters and residency assistance. In addition to these smart phone services, the MoI mobile application provides the locations of assistance centres as well as information on what is offered at these centres. The app also provides news, updates and information about the MoI. Moreover, ADP is also actively introducing expansive training programmes, which have seen a host of recruits earn their PhDs abroad.

Aerospace

Abu Dhabi is also moving to rapidly advance its aerospace agenda, which includes transforming the emirate into a regional aviation centre active in both maintenance, repair and overhaul (MRO) and manufacturing, as well as participating in an ambitious space programme that will see the UAE launch its first-ever probe to Mars in 2021.

The General Civil Aviation Authority was established in 1996 to oversee the aviation industry and is responsible for managing the UAE’s air navigation systems, safety and security. The authority works closely with Abu Dhabi Airports, established in 2006 to operate the Abu Dhabi International Airport (ADIA), Gulf Centre for Aviation Studies and Abu Dhabi Duty Free. Abu Dhabi Airports is in the midst of two major aviation projects at present – ADIA’s $3bn expansion, including construction of a new midfield terminal building (see Transportation chapter) and expansion of the Nibras Al Ain Aerospace Park, a 25-sq-km joint venture project which is a collaboration between the Mubadala Development Company and Abu Dhabi Airports. Located in the emirate’s second city, Al Ain, Nibras is already home to a number of major aviation companies including Strata Manufacturing and the Advanced Military Maintenance Overhaul and Repair Centre (AMMROC), as well as the Horizon International Flight Academy, Etihad Flight College and several other related firms.

Government-Private Sector Cooperation

Private sector involvement in the defence sector has created a host of new opportunities for a wide range of local firms, and Abu Dhabi has benefitted from a raft of new private sector investment initiatives across the defence, security and aerospace industries. This strategy of public-private security collaboration works across the whole range of security services and spans the entire scope of the sector, from investments in technology, to emergency planning and incident response. “There are measures to implement immediate responses through strong coordination between government and security services such as G4S. If there is any alert received, both entities will be in contact almost immediately to implement the most integrated and informed response,” David Stockton, CEO of G4S UAE, told OBG. A growing array of state-owned entities work with the private sector to further the emirate’s security agenda, most notably the GHQ, Tawazun Economic Council (TEC), Mubadala Development Company and EDIC.

In addition to overseeing military operations, GHQ is also tasked with managing and awarding military contracts, and works closely with the TEC, which was re-branded from the UAE Offset Programme Bureau in 2012. The programme, originally established in 1992, mandates that international contractors doing business in the UAE must also invest in local ventures. The Defence Contractors Council is an industry body tasked with facilitating communication and collaborations between the private sector and TEC.

Although many of its defence subsidiaries, including Tawazun Precision Industries (TPI), have been acquired by EDIC over the previous year, TEC had formerly been active in launching new projects across the aerospace and defence segments, many of which are located within its aerospace and defence-focused Tawazun Industrial Park. Mubadala Development Company, meanwhile, stands out as one of the most important players in the aerospace sector, and after years of successful partnerships with major private aviation players such as Boeing, Airbus, Rolls-Royce and GE, it is expected to see further expansion of its activities with the global original equipment manufacturers (OEMs) in the coming years.

Capacity Development

The emirate’s offset programme has been a driving force behind its success in developing its aerospace and defence manufacturing capabilities. Under the programme, foreign companies bidding on defence contracts will generally receive preferential treatment if they have made efforts to partner with local firms in enhancing domestic capability, knowledge transfer and training activities. This has enabled the emirate to advance development across the entire spectrum of the aerospace and defence industry, with Abu Dhabi now counting major multinationals including Lockheed Martin, BAE Systems, Thales, Boeing and Airbus, among many others, as development partners rather than pure suppliers. Although defence spending is on the rise in the UAE, with Dh9.5bn ($2.6bn) worth of orders made at Abu Dhabi’s 2015 International Defence Exhibition (IDEX) alone, there is always the expectation that foreign companies will work with Emirati partners to develop domestic capacity.

Training

These capacity-developing partnerships also extend to training and education, with the continuing development of highly skilled human capital standing as perhaps the most important priority in the aerospace, defence and security segments.

Rabdan Academy and the National Defence College offer critical vocational and professional training for an increasing number of security and defence personnel. In the vocational segment, Rabdan Academy is tasked with training safety, security, defence, and emergency preparedness personnel, including ADP officers, across all sectors, with an emphasis on development of Emirati talent. The school offers degree programmes in business community management, comprehensive police station management and integrated emergency management, as well as English-language foundation programmes. In 2015 Rabdan was still in the first phase of its expansion, concentrating mainly on military security, but now it is moving into its second phase which is focused more on civilian affairs, which will include a strong emphasis on safety and security. It is set to unveil a number of continuing education programmes, including accredited courses in 2016 and certified vocational courses in 2017, after rolling out short-term practical courses. In line with the emirate’s cybersecurity agenda, Rabdan recently launched an Excellence Digital Learning Centre in Abu Dhabi, announcing in October 2015 that the new facility will be equipped by private firm Visionaire, using Huawei systems.

The National Defence College opened in Abu Dhabi in December 2013 under the general command of the UAE armed forces, with the goal of preparing military and civilian leaders to assess and address national, regional and international security concerns. The college will train future police officers, heads of state security, diplomatic and consular leaders, as well as senior public officials involved in crisis management. It primarily aims to better facilitate communication and cooperation between various relevant actors in bolstering security, defence and emergency preparedness policy and procedures.

“Given that national institutions rely upon one another to carry out their tasks, and due to the importance of time factors, breadth of geographical space and the diversity of material resources, it is imperative that some kind of joint qualification and preparation exists among military leaders and civilian officials at certain leadership levels,” Rashad Mohammed Al Sa’adi, major general staff pilot and commander of the National Defence College, told OBG.

Industry Collaboration

The private sector is also playing a critical role in training the next generation of security, aerospace and defence professionals, particularly at the foundational levels, and often in partnership with post-secondary institutions. Khalifa University (KU), for example, launched a cyber-operations centre of excellence in partnership with cybersecurity firms Cassidian and Emiraje Systems in 2011, and is currently finalising construction on its Aerospace Research and Innovation Centre, which will train students in collaboration with Boeing, Airbus, and GE (see Education chapter). Lockheed Martin, a major defence manufacturer headquartered in the US, has previously partnered with KU to host an innovation summit and has also collaborated with the university to develop a data analytics research programme, in addition to joining AMMROC with its now-subsidiary Sikorsky, which manufactures Black Hawk helicopters. In December 2014 the company officially inaugurated its new Centre for Innovation and Security Solutions, which is located on the campus of the Masdar Institute for Science and Technology, and has risen to become a preferred bidder on a number of defence projects as a result of its strong collaboration with local industry.

More recently, BAE Systems, the UK-based company that manufactures the Typhoon and Hawk jets, announced in September 2015 that it had signed a student cooperative agreement with Mubadala Development Company to establish an international internship programme for Emirati students, as well as an outreach programme for school children in the UAE. Under the programme, which runs until 2020, five full-time undergraduate engineering students will be selected annually for an intensive 18-week programme at BAE Systems’ military air and information business located in the UK. “For the aerospace, security and defence sector it is important to continue supporting the UAE as a centre of excellence for associated industries such as manufacturing. Any existing plans to build on this would firmly establish the country on the map as a regional hub for defence manufacturing,” Charlie Simpson, director of BAE Systems’ UAE division, told OBG.

Event

Looking to anticipate future trends in the sector, Abu Dhabi hosted the Global Aerospace Summit in March 2016 as part of the Abu Dhabi Aviation and Aerospace Week. Working under the overarching theme of innovation, the summit examined how new means of aircraft construction, as well as developments in launch systems and satellites, are affecting the costs and capabilities of aerospace products. By bringing together a variety of key decision makers and business leaders from across the sector, the meetings included discussions of the financial strategies and technical innovations that are changing the face of aerospace, as well as the future opportunities for public-private collaborations.

Manufacturing

As a result of strong partnerships between the government and private sector, Abu Dhabi’s aerospace and defence industries have also witnessed significant growth in manufacturing capabilities in recent years. In addition to a thriving and fast-expanding aerospace industry comprising both MRO and manufacturing activities, the emirate’s defence manufacturing segment is in the midst of a robust expansionary phase, with a number of leading global players partnering with various government investment arms to establish facilities in the emirate, an indicator of the success of its offset programme.

Defense News reported in June 2014 that the UAE is leading the region in defence manufacturing companies, with more than 80 firms focusing on shipbuilding, unmanned systems, and aviation and land systems, of which 15 are government owned. Until recently, TEC and Mubadala Development Company have been leading growth in the segment through a host of subsidiaries, many of which were formed in partnership with the private sector.

After the establishment of EDIC in early 2016, the new company integrated over a dozen of these subsidiaries brought together under one company in an attempt to streamline operations, cut costs and improve the emirate’s competitive advantage regionally. Mubadala Development Company is increasingly focused on aerospace activities, while the majority of Tawazun’s defence business is expected to be absorbed by EDIC once integration is complete.

TEC subsidiary Tawazun Holding has launched more than 40 joint venture companies since its establishment in 2007 as a defence, munitions, aerospace, automotive and metals-oriented investment unit. Many of these companies operate from within Tawazun Industrial Park, a manufacturing hub located between Abu Dhabi and Dubai and home to a rising number of new projects, including a planned aerospace surface treatment plant under joint development by TPI and Boeing, which broke ground in June 2015, and a new manufacturing facility for Nimr Automotive scheduled for completion by the end of 2015.

EDIC

One of the most significant recent developments in the security and defence segment was the formation of EDIC, which was created through a partial merger of Tawazun Holding, Emirates Advanced Instruments (EAI) and Mubadala Development Company’s defence portfolio. In April 2014 the three companies signed a memorandum of understanding at Abu Dhabi’s International Exhibition for Security and National Resilience, with the aim of bolstering the new company’s role in national and regional military-manufacturing supply chains, to present a larger and more united front which will benefit future contract negotiations and enhance domestic development of the critical aerospace and defence industries, in addition to streamlining operations and cutting costs.

EDIC was formally established in December 2014, with officials announcing the new company will comprise 11 firms previously operating under Mubadala Development Company, Tawazun and EAI during the first phase of integration. EDIC’s new board chairman Homaid Al Shemmari told the media that the new company would operate as an integrated defence platform “benefitting from improved alignment, performance and increased capacity”, putting it in a better position to successfully compete for regional business. Mubadala Development Company holds a 60% stake in the new company.

The first companies to be integrated under this umbrella included: Mubadala Development Company’s Al Taif Technical Services; Bayanat for Mapping and Surveying Services; Horizon Flight Academy; Tawazun’s NIMR Automotive; Tawazun Dynamics; TPI; EAI’s C4 Advanced Solutions; Global Aerospace and Logistics; Naval Advanced Solutions; Secure Communications; and Thales Advanced Solutions.

In February 2015 EDIC announced it had acquired five additional firms, including Caracal International, Caracal Ammunition and Burkan, as well as Mubadala Development Company’s Abu Dhabi Autonomous Systems Investment Company (ADASI) and AMMROC. This brings the total number of companies operating under the EDIC umbrella to 16, representing Dh3.2bn ($871m) worth of assets and 4800 employees, according to Al Shemmari. The synergies being created are widely praised by the companies involved. “The integration of companies under the EDIC umbrella will allow for enhanced collaboration among its subsidiaries as well as increase its capacity while benefiting from improved economies of scale. This will better position companies such as AMMROC to compete for new business regionally and internationally,” Fahed Al Shamesi, CEO of AMMROC, told OBG. In September 2015 EDIC announced that its long-term strategy, to be unveiled in 2016, will focus on the development of software, drones and ammunition, in addition to examining the potential for international expansion of its well-established manufacturing subsidiaries.

Nimr

Nimr Automotive, originally a 60-40 joint venture between Tawazun and Emirates Defence Technology, holds perhaps the highest potential for future expansion. The company produces multi-purpose armoured vehicles including 4x4 and 6x6 vehicles, the first military hardware ever to be built entirely within the UAE. Prototypes of the first Nimr vehicles were unveiled in 2000 and launched commercially in 2005, offering design features tailored to the Gulf climate, with cooling systems able to handle temperatures in excess of 55°C. Nimr armoured vehicles also feature composite ceramic armour and a central tire inflation system, and are designed using a flexible modular concept enabling support for a diverse array of missions. The company’s 6WD vehicle was first inaugurated in 2003, offering the additional benefit of anti-ballistic technology, and the Nimr vehicle stands today as one of the most prominent “made in the UAE” successes. Nimr vehicles are in demand both regionally and domestically; in addition to selling its vehicles to Lebanon, Libya and Jordan, the company is also in the midst of delivering thousands of vehicles to the GHQ, after winning a Dh3bn ($816.6m) purchase order for 1800 vehicles in November 2013, and an additional Dh1.2bn ($326.6m) purchase and development deal for 1000 vehicles in February 2015, one of the largest deals to be announced at IDEX 2015.

In June 2015 Nimr officials announced that the company had officially broken ground at a new integrated production facility in Tawazun Industrial Park, which was expected to become fully-operational in 2016. The new facility will double Nimr’s current production capacity of 4WD and 6WD vehicles, allowing it to tap new regional markets.

In the same month, Defense News reported that although the UAE had recently upgraded its fleet of 436 Nexter-Leclerc battle tanks and armoured recovery vehicles, the country will acquire an additional 600 8WD combat vehicles, with five 8WD Patria armoured modular vehicles already on order, leading stakeholders to speculate that Nimr could soon add 8WD vehicles to its offerings. In September 2015 the company unveiled a new line of blast-resistant armoured vehicles designed to withstand the impact of an improvised explosive device, after earlier unveiling a 2015 line-up that included a light-medium-weight open-top 4X4 reconnaissance vehicle, the Ajban SOV.

Munitions, Weapons, & Unmanned Vehicles

Outside of Nimr, Abu Dhabi is increasingly building its munitions, weapons and unmanned vehicles manufacturing capacity through a host of companies that are operated in partnership with, or selling to, regional and international firms.

Many of these have been acquired recently by EDIC, including Burkan Munitions Systems, a joint venture between Tawazun and Al Jaber Trading Establishment Group, and the UAE’s first arms factory. Former Tawazun subsidiary Caracal Light Ammunition produces NATO-compatible bullets and is currently supplying US firm Century Arms with bullets under a five-year supply agreement signed in February 2013, while Tawazun’s second former Caracal subsidiary, Caracal International, produces long-range precision rifles for Russia’s Tsar Cannon Group.

Another former Tawazun subsidiary, TPI, manufactures industrial defence components and parts for Airbus’ A320 and A330 passenger jets, with activities expected to ramp up on completion of its new aerospace surface treatment plant.

In the unmanned vehicles segment, ADASI is active in manufacturing unmanned land, air and sea vehicles, while Tawazun Dynamics, originally a joint venture with South Africa’s Denel Dynamics, manufactures precision-guided air munitions systems.

Mubadala Development Company is also increasingly active in the manufacture of unmanned vehicles, announcing it had completed its acquisition of Italy’s Piaggio in September 2015, and would be shifting the company’s focus from building luxury jets to developing unmanned aerial vehicles and drones. According to a report by the international defence consultancy IHS Jane’s, Piaggio is currently working on a multi-role patrol aircraft based on its P.180 Avanti II, in association with ADASI, as well as an unmanned aircraft called the P.1HH Hammerhead, currently under testing. The company is also working to manufacture components for the Pratt & Whitney F135 engine, which is used in major products such as Lockheed Martin’s F-35 Lightning II Joint Strike Fighter.

Space Ambitions

The most recent entrant to the federal government’s portfolio of aerospace entities is the UAE Space Agency (UAESA), which is tasked with organising and supervising the country’s quickly expanding space sector. A financially and administratively independent body, the agency also provides technical and advisory support for the Emirates Institution for Advanced Science and Technology, which is responsible for the planned 2021 Mars probe. The project is a federal government initiative being implemented at the Mohamed bin Rashid Space Centre in Dubai, and the probe will be launched from Japan. This major undertaking also includes significant input from many of Abu Dhabi’s main players in the sector.

The UAE’s space ambitions formally began in July 2014 with the establishment of UAESA and the simultaneous announcement that the UAE would launch a scientific mission to Mars in 2021. The probe’s nine-month journey will see the UAE become one of only nine countries with space programmes to explore the red planet, and will launch on the 50th anniversary of the formation of the UAE. The planned probe will circle Mars and study its atmosphere, including the effects of surface features such as volcanoes.

In October 2014 UAESA signed a seven-year partnership with Emirates Institute for Advanced Science and Technology, which will see the agency supervise and finance the institute’s Mars mission. In May 2015 the agency unveiled new details of its long-term strategy, including an academic space programme involving a partnership between the Masdar Institute and US-based Orbital ATK, as well as the establishment of the $27m Mohamed bin Rashid Space Centre, the first such facility to be launched in the Middle East. UAESA also announced it has partnered with France’s space agency, the National Centre for Space Studies.

Abu Dhabi has already risen to prominence in satellite services through Mubadala Development Company subsidiary Yahsat, established in 2007 and today operating the region’s first multi-purpose satellite system, comprising two satellites, the Y1A and Y1B, launched in 2011 and 2012, respectively. In September 2014 the company announced plans to launch a third satellite, Al Yah 3, in 2016, with the government also unveiling plans in August 2014 to launch a fully “made-in-the-UAE” satellite, Khalifa-Sat. Expected to be operational by 2017, the satellite will deliver broadband internet services to over 95% of Brazil’s population and over 60% of Africa’s population.

Outlook

Although revenues and budgets will likely be affected by lower global oil prices in 2016, development of the defence, aerospace and security sectors remains a critical priority for both the emirate and the federal government, with investment in the sectors expected to continue on an upwards trajectory. These national priorities also underscore the potential for future private-sector collaboration. With the UAE’s strong offset programme emphasising collaboration between local and international companies, and an increased focus on training and education, Abu Dhabi is poised to see significant development of, and innovation within, these critical sectors, further underpinning its long-term plans for economic diversification and a knowledge-based economy.

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The Report: Abu Dhabi 2016

Security, Aerospace & Defence chapter from The Report: Abu Dhabi 2016

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