2009-08-10 07:11:01 -
United Arab Emirates Defence and Security Report Q3 2009 - a new market research report on companiesandmarkets.com
www.companiesandmarkets.com/Summary-Market-Report/united-arab-em ..
The year continues to be difficult economically for the UAE. Our growth forecasts have been revised downwards again on the back of a worsening export sector, weakness in the construction market, job losses and increased investor caution. The country could fall into recession – defined as two consecutive quarters of negative growth – during the year, but this will be difficult to assess given the lack of quarterly data provided by the central bank. The publication of the UAE’s first-ever monthly inflation data is a big step forward in itself, regardless of what the figures show. As it is, they reveal a steep drop in inflation rates since the beginning of 2009, driven by falling housing costs and a
moderation in food price inflation. Given the poor state of the economy – we are forecasting a real GDP contraction of 2.9% in 2009 – we have lowered our year-end CPI forecast to 3.0% y-o-y. President Obama’s long-awaited speech to the Muslim world in Cairo, and plans for engagement with countries that the US has formerly ostracised, such as Iran and Syria, can be expected to at least ease security concerns generally in the region.
Unlike neighbouring Qatar, which has played an active role in conflict resolution in recent years, the UAE tends to take a back seat in regional affairs. This is largely a sign of the UAE’s pragmatism – it is a long-time ally of the US, and is thought to have extensive economic dealings with Israeli businesses, despite the government’s official refusal to normalise relations with Israel. As a grouping of Sunni monarchies, the UAE is hardly a natural supporter of Hamas, yet it retains economic ties with Iran (in spite of US pressure to expel Iranian businesses). The UAE maintains a brisk arms trade, underpinned by regional insecurity, a large budget and a willingness to spend on military hardware. Its armed forces are small but technologically sophisticated and the country rivals the regional dominance of Saudi Arabia and Iran. Procurement remains a high agenda item for the armed forces in the UAE. Deficit spending, on the rise in the Emirates in recent years, indicates that defence procurements will not suffer from a downturn in the local economy. Regional tensions fuelled by an ongoing US presence in the Gulf, and uncertainties in both Iraq and Iran, will also stimulate brisk arms trade in the UAE in the medium-term. Most recently, in March 2009, the UAE announced some AED18.4bn (US$5bn) worth of contracts at the ninth IDEX defence exhibition in Abu Dhabi. On the whole, the security situation remains stable for the country. Its armed forces are a significant deterrent to aggression and it enjoys the support of numerous allies, including those in the Gulf Cooperation Council (GCC) security guarantee, the US, UK, France and Germany. Recently, Australian Prime Minister Kevin Rudd visited the United Arab Emirates, meeting with the Crown Prince, Sheikh Mohammed bin Zayed al-Nahyan, and separately with the Vice President, Sheikh Mohammed bin Rashid Al Maktoum. These talks focused on expanding the two countries’ security relationships and both governments expressed interest in building ties in defence and counter-terrorism.
We anticipate that the United Arab Emirates will continue to increase its defence spending, which is likely to grow at around 5% annually, in real terms, over the coming years. This forecast assumes that the economy can ride out the global financial crisis and the downturn in oil prices. This quarter, we have introduced a significant new aspect to BMI’s Defence reports, which is the City Terrorism Rating (CTR). This assesses the risk of a terrorist attack. The CTR takes into account the overall BMI Terrorism Rating for the country in question. It also incorporates the ‘prevalence’ of terrorism, which recognises the frequency of attacks, and whether the city is a target for terrorists. The CTR also recognises the ‘threat’ of terrorism in terms of the likely numbers of victims and the ability of groups to launch sustained campaigns. In the UAE we assess the CTRs for both Dubai and Abu Dhabi at 90.0, rating equal second with Damascus behind Tripoli among the Middle East Region’s 23 rated cities.
