The he ch challenge enges s of of de developing ping de - - PowerPoint PPT Presentation

The he ch challenge enges s of

• f de

developing ping de defenc ence indu dustr stry y in the he Midd ddle le East

The moti tivat atio ion n for r Middl dle e East natio ions ns to develop elop defe defenc nce indust ustries ries

• Domestic development of military capability is a statement of national intent or priority
• Profitable defence industry helps national economic diversification, the development
• f technology and the growth of the technical skills base
• It facilitates the building relationships and influence with other nations
• Nation seek better value for money by developing domestic industry rather than

importing defence products

4.492 7.429 Iraq China Saudi Arabia 16.869 India Egypt South Korea Australia Algeria 6.103 UAE Vietnam 5.350 13.876 6.793 6.441 5.425 4.240

Top Defence importers (2014-2018 consolidated, US$ Bn)

MENA Nations

The graph shows the top10 global defence importers of which 5 are from Middle East & North Africa (MENA)

Source: Stockholm International Peace Research Institute (SIPRI) 2019

The histor torical ical limit iting ing facto ctors rs which ich have e hinde dere red d develo elopment ent in the Middle le East

Conflict and instability

• Have drained resources
• Have limited cooperation between nations

Dependence on Imports

• Lack of a manufacturing base and funds increased

the attraction of imports in the short-term

• Exporters have been reluctant to transfer

technology or allow production under license

Bureaucracy and lack of cooperation

• International alliances have not been productive
• It has been difficult to start a strong flow of Foreign

Direct Investment

National infrastructure and resources

• Existing industrial bases were not capable enough

to support defence industrial growth

• There was insufficient funding and trained people

to support development

Overreach

• Plans for the development of defence industry were

too ambitious and costly

• Industries were unsustainable

The he inher herent nt risk sks s in develo velopi ping ng domes esti tic c defen fence ce indust dustries es

• Set-up costs are a major investment
• Domestic industry often requires preferential trading

conditions

• They often require financial support or subsidies
• They often require legal and commercial support
• Technically Inefficient
• Poor quality
• Costly
• Slow to produce
• Uncompetitive and therefore not for export

Increased financial costs Reliance on the domestic market The creation of monopolies Opportunity Costs

• Domestic defence industries depend normally upon

domestic spending for survival making them a compulsory cost

• Export sales alone are not sufficient to compensate
• Overspending on defence creates an opportunity cost

elsewhere in the economy

• This can have unforeseen effects

Key success cess factors

• rs for defenc

nce industri trial devel elop

• pmen

ment

Budget Policy Alignment

Transmitting Demand Incentivizing Strategic Partners & Allies

Export Strategy Laws and Regulations

Successful Defence Industrial Development

There are five factors which help the successful development of a defence industry

Clear ar and aligne gned d natio ional nal polic icies ies

• Defence Objectives and Tasks
• Capability Priorities & Security of Supply
• Make or Buy decisions
• Foreign Direct Investment rules
• Financial and other support for Start-ups and

SMEs

• Industrial Development Priorities
• Export Policy
• Analysis of Value Chain and Supply Chain

selection

• Selection of technology development priorities
• Long-term strategy for R&D
• Selection of priority subjects for schools and

Universities

• Selection of postgraduate priorities
• Align with Defence Industry requirements
• Development of employment terms and conditions

for defence ecosystem

Defence Policy Economic Policy Industrial Policy Education Policy Employment Policy R&D Policy

The right capability Diversified Economy Compete in defence markets

Successful Defence Industrial Development

Alignment in national policies is essential to develop a successful defence industry

Alloc locati ating ng and aligni gning ng budgets gets and financ ance

Government Spending and Innovation Funding Foreign Direct Investment & Offsets Venture Capital Ministry of Defence Capital Expenditure Operating Expenditure Regional defence spending is forecast to rise – nations must focus funding and investment to develop industry to meet this opportunity

2018 2021 2024 2027

US $ Bn

220 203 187 170

Middle East

3 %

Laws, , Regul gulati ations ns and Standar dards ds

Laws

Regulations Standards

National Laws

• Trading
• Contract
• Ownership
• Investment….

Regulations

• Licenses
• Permits
• National

regulations

• International

Agreements… Standards

• Manufacturing
• Transport
• Safety…..

Strong laws, regulations and standards set and control the environment in which successful industrial development can occur and high quality manufacture can be achieved

Trans nsmit itting ing demand and to defe fenc nce indus dustr try

• Industry delivers spares

and services

• Industry modifies and

delivers upgrades

• Industry supports disposal
• Industry expresses an
• pinion on the ‘art of the

possible’

• Industry conducts R&D &

begins to plan in which technology to invest

Armed Forces deliver forces for

• perations

Armed Forces identify the capabilities needed in the future Armed Forces examine new concepts for capability

Now

30+ Years

Degree Of Uncertainty Degree Of Uncertainty

Armed Forces and Industry communicate so that early investment decision can be made

• Industry conducts R&D,

gives information on capability options

• Industry makes decisions on

its future investments

• Industry develops products,

designs upgrades, replies to RFPs and accepts contracts

• Industry delivers capability

Armed Forces construct the funded requirement for new capability

Poli licy y which ich incen entiv ivizes izes Strategic ategic Partne rtners rs and Allies ies

Industrial Models

• Traditional Joint Ventures often have only short-term impact
• Other model could have longer-term advantages

– Landed Companies – Government-owned Contractor-operated – Tapering Equity

Technology Transfer

• Strategic Partners must be incentivized to transfer technology
• Mutual advantage must be identified
• Good relations and cooperation with allies are essential –

regulations exists, agreements will be required

Offsets

• Successful nations target offsets or use them flexibly
• Funding can be directed to R&D, Start-ups and innovation

projects

• OEMs welcome direction on discharging their liabilities

Foreign Direct Investment (FDI) and partnerships are essential to successful industrial development

R&D

• Nations should work with Strategic Partners and Allies to

develop onshore companies which co-develop R&D and products from an existing technological base

Targe gete ted d and aligne ned d export port stra rate tegy gy

Target Markets

Target markets must be selected, analyzed and a national approach developed The strategy must be formulated and aligned as a cross- government initiative Support from domestic Armed Forces to market domestic products An assessment must be made of which whole systems to export or which part

• f international supply

chains to target

Cross- Government Armed Forces Support Market Participation

The UAE Appro proac ach h – Developing eloping a national ional eco cosys yste tem

• f inter

erconne

• nnecte

cted elem ements ents

National Artificial Intelligence Strategy 4th Industrial Revolution Councilt Investment in Universities and Advanced Sciences National Innovation Strategy Ministry of Defence Strategies and Plans UAE Vision 2021 National Strategy for Higher Education 2030 National Space Strategy 2030 National Defence Industry Strategy Foreign Direct Investment Reform

The UAE has many initiatives which create an ecosystem in which defence industry can develop.

4th Industrial Revoution Strategy Offset Reform UAE Centennial 2071

The UAE is develo eloping ing a st stro rong ng in a wide e range ge of defe fenc nce indust ustry ry secto ctors

Electronics and ICT1

C4I2 Electronic Warfare3 Cyber Optronics4

Aircraft

Fixed Wing Rotary Wing

1

Arms and Munitions

2

Ground Vehicles

4

Soldier Systems

Support Equipment Combat Equipment

7

Ships

Ground Sea Air

Unmanned Systems

3

Services5

Training7 Support6 MRO

10 Services support all other sectors Services support all other sectors

Space

Satellites

8

Ammunition Guided Weapons Arms Simulation

Simulation

6

Combat Support Logistics Combat Amphibious Fleet Support Surface Warfare Sub- marine

9

Launchers

5

Th Thank k You

• u …