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By Jonathan Portman

Concentrations of Demand

Historically the supply-side of the global defence materiel market has been characterised by concentrations of demand and industrial capacity. A tendency towards over-capacity has customarily been explained by the need to be able to respond to surge requirements. In the most general terms, the US and European/Russian defence industries have found readily-accessible ‘downstream’ international markets for their products – some of the most significant of which have been in the Middle East and North Africa (MENA) region.

The nature of the demand for defence materiel reflects a balance between threat and a combination of political will and economic means. As the point of balance has shifted since the late 1980s, the profiles of the major (read ‘influential’) businesses within the ‘traditional’ supply-side have undergone significant change. The process seems likely to continue but although there have been new entrants typified by South Africa and Singapore ‘concentration’ continues as a major driver for change. New concentrations have developed, with rivalry between constantly evolving large corporations and the prospect of more coherent regional markets prominent amongst the factors that are likely to shape the response to future demands for defence materiel.

Economic Stability

As at 2006 the MENA regional defence equipment market is anything but coherent and despite the ‘background’ influence of the Gulf Cooperation Council (GCC) seems unlikely to coalesce in at least the near-to-mid term. That said, the region is characterised by a relationship between the threat of regional conflict and a burgeoning economy that reflects recent high hydrocarbon fuel prices. Moreover although there will be some falling away, oil prices are unlikely to fall below US$40 per barrel during the next 3-5 years.
According to the Institute for International Finance the economy of the GCC (Saudi Arabia, Kuwait, UAE, Qatar, Bahrain and Oman) grew by 74 per cent in the three years to late 2006. One significant aspect of this growth has been the absence of the extravagance that was a feature of previous oil booms. Instead, liquidity flows have been directed into the oil industry, infrastructure and the creation of industrial capacity. Industrial growth has become an increasingly significant factor in the regional economy with Qatar (which has the fourth highest per capita income in the world) foreseeing oil and gas contributing less than fifty percent of the state budget requirements over the next decade as against 70 per cent in 2006.

Corporate Strengths

There have been equally significant developments in the regional approach to the management of industrial growth. These reflect combinations of strategic vision with managerial expertise in the investment of oil and gas revenues. Typically, the creation of Dubai Aerospace Enterprise (DAE) has brought together:
* Emaar Properties: Developer of Dubai Marina and a major player in the international property market.
* AMLAK Finance: 45% owned by Emaar and a partner in Islamic Finance. A major provider of real estate mortgage finance
* Dubai International Capital: A subsidiary of Dubai Holdings specialising in private equity investments. Acquired the (£700Million) Doncaster Group in 2005
* Dubai International Financial Center: A major regional provider of financial services
* Dubai Airport Free Zone Authority
* Government of Dubai
The outcome is a well-resourced corporation with capabilities for manufacturing, aircraft leasing, aviation support and maintenance, and leasing finance and insurance. In addition it is actively engaged in the promotion and development of the Jebel Ali Aerospace Cluster and has linked with the UK‘s Cranfield University to create the DAE University.
DAE is a key piece in a plan for the development of Dubai as a major multi-modal transportation hub that dovetai

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