IDEX 2023: UAE’s Defense Contracts Emphasizes Local Production

IDEX 2023, a biennial defense exhibition held in Abu Dhabi since 1993, was the largest and most successful edition by most metrics. The UAE Armed Forces awarded 56 contracts worth $6.4 billion, a 12% increase in value from the previous edition. The number of visitors grew from 62,000 in 2021 to over 130,000 in 2023, and the 1,350 exhibitors represented a 50% increase from the previous edition. The number of participating countries also grew to 65 (a 10% increase), with nine newcomers, such as Uzbekistan, Nigeria, and Bangladesh. This new edition welcomed over 360 delegations, a 111% increase from the 2021 edition. EDGE, the UAE’s defense conglomerate, was the major player, exhibiting over 110 products and unveiling 14 new ones, including 11 autonomous and unmanned platforms. More importantly, the exhibition reflected several key trends within the UAE’s defense industry, which are explored below.

Shift from Foreign to Locally Produced Arms

IDEX 2023 marked a significant turning point for Emirati defense procurement. For the first time in the exhibition’s history, the UAE procured a majority of its military equipment from domestic companies. The Tawazun Council, the Emirati entity that manages defense procurement, awarded contracts to foreign companies that decreased from 65% in IDEX 2019 to 25% in IDEX 2023. The share of local companies increased from 35% to 75% during that same period. These contracts with Emirati defense companies demonstrate a lot of “confidence in locally manufactured defense products,” given that the UAE demands highly advanced military equipment. The above does not mean that most UAE armed forces’ arms acquisitions come from domestic companies because other large contracts are being signed outside of IDEX, especially with French and American companies. But it nevertheless reflects a tendency toward procurement from local entities.

Most foreign companies receiving contracts at the exhibition were French (10 out of 24 contracts), followed by the U.S. (5/24) and other European countries. Most of these contracts were for maintenance systems the UAE had previously bought. Despite China’s presence at the event, they only received a minor contract, while Russia did not receive any contracts. The Arab Gulf states’ arms market has been traditionally dominated by American and European firms. Western military equipment tends to be of a better quality than its Russian counterpart, and because the UAE’s armed forces are already built around Western military platforms and systems, buying Russian equipment would lead to serious interoperability problems. That is, the US’ strict controls on the end use of the weapons it exports would make it burdensome for the UAE to operate American and Russian systems next to each other. Additionally, buying arms from Russia in the context of the Ukraine war would be seen as a strong political statement that the UAE may not be willing to make.

Local companies were the primary beneficiaries awarded at IDEX 2023. Out of the total of $6.4 billion awarded during the exhibition, $4 billion worth of contracts went to EDGE’s subsidiaries. Halcon received $2.4 billion for drones and missiles, Earth was awarded $1.1 billion for a tactical communications and data link network, and Adasi received $350 million for loitering munitions. Other major contracts for local companies were awarded to International Golden Group (5 contracts) and Trust International Group (2 contracts), which was, in turn, acquired by EDGE on March 27, 2023. Tawazun Holding, the investment arm of the Tawazun Council, is a shareholder in the latter two companies. Although now fully local, some of these companies were initially established as joint ventures with Western defense companies as part of the UAE’s offset program, designed to attract investment into the UAE’s domestic defense industry. Abu Dhabi Shipbuilding, for instance, was set up by Northrop Grumman, while Sikorsky established AMMROC.

New Approach to Defense Procurement

The UAE is emphasizing on support platforms, services, and ammunitions which are often less visible than combat platforms. Two-thirds of the contracts awarded at IDEX 2023 were in the category of support platforms and services, including sensors, telecommunications and C4I systems, a tactical communications and data link network, radars, an operation center, guard rooms, thermal cameras, thermoscopes, training, and maintenance for numerous existing systems in service in the UAE Armed Forces. Although the category of munitions reaped the least number of contracts (only 18%), these were among the largest ones in monetary value. They focused on loitering munitions and precision-guided missiles, as well as some torpedoes and air-to-air missiles.

This reflects a more mature approach to defense procurement that no longer exclusively focuses on acquiring shiny tanks and jet fighters. Instead, the focus is shifting towards prioritizing faster and more efficient decision-making in the battlefield through increased domain awareness, information superiority, intelligent munitions, better training, utilizing AI, autonomy, and large amounts of data collected through a growing number of sensors. The few combat platforms the UAE acquired (16% of all contracts) were heavily skewed toward the maritime domain, including a Landing Platform Dock (LPD), rescue boats, and multi-mission unmanned boats. This focus on maritime platforms, which have traditionally suffered from under-investment relative to other armed services, stems from an understanding that securing its ports and sovereign waters is key for the UAE’s regional positioning and commercial aspirations. The LPD acquisition will further strengthen the UAE’s logistical punch, after the country discovered how crucial this capability was during its intervention in Yemen, where it had to undertake complex logistical operations on its own. The UAE also purchased multiple rocket launchers, helicopters, counter-UAV systems, drones, machine guns, and armored vehicles.

EDGE Localization and Success

EDGE’s training and localization efforts continue at a quick pace, and the company is gradually becoming more competitive as an international exporter. At IDEX 2023, numerous agreements were signed between EDGE and international defense companies to improve cooperation and joint development of a variety of systems and technologies, with a focus on drones, missiles, 3D printing, sensors, and vessels. There were at least four concrete examples of such training and localization efforts at IDEX 2023. First, Tawazun signed an agreement with Boeing to open a facility for unmanned systems at Tawazun Industrial Park, which will employ an Emirati workforce and focus on aircraft engine repairs and training for operators. Second, Tawazun signed a different deal with U.S.-based Kaman to establish a manufacturing facility in the UAE to work on the height of burst, a technology critical for guided bombs and missiles. Third, France’s Thales also announced it would increase local procurement in the UAE and double its workforce from 160 employees to 300 in 2025, with at least 30% being Emiratis. Fourth, EDGE’s subsidiary Halcon agreed to send some employees to TÜBİTAK SAGE, a Turkish R&D defense institute, to undergo training on chemical engineering and propellants.

EDGE is becoming a competitive exporter on a global scale. In November 2022, EDGE subsidiary Abu Dhabi Shipbuilding (ADSB) signed a deal to build interceptors, landing craft, and rigid-hull inflatable boats for Indonesia’s navy and coast guard. During IDEX 2023, ADSB signed a deal worth $1.06 billion with the Angolan Navy to supply three 71m corvettes and other ships. Another EDGE subsidiary focused on small arms manufacturing (Caracal) signed a licensing agreement with Indian ICOMM to develop a portfolio of locally manufactured small arms for the Indian market. In addition to these existing deals, ADSB revealed it expects to sign deals “worth billions of dirhams” in the next two years with customers in the UAE, Africa, and Asia. The EDGE chairman also said that the company is in the process of closing a very large order to sell its Reach-S drone. Furthermore, according to a statement by Serbian President Aleksandar Vucic, the Emirati conglomerate will soon sign an agreement with Serbia to provide loitering munitions.

In a recent interview, EDGE’s chairman Faisal Al-Bannai explained how EDGE’s drones are highly competitive from a pricing perspective. He mentioned the Hunter S drone, stating that EDGE plans to offer it for $29,000, a much lower price than competing products in the same category, priced between $110,000 and $170,000. The Reach-S is another example of EDGE’s competitive pricing, as a single aircraft without a ground station will cost $1.1 million, while competitors sell very similar platforms at between $3.5 and $5 million.

Despite the appearance of rapid progress in localization, many of the Emirati defense companies that signed contracts with Tawazun at IDEX still rely heavily on multinational defense companies such as Thales, Raytheon, and many others to manufacture their products and provide services. In other words, while these deals signed by domestic companies are presented as fulfilling localization goals, the actual production processes often involve subcontracting large portions to non-Emirati companies. The extent of this continued dependency is unclear, and although the trend is clearly toward localization, this factor should be kept in mind.

In brief, IDEX 2023 is the first edition where the UAE armed forces have awarded a majority of contracts to domestic companies. The UAE is also exhibiting a more mature approach by emphasizing support platforms, services, and ammunitions, rather than more visible combat platforms, and EDGE’s training and localization efforts are turning the conglomerate into a competitive exporter on a global scale. What does the future hold for the UAE’s defense industry? Assuming that the training initiatives persist and significant contracts continue to be awarded to local firms, the defense industrial base of the UAE will become increasingly able to produce more sophisticated platforms. EDGE will also likely increase its arms exports to Asian and Latin American markets. Ultimately, the degree of subcontracting and reliance on multinational defense companies will determine the true extent of the Emirati defense industry’s success.

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of Gulf International Forum.