GCC Defense Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2031)

The GCC defense market is anticipated to register a CAGR of over 2% during the forecast period, 2022-2031.

The impact of the COVID-19 pandemic on the defense market of the Gulf Cooperation Council (GCC) region has been low. Despite the pandemic, countries in the region, including Bahrain, Kuwait, Oman, Qatar, and the United Arab Emirates, have surged their defense expenditures for the modernization of military equipment of their armed forces.

The existing geopolitical tensions between the GCC countries are forcing the armies to concentrate on strengthening their military power by investing in the modernization of air, land, and sea platforms through the replacement of aging military equipment with new generation equipment and up-gradation of technology onboard the existing equipment.

Furthermore, as the governments are increasing their emphasis on the development of local defense manufacturing capabilities, the regional players are expanding their portfolio of defense products in partnership with international players. This is anticipated to support the growth of the market in the coming years.

Key Market Trends

Procurement of Air-based Vehicles is Expected to Drive the Market Revenues during the Forecast Period

The countries in the GCC region are rapidly expanding their aerial capabilities due to their current geopolitical tensions in the Middle Eastern region and the involvement of the countries in foreign conflicts. The countries are robustly investing in the modernization of their old and aging military aircraft fleet with new generation aircraft. For instance, in December 2021, the United Arab Emirates signed an agreement with Dassault Aviation for the procurement of 80 Rafale F4 for the United Arab Emirates Air Force & Air Defence (UAE AF & AD). The country also signed a contract for the procurement of 12 Caracal (H225M) military transport helicopters. Similarly, in 2019, Lockheed Martin announced that the company began the construction of the first F-16 Block 70 for the Royal Bahraini Air Force. The construction was initiated as part of the contract signed between the parties for the construction and delivery of 16 new F-16 Block 70 aircraft. Nevertheless, due to the COVID-19 pandemic, the introduction of new F-16 aircraft was delayed by a year, and it is now planned to introduce by 2024.

In addition to the aircraft fleet, the countries are also introducing new generation unmanned aerial vehicles (UAVs) to support intelligence, surveillance, and reconnaissance (ISR) missions. In April 2020, Saudi Arabia’s General Authority for Military Industries (GAMI) announced that the country was procuring six unmanned systems from a local firm, Intra Defense Technologies. This first shipment was scheduled for delivery in 2021, and a further 40 systems were expected by 2026. The drone is expected to be the Karayel tactical UAV, developed by Turkey’s Vestel. Such developments are anticipated to boost the growth of the market during the forecast period.

Saudi Arabia is Expected to Dominate the GCC Defense Market

Saudi Arabia currently accounts for a major market share due to the highest military spending of the country in the Middle Eastern region. The country has reduced its defense spending and budget allocation since 2015, primarily due to downward pressure from declining energy prices and more focus on the education sector. Nevertheless, according to SIPRI, the military spending of the country in 2020 was USD 57 billion, which was approximately 8.4% of the country’s GDP. In addition to this, in December 2021, the government announced its plan to decrease its military budget for 2022 by 10% compared to 2021. The defense budget for 2022 is expected to be SAR 171 billion (USD 46 billion). Despite the decrease in the overall military spending of the country, the armed forces are robustly investing in the modernization of their military equipment like weapon systems, aircraft, and counter-terrorism equipment, among others. For instance, in March 2021, Saudi Arabia signed two contracts worth more than USD 150 million with Lockheed Martin Corporation for UH-60M Black Hawk helicopters. Under one contract, the company received an order for four helicopters from the country, which are expected to be delivered in June 2022 (contract modification to the previous contract signed in 2017). Another contract was awarded to deliver 25 modified UH-60M helicopters for the Saudi Arabian National Guard (SANG). The contract is scheduled to be delivered through October 2024. With these two orders, the order book for UH-60M helicopters has increased to more than 110. Currently, as part of its Vision 2030, the country is reducing its dependence on defense imports and strengthening its local military manufacturing capabilities by partnering with international companies. Such support initiatives of the government for the development of the local defense manufacturing industry are expected to accelerate the growth of the defense market in the country during the forecast period.

Competitive Landscape

Lockheed Martin Corporation, The Boeing Company, Airbus SE, Elbit Systems Ltd, Saudi Arabian Military Industries, and EDGE Group are some of the prominent players in the GCC defense market. Earlier, foreign players accounted for the majority share in the GCC defense market due to the dependency of the countries on international players for arms and ammunition. However, over the past few years, it can be observed that regional players are gradually increasing their share in the market. Saudi Arabia and the United Arab Emirates are strongly emphasizing on indigenous production of defense equipment, and many foreign defense organizations are partnering with the local Gulf-based organizations in the defense sector.

For instance, SAMI signed a joint venture agreement with FIGEAC AÉRO Group and the Saudi Arabian Industrial Investments Company (Dussur) for the establishment of SAMI FIGEAC AÉRO Manufacturing LLC. The joint venture will manufacture aerostructure components and initially manufacture machined and processed aerospace parts with light alloy (aluminum) and hard metal (titanium) materials. Similar developments in product portfolios of regional players are expected to intensify further during the forecast period.

Additional Benefits:

• The market estimate (ME) sheet in Excel format
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