Saudi Arabia and Qatar Tensions Drive Defense Export Growth

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The wholesale re-armament of Qatar in the midst of growing regional tensions caused a dramatic shift in the global defense trade market, according to the 2018 Global Defense Trade Report, released today by Jane’s by IHS Markit, the global business information provider. The annual report highlights a 3.8% compound annual growth rate in total exports since 2009 across 2018.

”Regional tensions in the Middle East continue to drive growth in the global defense markets as we see armament projects take hold,” said Ben Moores, senior defense and aviation analyst at Jane’s by IHS Markit. “We are also seeing that regional imports from East Asia—especially Taiwan, South Korea and Japan—jumped by 50% over the past decade from $10.6 billion in 2009 to $16.2 billion in 2018.”

Key highlights from the Balance of Trade study:

  • Qatari re-armament causes defense import market to leap to ninth position globally after only entering the top 20 importer list in 2016.
  • France set to overtake Russia as second largest global exporter in 2020, with annual exports due to total $7 billion.
  • The Middle East defense market reaches $27.4 billion, up from $26.8 billion in 2017 and up from $14.2 billion in 2009.
  • East Asia becomes fastest growing export market globally, jumping by 50% over the past decade from $1.1 billion in 2009 to $2.9 billion in 2018.
  • UK now set to become a minor player in the global defense export market from 2024 due to planning and investment failures in its domestic defense industry.

Qatari Rearmament Causes Leap to Eighth Position as Tensions with Saudi Grow

Sitting outside the top 20 global markets for defense imports since at least 2009, the Qatari defense market has now jumped to eighth place in 2018.

“Despite having a population of 2.6 million people, Qatar has the fourth largest import backlog over the coming decade and will be the third largest importer globally for most of the coming couple of years,” Moores said. “The acceleration of a wholesale re-armament of Qatar has been primarily driven by its political disputes with Saudi Arabia, combined with regional instability.”

The Qatari defense market has traditionally sat outside the top 20 global markets for imports but jumped to ninth place in 2017 and eighth place in 2018. Qatar imported $2.6 billion in 2018 (against $700 million in 2009) and has a ten-year order backlog of $28 billion.

Middle East remains biggest defense importer since 2003, accounting for one third of global defense trade

The Middle East import defense market was worth around $27.4 billion in 2018, just under one third of the global defense trade market, with US companies accounting for half of all defense exports to the region.

“Continuing the trend that started in 2009, countries in the Middle East are importing more than ever – this trend shows no sign of slowing down,” Moores said. “With imports of $27.4 billion, the region imported more than Western Europe and Central and Western Asia combined (at $23.8 billion).”

In 2009, Saudi Arabia imported $2 billion in defense equipment. In 2018, that number quadrupled to $7.7 billion and is forecast to reach $10 billion in 2019. In comparison, India, the next largest importer, only imported $4.7 billion in 2018.

After Half a Century, France Set to Overtake Russia and Claim Position as Second Largest Global Exporter

France is set to eclipse Russia as it reaches $7 billion in annual exports and climbs to become the second largest global exporter of arms by 2020.

“Exports of the Rafale fighter aircraft to India and Qatar are the primary reason for the expansion, but wider continued success in exports to the Middle East as well as wider helicopter exports have driven this spectacular market shift,” Moores said.

The US remains the largest exporter with $32.7 billion defense exports in 2018 and a substantial ten-year order backlog of $280 billion primarily driven by the F-35 programme and key allies rearming.

East Asia Triples Exports to Become Fastest Growing Market Globally

East Asia is increasingly becoming an important global exporter, tripling its exports over the past decade to $2.9 billion in 2018. Simultaneously, the region has also increased its imports by 50% over the past decade to reach $16.2 billion in 2018.

“The East Asia region has an order backlog of $108 billion out of a global order backlog of $621 billion. This makes East Asia the fastest growing defense export market globally and the second most important market after MENA,” Moores said. “The export growth has been led by China and South Korea who have penetrated a number of higher end market areas such as military aviation.”

United Kingdom Increasingly Reliant on Defense Imports

As the UK moves away from its domestic defense manufacturing industrial base, it is becoming an increasingly more important market for exporters. The UK is set to become the fifth largest market for defense imports, despite being traditionally outside the top 10 importers.

“Current UK defense industrial policy is to acquire capability at the lowest possible cost, often regardless of potential domestic partnership or offset work. This policy led to the end of the vehicle industry over the past decade and is now set to see the UK’s aviation sector lose large segments through lack of domestic offset from foreign manufacturers. Brexit will accelerate this trend,” Moores said.



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