GCC Defense Market Research Report: Forecast (2021-2026)

Market Definition

Several countries in the GCC region are spending extensively in their respective defense sectors to strengthen their national security. However, these expenses are sent majorly to contractors of other nations. Hence, countries across the GCC region must increasingly focus on local defense manufacturing capabilities to boost their economy.

Besides, another reason Gulf countries are raising investments in their defense sectors is the increasing geopolitical tensions among them. Hence, with the approach toward local manufacturing, these countries are anticipated to display vibrant growth in their manufacturing sectors & generate significant growth opportunities.

Gulf countries have a competitive edge of massive military budgets, the ability to learn from the other regions, and a drive to bring greater efficiency in their defense bases. In the coming years, several prominent defense equipment manufacturers shall work directly with the governments & militaries of different countries in the GCC region under the umbrella of joint management & risk-sharing initiatives to enable better transparency & information sharing. Besides, the contractors for various defense equipment shall become more proactive in developing & procuring defense systems in the years to come.

Market Insights

The GCC Defense Market is projected to grow at a CAGR of around 2.12% during the forecast period, i.e., 2021-26. The market is driven principally by the rapidly increasing & existing geopolitical tensions among different countries across the GCC region entwined with their growing focus on strengthening national security with massive investments and procurement of advanced defense equipment & weapons. 

In addition, these countries are working on improving their local defense manufacturing. With more lethality, range, & flexibility in weapons, different GCC countries are inclined toward advancing these weapons & other equipment like combat ships, jets, missile defense systems, etc. Although several technologies are yet to enter the market and are in their developmental phases, different countries & their respective militaries are seeking autonomous weapon technology and testing weapons that could fight on their own.

In recent years, different countries in the region have inclined more toward equipment modernization and displayed a shift from outsourced & offshore maintenance to onshore Maintenance, Repair & Overhaul (MRO) contractors. Additionally, the market shall also expand due to a greater influence of local military capabilities across the GCC region to support secured supplies of defense equipment, operational sovereignty, & display a source of pride. It, in turn, would also create job opportunities for local talents, increase research & development activities, and enable economies to diversify their resources away from the oil & gas sector.

Impact of Covid-19 on the GCC Defense Market

The Covid-19 pandemic in 2020 catastrophically impacted most industries across the GCC region. However, the GCC Defense Market underwent a moderate effect of the crisis. The governments of different countries in the region imposed stringent movement restrictions & lockdown to curb the spread of this dreadful disease, which led to supply chain disruptions, shortage of raw materials, challenges associated with logistics, & reduced defense expenditure, among others. Additionally, investments in several research & development activities & business expansion got reduced to resist the decline in revenue & operating performance of the market.

Besides, since most countries across the region were investing in resources to address the various issues associated with the pandemic, there were delayed purchase orders in the defense sector throughout 2020. However, with the gradual improvement in the situation, governments uplifted restrictions and allowed the recommencement of business operations.

The supply chains are back on track, with deliveries & distribution of defense equipment regaining their momentum across the region. As a result, the market is anticipated to generate remunerative growth opportunities for the leading players in the coming years.

Market Segmentation:

Based on Procurement, the GCC Defense Market bifurcates into:

• Aircraft
• Weapons & Ammunitions 
• Sea-Based Platforms
• By Land-Based Platforms
• Personal Training & Protection
• Maintenance, Repair & Overhaul (MRO)

Of them all, Aircraft are anticipated to dominate the market with the largest share during 2021-26. Even though gulf countries potentially witness threats from the sea, they are actively focusing on strengthening their air-based defense systems. Since countries like Saudi Arabia, the United Arab Emirates (UAE), Bahrain, & Egypt, have worsening relations in the region, they are rapidly adopting advanced & robust air defense systems. For instance:

• In February 2019, the first Rafael fighter jet was delivered to Qatar.
• In 2017, Qatar signed a deal with BAE Systems to supply 24 Typhoon Eurofighter aircraft, with delivery expected to commence in late 2022.
• The same year, in June, Qatar also signed a deal with the US to purchase F-15 fighter jets to improve its air support mission capabilities.

Moreover, the continuous political tensions among different countries across the GCC region have surged their defense budgets, along with the need to modernize their militaries by 2030 by procuring technologically advanced aircraft like fighter jets, which, in turn, would fuel the overall market growth through 2026.

On the other hand, among all Ammunitions & Weapons, Ammunitions are anticipated to display the fastest growing demand in the coming years, mainly due to the swiftly escalating tensions across borders and uncertainty associated with warfare, drug trafficking, terrorism, etc. Besides, militarization & modernization of armed forces, coupled with rapidly advancing technologies in weapons & ammunition, are also accelerating their adoption across the GCC countries and driving the market.

Country Landscape

On the geographical front, the GCC Defense Market expands across the following countries:

• Saudi Arabia
• UAE
• Qatar
• Kuwait
• Bahrain
• Oman

Of them all, Saudi Arabia is anticipated to dominate the market with the largest share during the forecast period. The country is the largest spender in the defense sector throughout the GCC region. With the rising geopolitical tensions in the Middle East & North African regions, Saudi Arabia is increasingly focusing on strengthening its national security and attaining regional dominance in the defense. Moreover, the country is also procuring advanced weapons & equipment from other countries like the US.

On the other hand, Kuwait is also focusing on strengthening its defense base by strengthening its military capabilities, especially around the air-based vehicles, owing to territorial conflicts, which shall also contribute to the overall market growth during the forecast period.

Nonetheless, the UAE is projected to display significant growth opportunities for the leading market players, mainly due to the increasing focus of the UAE government on the production & coproduction of defense equipment like ammunition, advanced communications equipment, strategic radars, desert armored vehicles, guided rocket launchers, drones, & naval warships to strengthen its national security.

Recent Developments by Leading Companies

• In February 2021, Saudi Arabia Military Industries (SAMI) signed a deal to jointly work with the US-based Lockheed Martin Corporation to improve Saudi Arabia’s defense & manufacturing capabilities. This deal involves the development of localized capabilities by transferring technology & knowledge and training the Saudi workforce in manufacturing products for & providing services to the Saudi armed forces.

Market Dynamics:

Key Driver: Rapid Technological Advancements & Favorable Regulations by Member Countries

With swiftly escalating geopolitical tensions among countries, the government is immensely investing in the defense sector & taking initiatives in several research & development activities to procure weapons & equipment with advanced technology having more accuracy, lethality, and range. Besides, the dynamic warfare nature and rising cases of terrorist activities are further instigating the need to strengthen national security with a robust defense system. Hence, gulf countries are anticipated to drive the market in the coming years.

Possible Restraint: Gradually Reducing Defense Budgets of Saudi Arabia

In recent years, governments of countries like Saudi Arabia have reduced their defense budgets and are inclined more toward investing in the education sector. Besides, some European Union states have restricted or banned exports of defense equipment to Saudi Arabia, owing to IHL (International Humanitarian Law) & human rights concerns. It is a prominent aspect that shall negatively affect the procurement of defense equipment in Saudi Arabia, which, in turn, would hamper the overall growth of the GCC Defense Market during the forecast period.

Growth Opportunity: Structuring of Defense Budgets among various GCC nations

Governments of different GCC countries are working on carefully structuring their defense budgets. Doing this can generate lucrative growth opportunities in several ways, like creating jobs, developing the economy, and enabling policymakers to produce possibilities for localization, owing to a continuous need for massive expenditure on the defense sector. Besides, with mounting geopolitical uncertainties, the burgeoning need for a robust & more efficient defense system is anticipated to boost the GCC Defense Market during the forecast period. 

Moreover, the growing sophistication of militaries for defense equipment is expected to prevail in the coming years, which eventually would become a core requirement for defense system procurement across the GCC region. It, in turn, is projected to lead toward enhanced involvement of the local defense market, especially for MRO contractors, thereby driving the market in the coming years.

Key Questions Answered in the Market Research Report:

1. What are the overall statistics or estimates (Overview, Size- By Value, Forecast Numbers, Segmentation, Shares) of the GCC Defense Market?
2. What are the country-wise industry size, growth drivers, and challenges?
3. What are the key innovations, opportunities, current & future trends, and regulations in the GCC Defense Market?
4. Who are the key competitors, their key strengths & weaknesses, and how do they perform in the GCC Defense Market based on the competitive benchmarking matrix?
5. What are the key results derived from surveys conducted during the GCC Defense Market study?