This article was originally published by the British Business Group Abu Dhabi in their Capital Letter magazine (Summer 2021 edition) – click here to view the original article (page 8).
For many UK defence and security exporters, the UAE is a key market. The country’s high net wealth and desire to independently defend itself against regional threats, means the UAE regularly features in the top 10 defence spenders, when calculated with reference to GDP.
For more than a decade, the UAE has been implementing a strategy to develop its own indigenous defence industry, with the objective of not just to decrease its reliance on defence imports, but also to make the UAE a major defence exporter.
During this year’s IDEX, the UAE took a major step by transferring responsibility for military and Abu Dhabi Police acquisitions, to Tawazun Economic Council. So why is this significant?
Role of Tawazun
Tawazun is responsible for administration of the UAE’s offset programme, the Arabic word Tawazun meaning “balance”. As per its 2019 Policy Guidance, Tawazun is mandated “to be a prime enabler for the Defense and Security industry sector in the UAE with a strong focus on economic development”. Broadly speaking, Tawazun are responsible for ensuring that those companies with qualifying defence sales, undertake industrial participation in the UAE.
What has changed?
Previously, procurement was undertaken directly by the Armed Forces, meaning that Tawazun were only involved towards the end of the contract award process. This meant that Tawazun had little influence in shaping the selection of companies, with whom they would be required to enter into a TEPA with (Tawazun Economic Programme Agreement). The announcement at IDEX, puts Tawazun firmly in the driver’s seat, and gives them end-to-end control over all military and Abu Dhabi Police acquisitions. Strikingly, this means that Tawazun will likely be one of the main decision makers for UAE military and AD Police acquisitions and, given their mandate for economic growth, it is likely that their contract award criteria will focus heavily on industrial participation in the UAE.
What was does this mean for UK exporters?
Exporters should pay careful attention to Tawazun’s roll-out and be mindful of any in-country or industrial participation criterion in tenders. UK exporters will need to self-evaluate the strength of an independent bid, against an option with greater in country participation. Tawazun may even adopt ADNOC’s highly successful In Country Value (ICV) programme. What is clear, is that UAE industrial participation is going to be more important than ever in winning defence contracts.
UK defence and security suppliers looking to launch or expand an existing presence in the UAE, still have plenty of opportunity, provided they approach it in the correct way. Exporters with an appetite to establish deep-roots and long-term relationships can flourish, provided they accept that in country participation is a pre-requisite to that success. Exporters should explore the multitude of available collaboration structures, to determine the best approach for their company.
Exporters unwilling to embrace UAE’s drive towards an indigenous defence market, are unlikely to reap the full benefits of what the UAE’s defence market has to offer.
This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please note that the law may have changed since the date of this article.