As defense spending decreases in the U.S. and elsewhere following force reductions in Iraq and Afghanistan, defense contractors – who have been largely reliant on NATO countries – are finding that they must expand into territories outside the west. Though none of these match America’s $611 billion military budget, four markets in particular are very appealing as long-term partners in aerospace and defense for contractors of all sizes.
1) Saudi Arabia
(Saudi Security Forces: Al Jazeera English/Flickr)
According to the Stockholm International Peace Research Institute (SIPRI), Saudi Arabia and the United Arab Emirates were the top two destinations for American arms exports from 2012 – 2016. McKinsey & Co. have called the Middle East the defense industry’s “most attractive international market” and for good reason. As Saudi Arabia presses towards its Vision 2030 modernization initiatives, defense spending continues to rise having jumped 54% between 2010 and 2014. In 2015, they surpassed Russia as the third largest military spender, largely due to an ongoing war with Yemen. That surge in spending has continued into 2017. Last December, the country announced a 6.7% increase in defense spending for 2017. This was confirmed in May, when Lockheed Martin closed a $28 billion deal with the Saudis that included 150 S-70 Black Hawk helicopters, missiles, and radar systems.
2) The UAE
The United Arab Emirates is also seeing increased military spending, driven in part by ongoing territorial disputes with Iran in the Persian Gulf and the need to fortify and protect its infrastructure. According to GlobalSecurity.org, UAE’s annual defense spending, which was $23.5B last year, is projected to reach $31.8 billion by 2021. In May, CNN reported that the U.S. Government approved the sale of 60 Patriot Advanced Capability 3 missiles, made by Lockheed Martin, and 100 Patriot Guidance Enhanced-Tactical (GEM-T) missiles, made by Raytheon, to the UAE in a deal worth $2 billion.
As Indian President Narendra Modi’s ongoing push for modernization continues, India continues to rely on other countries for its defense systems, particularly Russia and the United States. The recent sale of 22 unarmed Guardian MQ-9B maritime surveillance drones by General Atomics underscores India’s importance as a growing military spender: it is now the fifth largest in the world, having spent $55.9 billion in 2016.
4) South Korea
Last year South Korea prepared to spend a record-breaking 40.33 trillion South Korean Won ($36.49 billion) on defense in 2017 as North Korea’s sabre-rattling leader Kim Jong-Un becomes more and more belligerent. Most recently, the country began a U.S.-led deployment of Terminal High Altitude Area Defense (THAAD) anti-missile defense systems worth $3.9 billion after missile testing by the North Korean regime. In 2014, the country closed a deal with Lockheed Martin worth $7.04 billion for 40 F-35 jets, while last year Lockheed Martin secured a contract to upgrade 134 F-16 Fighting Falcons jets into the deadlier, more modern Viper configuration.