The development of the aerospace and defence sector in the Middle East and Africa region has always been diverse, geographically as well as within its subsectors. Once again, the oil-rich Gulf countries stand out. They have been riding the wave of booming passenger travel that increased by 490% between 1981 and 2015, resulting in high levels of investment in commercial aerospace.
This year, they will be joined by ‘sleeping giant’ Iran, which is slowly reconnecting to the global travel community. Its first sign of revival, an order for 118 Airbus planes from France, is apparently just the beginning. Iran needs about 450 planes to renew its ageing fleet, cover its domestic, regional and international travel markets and compete with neighbouring Arab countries.
The Gulf Co-operation Council (GCC) countries have also been the defence subsector's most lucrative clients. In 2014, the six GCC members spent $113bn – more than 57% of the total military expenditure of the entire Middle East. The regional crises in Yemen and Syria and the newly developed rivalry with Iran have led Saudi Arabia to increase its defence spending significantly, ranking the country third on the global military expenditure list.
This might not have been a problem a few years ago, with oil prices at $100 per barrel. But at $40 to $45 per barrel, national budgets must be calculated very carefully – a fact that countries such as Angola, Venezuela and Russia are now recognising.
GCC countries are now cutting subsidies, raising governmental fees and introducing taxes for their citizens. Expensive wars and persistent local rivalries could lead to deeper social and economic problems – with serious political consequences. Let’s hope that more peaceful times lie ahead, for the benefit of everyone in the Middle East.
Mazdak Rafaty is managing partner of Ludwar International Consultancy and SME adviser to the joint Emirati-German Chamber of Commerce. Email: firstname.lastname@example.org