How did the UAE manage to achieve defense exports worth 2.3 billion dollars, nearly fourteen times the defense exports of Egypt? And if we talk about defense revenues, the UAE achieves about thirty times that of Egypt. Is the Emirati defense model as successful as claimed?
The UAE is a special case in defense economics; it is a country that combines success in numbers, but that success itself carries with it significant challenges, to the point that there are extensive campaigns to boycott Emirati defense products. These boycotts are not for ethical reasons but for market-related reasons, with allegations that they have harmed several companies and various industries in countries that have entered the same market.
Let's look at the story of the UAE in the defense industries comprehensively.
The UAE is a different model because it is one of the few countries that decided to build a defense sector not from the perspective of "a military needing weapons" but from the perspective of "an economy wanting to manufacture." In other words, purely from a commercial standpoint, where there is an opportunity to exert regional and international influence.
In other words, the defense industry in the UAE is not merely an arm for the military, but can be seen as a tool within its overall strategy to diversify sources of the economy beyond oil. This represents a fundamental and important difference in the management and economic philosophy of the UAE in the defense industry sector.
The UAE's story with the defense industries began just ten years ago, specifically eleven years ago. Looking at the development of this sector from 2014 to today, we can understand why the Emirati experience deserves study.
In 2014, the state established the "Edge" group (EDGE), which is not a single company as some might think, but an umbrella that includes more than twenty-five companies operating in defense, security, and advanced technology fields.
This group can be viewed as a holding company managed with an investment mindset and funded by sovereign funds, indicating that it is not subordinate to the military, nor was it established to directly meet its requirements. This is evident from its administrative structure, which is civilian and technical, featuring a board with financial and industrial expertise from outside the military sector. The UAE operates according to a clear commercial concept, based on performance indicators (KPIs) and annual budgets subjected to detailed financial audits, without a direct military concept in management.
What happened next is considered one of the fastest institutional transformations in the Arab world and perhaps in the whole world.
Companies like "Tawazun," "Nimr," "Industrial Offset," "Adasi," "Yahsat," and "Halcon" have merged into a single entity that operates under the logic of the global market, namely through development, manufacturing, and exporting, following the same approach as major companies like British "BAE Systems" and Italian "Leonardo."
This merger shifted the UAE from a phase of importing ready-made weapons to a phase of acquiring operational knowledge in fields such as satellites, aerial munitions, and command and control systems. It is important to emphasize here that what is meant is "acquiring operational knowledge" not "possessing technology" or "advanced manufacturing," as the UAE has not yet reached that stage.
Economically, the Emirati experience is significant because it did not try to compete with the United States or France on the same technology, but instead focused on existing market gaps and worked to exploit them; such as short-range air defense systems, light drones, smart munitions, and tactical electronics. These are precisely the areas that major companies consider minor details they do not wish to expend resources on, and these are the specializations the UAE chose to operate in.
Thus, the UAE moved according to a strategy of "niche specialization," with a clear strategy: to offer a tailored product for a specific market, of medium quality, with high returns, and fast delivery.
The different point is that the "Edge" group (EDGE) has not operated as a closed government defense company but as an open international partnership platform. Its logic is simple: "I am here, I possess massive financial resources, and if you wish to collaborate on producing a certain product, you will find me ready to participate."
Companies such as BAE Systems, Raytheon, Leonardo, and Baykar have all entered into partnerships with the UAE for joint development, production of components, or testing systems. These, by the way, are among the largest global companies in the defense industry.
By 2024, the value of Emirati defense exports reached around 3 billion dollars. This may seem small compared to the global industry, but it is very significant if we consider that this sector's age does not exceed ten years.
I will mention a strange fact, which has no direct significance but is noteworthy: "Edge" exports are now more diverse than Emirati oil exports in terms of the number of importing countries.
But more important than the numbers is that the UAE is building its defense sector as a knowledge production sector. The state uses defense not only as a tool for military power but as a technology laboratory supporting fields such as artificial intelligence, robotics, aviation, and space in the civilian sectors. This is what economists call the dual-use spillover effect, which I have previously explained in terms of its meaning and importance.
From a governance perspective, the UAE has managed to achieve the equation that many countries have failed to do:
Civil executive leadership, sovereign control from the state, financial governance resembling global corporations, and a reward culture based on innovation and quality execution.
In other words, the UAE has succeeded in establishing a quasi-market management within a sovereign system, which is a rare occurrence.
This has made it one of the few experiences that understood that defensive power is not measured by the number of tanks, but by the number of engineers testing them and innovating patents that benefit other sectors.
However, the UAE is not a defense paradise; there are three main problems:
First: Building local capabilities takes decades, not just years, especially with the obvious shortage of Emirati engineers in advanced technology fields. Despite intensive campaigns for Emiratization of the workforce (similar to "Saudization" in Saudi Arabia), the ratio remains limited: only 20% of the sector's workers are Emiratis, and about 50% of the engineers are Emiratis, while the rest are foreigners.
Second: Despite this significant boom, the UAE still relies on critical imported components such as electronic chips, advanced sensors, and software from the United States, Europe, and South Korea. There is no publicly announced plan to localize the production of these components.
Economically, this situation is known as the technological dependency trap, as most UAE products are assembly or superficial development products, not complete sovereign innovations. Therefore, in the event of sanctions or a trade war, production could halt immediately, limiting the industry's ability to endure and making the value of its exports more low-to-mid tech rather than high-tech.
Third: The biggest and most dangerous problem relates to international accusations against the UAE of adopting monopolistic behaviors and intervening in or manipulating foreign markets.
The UAE is accused of posing a threat to the economic sovereignty of the countries it entered the markets of, as it imposes conditions in contracts that make local companies mere secondary suppliers under its management, with a partial transfer of technology to the UAE.
In markets such as Kenya, Poland, Brazil, and Spain, "Edge" faces accusations of market distortion through a government control that stifles local competition.
This has occurred through exclusive contracts and acquisitions that have weakened small companies in those countries, leading to international boycott campaigns against the group as a governmental entity controlling supply chains and threatening the economic sovereignty of importing countries.
Economically, this accusation is based on a model known as predatory acquisition. Critics argue that the group is a sovereign-backed company with annual revenues of about 5 billion dollars, in addition to it being linked to sovereign funds like ADQ. This gives it the ability to buy companies at very high prices without the need to achieve quick profits, and it can rapidly attract expertise.
Thus, the situation does not represent fair competition, as this model reduces local innovation in the countries it enters, particularly those where small and medium companies rely on limited defense contracts.
Since 2023, the UAE has acquired significant stakes in European companies and others in South America, such as Milrem Robotics in Estonia, which incidentally was the largest investment in the history of the Estonian defense industry.
The European Union has opened an investigation lasting five months due to fears of a leak of technology supported by the EU to the UAE, as occurred previously in the iMUGS project concerning robotic tanks.
The UAE also purchased a large stake in the Swiss company Anavia, which specializes in drone manufacturing, acquired 50% of the Brazilian company SIATT involved in precision munitions, and purchased the Polish company Flaris—or part of it—a company that manufactures light aircraft, in addition to acquiring the Brazilian company Condor.
Numerous reports indicate that these acquisitions are effective in the short term as they aim to transfer technology, but they create problems in the long term. The Emirati company often leaves after achieving its goal, returning to technology localization, and sometimes to staffing from the acquired company itself, leaving behind a country that did not achieve real gains from the deal.
This problem has arisen within the UAE itself, not just abroad.
The Edge group dominates the UAE market almost entirely, reducing competition and pressing local small and medium companies, creating what can be termed a bubble of innovation—that is, innovation based on unsustainable government support in the long term.
Based on these factors, we can say that while the Emirati model is brilliant in terms of speed, it is fragile in terms of dependency and the balance between profitability and independence.
Economically, the model is successful so far, but if international campaigns escalate or the European Defense Agency tightens laws and restrictions on UAE activity in Eastern Europe, "Edge" may lose all it has achieved so far.
This represents an important lesson for the UAE itself and for other countries like Saudi Arabia: that speed in growth is not always an advantage, as true growth needs balance between capabilities and objectives, and the establishment of international trust and partnerships that yield mutual benefits for all parties.
This is an AI-generated English translation. The original text is in العربية
PhD Researcher in Defense Contracting and Cooperation Policies