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With Adcom Drone, UAE Makes Big Export Push

Nov. 18, 2013 - 03:45AM   |  
By AWAD MUSTAFA   |   Comments
Drone Sales: Russia has agreed to purchase two Yabhon United 40 UAVs, built by United Arab Emirates-based Adcom Systems.
Drone Sales: Russia has agreed to purchase two Yabhon United 40 UAVs, built by United Arab Emirates-based Adcom Systems. (Adcom Systems)
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DUBAI — The United Arab Emirates defense industry has launched an aggressive drive to enter the global market, securing at least four deals to supply weapons and hardware to Algerian, Turkish, Russian and Italian customers.

Tawazun, the strategic defense investment company, inked agreements with the Algerian and Turkish governments to set up joint ventures for its Nimr Automotive subsidiary last year and this year. Meanwhile, gun maker Caracal, another subsidiary, is supplying pistols to an unnamed Italian police force.

And Abu Dhabi-based unmanned aerial vehicle maker Adcom Systems also is in talks for the sale of two of its Yabhon United 40 UAVs to the Russian military.

According to Saif al Marzooqi, Tawazun’s associate corporate communications director, the company plans to display its defense technology capabilities overseas in markets such as the US, Brazil, France and the Far East.

Leading UAE enterprises such as Mubadala, Tawazun, Emirates Advanced Investments and other companies lead the domestic defense industry of the UAE, according to Mathew Hedges, an analyst for the Institute of Near East and Gulf Military Analysis.

“Thanks to joint ventures with internationally leading industrial partners, the UAE is now able to design, manufacture and sell a wide array of armaments and services for the UAE armed forces and global clients,” he said.

Hedges said these landmark indigenous products and services being offered by the UAE defense industry have helped the armed forces conduct its mission to protect the UAE’s national sovereignty while providing an opportunity for diversifying the UAE’s economy, which provides jobs.

“The powerful public-private cooperation that is seen in the UAE helps to empower the UAE armed forces to transfer some of its noncore activities to industry, allowing the UAE armed forces to focus on its core military activities,” he said.

With the fulfillment of its main objective within a short period, Hedges said, the indigenous defense industry is aggressively pushing to enter the global market.

In September, UAE firms displayed their technology at the Defence and Security Exhibition International in London for the first time. They also appeared at the Moscow Airshow, the Gun show in Las Vegas and the Defence and Industry show in Bangkok in a large marketing drive to establish their brand globally.

Emirates Advanced Investment set up a company in the US in 2010, known as Knowledge International, to create a bridgehead into the US market.

The first international joint venture agreement for Tawazun was signed by Nimr Automotive to build two variants of its four-wheel-drive command vehicle. Nimr was paired with Algeria’s Groupement de la Promotion de l’Industrie Mécanique.

The company, which comes under the Algerian Ministry of National Defense, will work with Tawazun to help it enter the African defense market.

Hamad al Neyadi, with Nimr Automotive, said at the time that the agreement sets up the joint venture to become the main supplier of 2,500 armored vehicles to Algeria’s military over 15 years, as well as to generate the potential to develop products for customers across Africa.

The second agreement, signed this year with FNSS Savunma Sistemleri, will see the UAE vehicle manufacturer sell and possibly produce Nimr vehicles in Turkey for the Turkish defense market.

The UAE armed forces awarded a US $1.09 billion contract for 1,800 Nimr vehicles in February.

Another Tawazun subsidiary, Caracal, which produces handguns and rifles for use locally and across the Gulf Cooperation Council, has claimed to have made export sales to Italian and US entities.

“We export our guns to the Italian police force as well as to the US consumer market,” Salem al Matroushi, former chief executive of Caracal, said earlier this year.

But the biggest deal yet to be struck by a UAE weapons manufacturer is the sale of two Yabhon United 40 medium-altitude, long-endurance UAVs to the Russian military, made by Adcom Systems.

According to Ali al Dhaheri, the chief designer of the drone and chairman of Adcom Systems, the Yabhon United 40 can carry up to 10 air-to-ground missiles with a delivery range of 60 kilometers each, while flying for up to 120 hours.

Al Dhaheri confirmed that the Russian government is interested in the drones. Numerous demonstrations were conducted ahead of the Moscow Airshow in August.

A Russian defense industry official was quoted by Russian state news agency RIA Novosti, stating that Russia needs up to 100 UAVs and at least 10 guidance and control systems to ensure effective battlefield reconnaissance.

“We are talking about at least two United 40 Block 5 models developed by the company Adcom Systems,” the source was quoted as saying in July.

He added that, so far, Adcom Systems had been approached by more than 10 countries interested in acquiring the UAV.

“This plane is new, but we have more than 10 countries from the Northern Hemisphere, east and west,” he said. “By the end of the year, we expect to have two or three large contracts for the UAV. We will also be largely pushing into the South American market.”

Not everybody is enthusiastic about seeing UAE companies plunge into the export markets.

According to Grant Rogan, the CEO of offsets company Blenheim Capital, it’s becoming an issue for companies that have become minority shareholders in joint venture operations set up with local entities in the UAE such as Tawazun on the back of offset obligations generated by massive weapon sales to the Emiratis.

“The challenge for Western contractors is, how do you meet the aspirations of the buying government while not giving away industrial crown jewels, which end up in the export market. The problem comes from the difficulty you have as a minority shareholder,” Rogan said.

Foreign investors are not allowed to take a majority stake in defense companies under offset rules that encourage the creation of joint venture operations.

“The fact is, without breaking into the export market, many joint companies in the region are probably not sustainable in the long term,” he said.

Selex ES, Sikorsky, Lockheed Martin, Ultra Electronics, Saab and Fincantieri are among Western contractors with joint venture operations in the UAE, principally through Tawazun and Emirates Advanced Investments.

Andrew Chuter in London contributed to this report.

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