Guy Anderson, editor and lead analyst, Jane's Defence Industry

The United Arab Emirates is one of the world's true "frontier" defence markets. It is courted by Western firms seeking to offset slumping spending at home; emerging exporters like South Korea seeking to establish a foothold beyond their own borders; and Russia and China under their arms-for-energy-access strategies.

A precarious geographical position, buoyant oil revenues and strong defence expenditure growth (military funding leapt 276 per cent between 2001 and 2010)[1] make the UAE an attractive prospect. There is both the means and the rationale to continue spending on national defence.

The UAE, meanwhile, knows its value to the world market and is looking for a healthy return on its investments. It is looking to defence expenditure to help overcome two pressing problems: firstly, the twin demographic challenges of a young population in need of meaningful employment and a strong reliance on foreign labour (20.9 per cent of UAE nationals were under the age of 15 in 2008 and 73.9 per cent of those of working age were non-nationals)[2] and, secondly, continued high reliance on oil revenues (oil exports accounted for 40 per cent of GDP in 2008).[3]

It is unsurprising that the UAE overhauled its offset regime this year [2010] in order to maximise the social and economic returns on its investment in military materiel.

The reforms have created numerous challenges for foreign industry, however, and may yet backfire by alienating the very firms which the UAE is seeking to work with. Indeed, there have been reports that international defence trade associations are considering sending a jointly-signed letter to the UAE's offset bureau to vent their frustrations (there is a precedent - a similar letter on a similar subject was recently despatched to India)[4].

By Anthony Etchells, UKDF Research Associate

 The future is challenging. The Arab Spring has shaken the region, and the UK will have to review and possibly reset its relationships with certain states after new governments have taken power and established ones have made various concessions. Iran seems as determined as ever to realise its nuclear ambitions. Syria's Bashar al-Assad is accused of widespread human rights violations against his citizens, but has shown no willingness to step down; international partners have so far achieved little but rhetoric; al-Assad agreed to a Kofi Annan's peace plan, but it remains to be seen whether he will stick to his word. British troops are still in Afghanistan, with the government aiming to withdraw all combat troops by 2015 to leave behind a strong and stable country. The final US combat troops quit Iraq in December 2012, and since then the country has shown signs of returning to the bombings and sectarianism that marked its darkest days after the 2003 invasion.