The Tawazun Economic Council (TEC) was established in 1992 to ensure the implementation of the tawazun Economic Programme (PET) 1. The role of the CET should be seen as both a regulatory authority and a business developer for offsetting opportunities, as it aims to facilitate investment in the United Arab Emirates and help defence firms meet their contractual obligations. Currently, more than 72 countries use clearing programs that require foreign contractors to invest in the importing country`s economy. Compensation obligations are triggered when a supplier (or group of suppliers) reaches a threshold of $10 million for past contracts. Under previous guidelines, this would happen if the value of a number of contracts met the threshold. In a substantial change, clearing obligations will only take place if a single market is not below the threshold. Lower value contracts that will be awarded later will also be included in the counter-program as long as the supplier has an active account at Tawazun, but not lower value contracts awarded to a supplier without an active account at Tawazun. According to Business Monitor International (BMI), the United Arab Emirates (United Arab Emirates) is one of the 15 largest defence spending in the world. Defence spending as a percentage of GDP has remained relatively high in recent years in response to the rise of Islamist extremism in the region, lingering tensions with Iran and the united Arab Emirates` participation in the military efforts of the Saudi-led coalition in Yemen.
While the UAE government has continued to provide high-priority defense items and services, it has focused recent purchases on urgent operational requirements in support of Yemen operations, and has delayed procurement of other lower-priority defense items. Precise information on UAE defence spending has been very scarce since 2016. According to the BMI and GlobalSecurity.org, THE UAE`s defence spending amounted to about $23.4 billion in 2016. GlobalSecurity reported that the United Arab Emirates recorded a high annual growth rate (CAGR) of 4.5 percent in 2016 and that the country`s defence spending would increase by 2021 with a CAGR of 6.5 percent to $31.8 billion. On a cumulative basis, the country is expected to invest $140.8 billion in defence, of which $53.1 billion is for investments to finance arms acquisitions. Key Stakeholders In December 2014, the GOVERNMENT of the United Arab Emirates signed several armaments and aerospace companies owned by Mubadala, Tawazun Holding and Emirates Advanced Investment Group (EAIG) into a single entity, Emirates Defense Industries Company (EDIC). EDIC`s role is to promote the UAE`s defence industry through manufacturing, training, mapping, logistics, technological development and communication services, as well as maintenance, repair and operations services for air, land and sea platforms. According to several sources, the United Arab Emirates signed contracts worth an estimated $4.5 billion at the 2019 International Defense Conference and Exhibition (IDEX). Domestic manufacturers have won many of these contracts, demonstrating that the local defence industry is growing. Although “Local Buying” is hardly unique to the United Arab Emirates, the prioritization of domestic producers nevertheless offers some interesting insights into the current state and possible evolution of their defence industry. By investing in the UAE`s indigenous defence sector, Abu Dhabi is trying to advance the country`s interests while creating lucrative business opportunities outside the oil and gas sector for UAE nationals.
The establishment of EDIC in 2014 was an important step in the UAE`s efforts to “locate” its defence spending, a pillar of the country`s economic diversification agenda. EDIC was born from the integration and consolidation of defence companies that were previously under the aegis of Mubadala Development Company, Tawazun Holding and EAIG.