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21 February 2024

Defence spend increases despite slump

More than 900 arms-makers displayed their products in the event. (SUPPLIED)

By Nadim Kawach

Arab nations are expected to keep defence spending high despite a sharp decline in crude prices due to the global financial crisis and the adverse impact of such expenditure on growth, experts said yesterday.

Official figures showed the combined Arab budget allocations on defence security and justice have exceeded $480 billion (Dh1,761bn) during 2002-2008 and the bulk of such allocations have been made by Gulf oil producers.

More than 900 arms-makers streamed into Abu Dhabi this week to display their latest products and take advantage of a steady growth in military purchases in the region, the world's largest defence spender relative to GDP.

Idex 2009 came amid a severe global economic distress that has sharply affected the financial position of many institutions but diplomats believe this would not impact defence spending on the grounds it is mostly government.

Arab League figures showed member states have allocated more than eight per cent of the gross domestic product to defence and security over the past 10 years while such allocations accounted for as high as 28 per cent of their current expenditure and an average 20 per cent of their total spending.

The latest figures showed their cumulative expenditure totalled around $2,302bn during 2002-08, including nearly $1,726bn in current spending, which has normally accounted for as high as 75 per cent of the total expenditure.

At 28 per cent, the region's allocations for military hardware, defence, security and justice totalled around $483 billion during that period, including over $130bn in 2008, their highest defence allocations.

"Arab defence spending has remained high even when oil prices were very low," said one Abu Dhabi-based Arab diplomat. "I don't think the recent plunge in oil prices will affect this spending. This was illustrated in high defence and security allocations in budgets announced recently by some countries in the region."

The figures showed Gulf countries, which control nearly 45 per cent of the world's recoverable oil deposits, accounted for the bulk of the region's military and security spending, allocating more than $360bn during 2002-2008.

While such massive defence allocations had smothered their economies and widened their fiscal deficits during the 1990s, they have had little impact over the past few years because of a sharp increase in their oil revenues.

The crude export revenues of the six Gulf Co-operation Council (GCC) countries during 2000-2008 were estimated at more than $1 trillion, nearly triple their earnings in the previous seven-year period.

Such a sharp increase has allowed them to record high economic growth rates in the past five years, slashed their debt, replenished their eroding financial reserves and turned fiscal deficits into large surpluses.

GCC states of Saudi Arabia, Kuwait, Bahrain, Qatar, Oman and the UAE have long been among the world's biggest military spenders, allocating nearly a third of their current expenditure to purchase weapons and military equipment, apart from maintenance, training and salaries to the armed forces.