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High defence costs create GCC budget gap

posted on 18/03/2003: 1962 views

GCC states sharply boosted defence expenditure to bolster their military capabilities in the wake of the 1990-91 Gulf crisis and the increase was at the expense of development spending and budget balance, according to a Western report. The six countries, which joined each other in a defence, political and economic group in 1981, decided to slow down their arms purchases in the 1990s because of concerns about the widening fiscal shortfalls but such programmes picked up in the following years.

"Arms sales to the Gulf increased sharply after the 1990-91 Gulf conflict, and then declined as many governments became concerned by their budget deficits," said a paper by the London-based Jane's defence magazine. "In the mid 1990s, there was a resurgence in regional spending, in which the UAE played a leading role as it has been negotiating to buy 80 F-16 fighters from the U.S. firm, Lockheed Martin," Jane's said at a conference during IDEX in Abu Dhabi.

It said defence spending was expected to remain high in the near future and the emphasis in the UAE and its GCC partners would be on beefing up their naval forces following the delivery of three Russian Kilo class submarines to Iran.

"The emphasis in future contracts is likely to be on a perceived need for modernisation and expansion of the UAE's naval forces," it said at the two-day conference entitled 'Gaining an edge: future challenges and requirements for the GCC armed forces'.

"This is the area being emphasised by most GCC states, particularly in the anti-submarine warfare area, where the GCC is striving to counter Iran's flotilla of three Kilo class submarines...the UAE, like Saudi Arabia, is vulnerable in this respect, as it has two coastlines to protect, in the Gulf and in the Arabian sea." Jane's figures at the conference, attended by top UAE Army and Navy officers, showed the country's defence expenditure aimed at strengthening its defence against potential external threats stood at US$1.9 billion in 1996 and grew to nearly US$2.2 billion in 1997. It rose further to around US$3 billion in 1998, to US$3.2 billion in 1999 and peaked at US$3.4 billion in 2000 before it receded to nearly US$3.1 billion in 2001.

For the GCC as a whole, defence spending is estimated by an Arab League report at a staggering US$277 billion between 1995 and 2002, accounting for around 12.7 per cent of their gross domestic product during that period, the highest ratio in the world. The expenditure was calculated on the basis that the combined GCC defence spending accounted for nearly 35 per cent of the total spending of around USUS$793 billion between 1995 and 2002, according to the figures published by the Abu Dhabi-based Arab Monetary Fund.

To make use of such funds, the UAE and Saudi Arabia stipulate that arms suppliers must invest a percentage of the weapon deal's value in civilian projects in partnership with their citizens under offset programmes introduced several years ago. Such deals have attracted billions of dollars into various sectors and prompted other GCC members to consider following suit.

High defence spending has been blamed for the GCC's persistent budget deficit and slow growth over the past years.

The combined budget deficit hit a record US$63 billion in 1991 before receding in the following years to reach around US$17 billion in 1999. It turned into a surplus of nearly US$13.3 billion in 2000 due to a surge in oil prices but the shortfall resurfaced in the following years, mostly in Saudi Arabia. (The Gulf News)


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