Industry Briefing: Outlook for offset strategies of Saudi Arabia and the UAE

Saudi Arabia and the United Arab Emirates (UAE) – the largest military markets within the Gulf Co-operation Council (GCC) – face comparable social and economic challenges and are pursuing parallel strategies through the employment of defence-derived offset accords with a view to reaching similar goals.

Both states face what was described by one Western defence company executive as a "demographic tsunami": the percentage of their populations made up by people under the age of 15 is high (38 per cent in Saudi Arabia and 20.9 per cent in the UAE, according to US Central Intelligence Agency [CIA] 2009 figures) and therefore the number of new entrants to the job market seeking appropriate opportunities is increasing. However, they recognise the social impact of failing to provide domestic nationals with relevant skills – and, ultimately, a purpose.

In addition, they each have a strong reliance on foreign labour. In the UAE, 73.9 per cent of 15 to 64 year olds (effectively those of working age) are non-nationals (according to CIA figures). In Saudi Arabia, meanwhile, foreign residents make up 5.6 million of a total population of 28.6 million (CIA 2009).

Both states also have a heavy reliance on oil revenues. Saudi Arabia (the world's largest oil producer) looked to oil for 90 per cent of exports, 45 per cent of GDP and 80 per cent of budget revenues in 2008. The UAE (the world's eight largest producer) looks to oil for 40 per cent of GDP.