Abstract
The three months to the end of December 2008 brought a number of issues
relevant to the Kuwaiti
defence industry to the fore. One is that Kuwait
has a small number of indirect security threats, but
benefits from the
external security endowed upon it by the US. In the past, its geo-strategic
location made
it vulnerable to threats, illustrated by the Iraqi invasion
in 1991 and the possibility of an Iraqi missile
strike on Kuwait prior to
the US-led coalition invasion of Iraq in 2003. Kuwait faces a limited
internal
threat from al-Qaeda-linked militants operating on Kuwaiti soil.
As with many of the region’s ruling
regimes, there is a degree of
protest from within disaffected sections of the population. The emirate
will
remain concerned with the ongoing instabilities in post-war Iraq and
the possibility of Kuwaiti jihadis
returning from Iraq.
Another key
theme is that US foreign military assistance will continue to dominate
Kuwait’s imports
trade, with the vast majority of its arms
procurements being supplied by US-based companies. Kuwait
lacks an
established indigenous defence industry of significance, and its armed forces
are almost entirely
reliant upon procurements from foreign sources for
equipment and training. The Kuwaiti economy is
currently able to support a
high level of military expenditure as high oil prices raised the oil revenue
in
recent years, leading to record excess budget surpluses. The upgrading
of Kuwaiti military hardware and
equipment is unlikely to decrease in the
near future, given the ongoing US involvement in the region and
the
current strength of the Kuwaiti economy. On this basis, high military
expenditure is therefore likely to
continue into the foreseeable future.
While the US is the major layer, Kuwait has increasingly begun to
obtain
arms from a wider source of suppliers, including European and Asian states.
The emirate does not
have an extensive arms export industry.
For the
time being, we continue to expect that the Kuwaiti government will increase
defence spending by
5% annually, in real terms, over the coming years.
Absolute increases will depend in part on how the
country’s economy
fares in the face of the global financial crisis. Thus far, the economy has
avoided
recession, but our oil price forecast for 2009 at US$75.00/bbl
implies a significant but not disastrous
downturn for the Kuwaiti
economy.
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