BAE Systems eyes Middle East for business growth

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A BAE Hawk Advanced Jet Trainer sits on a runway. BAE announced a $2.5 billion training deal, which includes Hawk jets, with Saudi Arabia. Photo – BAE

BAE Systems is eyeing the Middle East for business growth after a merger with EADS was torpedoed by the German government, media reports suggested on Tuesday in the wake of British Prime Minister David Cameron’s trip to the Gulf.

Many analysts said investors are hoping they will receive proceeds from the BAE when it renegotiates a contract for 72 Typhoon aircraft and $600 million deal with Saudi Arabia.

The British company also hopes to seal a deal for 12 Typhoon jets with Oman as well as extending negotiations with the United Arab Emirates and Qatar.

BAE Systems signed the al-Yamamah arms deal with the Saudi government which generated $64bn of revenue in 2006 and helped the company get its foot in the Middle East market.

“British contractors cannot rely on countries in the Middle East due to the emerging preference for broader supplier ties,” Guy Anderson, chief analyst at IHS Jane’s, wrote in a commentary.

He added that the BAE’s position in the Middle East and Africa is pretty vulnerable since 15% of their revenues come from the volatile region.

Post-Arab Spring scenario has forced many countries in the MENA region to cut back on defence and spend more on funding social welfare and employment generation programmes, a trend that might hurt the interests of defence firms, the analyst disclosed.

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