Qatar is preparing to follow in the footsteps of Saudi Arabia and the UAE by giving its air force up to 36 new fighter jets. Lockheed Martin/US Air Force via Bloomberg News
Qatar is preparing to follow in the footsteps of Saudi Arabia and the UAE by giving its air force up to 36 new fighter jets. Lockheed Martin/US Air Force via Bloomberg News

Qatar targets multibillion-dollar fighter jet deal



Qatar is preparing for a major purchase of fighter jets, with the contract likely to be won by US or French firms, say analysts.

The expected  deal would follow announcements in Saudi Arabia and the UAE on significant planned fighter jet acquisitions as Gulf nations continue to build up their homeland defences.

Late last year, Qatar Emiri Air Force (QEAF) officials told a conference in London that a formal evaluation of fighter jet capabilities was under way, and that a winner was expected to be announced before the end of 2012.

Brigadier Gen Mubarak bin Mohammed al Khayarin told people attending the Shephard Air Power Middle East event in November that while the number of jets to be acquired was still under discussion, it was likely Qatar would order between 24 and 36 units.

The new planes would replace the QEAF's existing fleet of French-made Dassault Mirage 2000-5s.

Fighter jets made by companies in France, the UK, Italy and the US are being evaluated, Brig Gen al Khayarin said, including the Lockheed Martin F-35 Joint Strike Fighter, the Boeing F/A-18E/F Super Hornet and Boeing F-15, the Eurofighter Typhoon and the Dassault Rafale.

The Swedish company Saab is also entering the competition, according to the trade magazine Aviation Week.

Dan Darling, a Middle East defence analyst with Forecast International in the US, said the acquisition was not being geared to refashion Qatar's regional profile.

"This purchase is merely a replacement and modernisation of the current fighter fleet," Mr Darling said. "It already has US military bases on its soil to act as its deterrent."

France's Dassault would be considered a front-runner to supply its new Rafale jets to Qatar, Mr Darling said, because the company supplied its Mirage jets to the Qatari Air Force in the 1990s. But he added that France had had a difficult time securing an export order for the Rafale.

"With US platforms the preferred choice among the GCC states, Qatar may wish to follow suit for interoperability purposes," Mr Darling said. Although Qatar's defence spending is small compared with that of Saudi Arabia and the UAE, the purchases it did make between 2005 and 2009 were overwhelmingly awarded to US companies, according to the Stockholm International Peace Research Institute.

As a sign of Qatar's growing role as a buyer of military and civilian aircraft, Boeing opened its first office in the country last month.

Mr Darling said Qatar could also be interested in one of the newest and "stealthiest" fighter jets, the F-35 Joint Strike Fighter from Lockheed Martin. However, such a sale would be more complex politically, with approvals needed from the US Congress first, he said.

Defence companies, faced with slowing economic growth in the US and Europe, are increasingly focusing on the Middle East to boost sales.

The US government recently alerted Congress to the possible sale worth up to US$60 billion (Dh220.38bn) of aircraft, naval ships and associated long-term service contracts by US defence contractors to Saudi Arabia. That deal includes orders for 84 new Boeing F-15 fighter aircraft and upgrades of 70 of the kingdom's existing F-15s.

In the UAE, Dassault has been in protracted negotiations to supply the Armed Forces with Rafale jets which, if successful, would mark the first export sales of the Rafale. Prospects appear to have improved after recent statements from the French government.

Alain Juppe, the French defence minister, was reported as saying during a presidential New Year's address at a French air force base: "We're advancing with [UAE] because negotiations have resumed. We'll see, it's on the right track."

The comments came after a meeting in Paris last month between Nicolas Sarkozy, the French president, and Sheikh Mohammed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces.

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”