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Mideast Budgets Draw Defense Companies

With the U.S. and other western countries reducing the size of their budget outlays, defense companies are turning greater attention to an expanding market; the Middle East.  As tension in the region increases and oil prices remain high, many Middle East countries are increasing their defense spending.  The Wall Street Journal reports, nearly 11% of global arms orders will come from the Middle East by 2014.

While it may be troubling to see massive amounts of cutting-edge military technology being sold to the Middle East, this increased defense spending could have an overall positive gain for the region.  Most countries require a foreign company to “offset” a percentage of the value of their contract by reinvesting that amount into the economy.  For example, Dubai requires a 50% offset. If a foreign company contracted with Dubai for a value of $100, that foreign company would have to invest another $50 into the Dubai economy.  In the case of defense companies, this could be in the form of a maintenance contract with a local company.  These offsets could develop a non-oil reliant economy in the region.

Read more at Wall Street Journal


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