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Drone aircraft add $2 billion to economy

The Pentagon’s increasing use of drone aircraft over hotspots like Afghanistan and Yemen is having a growing impact on San Diego’s economy, according to a report released Thursday by National University’s Institute for Policy Research.

Between 2008 and 2011, spending on unmanned aerial vehicles (UAVs) in the county jumped from $774 million to $1.3 billion per year, directly employing more than 2,000 workers. When indirect expenses are included, the total economic impact gets close to $2.3 billion per year, affecting more than 7,000 workers, the report said.

And that doesn’t count classified spending on UAVs by agencies such as the CIA, whose budget is top secret. The report said it is classified UAV spending that probably adds several hundred million more dollars to the San Diego economy.

“Over the next decade, [worldwide] spending on UAVs is projected to almost double,” Erik Bruvold, who heads the institute, told a luncheon meeting of the North County Chamber of Commerce, where he unveiled the report. “And that’s probably a conservative estimate, since it doesn’t include all the potential civilian and nonmilitary uses.”

But Bruvold warns there’s no guarantee UAV production will remain centered in San Diego County. He said a multipronged approach is needed to keep the industry local.

Currently, Northrop Grumman's (NYSE: NOC) Global Hawk program accounts for 62 percent of local UAV prime contracts in the county, and General Atomics gets 37 percent for its Predator and Sky Warrior UAVs. Slightly more than 1 percent goes to companies like L-3 Communications, BAE Systems and SAIC (NYSE: SAI).

That money filters through to a large number of subcontractors and suppliers throughout the region.

The UAVs have been controversial, partly because of the number of civilians killed in covert attacks in Pakistan, Yemen and other locales. A joint study by New York and Stanford universities last year found that nearly 900 civilians in Pakistan — including 176 children — have been killed in UAV attacks.

The aircraft have also been used to kill suspected terrorists.

Joe Ahn, Northrop’s regional manager of public affairs, told the chamber that UAVs have increasingly been used for peacetime purposes as well, such as conducting environmental studies for NASA and search-and-rescue efforts after natural disasters, including the 2008 hurricanes in Louisiana and Texas, the 2010 earthquake in Haiti and 2011 tsunami in Japan.

Bruvold warned that other locales, including Oklahoma, Florida and North Dakota, have been jockeying to get the drone business to shift to their states. To keep UAVs in San Diego, he recommended:

* more cooperation between production centers near the coast and inland areas where the UAVs could be tested;

* more focus on UAV-related subjects at local universities; and,

* tax waivers or other measures to keep costs competitive.

“We need to be very concerned about driving the costs down,” he said.

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