International Partnerships for Local Production

Military industry localization

Counterintuitively, Saudi Arabia aims to localize half of its military spending through international partnerships.

Vision 2030 announces the plans for the government to localize 50% of the country’s total military spending, an ambitious target considering the current level of Saudi Arabian procurement in the sector is only about 2%. However, this has been further evidenced by the new approach that Saudi Arabian Military Industries (SAMI) is conveying to international players. The new message emphasizes that investment in defense will have the final goal of becoming self-sufficient by transferring know-how and operating and manufacturing partially inside the Kingdom. To help achieve this task, the government established the General Authority for Military Industries (GAMI), which will oversee the development of the military’s procurement architecture. But even though the latest national budget allocated more than USD55 billion to defense spending, to comply with Vision 2030, Saudi Arabia will need partners.

Challenges, such as the lack of human resources and technical abilities and a weak cooperation between factories in the country, still need to be overcome to strengthen the sector. But the government remains hopeful that partnering with international companies could bring a solution to these issues. To this end, the government went on a roadshow around Europe and the US in 1H2018. Alongside the roadshow, March 2018 also witnessed the celebration of the Armed Forces Exhibition to Support Local Manufacturing (AFED 2018) where participants from around the globe were informed about investment opportunities and how to go about collaborating on various fronts. In it, the country’s Minister of Defense, Major General Attiyah Al-Maliki, commented that the savings that would be achieved by localizing half of the military spending would be SAR33 billion, and subsequently reinjected into the Saudi Arabian economy.

Much progress has been obtained with examples such as SAMI signing an agreement with Spanish company Navantia SA to create a joint venture and localize naval combat systems activity. In addition, SAMI coined a deal with the American aviation giant, Boeing, for a new joint-venture that will oversee localizing more than half of MRO services for fixed and rotary-wing military aircrafts.