The Business Year

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Saudi Arabia has long been dependent on other countries for its security needs, but is now spurring long-term foreign agreements with a clear focus on knowledge transfers to build a robust domestic defense industry.

R. Maj. General Ali M. Alghamdi

CEO, TAQNIA Aeronautics Co.

Our vision is for Saudi Arabia to become a manufacturer of military and commercial aircraft. Our goals are to have two manufacturers of passenger aircraft by 2035 and to build a local supply chain. During the Dubai Air Show in 2017, nine Saudi companies signed the MoU we initiated, committing to four major programs. The first concentrates on the establishment of aircraft structure manufacturing. The equipment we purchased can manufacture composite structures for drones, fuselage, and the Boeing Dreamliner 787. All aircraft manufacturers are switching to composite because it is light, fuel efficient, and has minimal wear and corrosion. Our second project was for light transport. The consortium started with the Ministry of Defense, Ministry of National Guard, Ministry of Interior, and Aramco. We chose Antonov over Boeing, Airbus, and Lockheed Martin because knowledge transfers are limited with large corporations. The program to develop the Antonov 132 started in May 2015 with around 50 engineers from Saudi Arabia working with Antonov engineers; the rollout of the aircraft was in December 2016 and the first test flights in March 2017. The third program is regarding Black Hawk helicopters with Lockheed Martin; Saudi Arabia wants to acquire a license from the US to produce and export it to other countries. The fourth program is with Chinese companies to manufacture UAV. This will allow us to acquire knowledge from three different schools, enabling us to increase the share of local defensive manufacturing from 2% to 50%.

Abdulaziz H. Al Alaiwi

President & CEO, Horizon Shield

Our collaboration with StandardAero and GDC was the result of the need to meet the scope of Vision 2030, as well as the government’s need to localize maintenance, repair, and overhauls (MRO). In March 2018, a major military manufacturing exhibition took place where the Ministry of Defense explained its requirements for spare parts in order to present opportunities for local companies. Most of the agreements and contracts with foreign companies call for some percentage of manufacturing facilities to be local or include a clause that Saudis will be trained to take over in a few years. The requirements for foreign companies have been made easier, and the government is doing its best to encourage investment. We have completed several projects with Royal Saudi Land Forces, starting with the development of a portable communication tower for the academy. Then, we began getting projects for the land force aviation fleet, including the Black Hawk, Bell Helicopter, and Schweizer. We recently signed an agreement with a big company that is specialized in UAV vehicles. There are strategic and specialized uses for UAVs, including geology and civil defense. There is also mapping and systems for fighting foreign UAVs; there are plenty of UAV manufacturers, but we prefer to be selective. Equally important is to develop local talent and academic institutes are offering programs for aviation manufacturing and maintenance, as well electronics related to aviation. The government is doing its best to attract young people into the field of aviation.

Khaled I. Al-Mazrou

Managing Director, Khaled I. Al-Mazrou

Our focus is on military equipment and supplies, mobile field camps, kitchens and laundries, and field equipment. We import specialized equipment for the military; unlike the civilian industry, a business needs confirmed long-term contracts to meet its commitments in the defense and security industries. Corruption is one of the issues in this particular type of import business; for example, we do not import products from certain countries due to the lack of quality. In addition to supply, we also do maintenance work and provide spare parts. In order to achieve the localization goals defined by Vision 2030, we have to make sure we have the required raw materials; we need to source the raw materials from Saudi Arabia, and this includes labor and training. We also need to find excellent foreign partners that are ready and willing to invest here. Some of our suppliers are interested in investing in Saudi Arabia but only after the local market matures. There is potential for Rawadef Trading to be advisors and marketeers for manufacturers that decide to invest here. For us, it is extremely important that we provide excellent after-sales service to maintain our solid reputation. There were 45 companies in the sector around five years ago compared to only around 12 now. Nonetheless, the future is bright because the Crown Prince supports the elimination of corruption. Any change like Vision 2030 needs time, and if we do not clean up the country, no one will want to come here and invest.

Nasser Al-Ajmi

CEO, Ezah Company for Technologies

While working for Advanced Electronics Company (AEC), I was a member of the team that executed the knowledge transfer of technologies while managing contracts. When Saudi Arabia purchased 73 F-15 aircraft and formed an agreement with AEC to manufacture some avionics in Saudi Arabia, I decided to set up Ezah; the market was worth more than SAR30 billion and needed more than 30 companies like AEC. Later, we collaborated with the Ministry of Defense, Ministry of Interior, the Saudi Arabian Royal Guard Regiment, and the Saudi Arabian National Guard, while also serving more than 300 companies such as Saudi Aramco and SEC. One of our specialties is to reverse engineer devices and fix them after they have been deemed obsolete by the manufacturer, with no spare parts on the market. We can currently produce 100-150 units per day, but our new facility will produce thousands of printed circuit cuts per day. In terms of government initiatives, Saudi Aramco’s In-Kingdom Total Value Added has benefitted us immensely. We recently added the OSHAS 18001 series and the ISO 14001 environmental management standards, but companies who want to work in manufacturing or technical support require European Cockpit Association approval and Federal Aviation Administration certification. We also formed a partnership with Denmark’s Scandinavian Avionics, which has certificates for more than 3,000 aircraft parts to support different avionics for several types of aircraft and ground systems. Through such steps, we are helping to achieve some of the targets of Vision 2030.

Fahad A. Al Ameel

General Manager, ERAF Industrial Company

ERAF started in 2005 as a subsidiary of a holding that was primarily involved in defense supply and training. After many years of experience, we started manufacturing as two separate companies: ERAF Maritime for the navy and other maritime organizations, and ERAF Industrial for land vehicles. New developments in the industrial space take time, and it took us between 1.5 and two years to win contracts and expand into armored and military vehicles. Our range of operations cover land, naval, and weaponry systems such as building mine protected vehicles, mobile mortar vehicles, aluminum fast interceptor boats, and supplying and installing remote weapon stations. In order to build local capacity, we partnered with a Spanish company to build mobilized warfare systems. We have diversified our capabilities to be more in line with Vision 2030 by adding local manufacturing capabilities. Furthermore, we partnered with a South African company to produce naval and land-based system in the Kingdom. At 40,000sqm, our factory is the largest private-sector military industrial facility in the country, and we have additional capacity of 8,000sqm for future expansion. Saudi Arabia is not known as a manufacturer of defense technologies because of past regulations and restrictions, but we hope new rules will change that. Private firms can provide 50% of the required defense manufacturing and reaching this target is a matter of building the proper manufacturing capabilities. These areas need their own domestic supply chains if they are going to reach their full potential; integration is key.



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