Saudi Arabia

According to the December 2018 report by Stockholm International Peace and Research Institute (SIPRI), Saudi Arabia is the world’s third-largest military spender behind the USA and China, the largest spender on arms in the Middle East, and the largest military spender per capita. According to the General Authority of Statistics-GaStat the Military spending of the Saudi Arabian State Budget in 2019 was SAR 198 Billion (US$52.8 Billion) representing 18.89% of the State Budget, reduced by -12.22% compared to 2018. The Security spending in 2019 was SAR 104 Billion (US$27.73 Billion) reduced by 3% compared to 2018.

Traditionally, Saudi Arabia sided with the Western countries and became one of the most important importer of western weapon systems. The biggest arms suppliers of Saudi Arabia from 1998-2017 are: USA (61%), Britain (23%), France (3.6%), Spain (2.4%), Switzerland and Germany (each 1.8%), Italy (1.5%), Canada (1.4%) and Turkey (1.3%), Sweden (1.1%), and the Netherlands (0.5%).

Defence Industry 

The development of the local defence industry was part of the targets of the “Vision 2030” program that the Crown Prince of Saudi Arabia Mohammed Bin Salman initiated in 2016. According to the existing facts, the Saudi defence industry at that time was able to cover only 2% of the needs of the Saudi Armed Forces. According to the “Vision 2030” the desire of the Saudi Government is to raise the local defence manufacturing to 10% initially and later to 30-50% by 2030.

The first changes at the Saudi governance system for the defence industrialization began in 2010 with the creation of the Central Committee for Local Industrialization (CCLI) and the acceptance of the local defence industries to bid on supply contracts for basic materials. The Committee acted as a forum for industry and government leaders to collaborate on local capability and enhancing performance.

In 2011, Prince Khalid bin Sultan bin Abdulaziz announced the creation of a new department under the Saudi Armed Forces Command to oversee local industrialization and the transfer of military technology. In 2013, the Saudi Arabian Ministry of Defence passed a new law regulating the General Organisation for Military Industries (GOMI), formerly known as Military Industries Corporation (MIC), an independent body reporting to the minister of defence. The organization was designed to give priority to domestic producers over foreign firms.

According to the Saudi Cabinet, “The main purpose of MIC shall be to support the national security by creating a sophisticated military industry to meet the needs of all military sectors. The governmental military and security bodies shall give priority to MIC when they intend to purchase their needs of arms, ammunition, equipment, machinery and vehicles as well as services that fall within the organization’s activities.”

In August 2017, the Saudi Government established Saudi Arabia Military Industries (SAMI), a state-owned defence company and General Authority for Military Industries (GAMI), a financial and administratively independent entity, that is chaired by Crown Prince Mohammed Bin Salman.

The core of the responsibilities of GAMI is the development of the defence industries sector in order to localize 50% of the country’s military procurement expenditure from 2% in 2017 over the next decade and the monitoring of its performance in meeting various national development goals. To achieve these targets, GAMI has identified four strategic focus: pillars, industry regulation, acquisition, and technology.

GAMI is the regulator, enabler and licensor of the defence industry of Saudi Arabia and its task is to build a sustainable domestic defence sector that delivers significant social and economic benefits enable the local defence industry sector to become a key component of the economy of the Kingdom.

GAMI was established in order to achieve five key national priorities:

  • Reinforcing strategic autonomy,
  • Increase military readiness
  • Enhance interoperability within and across entities
  • Develop a sustainable local military industries sector
  • Increase transparency and efficiency of spend

GAMI is responsible to:

  • Facilitate exports of local defence products and services to regional and international markets by collaborating with foreign governments and companies
  • Collaborates with international counterparts to ease the transfer of technologies and promote domestic manufacturing activities
  • Aligns with respective Ministries and government entities across funding, education, and industry development to enhance domestic industry infrastructure and capabilities
  • Coordinates with relevant educational institutions and training centers to align curricula with sector requirements
  • Manages and directs defense related studies conducted by research institutes, centers, and companies, to ensure alignment with military industries strategy
  • Directs investments, offers incentives, supports technology transfer, and promotes infrastructure development in the sector by issuing licenses and promoting ease of doing business
  • Facilitates joint ventures through KSA’s fiscal balance program and applies its Industrial Participation Policy to negotiate the transfer of value, technologies, and human development opportunities
  • Works closely with local military and security entities, consolidating demand and enhancing procurement processes to achieve spending efficiency and ensure that localization always takes precedence
  • Oversees the development of a world-class regulatory framework that promotes transparency and encourages investments in KSA’s promising military industry

According to GAMI, the Kingdom will increase the support for scientific research and development of new weapon systems, from 0.2% to 4% of the annual Defence Budget during the following 10 years, building a sector of the economy worth more than US$8 Billion in 2030.

The development of the local defence industry will be achieved through direct investments and strategic partnerships with leading companies of the sector which will transfer technology and know-how, provide licensed production assistance, and joint training programs, in order to build national expertise in manufacturing, maintenance, repair and R&D. The first thing that GAMI did was to launch an online portal through which investors were able to apply for three type of operating licenses in the Saudi defence and security industry, a) military equipment, b) military services and c) the supply of military equipment and services.

In 2019, GAMI launched an Industrial Participation Program (IPP) which gives precedence to localization objectives in the issuing of military contracts, in order to help to develop local production capacity and supply chains. The aim of the IPP is to make foreign suppliers seeking to win contracts with the Saudi Arabia Armed Forces, to demonstrate how they will support the industrial localization and the transfer of technology.

Saudi Arabia Military Industries (SAMI) was launched in 2017 by the Public Investment Fund (PIF) of the country and it includes four business units: a) land systems, b) air systems, c) weapon and missiles systems and d) defence electronics. Furthermore, the company offers repair services for aircraft and armored vehicles. When the company was established, SAMI incorporated the existing defence industry MIC (Military Industries Corporation) established in 1950 and inherited two weapon and ammunition factories that MIC operated since 1953 and 2016 (a US$240 Million partnership with Rheinmetall Denel Munition, a joint venture between Rheinmetall and Denel) and one facility in Saudi Arabia that produces since 2016 Software Defined Radios with the technical assistance of ASELSAN.

The company aims to create 40,000 jobs and contribute US$3.7 Billion to the Saudi economy by 2030 and spend US$1.6 Billion in research and development.

In May 2017, SAMI signed MoU with Boeing, Lockheed Martin, Raytheon, General Dynamics and Rosobononexport. In 2018, SAMI established new joint ventures with Thales, Navantia, Boeing and CMI Defence. The scope of the joint venture with Thales included short range air defence and counter rockets radars, Command Communication (C2) Systems, missiles, fuses for guided bombs, and inter-communication radios. The joint venture will eventually create direct and indirect 2,000 new jobs and expects to achieve localization ratio of 70%.

The joint venture with CMI Defence includes the delivering of multifunction high-power turret systems for armored vehicles. joint venture will eventually create direct and indirect 700 new jobs and expects to achieve localization ratio of 60%.  The joint venture with Boeing aimed to the establishment of MRO capabilities for both fixed-wing and rotary military Boeing aircraft. The third joint venture signed in 2018, focused on the development of naval high-tech subsystems. The joint venture was signed with NAVANTIA Naval Industries following the order of 5 Avante 2000 corvettes from the Royal Saudi Navy.

In 2019, SAMI signed its first agreement under the IPP scheme with Raytheon to localize the maintenance and refurbishment of the Patriot missile system. Finally in February 2019 SAMI created a joint venture with the French company Naval Group. SAMI also bought the Saudi defence electronic industry AEC (Advanced Electronics Company) established in 1988 under the Saudi Economic Offset Program.

Besides SAMI another company, Saudi Technology Development and Investment Company (TAQNIA) has been a key player in securing defence sector knowledge transfers to the defence industry of Saudi Arabia. The holding company was funded by the Public Investment Fund (PIF) in 2011 and five years later Taqnia Defense and Security Technologies formed with the Turkish military electronics company ASELSAN a joint venture, the Saudi Arabian Defence Electronics Company (SADEC). SADEC will fulfill the demands of Saudi Arabia and the region with the local design, development, production and sales of radar, electronic warfare and electro-optical systems.

Another example of the industrial partnership between Saudi Arabian and foreign defence industries, is the cooperation between the Saudi company “Information Technology & Engineering Applications Co (ITEAC) Group” and the South African defence industry “Denel Dynamics”. The two companies signed in 2016 a Memorandum of Understanding (MoU) to jointly market Denel’s ZT3 Ingwe laser-guided anti-tank missile to the Saudi Armed Forces.

Besides the companies mentioned above there are several other Saudi defence industries such as:

  • Thales Group International Company
  • Saudi Aerospace Company
  • Saudi Rotorcraft Support Company
  • AVC-Defense
  • Advanced Arabian Simulation Company AASC and ICT BU
  • International Systems Engineering (ISE)
  • Middle East Propulsion Company (MEPC)
  • Al Salam Aircraft Company
  • Abdallah Al Faris Company for Heavy Industries
  • AASC
  • Aircraft Accessories & Components Company Ltd
  • Armored Vehicles & Heavy Equipment Factory
  • Saudia Aerospace Engineering Industries (SAEI)
  • RAKAA Defense & Security Company

Besides GAMI and SAMI, Saudi Arabia established two Research Centers, the King Abdulaziz City of Science and Technology (KACST) which runs the National Center for Sensors and Electronic Defence Systems Technology as well as, the Center of Excellence for Space and Aeronautics National Center for Aviation Technology and the Prince Sultan Advanced Technology Research Institute (PSATRI).

The Institute does research for the development of autonomous vehicles, communications, electro-optics, microwave and antenna systems and electronic warfare systems. Both institutions contribute with their expertise to the development of the Saudi defence industry bringing the Saudi scientist closer to the local industry.