Saudi Arabia on schedule with military budget aims

Saudi Arabia said it is “on track” to hit a target of localising half of the kingdom’s military expenditure over the next decade, a major goal under plans to diversify the economy away from oil exports.

Changes to the national military procurement process has already resulted in savings of about 900 million Saudi riyals (Dh881m), the General Authority for Military Industries said yesterday.

“We have already started reaping the benefits of purchase power consolidation and the developments made in national military procurement processes,” said Ahmad Al Ohali, governor of Gami. “As a result, we achieved significant added value at financial, commercial, legal and operational levels, including savings of around 900m riyals”.

Saudi Arabia is developing its manufacturing industry to create jobs and diversify its economy away from oil exports, which account for the majority of its revenues. The country’s sovereign wealth fund, the Public Investment Fund, created Saudi Arabian Military Industries in 2017, as part of the Vision 2030 plan for economic overhaul. Sami is mandated to localise more than half of the kingdom’s total military spending by 2030, up from about 2 per cent currently. Sami has already signed several joint ventures and partnership agreements to bring international expertise and knowledge to the kingdom’s defence manufacturing sector.

Industry regulator Gami has identified opportunities for localisation worth 4 billion riyals in supplier contracts since it was created in 2017, which which will be realised over the next few years, Mr Al Ohali said.

The kingdom is among the top five defence spenders in the world and its move towards local production and procurement signals a shift in the way it is doing business with international defence companies.

Technology transfers and commitments to produce and buy equipment locally have become key factors in determining which companies win global arms sales orders.

There is increasing demand for agreements beyond simple “off-set” arrangements, projects that make weapons deals more attractive, to more complex knowledge transfers and a slice of the work on weapons programmes to seal deals.