This is a best prospect industry sector for this country. Includes a market overview and trade data.
Saudi Arabia’s defense and security expenditures reached $63.2 billion in 2019 and are expected to reach $83 billion in 2020. Defense and homeland security spending (Defense, Interior, National Guard and Royal Guard) accounts for approximately 35% of the national budget.
U.S. defense companies have a significant role in the Kingdom’s defense sector. U.S. firms with a presence in the Kingdom – such as Raytheon, Lockheed Martin, and Boeing — consistently rank among the top defense companies. Other top defense companies including Northrop Grumman, and General Dynamics, and are also active in this market.
Saudi Arabia is expected to maintain its defense spending over the coming years, driven by both internal and external security threats, and aided by the global demand for Saudi oil. Internal threats include terrorism and social tensions brought on by high unemployment rates and rapid social changes in the country. Externally, apart from Iran and its nuclear ambitions, the largest threat is the border clash with northern Yemen’s Houthi rebels as they battle with Yemeni government forces.
Vision 2030 encompasses two key goals that are central to the defense sector. First, to establish a holding company for the military industry that is 100 percent owned by the Saudi government. The Saudi Arabian Military Industries (SAMI) was created in 2017 for the fulfillment of this goal and will be instrumental in advancing the Kingdom’s defense industry capabilities and leading to new defense investments. The company will head consolidation of local companies and assets. The business units of the company will align with Saudi Arabia’s current capabilities and the country’s future requirements.
The Government established the General Authority of Military Industries (GAMI) in late 2017, that will oversee regulation of the military industry and will support the Kingdom in achieving its sector-related objectives of Vision 2030. GAMI proposes new policies, strategies, and regulations that are relevant to the military industry and complementary sectors. GAMI also manages the military procurement operations of arms, ammunition, equipment, supplies, maintenance, and the operation contracts for arming the security and military. It should be noted that the Saudi Technology Development and Investment Company (TAQNIA) has been key to securing defense-sector knowledge transfers in Saudi Arabia. The holding company TAQNIA was formed in 2011 under a royal decree and is funded by the Public Investment Fund (PIF). In 2016, TAQNIA Defense and Security Technologies and the Turkish military electronics company ASELSAN entered into a joint venture, forming the Saudi Arabian Defense Electronics Company (SADEC). SADEC will construct a factory in the Kingdom to manufacture electronic military equipment, radar systems, and electro-optical equipment. Ultimately, this venture is supposed to fulfill Saudi Arabia’s promise to create high-skilled jobs by creating opportunities for Saudi engineers to gain training in Turkish electronics factories. SADEC is an example of Saudi Arabia’s goal of becoming self-sufficient in production of military equipment.
Saudi Arabia also aims to develop a defense-related manufacturing base of production by 2030. Development of this supply chain will require a large sum of capital for research and development, the training of Saudis in high-skill jobs to develop and engineer equipment and technology, and a framework to assist small businesses to enter the supply chain.
Currently, the Government is negotiating with foreign firms to develop this local defense sector through joint ventures. Potential agreements would provide the Kingdom with technology transfer, licensed production assistance, and joint training programs. U.S. firms may increase their likelihood of procuring government contracts by first establishing a strong presence in the Kingdom. Currently SAMI is handling contract negotiations for both defense purchases and joint ventures.
Opportunities have emerged in the market for personal and perimeter security products. A need for expertise in cybersecurity also increases with the growing sophistication of threats. Forecasts indicate that the market for cybersecurity will be a growing segment and reach a market value of $5.1 billion by 2022.
Other areas of potential growth are: additional contracts through technology transfer, growth and sustainment of local spare parts manufacturing, defense and security training programs, intelligence, surveillance, reconnaissance (ISR), and unmanned aerial vehicles (UAV).
In terms of growth, opportunities for U.S. companies exist in military aircrafts and parts, ground combat technologies, intelligence, surveillance and reconnaissance (ISR), and the naval platforms segment.
The Kingdom of Saudi Arabia seeks defense technologies and material to include ballistic missile defense, maritime security, Royal Guard modernization, armor, C4ISR, and other requirements to satisfy their defense needs, given the current regional condition in the Gulf.
The Armed Forces Exhibition for Diversity of Requirements and Capabilities (AFED) (www.afed.com.sa)
Intersec Saudi Arabia (www.intersec.com),
IDEX Abu Dhabi (www.idexuae.ae),
Dubai Air Show (www.dubaiairshow.aero),
Sofex Jordan (www.sofexjordan.com)
DSEI in London (www.dsei.co.uk) .
The Saudi Arabian National Guard (www.sang.gov.sa)
The Royal Saudi Air Force (www.rsaf.gov.sa)
The Saudi Ministry of Interior (www.moi.gov.sa)
Saudi Arabian Military Industries (www.sami.com.sa)
Alsalam Aircraft Company (www.alsalam.aero)
Taqnia Company (www.taqnia.com)