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Saudi Arabia 2020 | INDUSTRY & DEFENSE | FOCUS: LOCALIZATION

Through long-term investments and international partnerships, Saudi Arabia is making fast progress in its goal to localize its aerospace and defense industries.

In line with Saudi Arabian Crown Prince Mohammed bin Salman's Vision 2030, a long-term plan to diversify the nation's industrial capacities away from petroleum projects to create a robust self-sufficient economy, the steady development of Saudi aerospace and defense manufacturing is gaining international acclaim.

Since its establishment in 2017, the state-owned Saudi Arabian Military Industries (SAMI) has been inking deals with international manufacturers with the aim of developing locally produced airplanes, military equipment, and weapons that will support highly-skilled engineering and industrial jobs and secure future economic growth.
Taking its cue from countries like Turkey and South Korea, which have developed their domestic industrial capacities through joint ventures, Saudi Arabia has allocated a yearly defense budget of about USD70 billion—the third largest in the world—to create new economic opportunities for its citizens. SAMI also aims to become one of the world's 25 largest defense companies by 2030.

Such ambitions will be achieved by serving local clients, including the National Guard, the Royal Guard, and the Ministry of Interior, with the goal of exporting locally produced and tested vehicles and light arms in the near future. The target is to localize 50% of the aerospace and defense industry, which would include new procurements as well as maintenance and reparation tasks.

Major General Attiyah al-Maliki, who serves as the director of the local manufacturing support department at SAMI, said a localization rate of 50% would ensure sustainable job growth, bolster long-term economic development, and produce significant savings for the central government. “The savings expected to be achieved by localizing 50% of the military spending, amounting to SAR33 billion [USD8.8 billion], is being re-injected into the Saudi economy," Al-Maliki told Al Arabiya news.
He said his company's goal was to establish partnerships between foreign companies and Saudi factories and enable the transfer of technology and technical know-how, as well as reduce delivery times in the supply chain. In seeking out new partnerships, Saudi Arabia has been hosting various trade shows, inviting international manufacturing companies and signing dozens of agreements and memoranda of understanding in recent years.

SAMI signed several notable deals in 2019, including two new joint ventures with France's Thales Group and Belgium's CMI Defense Group. Thales will help Saudi engineers develop an array of short-range air defense radars, multi-mission missiles, and inter-communication radios. The project involves the construction of local facilities and equipment plants, with an expected localization ratio of 70%, creating about 2,000 direct and indirect jobs in Saudi Arabia.

CMI Defense will cooperate with the Saudi company to deliver multi-functional turret systems for armored vehicles and all related services, including in-country research, prototyping, material management, manufacturing, assembly production, testing and integration. The partnership is expected to reach a localization rate of 60% and produce 700 high-wage jobs.
SAMI has also established R&D agreements with other major companies, including Lockheed Martin, Paramount, Hensoldt, L3 Technologies, BAE Systems, the UK Defence Solution Centre, Airbus, MBDA, and Leonardo.

One of the more prominent joint ventures comes from a collaboration between SAMI and Boeing, the US aerospace company that has been supporting Saudi Arabian aviation needs since 1945, when US President Franklin Roosevelt presented a twin-engine Dakota DC-3 airplane to King Abdulaziz Al Saud.

Through an agreement signed in 2018, Boeing will help localize more than 55% of the maintenance and repair of its fighter jets and helicopters that are deployed in the Kingdom. The deal also includes the transfer of technology to integrate weapons into aircraft and the establishment of a supply chain for spare parts produced within Saudi Arabia.