‘Saudi Arabia’s doors are open to international manufacturers’
RIYADH: Faced with growing geopolitical tensions in the region and terrorist threats, Gulf Cooperation Council countries, including Saudi Arabia and the United Arab Emirates, are stepping up their defense spending.
Their budget allocation aims to diversify defense imports and encourage local arms production.
Saudi Arabia will spend SR171 billion ($46 billion) on its military in 2022, according to the Kingdom’s budget statement.
The Kingdom has already met most of its military needs and is currently strengthening its local military production capacity.
According to the US-based International Trade Administration, its neighbor the United Arab Emirates is among the top 15 defense spenders in the world and was the world’s fifth largest arms importer in 2009. -2018.
The UAE spent $19.8 billion on defense in 2020. This figure represents 5.6% of GDP and ranks second behind Saudi Arabia regionally. Between 2010 and 2019, the country spent nearly 15-16% of its annual defense budget on foreign contractors.
Consolidation was particularly evident in 2021 when the UAE Armed Forces signed 86 agreements worth $5.7 billion at the International Defense Expo and Naval Defense Expo.
“GCC countries spend over $100 billion on defense,” said Haroon Sheikh, a partner at Strategy & Middle East, a leading think tank affiliated with the PwC Network, in an interview with Arab News.
Previously, Saudi Arabia and the United Arab Emirates relied heavily on the United States, with which they held defense cooperation agreements. About 80% of the Kingdom’s defense purchases are allocated to the United States. Washington currently has about $126.6 billion in military sales with Saudi Arabia.
But that seems to be changing. Last August, Saudi Arabia and Russia signed a military cooperation agreement in Moscow. The main objective of the agreement was to develop joint military cooperation between the two countries. In February, the United Arab Emirates announced its intention to buy a dozen Chinese L-15 planes.
“Diversification of defense imports is not the only way the GCC is using to strengthen its military industry. There is also a growing push on localizing military spending,” Sheikh said while adding that domestic military spending is in the range of 5-15% and growing.
As part of the localization process, GCC countries are actively putting in place regulations, incentives and investments to build national defense capabilities. There is also a growing momentum towards empowering small and medium enterprises, making them partners in the growth of the defense industry.
“The process of building localization capabilities typically begins with maintenance, repair and operations, followed by equipment upgrades and modifications. Such activities create an ecosystem of small and medium-sized enterprises and, in turn, strengthen the manufacturing and design capabilities of the region,” Sheikh points out.
Under the Vision 2030 diversification program, Saudi Arabia aims to make 50% of its military procurement local, to which it has earmarked around $10 billion. The authorities controlling this vast transition are the General Authority for Military Industries, known as GAMI, and Saudi Arabian Military Industries, SAMI. These two actors act respectively as a regulator of the military industry and as a contractor of the country with foreign or local companies.
In the United Arab Emirates, EDGE, which comprises 25 military entities including Emirates Defense Industries Co., Emirates Advanced Investments Group, Tawazun Holding and others, is responsible for procurement and growing efforts to localize the country’s military industry.
PwC believes the GCC is making great strides in the defense industry.
Today, the GCC militaries have more digitized and automated supply chains than before thanks to improved procurement mechanisms that provide efficiency and effectiveness, Sheikh explained.
“That’s because the GCC military has invested in logistics and supply chain modernization over the years,” he added.
“GCC countries are building national defense capabilities. The region is currently home to MRO, aircraft component manufacturing, land vehicle assembly, shipbuilding, advanced electronics, and production capabilities for unmanned aerial vehicles, munitions, and missiles,” he said. pointed out Sheikh.
The region’s ambitious military projects are part of an international arms race, in which the United States remains the dominant actor. David Des Roches, a professor at the Center for Near East and South Asia Strategic Studies, National Defense University in Washington, told Arab News that the usual military development powers – the United States , the United Kingdom, Russia, Germany and Israel, are leaders because of their advanced scientific knowledge. and research culture.
However, Munira Mustaffa, a non-resident fellow at the Newlines Institute for Strategy and Policy, in Washington, DC, told Arab News that market outliers are gaining traction. “The Barracuda camouflage system developed by Saab (Sweden) is an example of applying new, old-fashioned technology to protect vehicles, equipment and personnel. UK company 4GD is recognized as the leading exponent of immersive training technology, allowing troops to rehearse close combat with sounds and realistic targets, while being monitored by an operations room and integrated with supporting fire such as snipers.