Saudis Boost Defence Sector In Drive For Self-reliance

On the outskirts of Riyadh, officers present guests round one of many newest investments by the sovereign wealth fund on the forefront of Crown Prince Mohammed bin Salman’s plans to modernise the financial system of the Gulf state — a defence electronics manufacturing unit.

Superior Electronics Firm, whose Riyadh manufacturing unit makes components for bombs and drones, is the “crown jewel” of Saudi Arabia’s nascent navy trade, the dominion’s officers say. AEC was purchased final yr by Saudi Arabian Army Industries (Sami), the corporate arrange 4 years in the past by the Public Funding Fund to localise defence manufacturing.

Saudi Arabia has one of many world’s greatest defence budgets. The dominion spent $57bn on defending the nation final yr, based on the Stockholm Worldwide Peace Analysis Institute. AEC is on the coronary heart of its plan to extend native manufacturing to 50 per cent of its defence spending inside a decade. In 2017 — the yr Sami was established — it accounted for simply 3 per cent.

The undertaking, in step with Prince Mohammed’s Vision 2030 plan to diversify the oil-dependent financial system, is formidable, however analysts mentioned it might be a mistake to dismiss it.

“Simply have a look at the quantity the Saudis spend on weapons . . . that sort of finances can get you an trade in order for you it,” mentioned Francis Tusa, a defence marketing consultant and editor of Defence Evaluation. “They may get a functionality. Completely.”

The plan additionally displays Saudi Arabia’s need for self-reliance — Riyadh is at battle in neighbouring Yemen, its oil amenities and different infrastructure are uncovered to drone and missile assaults from Iran-backed rebels, and weapon gross sales from the US, its greatest provider, typically face opposition in Washington. Two motions are at present making the rounds in Congress to dam a $650m sale of air to air missiles to Saudi Arabia.

“There’s a robust want to spice up navy capabilities and self-sufficiency and strengthen protection ecosystems in our area, together with Saudi Arabia’s, so I see massive defence budgets being ramped up,” mentioned Walid Abukhaled, Sami’s chief government, in an interview with the Monetary Occasions.

“One of many fundamental causes Sami has been established is sovereignty, you need that self-sufficiency. One other one is the time it takes typically to restore and preserve a product, to attend for a spare half can take two years,” Abukhaled mentioned.

To perform that, Sami desires arms producers to maneuver manufacturing and upkeep to the dominion. “All my companions know, the nice outdated days . . . [the original equipment manufacturers (OEMs)] who come signal a contract and ship all of it from overseas are gone. That’s not going to occur any extra,” Abukhaled mentioned.

“That’s forcing the large gamers to say we have to suppose in another way, we have to work with Sami, or different Saudi native companions, to win contracts. OEMs might construct their very own facility within the kingdom,” he mentioned.

Sami is already trying to assemble Lockheed Martin’s Blackhawk helicopters in Saudi Arabia with native labour, and armoured automobiles in partnership with a United Arab Emirates firm. Sami, whose divisions embody aeronautics, defence programs and missiles, is in talks with different firms as effectively. “Different firms and international locations have taken 30 to 50 years to do it, so it’s unattainable to do all of it organically, so you need to look exterior and have a look at acquisitions,” Abukhaled mentioned.

One among its priorities shall be a drone defence system, he added. A 2019 drone and missile assault that Iran was accused of masterminding quickly knocked out two Saudi oil amenities and took offline about 5 per cent of worldwide oil manufacturing.

Nonetheless, Sami, which has begun to fabricate its first surveillance drone, is a latecomer to home navy manufacturing within the area. Its neighbour, the UAE, already produces surveillance drones and armoured combating automobiles that noticed fight quickly within the Yemen and Libya wars. Israel, whose navy finances is lower than half of Saudi Arabia’s, makes among the world’s most superior armaments. Iran, its fundamental regional rival, has an more and more refined home arms trade.

Given the huge spending on arms, the Saudi market is simply too massive for the international defence trade to go up, mentioned Charles Forrester, lead analyst for Center East trade and budgets at Janes, the defence specialist.

“For them Saudi Arabia is simply too massive to disregard and there are some international locations and corporations on the market which can be realising they should catch up as a result of they’ve misplaced floor over the previous few years,” he mentioned.

For now, the ability in Riyadh has change into a showcase for reforms sweeping the dominion, which embody the “Saudization” of a workforce historically reliant on foreigners, and the entry of girls into the office.

The AEC lobby options a few of its merchandise — circuit boards for US-made F-15 jet fighters, navy radios, and on the centre of the show, an upright laser guided missile for which the corporate makes parts.

A younger Saudi girl who led the FT on a tour of the manufacturing unit identified that her compatriots made up greater than 80 per cent of the workforce. In a hallway, she paused at an outdated group image of the corporate’s staff, all males, and famous that she wanted to get it up to date, earlier than persevering with the tour.

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