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Nothing should prevent Saudi Arabia from making its own fighter jets
DOMESTIC PRODUCTION: Perhaps the most important trend in Saudi military thinking is a new appreciation of the need to develop a local defence industry, characterised by a decade-long move to invest in defence-related companies and personnel. At present, domestic production tends to focus on small arms and military vehicles, or refurbishing existing weapons.
Historically speaking, the defence industry has not been an attractive area for investment for the private sector in Saudi Arabia because of the high costs and technical know-how required, Peter Wilson, the managing director and chief executive of BAE Systems Saudi Arabia, told OBG. However in recent years, more and more private companies are becoming involved in this industry, resulting in high technology and high-quality investments within the Kingdom. For more advanced weapons and weapons systems the Kingdom is still reliant on imports from its strategic partners.
The Ministry of Defence and Aviation would like to see this change. In February 2010 the ministry announced that it would allow local firms to supply basic materials to the armed forces. To further encourage local manufacturing, the defence ministry created the Central Committee for Local Industrialisation, comprising business leaders and defence officials. Describing the committee during a speech at the Riyadh Chamber of Commerce in February 2010, Colonel Attiyah Al Maliki expressed the hope that it would encourage foreign suppliers to partner with Saudi counterparts. This would help develop local capabilities, ensure speedy deliveries and reduce costs, Al Maliki said. Plans are to start modestly with items such as plastic, piping and covers for jet engines, before gradually opening up to more sophisticated industries. Looking ahead, Al Maliki is even more ambitious. Nothing should prevent Saudi Arabia from making its own fighter jets, he said.
Saudi Arabia took its first concrete step in that direction in 2007 when it signed the Salam deal with BAE Systems for 72 Eurofighter Typhoon jets. However, the transaction is important for reasons other than sheer size. The governments agreement with the UK government ensures that BAE Systems will support the Typhoons from within the Kingdom of Saudi Arabia, including the manufacturing of some of the planes spare parts. The deal also allows Saudi crews and ground technicians to train in the UK.
GIVING BACK: As is customary, the Salam deal includes a provision regarding the Economic Offset Programme (EOP). The purpose of the programme is to ensure that some of the funds devoted to meeting the Kingdoms defensive needs are reinvested in the economy through joint ventures that facilitate the transfer of technology, expertise and skills. In recent years the programme has expanded well beyond the defence sector, but Riyadh thinks it can help plant the seeds for a domestic defence industry. Saudi Arabia will continue looking abroad for its most advanced weaponry, but it would like to meet more of its security needs locally.
An important step in this direction involves opening military supply contracts to domestic companies, which is part of the Salam deal. However, Salam goes even further in forging a partnership between BAE Systems and local industry. As part of the agreement, a facility will be dedicated to the maintenance and upgrade of all the aircraft, with the work undertaken by local companies. The complex was developed at King Abdulaziz Air Base near the Eastern Province city of Dahran, and includes hangars, workshops, fuel storage facilities and other infrastructure. The centre will be an important location for an high degree of technology and know-how transfer to the Kingdom.
This effort dovetails with Riyadhs ongoing economic reforms, including the liberalisation of foreign investment requirements that has helped firms such as BAE Systems invest more confidently in the EOP and plan for manufacturing operations as opposed to mere assembly in the Kingdom. Press reports suggest that the Salam project could create 15,000 local jobs. The project is part of an ongoing cooperative effort between the Saudi government and BAE Systems. Investments in the defence sector create high-skilled employment opportunities, encourage knowledge transfer and help widen the industrial base of the country, said Wilson.
At the ready: Increasing capabilities in the defence industry | Economy | Saudi Arabia | Oxford Business Group
DOMESTIC PRODUCTION: Perhaps the most important trend in Saudi military thinking is a new appreciation of the need to develop a local defence industry, characterised by a decade-long move to invest in defence-related companies and personnel. At present, domestic production tends to focus on small arms and military vehicles, or refurbishing existing weapons.
Historically speaking, the defence industry has not been an attractive area for investment for the private sector in Saudi Arabia because of the high costs and technical know-how required, Peter Wilson, the managing director and chief executive of BAE Systems Saudi Arabia, told OBG. However in recent years, more and more private companies are becoming involved in this industry, resulting in high technology and high-quality investments within the Kingdom. For more advanced weapons and weapons systems the Kingdom is still reliant on imports from its strategic partners.
The Ministry of Defence and Aviation would like to see this change. In February 2010 the ministry announced that it would allow local firms to supply basic materials to the armed forces. To further encourage local manufacturing, the defence ministry created the Central Committee for Local Industrialisation, comprising business leaders and defence officials. Describing the committee during a speech at the Riyadh Chamber of Commerce in February 2010, Colonel Attiyah Al Maliki expressed the hope that it would encourage foreign suppliers to partner with Saudi counterparts. This would help develop local capabilities, ensure speedy deliveries and reduce costs, Al Maliki said. Plans are to start modestly with items such as plastic, piping and covers for jet engines, before gradually opening up to more sophisticated industries. Looking ahead, Al Maliki is even more ambitious. Nothing should prevent Saudi Arabia from making its own fighter jets, he said.
Saudi Arabia took its first concrete step in that direction in 2007 when it signed the Salam deal with BAE Systems for 72 Eurofighter Typhoon jets. However, the transaction is important for reasons other than sheer size. The governments agreement with the UK government ensures that BAE Systems will support the Typhoons from within the Kingdom of Saudi Arabia, including the manufacturing of some of the planes spare parts. The deal also allows Saudi crews and ground technicians to train in the UK.
GIVING BACK: As is customary, the Salam deal includes a provision regarding the Economic Offset Programme (EOP). The purpose of the programme is to ensure that some of the funds devoted to meeting the Kingdoms defensive needs are reinvested in the economy through joint ventures that facilitate the transfer of technology, expertise and skills. In recent years the programme has expanded well beyond the defence sector, but Riyadh thinks it can help plant the seeds for a domestic defence industry. Saudi Arabia will continue looking abroad for its most advanced weaponry, but it would like to meet more of its security needs locally.
An important step in this direction involves opening military supply contracts to domestic companies, which is part of the Salam deal. However, Salam goes even further in forging a partnership between BAE Systems and local industry. As part of the agreement, a facility will be dedicated to the maintenance and upgrade of all the aircraft, with the work undertaken by local companies. The complex was developed at King Abdulaziz Air Base near the Eastern Province city of Dahran, and includes hangars, workshops, fuel storage facilities and other infrastructure. The centre will be an important location for an high degree of technology and know-how transfer to the Kingdom.
This effort dovetails with Riyadhs ongoing economic reforms, including the liberalisation of foreign investment requirements that has helped firms such as BAE Systems invest more confidently in the EOP and plan for manufacturing operations as opposed to mere assembly in the Kingdom. Press reports suggest that the Salam project could create 15,000 local jobs. The project is part of an ongoing cooperative effort between the Saudi government and BAE Systems. Investments in the defence sector create high-skilled employment opportunities, encourage knowledge transfer and help widen the industrial base of the country, said Wilson.
At the ready: Increasing capabilities in the defence industry | Economy | Saudi Arabia | Oxford Business Group
