Saudi Arabia signs 12 agreements to increase investments in its defence sector

The Ministry of Investment of Saudi Arabia on Monday signed 12 agreements with companies to bolster investment in its defence sector and localise military spending.The agreements were signed by Khalid Al Falih, Minister for Investment, and Ahmed Al-Ohali, Governor of the General Authority of Military Industries, at the inaugural World Defence Show in Riyadh.

"Saudi Arabia has made significant strides in providing the necessary support to drive localisation efforts in the defence sector, while implementing appropriate regulations and empowering investors throughout the local supply chain," said Abdulrahman AlMazyad, managing director of defence sector at the Ministry of Investment, said. "Both local and international investors are realising the enormous opportunities that the kingdom’s military sector offers.”

Saudi Arabia has plans to develop its manufacturing industry as it seeks to diversify its economy away from oil. The kingdom's sovereign wealth fund, the Public Investment Fund, created Saudi Arabian Military Industries in 2017 in an effort to repatriate 50 per cent of the kingdom’s total military spending, up from about 2 per cent.

L3Harris Technologies, an aerospace and defence technology company, and South Korean video surveillance company Hanwha were among the signatories, the ministry said.

Raytheon Saudi Arabia also said on Monday it will manufacture components for its Patriot air and missile system in Saudi Arabia. Other companies that signed pacts with the ministry include Leonardo, LigNex 1, Norinco, Naval Group, Expal Systems, Steel Core Designs, Al Hokair Group, Milkor, MacJee, CBC and Glock.

Defence expenditure in the Gulf is expected to rise as government revenue increase following economic improvement, defence intelligence specialist Janes said in a report last year. "Defence budgets will return to pre-pandemic levels by 2024, with procurement expenditure expected to reach 2019 levels by 2022,” Charles Forrester, lead analyst at Janes, said.

Meanwhile, the efforts by Gulf countries, such as the UAE and Saudi Arabia, to develop their domestic military industries and localise production will lead to short-term changes in the region’s defence equipment procurement, the report said.