Saudi Arabia’s defense sector localization a major success story

A key feature of this month’s second World Defense Show in Riyadh, among regional and international guests alike, was Saudi Arabia’s efforts to emerge as a global leader in the defense space.

The five-day event saw the participation of more than 700 exhibitors and 100,000 attendees, but the notable increase in the number of Saudi-based exhibitors and manufacturers was unavoidable. The event showcased what is a growing sector economically, as Saudi Arabia develops as a destination for defense investment. As the Kingdom seeks to transform from defense purchaser to defense supplier, it is clear that its strategy to localize the sector is having an impact.

Saudi Arabia’s localization strategy can broadly be divided along two lines: reforming the Kingdom’s investment climate to allow the acquisition of the latest global technology and improving its own technical know-how for more efficient domestic manufacturing.

While, on the one hand, Saudi Arabia is actively purchasing advanced military equipment from established international companies, on the other hand, it is boosting its domestic manufacturing capability to eventually reduce international dependence. Growing this sector will have a significant economic impact. Given that the Kingdom remains one of the world’s top arms importers, the aim is to gradually go beyond the import of equipment to instead importing technology and training in order to boost the Kingdom’s own defense manufacturing capabilities. 

Defense localization has emerged as one of the pillars of Saudi Arabia’s economic reform process

Zaid M. Belbagi

As the largest defense spender in the Middle East and North Africa region and the fifth largest globally, defense localization has emerged as one of the pillars of Saudi Arabia’s economic reform process. Under the ambitious Vision 2030 program, the Kingdom aims to localize 50 percent of its defense procurement by the end of the decade. By localizing defense capabilities, it seeks to reduce its imports of defense equipment, infrastructure and personnel.

Moreover, defense localization is also crucial to ensuring national security. Increasing supply chain disruptions due to geopolitical developments, greater instability in the region and the presence of hostile states and nonstate actors in its neighborhood have made it evident to the Kingdom that dependence on foreign equipment may threaten its national security. By developing independent military capability, it can gain strategic autonomy and design an autonomous and robust foreign policy. 

Defense localization is also an important avenue for Saudi Arabia to strengthen its domestic manufacturing industries and generate employment. As the Kingdom gradually moves toward a post-oil economy, it is actively developing other avenues of employment. Also, as part of Vision 2030, the National Industrial Development and Logistics Program seeks to allow Saudi Arabia to develop into a global industrial leader and logistics hub. “Made in Saudi” is one initiative under this program that boosts localization in the Kingdom’s non-oil sectors. Saudi Arabia’s eventual emergence as a defense producer could, if managed correctly, provide a notable source of revenue to the Kingdom. 

To this end, the Saudi Arabia Military Industries subsidiary of the Public Investment Fund has a goal of localizing 50 percent of the Kingdom’s defense spending and becoming a top-25 global military company by 2030. It is primarily involved in fostering defense cooperation partnerships with global defense manufacturers, as well as strengthening the Kingdom’s indigenous defense sector.

SAMI Chairman Ahmed Al-Khateeb has expressed confidence that the Kingdom is on track to achieve its goal by 2030, having already localized at least 15 percent of defense production. With SAMI responsible for the acquisition and development of defense technology, the Kingdom has also actively reformed the regulatory framework of the defense sector to boost foreign investment.

The General Authority for Military Industries was established in 2017 to oversee licensing, research, procurement and monitoring in the defense sector. It also holds the mandate of 50 percent defense localization by 2030, meaning SAMI and GAMI are both key pillars of Vision 2030. 

The Saudi defense localization journey has seen remarkable progress. The progress made by the public defense sector goes hand in hand with steady growth in the private defense sector. Recent years have witnessed steady growth in Saudi-based private defense operators with a wide range of specializations, including advanced technologies, maritime defense and unmanned aerial vehicles. These companies are active in improving the Kingdom’s defense research and development and manufacturing capabilities.

The progress made by the public defense sector goes hand in hand with steady growth in the private defense sector

Zaid M. Belbagi

The leading actor in this sector is INTRA Defense Technologies, which was established in 2014 for the development of autonomous systems and advanced technologies. INTRA has carved a niche for itself in the development of UAVs and is committed to increasing Saudi self-reliance in drone manufacturing. In 2021, it agreed to jointly develop a Saudi version of the Vestel Karayel-SU tactical UAV manufactured in Turkiye, to be reproduced in the Kingdom as Haboob.

INTRA’s steady progress in the UAV space was again exemplified in 2023, when it signed an agreement with Turkish defense company ESEN for the INTRA-designed and produced ASEF-I UAV to be manufactured in Turkiye. This is the first instance of a Saudi-designed defense product being manufactured outside the Kingdom.

INTRA was a prominent exhibitor at the second World Defense Show. While there, the Saudi National Guard signed a strategic agreement with the company for the localization of the UAV sector and cooperation in operation and maintenance. 

Another notable private defense sector player is Middle East Maritime Repair, known as MEMR. Its expertise lies in the provision of products and services to the Saudi maritime sector. The company is involved in the entire life cycle of maritime assets, from designing and training to maintenance and repair. It is an entirely-Saudi based company and exemplifies the Kingdom’s notable achievements in the maritime defense localization process.

During the World Defense Show, MEMR, INTRA and American firm Ocean Aero announced a partnership to advance the Kingdom’s unmanned systems repertoire. Given Ocean Aero’s expertise in developing an autonomous underwater and surface vehicle, this partnership will significantly boost the Saudi maritime defense sector by localizing the use of disruptive maritime technology.

The success of these companies, which have benefited from Saudi Arabia’s reforms across the private sector, illustrates the great strides that the Kingdom is taking toward its goal of localizing 50 percent of defense spending by 2030. This was also seen with the success of the second World Defense Show. In the coming decade, Saudi Arabia is well positioned to emerge as a global leader in the defense and security industry. The growth in this space is a tangible representation of a sector that should be focused on. 

• Zaid M. Belbagi is a political commentator and an adviser to private clients between London and the GCC. X: @Moulay_Zaid

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