Saudi Arabia’s General Authority for Military Industries (GAMI) is to oversee what it plans to be a tenfold increase in localization of the kingdom’s military spending by 2030.
“2019 was a formal start-up year for GAMI and Saudi Arabia’s defense industry,” governor of GAMI, Ahmed Al-Ohali, told AIN. “We launched an online licensing portal that facilitates [approvals] in three areas: military industries, military services, and supply of military products and services. As a result, we saw great levels of interest from entities that wish to benefit from the opportunities offered by our developing defense industry.”
By the end of last year, GAMI (Chalet J55) had issued licenses to eight firms, with expected investments of more than SAR3 billion ($800 million). “We foresee several more licenses being handed out in the current year in line with the strong demand,” he said.
GAMI also developed and issued its Industrial Participation Program (IPP), which ensures localization always takes precedence in supplier contracts across military entities. “The program already started yielding results, as we signed the first IP Agreement with Raytheon Saudi Arabia to localize deep maintenance and refurbishment for [Saudi Arabia’s] Patriot systems,” he said. “We expect more such agreements to be signed in the coming year.”
The military acquisition sector was a key factor enabling the localization program and achieved savings of nearly SAR1.5 billion on supplier contracts reviewed by the end of 2019. “We see this as a significant achievement, and we look forward to leveraging the consolidation of demand and budgets of local military entities to further boost the efficiency of [Saudi Arabia's] defense expenditure,” he said.
GAMI is mandated to enable Saudi Arabia’s transformation into a key international manufacturer of defense equipment and technologies. “Part of that is promoting the significant opportunities offered by our growing local defense industry,” he said. “The Singapore Airshow is a prominent event in the international defense show [calendar] and we will leverage it to further connect with existing and potential international partners and investors. We also expect to make an important announcement with an impact on the international defense industry at the show.”
In 2017, GAMI was established as the regulator, enabler, and licensor of Saudi Arabia’s defense industries. The kingdom is currently the third-biggest per capita spender on defense worldwide, but only 5 percent is spent locally in the kingdom. To meet Saudi Arabia’s Vision 2030, GAMI aims to localize over 50 percent of military spending by 2030.
GAMI is mandated to enable the local defense industry, research and technology ecosystem to develop, while delivering what it calls "massive social and economic benefits" under a diversification program known as "Vision 2030," including generating 100,000 direct and indirect jobs, unlocking a new industry worth SAR30 billion, and contributing SAR90 billion to Saudi Arabia’s non-oil GDP over the next decade.
Companies expected to contribute to the localization effort include Saudi Arabian Military Industries, GDC Middle East, The Helicopter Company and the Saudi Rotorcraft Support Company.
“Our present defense industry is nascent, with a huge potential,” he said. “Current local manufacturing is mainly focused on ammunition, light weapons, and armored vehicles. GAMI aims to [augment this] over the coming decade, and we have identified 11 priority sectors for localization, including defense electronics, guided munition, missiles and launchers, and unmanned aerial vehicles (UAV).
“To deliver our localization goals, GAMI is developing a robust regulatory framework that promotes transparency and encourages investments; enhancing procurement processes to achieve spending efficiency and prioritize localization; and building national capabilities by directing R&D towards priority sectors and developing human capital.”
International partners can help Saudi Arabia achieve its defense procurement goals. “Our partners around the world are adapting to a new norm in military transactions in Saudi Arabia,” he said. “They understand that sealing arms deals will require them to present ways [to] support industry localization and technology transfer. Our [IPP] puts an excellent framework for these engagements [in place] and ensures that both parties [benefit] from military procurement deals.
“GAMI will extend its support to OEMs who share our commitment to defense industrialization in the kingdom through the transfer of technology and development of local manufacturing capabilities and talent.”