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Saudi Arabia promotes self-reliance in the defense sector

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On the outskirts of Riyadh, officials showed tourists one of the latest investments by the sovereign wealth fund, which is at the forefront of Crown Prince Mohammed bin Salman’s plan to modernize the Gulf States: a defense electronics factory.

Saudi officials said that the Riyadh plant of Advanced Electronics, which produces bombs and drone parts, is the “crown jewel” of Saudi Arabia’s emerging military industry. AEC was acquired by the Saudi Arabian Military Industry Corporation (Sami) last year, which was established by a public investment fund four years ago to localize defense production.

Saudi Arabia has one of the largest defense budgets in the world. According to data from the Stockholm International Peace Research Institute, the kingdom spent 57 billion U.S. dollars on protecting the country last year. AEC is at the core of its plan, which will increase local production to 50% of its defense spending within ten years. In 2017, the year the Sami were founded, it only accounted for 3%.

The project is in line with Prince Mohammed’s 2030 vision to diversify an oil-dependent economy and ambitious, but analysts say it is wrong to ignore it.

“Just look at what the Saudis spend on weapons… If you want, this type of budget can provide you with an industry,” said Francis Tusa, a defense consultant and editor of defense analysis. “They will gain an ability. Absolutely.”

The plan also reflects Saudi Arabia’s desire to be self-reliant-Riyadh is at war in neighbouring Yemen, and its oil facilities and other infrastructure have been attacked by drones and missiles from Iran-backed insurgents, as well as from its largest supplier, the United States. Arms sales often face opposition in Washington. Currently, Congress is considering two motions to prevent the sale of US$650 million worth of air-to-air missiles to Saudi Arabia.

Sami CEO Walid Abukhaled said in an interview: “Our region urgently needs to improve military capabilities and self-sufficiency, and strengthen the defense ecosystem, including Saudi Arabia, so I think The large defense budget is increasing.” Financial Times.

“One of the main reasons for the establishment of the Sami people is sovereignty. You want to be self-sufficient. Another reason is that sometimes it takes time to repair and maintain a product, and it may take two years to wait for spare parts,” he said.

In order to achieve this goal, Sami hopes that weapons manufacturers will transfer production and maintenance to the kingdom. “All my partners know the good old days…[the original equipment manufacturers (OEMs)]Those who came to sign the contract and delivered from abroad are gone. This will not happen again,” Abkhalid said.

“This forces big companies to say that we need to change our mindset and we need to work with Sami or other local Saudi partners to win contracts. OEMs can build their own facilities in the kingdom,” he said.

Sami is already seeking to use local labor to assemble Lockheed Martin’s Black Hawk helicopters in Saudi Arabia and cooperate with a United Arab Emirates company to assemble armored vehicles. Sami’s divisions include aviation, defense systems and missiles, and are also in talks with other companies.

“Other companies and countries have used 30 to 50 years to do this, so it is impossible to do it all organically, so you have to look outside and look at acquisitions,” Abkhalid said.

The chart shows how Saudi Arabia's defense spending compares to some countries

He added that one of its priorities will be drone defense systems. Iran’s allegedly planned 2019 drone and missile attack temporarily destroyed two Saudi oil facilities and brought about 5% of global oil production offline.

Despite this, Sami, which has begun to build its first unmanned reconnaissance aircraft, is a latecomer to domestic military production in the region. Its neighbor, the United Arab Emirates, has produced surveillance drones and armored combat vehicles, which have temporarily participated in battles in the wars in Yemen and Libya. Israel’s military budget is less than half that of Saudi Arabia, but it has produced some of the most advanced armaments in the world. Iran is its main regional competitor, and its domestic arms industry is becoming increasingly complex.

Defense expert Janes Middle East Industry and Budget Chief Analyst Charles Forrester (Charles Forrester) said that in view of the huge expenditure on weapons, the Saudi market is too large and foreign defense industries should not be missed. “For them, Saudi Arabia is too big to be ignored. Some countries and companies realize that they need to catch up because they have lost ground in the past few years,” he said.

Currently, Riyadh’s facilities have become a showcase of the reforms sweeping the entire kingdom, including the “Saudiization” of labor traditionally dependent on foreigners and the entry of women into the workplace.

The AEC hall showcased some of its products-circuit boards for American-made F-15 jet fighters, military radios, and in the center of the display the upright laser-guided missiles for which the company made components.

A young Saudi woman who led a tour of the factory by the British “Financial Times” pointed out that her compatriots accounted for more than 80% of the workforce. In the corridor, she stopped in front of an old group photo of all the company’s employees and pointed out that she needed to update the photo before continuing to visit.

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