WDS: Opportunity to boost local content in defense industry

The World Defense Show 2022, hosted by Saudi Arabia’s General Authority for Military Industries, is being held in the region for the first time. 

The event’s focus will be on innovative defense technologies and satellite defense systems, as well as defense interoperability, a topic that is becoming a growing challenge in the defense industry. The event will be held in Riyadh every 2 years.

With technology accelerating at a fast pace, and with global defense spending hitting $1.9 trillion, the show is expected to draw more than 30,000 international attendees and is being held at a time when the industry is evolving and defense considerations are becoming increasingly complex.

The show will be held in an 800,000 sq. meters facility specially built for the purpose and is equipped with interactive technologies and knowledge-sharing platforms. 

The building was completed in record time. It would be pertinent to mention here that it was not the first time the Kingdom has proved its ability to deliver megaprojects on time without compromising on the quality. Recently, the Kingdom built specialized facilities to organize the F1 race in Jeddah.

Not so long ago, it was only Saudi Aramco that was credited with completing huge projects on time but now most sectors in the Kingdom have become efficient enough to execute huge projects with much ease and by ensuring world-class quality. 

Saudi Arabia’s vision to localize 50 percent of its multibillion-dollar defense expenditure by 2030 as part of its Vision 2030, presents massive opportunities for global industry and investors. 

According to GAMI, the plan to localize 50 percent of the industry in Saudi Arabia is part of its mission to build a sustainable domestic defense sector that delivers significant social and economic benefits and to localize more than 50 percent of the Kingdom’s military expenditure over the next decade in line with Vision 2030.

The localization plan is driven by the Kingdom’s strategy to diversify its sources of income and decrease its dependence on other countries in all sectors including defense.

The plan also seeks to create jobs for Saudi nationals. Currently, the local defense production is limited and does not contribute significantly to the Kingdom’s exports. At present, the defense industry contributes less than 1 percent of the Kingdom’s total gross domestic product. This highlights a huge opportunity for growth to reach the 50 percent localization goals by 2030. 

The defense industry is very competitive and requires technology transfer, large capital deployment, and the development of local talent.

For this ambitious localization plan to succeed, Saudi Arabia will need to invest heavily in research and development, build stronger supply chains, and enhance the current infrastructure and its human resources. However, we must not forget that Saudi Arabia has experience in building industries from the ground up, as it has done in becoming a leader in the petrochemical industry within a few decades only. 

Interestingly, the benefits of localizing the industry in the Kingdom can spill over in other non-military sectors of the economy. Studies have shown that expenditures in military research and development have an effect on economic and technological development in aircraft, space, electronics, and communication equipment and in sectors at the technological frontier, such as laser technology and space that benefited the world.  

 Many people may not know that the internet and GPS were technologies that started in the defense sector before moving into civilian applications. For example, the internet started as a military communication network before becoming the vast global cyberspace that we know today. So, the localization of the defense industry in the Kingdom will surely spill over into the local economy in civilian applications as well. 

It is expected that in 10 years, the defense industry in the Kingdom will provide $24 billion to the national non-oil GDP and will provide more than 100,000 jobs to Saudis.

This World Defense Show will provide Saudi Arabia with the opportunity to showcase its capabilities, while also providing opportunities to partner with key players with the focus on increasing the local contribution in Saudi Arabia in line with Vision 2030.

• Fuad Al-Zayer is an independent consultant with expertise in economy, energy transition, digitization, and innovation. He is the former Head of the Data Services Department at OPEC and a former Global Coordinator of the JODI Data Transparency Initiative at the IEF.