Days of Easy Defence Deals in Saudi Arabia May Be Over

Saudi Arabia was every defence contractor's dream market- with no offsets clause and no local industry to provide servicing and spares, contractors raked in billions in after-sales service and life-cycle support.

However, all that is about to change with the announcement of a new company, the state-sponsored Saudi Arabian Military Industries (SAMI) which will establish joint ventures with foreign companies to make equipment, systems and spares.

Significantly, the announcement to set up SAMI was made a couple of days ahead of the US President Donald Trump's visit to the Saudi capital, Riyadh where he is expected to announce billion dollar deals including a probable sale of the THAAD missile system.

Global defense firms will have to tie-up with Saudi-Arabia’s state-sponsored Saudi Arabian Military Industries (SAMI) Company if they seek to sell or manufacture defense equipment in the nation.

Saudi Arabia’s Public Investment Fund (PIF) on Wednesday launched a state-owned military industrial company to contribute to the kingdom’s gross domestic product (GDP) with more than $3.7 billion by 2030.

"It will lead the military industries sector to increase local content, increase exports and bring foreign investment to the kingdom by entering into joint ventures with major international military industry companies," deputy crown prince and defence minister, Prince Mohammed bin Salman said.

Earlier this month, Salman Al Saud had said, no contract for the supply of weapons would be concluded if production of spare parts took place in any other country and not in Saudi Arabia.

UAE launched Emirates Defence Industries Company (EDIC) to form an integrated national defense supplier in December 2014.

The UAE’s armoured vehicle maker Nimr Automotive won a Dh2.42 billion (US$ 658.8 million) deal to supply 400 8x8 armoured vehicles to the UAE Armed Forces during IDEX in Febraury this year. Nimr Automotive is being integrated into EDIC.

15 UAE companies won the lion’s share of contracts during the exhibition. EDIC, a joint venture between Abu Dhabi fund Mubadala Development Company and Abu Dhabi-owned Tawazun Holding that will comprise 15 companies by the end of the year.