Localization Of Military Expenditure In Saudi Arabia Reaches 19.35%, Up From 4% In 2018

The General Authority for Military Industries (GAMI) has made significant strides in localising military spending in Saudi Arabia. Eng. Ahmad Abdulaziz Al-Ohali, Governor of GAMI, announced that the localisation rate has increased to 19.35% from just 4% in 2018. The target is to surpass 50% localisation of government spending on military equipment and services by 2030.

Eng. Al-Ohali shared these insights during a panel discussion at the Local Content Forum 2024 in Riyadh. He highlighted GAMI's efforts to establish supply chains within the military industries sector, enhancing procurement from local companies, which now amounts to SAR13 billion. This includes producing locally manufactured drones and fast interceptor boats.

Local content development is a key priority under Saudi Vision 2030. GAMI has achieved a local content percentage of 38% among companies in the military industries sector, contributing approximately SAR5 billion to the GDP. This initiative not only boosts local content but also creates numerous high-quality job opportunities.

To enhance governance and investor confidence, GAMI has launched 11 policies and regulations concerning the legislative framework of the military industries sector. These measures aim to increase local content rates and build new capabilities in manufacturing and service provision.

The governor emphasized the commitment to enhancing local content by signing over four framework agreements covering 70 categories. Around 80% of expenditures on military apparel, equipment, weapons, and ammunition are included, with contracts valued at SAR1 billion, achieving a savings rate of 20%. The volume of these agreements is expected to grow to SAR1.6 billion.

Support for local manufacturers includes facilitating license acquisition and creating an attractive investment environment for national and international companies. Initiatives like zero VAT on locally manufactured military goods and financial incentives are part of this effort.

Technological Advancements and Human Resource Development

Eng. Al-Ohali stressed the importance of leveraging digital transformation technologies to develop local products that meet military market needs. A unified platform for military industries has been launched to automate services using data science and artificial intelligence for tasks such as forecasting demand for military products.

In collaboration with the General Authority for Defense Development (GADD), GAMI focuses on research and development programs for defence products using digital transformation technologies and reverse engineering. The human resources strategy launched in 2022 includes establishing the National Academy for Military Industries, accommodating 2,000 students annually in technical disciplines.

The academy offers scholarships and training programs benefiting over 850 private sector employees. Additionally, GAMI is working on signing over 53 industrial participation programs valued at nearly SAR35 billion with both local and international companies, including approximately SAR13 billion in purchase orders for local firms.

This comprehensive approach aims to strengthen Saudi Arabia's military industry by fostering innovation, increasing localisation rates, and building robust capabilities within the sector.

With inputs from SPA