Saudi Defense Spending

• Saudi Arabia ranks as the world’s fifth largest sovereign spender on military & defense, according to the Stockholm International Peace Research Institute (SIPRI).

• The government announced a SAR175 billion ($47 billion) allocation for the military sector in 2021, a 10 percent decrease from the SAR195 billion ($52 billion) in estimated military spending for 2020. Actual estimated spending exceeded the budgeted level by 7 percent.

• Defense spending has fluctuated below its 2015 level due partially to lower oil prices since 2015 and a transition towards greater involvement by the Public Investment Fund (PIF) and the private sector in defense-related projects.

• Defense spending in 2020 and 2021 is expected to remain below 2019 levels, reflecting a broad-based reduction in overall expenditures as the Kingdom aims to cut its budget deficit in 2021 by 53 percent.

• Projects that are earmarked under the 2021 military budget include completing 80 percent of the operating plan within the Ministry of Defense’s 10-year plan, the second and final stages of the King Salman Base and King Faisal Air Academy relocation projects, and defense capacity-building across 8 military entities.

GAMI and SAMI

• SAMI, which is 100 percent owned by the PIF, has acquired both Aircraft Accessories & Components C Ltd. (AAC) and Advanced Electronics Company (AEC). AAC is part of the Ministry of Defense’s economic offset program and has longstanding ties with U.S. defense companies while AEC, also originally an economic offset company, is one of the Kingdom’s most established local defense manufacturing companies.

• SAMI has also established joint venture agreements with several international companies, including U.S. companies L3Harris Technologies and Lockheed Martin as well as Spain’s state-owned shipbuilder Navantia, France’s Thales Group, and Belgium’s CMI Defens SAMI is positioned to be the national domestic military manufacturing company through further acquisitions, local investments, and international partnerships.

• GAMI’s Industrial Participation program involves agreements with contractors to include local industries in the supply chain and ideally build new capabilities that will contribute to self-sufficiency in targeted sector The program creates opportunities for both direct and indirect participation of qualifying local industries in supply contracts.

New Technologies

• Targeted military technologies by GAMI include EO/IR, directed energy, radar, RF radio, cybersecurity, electromagnetic weaponry, and AI/machine learning.

• In the EO/IR field, advanced IR targeting, multispectral, and hyperspectral imaging technology are technologies of high interest. GAMI signed a SAR750 million ($195 million) agreement with local firm INTRA Defense Technologies to procure six unmanned aircraft systems with advanced EO/IR capabilities.

• The SAMI L3Harris Technologies, LLC joint venture also pertains to the deployment and development of advanced EO/IR capabiliti Other advanced digital technologies including blockchain encryption, and machine learning applications across data gathering, threat identification, and communications.

Localization

• Early signs of progress in Saudi Arabia’s defense manufacturing capacity include the deployment of the first domestically produced fast jet aircraft, the BAE Systems Hawk, in late 201

• In 2020, a joint venture between Oshkosh Defense and Al Tadrea Manufacturing Company to manufacture armed vehicles in-Kingdom was announced. Saudi Advanced Technologies Company (Wahaj) was licensed by BAE Systems to manufacture consumable and complex structural components as part of the supply chain for the Eurofighter Typhoon combat aircraft.

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