Saudi Arabia signed an agreement with the Riyadh unit of Raytheon for the maintenance of its Patriot missile defence system as the kingdom seeks to build home-grown industry and localise military spending.
The General Authority for Military Industries (Gami) and Raytheon Saudi Arabia signed the deal on Saturday, according to the state-run Saudi Press Agency (SPA).
The deal with Raytheon is part of Gami’s efforts to develop and support Saudi Arabia’s local military industries and its research and technology sectors, said Ahmed bin Abdulaziz Al Ohali, Gami’s governor.
Saudi Arabia is developing its nascent defence industry as part of a broader plan to reduce its reliance on oil, diversify income and create more jobs. The kingdom aims to localise half of its military spending by 2030, up from about 2 per cent currently.
In 2018, Saudi Arabia was the third-largest military spender in the world and the biggest military spender in the Arabian Gulf, according to a May 2019 report by Swedish think tank Stockholm International Peace Research Institute (Sipri).
The country has built diverse and advanced military capabilities by importing arms, mainly from the US and countries in Western Europe. It is among 17 nations to use Patriot, a ground-to-air missile system offering defence against ballistic missiles and other threats. Patriot customers in the region include Kuwait, the UAE and Bahrain, according to Raytheon’s website.
Gami and Raytheon did not indicate the value of the deal, how many jobs it will create or the location in which the maintenance work will be localised. Both entities did not immediately respond to queries.
Gulf countries are moving towards local military production and procurement, signalling a shift in the way they do business with international defence companies. Tech transfers and commitments to produce and buy equipment locally have become key factors in determining which companies win global arms sales orders from purchasing countries.
There is an increasing demand for agreements beyond simple "off-set" arrangements, projects that make weapons deals more attractive, to more complex knowledge-transfers and a slice of the work on weapons programmes to seal deals.
Gami said it is working on “restructuring and improving” Saudi Arabia’s military offset programme into “an industrial participation programme, which aims to invest and develop existing local capacities in addition to building new capabilities in the targeted industrial fields”.
Raytheon Saudi Arabia supports the kingdom’s Vision 2030 by creating “highly skilled” jobs for Saudi citizens in defence, aerospace and cyber security through partnerships with domestic private sector companies and universities, according to its website.
The global arms industry is continuing to see growth with annual sales rising 4.6 per cent last year as US companies dominate the market, according to the latest report by Sipri.
Sales of arms and military services by the industry's 100 biggest companies reached $420 billion (Dh1.54 trillion) in 2018, with an all-US line-up of Lockheed Martin, Boeing, Northrop Grumman, Raytheon and General Dynamics ranking in the top five for the first time since 2002, according to Sipri.
The top five US arms companies made $148bn in revenue and accounted for 35 per cent of the sales of the top 100 arms companies, the report said.