Defence Industrialisation in Saudi Arabia and the UAE

14 Nov 2022

In recent years, GCC countries have significantly increased defence expenditures. Focusing on Saudi Arabia and the UAE, we outline their respective defence strategies. The two countries have developed national industrialisation strategies for different reasons. Both are now driving forward ambitious programs to develop local capabilities and ultimately reduce dependence on foreign countries. Saudi Arabia and the UAE are keen to exploit technological leaps in the fourth industrial revolution to revolutionise defence manufacturing, communications, and data sharing. Aiming to create jobs for the local community, working with international firms, and combining local talent and international skills both countries have taken immediate action to support their efforts. The benefits of this are twofold: firstly, it will support the economy and create jobs for people in the local community; secondly, it will ensure that our defence capabilities are developed in a way that is sustainable and ensures that the country has skilled workforce ready to take up these roles.

The UAE and Saudi governments are This is particularly important for Saudi Arabia where its population is expected to double over the next 25 years, creating a large demand for jobs. In addition, both countries want to reduce their reliance on foreign defence imports, which currently account for more than 70%of total military spending.

Globally, defence spending has shrunk since the end of the Cold War, except for countries in the Gulf Cooperation Council (GCC). The GCC spends more than $130 billion annually on defence, 7.9 per cent of global expenditures and exceeding the combined defence budgets of France, the UK, and Italy. The region spent an average of 12 per cent of its government budget on military spending, which was higher than any other region.

According to data from SIPRI’s World Military Expenditure and Defence Transfers Database, between 2006 and 2018 Saudi Arabia increased its defence expenditures by over 300% while the UAE increased its spending by over 600%. These increases are also reflected in an increase in defence imports: between 2010 and 2020 Saudi Arabia doubled its defence imports while the UAE tripled theirs. High levels of defence imports in the UAE at the end of 2020 indicate that the trend will continue in the coming years.

For Saudi Arabia, the long-term vision is to develop its own defence industrial base. This includes developing and supporting local companies that can compete globally in the defence industry. The UAE has a shorter-term goal: it needs to have an effective defence force that can protect itself and its allies against threats. The UAE’s strategy is based on utilising foreign military equipment whilst they can develop their own technology and industrial base.

The two countries have developed national industrialisation strategies for different reasons.

In Saudi Arabia, the defence industry is considered a key part of the country’s economic diversification strategy. As mentioned previously, oil exports are a major source of revenue for the country and have contributed significantly to its economic well-being since the 1970s. However, in recent decades there has been an increasing desire for diversification away from oil production, creating new industries, employment opportunities and revenue streams.

It was therefore determined that developing its own defence industrial capacity would be one way forward for Saudi Arabia to reduce its dependence on foreign suppliers while strengthening its economy as well as military capabilities.

In contrast, while also focused on reducing dependence on overseas suppliers, the UAE has developed its own industrialisation strategy more specifically out of concern that relying too much on foreign-supplied systems could compromise national sovereignty.

Both are now driving forward ambitious defence industrialisation programs to develop local capabilities and ultimately reduce dependence on purchases from foreign countries.

They also want to develop expertise in managing complex projects efficiently, as well as gain access to advanced technology that could be used for commercial purposes in the future.

Saudi Arabia and the UAE are keen to exploit technological leaps in the fourth industrial revolution to revolutionise defence manufacturing, communications, and data sharing.

The rise in regional defence spending has also led to an increase in employment opportunities for locals living in countries like Saudi Arabia and UAE and international talent through joint ventures between local firms and international companies. Saudi Arabia’s defence industry is expected to create approximately 100,000 jobs by 2030.

The defence sector requires engineers and skilled workers in several specialisations. It also requires capital investments, capacity development capabilities and technological knowledge transfer between international partners and local entities. The UAE and Saudi have been taking major steps towards building a local defence industry. These include inviting international companies to invest in this sector; developing the necessary infrastructure; training Nationals to work in the sector; developing technology that can be used by local firms as well as others looking to partner with them; investing billions annually in research projects related to aerospace technologies and working closely with local universities so that they can develop curricula related specifically toward this end goal of creating native talent capable of contributing positively toward building an “international” industry at home.

The UAE has been able to attract an impressive array of international companies to invest in its defence industry. These companies include Lockheed Martin, Boeing, Raytheon, Thales, Saab, L3Harris and Northrop Grumman . They have all agreed to cooperate with local companies to establish joint ventures that will develop the country’s defence sector through collaborative innovation and technology development projects.

Saudi Arabia’s Vision 2030 aims at reducing its reliance on oil revenues by diversifying the economy through industrialisation and modernisation of its infrastructure as well as modernising its defence industry so that it can meet all its security needs domestically rather than relying on imports from abroad.

Both sectors have established national organisations to set priorities, lead programs and coordinate between government entities, armed forces, and industry players.

National industrialisation is now a key pillar in the country’s vision for the future.

The UAE and Saudi Arabia are leading the way in adopting a private-sector-led approach to defence. This approach is based on a clear understanding that local and international companies need to work together to develop and manufacture high-tech military equipment. In doing so, countries can create jobs for their young nationals while also attracting international talents who will contribute towards creating mutual collaboration.

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