Military ambitions seen as unrealistic

Published in MEED, 27 September 2016

Riyadh’s target of directing half its military budget to local firms by 2030 is unfeasible, but it will help to develop the sector

By the end of this year, a new aircraft should take to the skies above Saudi Arabia. The Antonov AN-132 is designed to be able to take up to 9.2 tonnes of cargo on short and medium-haul journeys. It will also be able to make mid-air drops of cargo and paratroopers. In aviation terms, it is not breaking any important new ground; it is really just an updated version of the existing AN-32 aircraft, but it still represents an important development for the kingdom.

The AN-132 is being developed by a joint venture of Ukraine’s Antonov Company and two Saudi partners, Taqnia Aeronautics Company and King Abdulaziz City for Science & Technology. It is part of a small defence industry in Saudi Arabia, but it may be a sign of things to come.

Under the recently launched economic masterplan, Vision 2030, the government plans to spend more than half its military procurement budget inside the kingdom by 2030, up from just 2 per cent today. There are many reasons for thinking that is an unrealistic aim, but even if that target is missed the local defence industry is still likely to grow in ambition and ability.

“A host of issues such as corruption, secrecy and exclusionism will challenge Riyadh to advance military industrialisation at a fast pace; technological limitations and a population lacking the necessary skills will also undermine its plans,” says Giorgio Cafiero, CEO of US-based consultancy Gulf State Analytics. “It is more realistic to expect the kingdom to take decades to build a strong defence industry.”

The local industry dates back to 1949, when King Abdulaziz al-Saud issued a decree to set up a weapons and artillery plant. Production began four years later. Despite that heritage of almost 70 years, the government says the defence sector today comprises just seven companies and two research centres.

Their capabilities are limited. The state-owned Military Industries Corporation produces ammunition, bombs and light weapons. It also owns the Armored Vehicles & Heavy Equipment Factory, which manufactures the Al-Shibl light armoured vehicle. Another company, Abdallah Al-Faris Company for Heavy Industries, makes the Al-Fahd armoured vehicle.

Others such as Advanced Electronics Company and International Systems Engineering Company provide information technology (IT) and related services. Like many local defence companies, they were set up under the economic offset programme, in which international firms help to develop local capabilities as part of their awards for defence contracts.

Maintenance is another area where there is some activity. Riyadh-based Middle East Propulsion Company was recently certified to maintain Rolls-Royce T56 turboprop engines, which are used by the Royal Saudi Air Force on its fleet of Lockheed C-130 Hercules transport aircraft. Alsalam Aircraft Company provides maintenance for the Eurofighter Typhoon and another firm, Aircraft Accessories & Components Company, services aircraft components.

The limited extent of the domestic industry along with long-running regional instability means Saudi Arabia spends a vast amount with international defence firms. Riyadh is the third-biggest spender on defence equipment globally, according to the UK-headquartered International Institute for Strategic Studies, with an outlay of $81.9bn in 2015.

Potential benefits

Developing the local defence industry will provide several potential benefits, not least in reducing the amount of overseas spending at a time of lower oil revenues. It also fits in with the wider aims to diversify the economy and create more high-value jobs for locals.

There are even some important strategic security benefits. Having a local manufacturing capability would offer Saudi Arabia some insurance against the potential for its current allies to suspend or cancel orders. Arms sales are intensely political affairs and it is not hard to envisage circumstances in which US or European arms companies are prevented from selling some weapons to a country that is regularly accused of human rights abuses in Yemen and indeed against its own citizens.

For a sign of what is possible, Riyadh only needs to consider how a series of multibillion-dollar deals to sell Boeing F-15 fighter jets to Qatar, Boeing F/A-18E/F Super Hornets to Kuwait and Lockheed Martin F-16 Fighting Falcons to Bahrain have been stalled for more than a year due to political machinations in Washington.

Slim chances

However, the chances of the country meeting its 50 per cent localisation target by 2030 are slim to non-existent, according to analysts. “It’s not going to happen,” says Matthew Hedges, an independent defence analyst. “They don’t have the capabilities in terms of manpower, there isn’t the infrastructure and there isn’t the R&D [research and development] that would enable them to stay ahead of developments. It won’t even get to half of that.”

He suggests the country may be able to localise 10-15 per cent of spending if it focuses on developing its maintenance, repair and overhaul capabilities, and on lower-tech areas such as munitions and light arms. “These are the easiest things to produce and it’s also a way to reduce costs. They’re things they use every day,” adds Hedges.

If Saudi Arabia wants to develop more advanced systems, there will be other stumbling blocks. There are big question marks about how willing other countries will be to share the more advanced technology with Riyadh. In particular, much of the Saudi equipment comes from the US, which is committed to ensuring Israel always has a qualitative edge over its regional enemies.

“Warfare is not getting less complicated,” says another defence industry analyst. “They’ll really struggle to do the complex stuff. The high-end military kit is really expensive, it’s complicated and takes astonishing amounts of R&D. The big-ticket items for the foreseeable future are unlikely to come from Saudi Arabia.”