Saudi Government announces 19.35% localization of military spending
Reaching 19.35% in 2024, a huge rise from just 4% in 2018, Saudi Arabia has reached a major localizing of military expenditure milestone.
By 2030, the ambitious aim is to exceed 50% Eng. Ahmed Al-Ohali, Governor of the General Authority for Military Industries (GAMI), declared this development during his remarks at the 2024 Local Content Forum hosted in Riyadh.
Al-Ohali spoke on the development in Saudi Arabia 's defense industry sector, pointing out that as of the third quarter of 2024, 296 licensed firms have grown to reflect, This shows how increasingly the nation is emphasizing local defense production and service capability growth.
Development of indigenous supply chains and procurement systems is a fundamental part of this drive. Al-Ohali disclosed that local businesses for defense projects had SR13 billion (about $3.4 billion) allocated by the government. These will serve to enhance the local defense sector by means of unmanned aerial vehicles (UAVs), quick interceptor boats, and maintenance of advanced defense equipment.
Saudi Arabia's Vision 2030 depends critically on the rise of local content within military expenditure. Al-Ohali noted that the military industry has already a local content proportion of 38%. With an estimated SR5 billion ($1.3 billion) contribution to the GDP of the nation, the sector makes a noteworthy part of the national economy. These initiatives complement Vision 2030's more general aim of diversifying the economy and lowering reliance on income from oil sales.
In line with this goal, GAMI has developed eleven fresh policies and rules meant to improve sector-wide governance, boost investor trust, and enable local manufacturing capacity development, These developments are meant to generate high-value employment for Saudi nationals, therefore supporting the larger aims of economic development for the nation.
Four framework agreements encompassing 70 categories of military goods including clothing, equipment, weapons, and ammunition have also been inked by Gami, These agreements should create contracts valued SR1 billion ($266.6 million), therefore saving the government 20% of its costs. The overall value is expected to increase to SR1.6 billion ($426.6 million) as the agreements develop; all of which will be spent domestically, therefore enhancing local industry.
Al-Ohali underlined the need of streamlining licencing procedures for local and foreign businesses if these projects are to be successful. Efforts are under way to establish an investment-friendly climate with financial incentives, VAT exemptions for domestically produced military equipment, and industrial zone development to assist manufacture.
Apart from that, GAMI has signed 53 industry participation agreements valued SR35 billion ($9.3 billion), with SR13 billion set especially for local procurement. These agreements help to promote knowledge transfer, local expertise in military technologies, and cooperation between local businesses and foreign enterprises as well as help to support military technology development.
GAMI's approach revolves mostly on digital transformation. Using cutting-edge technology including artificial intelligence and data science, the authority is simplifying processes and producing locally produced goods fit for military demand. Launched recently, the unified military industries platform automates numerous operations to boost efficiency by combining all services given to stakeholders.
As part of its long-term plan to create a strong defense system, Saudi Arabia is progressively localizing its military industries, The nation is well on its way to reach its aim of reaching 50% localization of military expenditure by 2030, with ambitious targets and continuous efforts to stimulate local manufacture, simplify rules, and attract investment.