F.I. on the Saudi Defense Market to 2012

In 2006 Saudi Arabia announced a raft of arms purchases, from mobile howitzers, to helicopters, to advanced fighter aircraft. More requests have followed, including a controversial request for JDAM GPS-guided bombs. Many of these official requests have yet to turn into firm contracts, but the volume of fulfilled requests has attracted attention nonetheless. So, too, has the diversification of Saudi suppliers, as Russia enters the arena for the first time. Will Saudi spending continue? How significant is it? Forecast International… forecasts:

“Faced with both internal and external threats to its security, Saudi Arabia will continue to boost defense spending significantly over the coming years… Record-high oil prices, substantial influxes of energy revenues and an unyielding global demand for Saudi petroleum, meanwhile, will continue to serve as enablers… Saudi defense and security spending – estimated by Forecast at around $36 billion for 2008 – will reach almost $44.5 billion by 2012… the fledgling Saudi defense industrial base is limited primarily to maintenance work thus leaving Riyadh heavily dependent upon international suppliers for its equipment. As a result the Saudi market is not only the largest for defense equipment in the Middle East, but one of the largest worldwide.

…Meanwhile, the Saudi government is attempting to rectify its defense industrial shortcomings, partly by increasingly insisting on offsets and technology transfers as conditions for arms purchases. The defense ministry is also initiating a program to domestically-produce spare parts for its weapons platforms, and a ‘Saudization’ process whereby a shortage of technically-qualified workers is filled through increased ranks of trained, qualified Saudi workers. Despite these initiatives progress in developing the Saudi defense sector is slow and its projects and workforce remain foreign-dominated…”