An evolving market landscape ideally positioned for investment
Over the last few years, the Kingdom of Saudi Arabia (KSA) continues to hold the largest defence market share in the MENA region, comprising approximately 9% of KSA’s GDP. To support Saudi Vision 2030, all industries are focusing on localisation efforts including the defence market with their target set to increase local military procurement by 48%.
The need for localisation is driven by various factors. This includes diversifying the country’s income sources and decreasing import dependency. Additionally, there is a growing demand to create jobs for Saudi nationals and to continue training and educating local engineers.
Investment opportunities within the KSA defence industry
KSA players contribute to the defence value chain and possess a global edge in the area of raw material products used in the manufacturing of defence-related machinery and equipment. Cross-platform technologies are examples of defence-related technologies that increase interoperability and operational effectiveness across military platforms.
This technology has been prioritised by KSA as it stimulates technology transfer into the Kingdom. In the defence industry, high-growth goods and services cover day-to-day logistics. This includes housing, catering, ventilation, capacity development and training which are all crucial in supporting the nation’s forces.
KSA players contribute to the defence value chain and possess a global edge in the area of raw material products used in the manufacturing of defence-related machinery and equipment.
Cross-platform technologies are examples of defence-related technologies that increase interoperability and operational effectiveness across military platforms.
This technology has been prioritised by KSA as it stimulates technology transfer into the Kingdom. In the defence industry, high-growth goods and services cover day-to-day logistics. This includes housing, catering, ventilation, capacity development and training which are all crucial in supporting the nation’s forces.
A shift towards localisation and industrial development
KSA has already made significant progress towards localisation and industrial development and will continue to build on this momentum. However, it is worth noting that the proportion of goods and services purchased from domestic producers and suppliers is expected to decline. Therefore, localisation would likely require the establishment of new contracts and strategic partnerships with foreign suppliers to boost KSA’s own military technology production capabilities.
A framework to leverage existing industrial capabilities and investment
- Localisation strategy
- Strategic optioning
- Structuring support
Localisation strategy
How to enter supply chain?
Supply/demand dynamics
Leverage market-led demand, competition and localisation opportunities
Supply chain considerations
Analyse business position across value chain, logistics and manufacturing processes
Stakeholder engagement
Support localisation strategies through the study and engagement with stakeholders
Strategic optioning
How to maximise value delivery?
Revenue-mix optimisation (value-added products)
Develop best product mix to ensure revenue maximisation
Operating model
Leverage operating model to increase efficiencies across governing practices
Execution planning
Create a roadmap of initiatives, activities and KPIs
Structuring support
How to unlock partnerships?
Investor search and selection
Support the process of suitable investor identification
Joint venture and deal structuring
Leverage partnership expertise
Negotiation support
Support with stakeholder negotiation process
Measuring the health of the sector
The Health of Military Industries (HMI) index aims to cover a number of KSA defence industry aspects. This includes platform and structural components, defence electronics, weapons and missiles, maintenance and repair operations, cyber warfare, fixed wings, rotorcraft, unmanned aerial vehicles (UAV), land, navy and personal equipment.
Conclusion
KSA has already made significant progress towards localisation and industrial development. To build on this momentum, key areas of opportunities have been identified to support this growth. Market size, investment, capitalisation of existing key industrial players and an effective sector monitoring system is pivotal for KSA’s ambitious journey.
