Saudi Arabian Defense Industry valued US$50.5 billion in 2012

Friday 20 July 2012, Amsterdam

The Saudi Arabian defense industry valued US$50.5 billion in 2012 and is the largest defense market in the Middle East. During the review period (2008-2012), defense expenditure grew at a CAGR of 7.2%, and is expected to record a CAGR of 5.4% over the forecast period (2013-2017), to value US$65.9 billion by 2017. As a consequence of both internal and external threats, the government is projected to continue to spend an average of 8.4% of its GDP on defense. 

The lack of industrial opportunities leaves very limited opportunities for the foreign companies and deters them from entering the market. Furthermore, defense contractors often favor direct offsets, as opposed to indirect offsets that are mandated by the country, as they are normally more experienced in, and better equipped to, enter those types of arrangements.

Political underpinnings, bribery, corruption and political affiliations hampers the growth of the Saudi Arabian defense industry. Bribery and corruption have been prevalent in Saudi defense procurement for many years, largely due to the monopolistic status exercised by the government over the purchase decisions of its armed forces.

The Saudi Arabian defense sector remains closed to FDI, which limits further growth opportunities. Moreover, in April 2009, the Saudi Arabian General Investment Authority (SAGIA), a body with the sole responsibility of approving foreign investment projects, included the defense sector in its list of sectors still barred to FDI.