Let us start with a clear economic fact: numbers can "lie." Not because they are wrong in themselves, but because they may measure things entirely different from what we think.
From 2018 to 2024, the Kingdom of Saudi Arabia announced that it raised the localization rate in defense industries from 4% to 25%. An impressive number in a short period, right? But if you ask yourself a simple question: does that mean that Saudi Arabia has been able to build a real defense industry? You will find that the answer is: no. It has built an improved version of the same trap it fell into about forty years ago.
What does this mean?
I will explain.
In the 1980s and 1990s, Saudi Arabia devised a strategy for localizing military industries through "offset" programs. Simply put, the government told foreign companies: If you want to sell weapons to us, welcome, but on the condition that you invest within the kingdom, work with local companies, and transfer technology. Theoretically, it was a brilliant idea, especially since Saudi Arabia is a huge and vital market for any defense company in the world, and one of the largest arms importers globally. However, the reality of implementation revealed a significant flaw.
And why is this catastrophic?
Because foreign companies were not transferring real technology. They were only satisfying the Saudi side by transferring a small part of the operational processes, such as assembly, maintenance, and training, while the intellectual property, design, research and development, and everything that makes an industry real remained outside Saudi borders.
If we look at the "Peace Shield" project with Boeing, we find that it failed. The same goes for the "Al-Yamamah" project in collaboration with BAE Systems; both the Americans and the British did not establish a real national industry in Saudi Arabia.
And here arises the important question: Why hasn’t the Saudi government learned the lesson?
The answer is simple: because the government was measuring success by the wrong metrics. It was not measuring the existence of a real industry or the extent of technology transfer, but was measuring the volume of investments, the number of jobs created, and the percentage of "local manufacturing" without verifying the nature and type of that manufacturing.
We now come to what might disturb some despite its truth: unfortunately, "Vision 2030" is a repetition of the same story.
In 2017, the Kingdom of Saudi Arabia established the company SAMI, the Saudi Military Industries Company, with the aim of localizing 50% of defense spending by 2030. A bold number and a clear plan, but the more important question: Does this mechanism differ this time from previous failed experiments? The answer, unfortunately, is: no.
When looking at SAMI, we find it is indeed achieving good numbers; it has entered the top hundred on the list of the largest defense companies in the world. In 2018, its staff did not exceed 100 employees, while it reached 3600 employees in 2023. The company has also formed important partnerships with Turkish companies such as FNSS, Nurol Makina, ASELSAN, and Baykar, which can be described as highly valuable partnerships.
However, when we delve deeply into the administrative structure, organizational culture, and technology transfer mechanisms within the company, we find that little change has occurred compared to the past.
Upon further reflection on the nature of the company, we will understand the implications more clearly. SAMI is 100% owned by the Public Investment Fund (PIF), and it is headed by Prince Khalid bin Salman, the Minister of Defense. Within just eight years, the CEO position has changed three times: the first was a German from Rheinmetall (Andreas Schwer), the second an American from Northrop Grumman (Walid Abu Khalid), and the current one is Thamer Al-Muhid, who comes from a background in general industries rather than defense.
Additionally, there is a deep structural problem between SAMI and GAMI (the General Authority for Military Industries). Anyone who has dealt with Saudi Arabia in this sector will fully understand what I mean, but in short: there are two entities performing nearly the same role, and there is competition between them. Although competition may seem like a positive thing from a distance, in a resource-limited sector—be it human or technical—it becomes a significant burden.
When the relevant authorities attempted to resolve this issue, another problem emerged: dual bureaucracy. GAMI is the regulating authority, while SAMI is the executing authority, and any private company trying to enter this sector finds itself navigating a long maze: licenses from GAMI, imposed partnerships with SAMI, approvals from military authorities, and funding from the Ministry of Finance.
Each entity has a different administrative path, and any delay in these paths kills any ambition toward innovation.
All these matters raise significant questions about the state of administrative and organizational stability in this sector, creating an image that resembles a state of "try and then change."
Let us compare this situation to what is happening in Turkey. We can take the companies ASELSAN and Baykar as examples. Baykar was established as a family company in 1975, as was ASELSAN in the same year. If we look at the administrative structure in both companies, we find it quite stable, and this administrative stability creates trust and enables long-term planning.
This does not mean calling for no changes in leadership at all, but the point is that what we see in SAMI is not just a change in leadership; it is a change in the thought itself, in the philosophy of management, and in plans and vision. This aspect needs further detail that we can discuss later.
The second difference is administrative freedom. Turkey – as I mentioned in a previous article – gradually moved away from a model where the military institution managed everything after 2016, to a new model overseen by civilian technocratic leadership in managing defense industries. This change has effectively changed everything, and I have previously outlined the reasons for the importance of this shift.
As for Saudi Arabia, even to this day, there is still a near-complete control of the military institution, represented by Prince Khalid bin Salman (the Minister of Defense), over the decision and vision. We should not confuse this point with the previous point regarding the change of leadership and the accompanying change in vision and management philosophy; they are entirely different matters and do not contradict each other at the same time.
We now reach the essential question: Why is the increase in the localization rate from 4% to 25% not a true indicator of success?
Let me start with a simple question: Does merely raising the percentage mean you have built a real industry? The answer is no. Because not all localization is considered industry.
Imagine, for example, that SAMI contracted with a Turkish company to manufacture a small part for a drone, and it stipulated that 30% of the production be local in Saudi Arabia. Is this good? I tell you: no, it is not good.
The problem here is that what happened is not building an industry, but simply that Saudi Arabia paid money to a foreign company to operate within it. And once the contract ends, the company closes its doors, takes the technology with it, and leaves. What’s worse is that the part that is actually transferred into Saudi Arabia is usually not the essence of real technology, while the most important part is kept outside.
This is an AI-generated English translation. The original text is in العربية
PhD Researcher in Defense Contracting and Cooperation Policies