Saudi defense sector to continue strong growth

Abdullah Jum’ah

RIYADH —The Saudi defense sector is expected to contribute SR231.27 billion to the Kingdom’s GDP by 2020, revealed a new report by the US-Saudi Arabian Business Council.

According to the Council’s “Defense, Security, and Aerospace” report, demand in the Saudi Arabian defense and security sector will expand at a compound annual growth rate (CAGR) of 1.48 percent through 2020 and at a CAGR of 1.71 percent over the next decade. By 2028, the public administration and defense sector will generate 2.52 million private sector jobs within the Kingdom.

“Historically, the Saudi Arabian defense sector has proven lucrative for foreign defense contractors given that the country is among the leading arms importers with growing domestic capabilities. In the coming years, we expect the Kingdom to progress toward the localization objectives of Vision 2030 while still expanding opportunities for the private sector across the training services, cybersecurity, MRO activities, and command and control segments,” said Abdullah Jum’ah, Saudi Co-Chairman of the Business Council and Former CEO of Saudi Aramco.

The report further indicated that opportunities have emerged in the market for personal and perimeter security products. Key areas for capital investment in surveillance include construction, power, and transportation sectors. The market for cybersecurity is estimated to be one of the fastest growing segments, expanding at a CAGR of 15.3 percent and reaching a market value of SR19.12 billion by 2022.

Moreover, of the foreign companies that have transacted with the Saudi Arabian government, US companies have supplied the largest amount of defense articles to the Saudi Arabian armed forces. With involvement from US companies in developing Saudi Arabia’s local defense expertise, Saudi Arabia’s labor productivity for manufacturing is anticipated to grow at one of the greatest long-term rates among industries, with a CAGR of 1.83 percent through 2030.

According to the latest figures, in 2017, Saudi Arabia was the third largest defense spender globally following the United States and China. In 2019, Saudi Arabia announced a military budget of SR191 billion, with defense and military accounting for 17.3 percent of the Kingdom’s total SR1.11 trillion spending plans.

The report is one in a series of in-depth publications produced by the Business Council that highlights new economic trends and opportunities in Saudi Arabia. Previous reports have focused on industries of strategic growth for the Kingdom such as healthcare, infrastructure development, and labor localization. — SG