Industry, Logistics & Shipping

Saudi defence sector 'to contribute $61bn to GDP'

The Saudi defence sector is expected to contribute SR231.27 billion ($61.6 billion) to the kingdom’s gross domestic product (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 defence and security sector will expand at a compound annual growth rate (CAGR) of 1.48 per cent through 2020 and at a CAGR of 1.71 per cent over the next decade.

By 2028, the public administration and defence sector will generate 2.52 million private sector jobs within the kingdom, said the report.
  
Abdullah Jum’ah, Saudi co-chairman of the Business Council and former CEO of Saudi Aramco, said: “Historically, the Saudi Arabian defence sector has proven lucrative for foreign defence 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 towards the localisation objectives of Vision 2030 while still expanding opportunities for the private sector across the training services, cybersecurity, MRO activities, and command and control segments,” he added.

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 per cent and reaching a market value of SR19.12 billion ($5.09 billion) by 2022.

Moreover, of the foreign companies that have transacted with the Saudi Arabian government, US companies have supplied the largest amount of defence articles to the Saudi Arabian armed forces.

With involvement from US companies in developing Saudi Arabia’s local defence expertise, Saudi Arabia’s labour productivity for manufacturing is anticipated to grow at one of the greatest long-term rates among industries, with a CAGR of 1.83 per cent through 2030.

According to the latest figures, in 2017, Saudi Arabia was the third largest defence spender globally following the US and China. In 2019, Saudi Arabia announced a military budget of SR191 billion ($50.92 billion), with defence and military accounting for 17.3 per cent of the kingdom’s total SR1.11 trillion ($295.94 billion) 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 labour localisation, it stated. – TradeArabia News Service