Tuesday, February 9, 2010

Saudi Arabia opens military supply to local firms

Posted by newsonline at 3:42 PM 0 Comments

Saudi Arabia's defence ministry will for the first time allow local firms to bid to supply basic materials excluding arms with the long-term goal of encouraging a domestic military industry, officials said.

The move, which will open a field that was reserved for foreign manufacturers, will first involve some 15,000 items that range from plastic to pipes, covers for jet engines and batteries, Colonel Attiyah al-Maliki said at a meeting with businessmen in Riyadh's chamber of commerce late on Saturday.

Saudi authorities expect the move -- backed by assistant Defence Minister Khaled bin Sultan -- to encourage foreign suppliers to partner with Saudi peers and set up shop within the kingdom so that they can continue to qualify as suppliers.

The defence ministry created a Central Committee for Local Industrialization which comprises business leaders and defence officials to "develop local capabilities, ensure speedy deliveries and reduce costs", Colonel Maliki said.

Abdul-Rahman al-Zamil, a member of the committee and chairman of a large family-owned industrial group, welcomed the move.

"This is a breakthrough for local firms because before all purchases were internationally tendered or bought from abroad by local suppliers. We know that these products can be made locally," Zamil said at the meeting.

None of the items are weapons or heavy military gear.

"The defence ministry will gradually eliminate from international tenders all items that can be produced here ... We are working for the next 20 years," Zamil said.

"This is just the beginning ... So the field remains open," said Colonel Maliki. "We will gradually open up to more sophisticated industries. Nothing should prevent Saudi Arabia from making its own fighter jets."

LUCRATIVE MARKET

Saudi Arabia is among the most lucrative markets in the region for international arms makers. It spent 154.8 billion riyals in 2009 -- or 32.6 percent of its GDP -- on defence and national security, according to central bank data. This sum includes salaries of the military and security forces. [ID:nLI7689] [ID:nLM315528]

The announcement comes after Saudi forces fought their first war in more than 15 years against Yemeni Shi'ite rebels.

"At times of crises people understand better the importance of getting supplies locally ... At times of high need, exporters impose their price and you have to take it," said Zamil.

Saudi Arabia, like other Gulf Arab countries, is wary of a relatively prolific military industry developed locally by regional rival Iran.

Asked if the move was linked to these concerns, Zamil said: "The intention of the military establishment is to maximize military industrialization and localise as much as possible the needs ... such as maintenance of military equipment".

"We are a world leader in water desalination yet we import all of the desalination machinery," he added.

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