Saudi Arabia - Defense and Security: Modernization to drive expenditure (Strategy, Performance and Risk Analysis)
In terms of the level of conflict, Saudi Arabia was ranked 12th globally as it faces protests in Riyadh, terror plots from IS, and a perceived nuclear threat from Iran. Saudi Arabia ranked highest in terms of regional militarization and sixth globally due to the government’s escalating modernization efforts. It ranked 18th globally in terms of societal safety and security, and 12th in terms of domestic and international conflict.
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Saudi Arabia’s defense industry revenue and capital expenditure to grow:
Saudi Arabia’s revenue expenditure stood at US$25.5 billion in 2016, and will post a forecast-period CAGR of 15.5% to reach US$56.8 billion in 2021. Modernization programs, the United States Military Training Mission to Saudi Arabia, and the construction of military prep schools will drive this growth. Saudi Arabia’s capital expenditure stood at US$20.3 billion in 2016, and will post a forecast-period CAGR of 14.0% to reach US$42.3 billion in 2021 due to the procurement of aircraft, C4ISR, and advanced weapon systems. The country’s total defense expenditure stood at US$45.8 billion in 2016, and will post a forecast-period CAGR of 14.9% to reach US$99.1 billion in 2021 due to the procurement of advanced military systems as a part of modernization efforts owing to the threats emanating from instability in Syria, Iraq, and Yemen.
Homeland security to drive capital expenditure:
Homeland security capital expenditure stood at US$6.6 billion in 2016 and will post a forecast-period CAGR of 3.1% to reach US$7.8 billion in 2021. Growth will be driven by investments in high-tech border fencing along boundaries with Iraq and Yemen to protect oil infrastructure, and combat human trafficking.
Strong ties with US and UK:
Strong military ties with US and UK provide Saudi Arabia with access to advanced military technology. In 2015, the US and Saudi Arabia signed a US$1.3 billion deal to develop a large consignment of air-ground munitions and spares. The deal includes the delivery of GBU-10 Paveway II Laser Guided Bombs, BLU-117/MK-84 2000lb General Purpose Bombs, and GBU-12 Paveway II LGBs. Saudi Arabia continued to expand its fleet of F-15 fighters and invested in modernizing their remaining fleet to F15SA standards. The country will also procure Typhoons from the UK.