Defence: Vision 2030 supports defence spending Celine Fornaro >> Benjamin Heelan >> MLI (UK) MLI (UK) [email protected] [email protected] Saudi Arabia is increasing its regional role as a Security and Defence nation in the Middle East region. The 2030 Vision includes a higher local content in defence procurement which can be achieved through new contract awards and increased cooperation with large Original Equipment Manufacturers (OEMs). BAE is best positioned, in our view: it has been the in the country since 1966 with 5,000 local employees and Saudi Arabia represents 21% of BAE’s group sales. Saudi Arabia to build out military industrial base Defence is one of the key industries that Saudi is pinpointing for investment as part of its future strategy plans, and one where it is well placed to become a global leader, in our view. Saudi Arabia has one of the largest defence budgets globally, and we expect its focus on defence investment to remain broadly intact regardless of the price of oil. Due to regional tensions, defence spending will likely remain high for the foreseeable future, in our view. Saudi Vision 2030 and the associated National Transformation Plan (NTP) will likely increase focus on use of defence to achieve their economic diversification goals. This is likely to take place through capability deployment and employment in partnership with long term defence partners. Saudi authorities aim to raise the locally-sourced defence procurement from 2% today to 50% in 2030. Much of the countries’ defence spending is for foreign imports. According to consultancy IHS, 1 out of every 7 dollars spent on defence imports in 2015 was spent by Saudi Arabia, which was predicted by IHS to increase its defence imports by 52%yoy to US$9.8bn in 2015. In our view, Saudi strategy to increase locally manufactured defence content is justified, given their level of purchasing power with international contractors. However, this could trigger a round of new contracts’