INTERVIEW: Head of SAMI explains how he wants to build Saudi Arabia’s defenses through homegrown industry

INTERVIEW: Head of SAMI explains how he wants to build Saudi Arabia’s defenses through homegrown industry
Illustration by Luis Grañena
Short Url
Updated 10 January 2021

INTERVIEW: Head of SAMI explains how he wants to build Saudi Arabia’s defenses through homegrown industry

INTERVIEW: Head of SAMI explains how he wants to build Saudi Arabia’s defenses through homegrown industry
  • The head of SAMI, Saudi Arabia’s military manufacturer, on the mission to grow an indigenous defense giant

Saudi Arabia spends more on defense than all but a few other countries, but until now it has imported virtually all of its military equipment from abroad. Walid Abdulmajid Abukhaled aims to change that completely and irrevocably.

Abukhaled, with a long career in the international defense industry, is CEO of Saudi Arabian Military Industries (SAMI), the company charged with expanding the Kingdom’s indigenous defense industry, with the goal of localizing at least 50 percent of supply by 2030.

That is a challenging target compared with a level of around 3 percent when SAMI was set up in 2017, but he is confident he can achieve it. “I’m shooting for a minimum of 60 percent, maybe more,” he told Arab News.

His ambitious goal received a significant boost recently when SAMI acquired the Advanced Electronics Co. (AEC), buying out the 50 percent stake held by British defense giant BAE Systems.

It was quite a coup for SAMI to acquire a company that Abukhaled described as the “jewel of defense electronics in the region,” making it a 100 percent Saudi-owned company for the first time in its 32 year history. 

No value was formally put on the acquisition when it was announced, but it was “definitely in the billions,” he said.

SAMI was set up with five main divisions: Aeronautics, land systems, defense electronics, weapons and missiles, and emerging technologies. 

One of its main mandates — under the regulatory supervision of the General Authorities for Military Industries — is to support research and development of new defense technology.

The aim is for SAMI to be ranked among the top 25 defense companies in the world by 2030, and the acquisition of AEC has given it a big push in that direction, taking many years off the timescale toward that goal.

The deal also completed a personal journey for Abukhaled, who was a senior regional executive of BAE Systems for several years. 

Despite the change of ownership, he expects the relationship with the UK company to continue and become even more supportive in the new setup.

“They’ve been in the Kingdom for 50 years, and I have no doubt they’ll continue their full commitment to AEC projects,” he said.

The deal also brings AEC under the umbrella of the Public Investment Fund (PIF) — the Kingdom’s sovereign wealth fund and owner of SAMI — and the multibillion-dollar resources the PIF has. 

“Any investment has to make big sense, and it has to have synergy, and it should be aligned to Vision 2030,” Abukhaled stressed, adding that the PIF has been “extremely supportive” of SAMI.

Throughout its history, Saudi Arabia has relied on international partnerships to supply its defense needs, and has remained “one of the safest places to live in the region for the past 60 years,” Abukhaled said. So what has changed now to prompt the move to grow its own defense industry?

“I think what’s changed is that we have an amazing leader now, with great vision to make our economy diversified from being totally dependent on oil,” he said.


BIO

BORN: 1966, AlUla, Saudi Arabia.

EDUCATION

  • Secondary school in Great Yarmouth, UK.
  • Degree in engineering, University of South Florida, Tampa, US.
  • Executive education at University of Pennsylvania.

CAREER

  • Head of strategy, BAE Systems.
  • Board director, International System Engineering.
  • Board director, Advanced Electronics Co.
  • Chairman, Aircraft Accessories and Components Co.
  • President and CEO (KSA and Bahrain), General Electric.
  • Deputy minister for industrial affairs, Saudi Ministry of Commerce.
  • CEO Middle East, Northrop Grumman.
  • CEO, Saudi Arabian Military Industries.

“We have one of the largest defense budgets in the world, and it’s an unusual opportunity for the Kingdom to ensure that this industry can localize to the point where we can satisfy our own needs, and then look regionally and abroad in the future. It should’ve happened 40 or 50 years ago.”

The global defense industry is a multitrillion-dollar business, at the cutting edge of technology and extremely competitive between American, European and Asian companies. 

It is also deeply involved in the sensitive world of international politics, and at the sharp end of geopolitical tensions.

Abukhaled recognizes that there are limitations as to the kind of equipment and systems the Kingdom will be able to manufacture on its own.

“To design and manufacture very sophisticated fifth-generation fighter jets, for example, isn’t going to happen in the near future. It’s a huge amount of investment,” he said.

“But I think I’d turn the question around and ask what kind of things we can’t make. There are so many things that can be done immediately. Maintenance, repair and overhaul for example, UAVs (unmanned aerial vehicles), defense electronics, land systems — all these are feasible now.”

SAMI already has in its portfolio the Jeddah-based Aircraft Accessories and Components Co., one of the largest providers of maintenance and overhaul services in the Middle East.

In the highly innovative sector of defense electronics and avionics, SAMI is ready to take on the world. 

“UAV is the future of aviation. In the near future, I’ll be very surprised if any country announced a new product in fighter jets that men actually fly,” Abukhaled said.

“For Saudi Arabia, an unmanned fighter plane is absolutely doable. We’re already in collaboration with some Saudi research centers to work on unmanned planes.”

Such ambitious plans are now feasible because Saudi Arabia has a cadre of well-trained and experienced engineers who have learned their skill at some of the biggest international defense companies, and are ready to apply those skills at home.

“There are so many thousands and thousands of Saudis who studied abroad in the best universities in the world, and they’re coming back home and they’re doing great. We really have great talent that we’re so proud of in the Kingdom,” Abukhaled said.

AEC’s workforce is 85 percent Saudi citizens, and the plan to further localize SAMI’s growing 2,500-strong workforce is a key element in his strategy.

“Without local talent I don’t think there will be a future, so preserving that is absolutely vital. We want to attract the best of the best, really that cream of the cream, when it comes to Saudi talents,” he said, highlighting the establishment of the SAMI Academy as a key part of the localization plan.

Saudi Arabia’s other great advantage is the wealth of international partnerships it has built up over decades as a good customer in the defense business, in addition to the relationship it has with BAE Systems. 

Abukhaled believes these relationships will remain and become stronger as SAMI seeks to build up its own industry at home.

“The world leaders in defense are the US, the UK and Europe, and they’ll be our key focus. There are good companies in South Africa and in South Korea that we’ll work with,” he said.

Saudi Arabia has been developing closer economic and investment ties with Russia and China in recent years, but has largely held off doing business with these countries in the defense sector. Might this change as SAMI seeks to broaden its group of international partners?

“We’ll always get direction from the leadership of the Kingdom. My focus is that we already have partnerships with many other companies. I want to do what’s best for my country and what’s best for my partners because I made a commitment to them,” Abukhaled said.

“I’m not going to upset my existing partners, because my commitment to our partners is that we’ll work with full transparency. We’ll do what’s best for both of us.”

The other big issue in the international sphere is that Saudi Arabia is the subject of pressure in political circles in the US and European countries, where some politicians have talked about restrictions on sales of defense equipment to the Kingdom.

US President-elect Joe Biden, was outspoken on the campaign trail about considering further limitations on defense sales to Saudi Arabia, a move that could — counterintuitively — be seen as an impetus to SAMI’s strategy of building up an indigenous defense industry.

“We have to do what’s best for the Kingdom of Saudi Arabia. We fully respect our leadership to point us in the right direction and take the right decisions,” said Abukhaled.

“Like any other company, we have to work with restrictions and we’ll always respect them. But we’ll have to do what’s best for the Kingdom, and this will come through the direction of the leadership of the Kingdom.”

In some ways, with the restoration of relations between Qatar and Saudi Arabia, as well as between Israel and several Arab countries, the region looks like a less dangerous place. But the big confrontation between Iran and its Arab neighbors shows no sign of resolution.

Such matters, Abukhaled says, are beyond his area of responsibility at SAMI. “Again, we follow the direction of our great leadership, and we do what’s best for the Kingdom,” he said.


Many global stocks lower after Wall St. decline

Many global stocks lower after Wall St. decline
Updated 21 April 2021

Many global stocks lower after Wall St. decline

Many global stocks lower after Wall St. decline
  • London and Frankfurt opened lower, while Shanghai and Tokyo also declined

BEIJING: Major global stock markets were mostly lower Tuesday after Wall Street retreated from record highs.

London and Frankfurt opened lower, while Shanghai and Tokyo also declined. Hong Kong and Seoul advanced.

Wall Street futures gained a day after the benchmark S&P 500 index lost 0.5 percent on declines for tech, bank and energy stocks.

Investor optimism has been boosted by higher corporate profits, US hiring and consumer confidence. Still, traders are uneasy about a rise in inflation and interest rates and renewed coronavirus infections that prompted some governments to reimpose anti-disease controls.

“Wall Street could be in for a few choppy trading weeks as more of the same strong earnings beats becomes the theme,” said Edward Moya of Oanda in a report.

In early trading, the FTSE 100 in London declined 0.3 percent to 6,982.77 and the DAX in Frankfurt lost 0.2 percent to 15,335.68. The CAC 40 in Paris shed 0.6 percent to 6,256.90. On Wall Street, futures for the S&P 500 and the Dow Jones Industrial Average were up less than 0.1 percent.

On Monday, the Dow lost 0.4 percent. Both the S&P 500 and the Dow hit highs on Friday.

Capital One lost 0.9 percent and Valero Energy slid 2.3 percent.

The tech-heavy Nasdaq composite slid 1 percent. Chipmaker Intel fell 1.7 percent.

In Asia, the Shanghai Composite Index lost 0.1 percent to 3,472.94 while the Nikkei 225 in Tokyo tumbled 2 percent to 29,100.38. The Hang Seng in Hong Kong gained 0.1 percent to 29,135.73.

The Kospi in Seoul rose 0.7 percent to 3,220.70 while the S&P-ASX 200 in Sydney sank 0.7 percent to 7,017.80.

India’s Sensex was up less than 0.1 percent at 47,978.05. New Zealand, Singapore and Jakarta declined while Bangkok advanced.

This week, 81 of the 500 members of the S&P 500 index are due to report earnings, as are 10 of the 30 members of the Dow, including Johnson & Johnson, Verizon Communications and Intel. On average, analysts expect quarterly profits across the S&P 500 to be up 24 percent from a year earlier, according to FactSet. In energy markets, benchmark US crude rose 82 cents to $64.25 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, used to price international oils, gained 90 cents to $67.95 per barrel in London.

The dollar advanced to 108.40 yen from Monday’s 108.11 yen. The euro gained to $1.2070 from $1.2039.


Surge in demand for companies looking to set up in KSA

Surge in demand for companies looking to set up in KSA
Updated 21 April 2021

Surge in demand for companies looking to set up in KSA

Surge in demand for companies looking to set up in KSA
  • Consultants have seen a 50 percent rise in activity in the first quarter of 2021

RIYADH: Sovereign AEI, a firm which specializes in helping companies set up operations in the Kingdom, has seen a spike in business activity.

“The beginning of this year has been very encouraging as we have seen a 40 to 50 percent increase in Saudi Arabia market-entry activity, when compared to pre-pandemic levels,” Stuart D’Souza, co-founder and CEO of Arabian Enterprise Incubators (AEI), one of the partner firms that makes up Sovereign AEI, told Arab News.

As part of the ambitious Riyadh Strategy 2030 announced by Crown Prince Mohammed bin Salman earlier this year, the government wants to attract up to 500 international companies to set up their regional bases in the city, create around 35,000 new jobs for Saudi locals, and double the capital’s population.

The strategy aims to invest up to SR70 billion ($18.67 billion) into the national economy by the end of the decade. The strategy is already paying dividends.

“Sovereign AEI is helping to facilitate this new strategy. Our products and services are conducive with Riyadh Strategy 2030 by helping new and existing businesses capitalize on the expected significant growth forecast for the Kingdom,” Paul Arnold, managing director of Sovereign Saudi Arabia, told Arab News.

BACKGROUND

• The government wants to attract up to 500 international companies to set up their regional bases in the city, create around 35,000 new jobs for Saudi locals, and double the capital’s population.

• The strategy aims to invest up to SR70 billion ($18.67 billion) into the national economy by the end of the decade. The strategy is already paying dividends.

“We are also encouraging businesses to look ahead and establish a physical presence in the Kingdom, while taking into consideration new criteria set to come into force by 2024, the specifics of which are yet to be formally announced,” he added.

Sovereign has been operating in Saudi Arabia for about 20 years and AEI since 2012. They formed their joint partnership in 2019.

In 2019, the company helped 600 businesses visit Saudi Arabia to investigate potential opportunities. Half were first-time visitors and over 70 percent went on to establish new business links in the Kingdom. AEI alone has helped over 1,500 foreign businesses to enter, establish or expand in Saudi Arabia since 2012.

Last year, despite the restrictions as a result of the pandemic, Sovereign AEI reported a 300 percent increase in corporate services in Saudi Arabia. The team is expecting this positive growth to continue in 2021.

“The Saudi market presents tremendous opportunities. Most companies are now aware of the potential of the market, the main pillars of Vision 2030 and the significant number of economic reforms carried out over the past 18 months. However, plotting a road map to success can be a challenge,” Arnold said.

“Our principles are to educate, de-risk and enable the client’s ability to enter, establish or expand in the Kingdom. Our robust performance in the first quarter is a testament to the attractive nature of the Saudi market and we continue to see a growing interest and increasing shift of client focus toward the Kingdom, as the country continues to unveil new strategic initiatives,” he added.


New oil price surge caps year of recovery since ‘Black Monday’

New oil price surge caps year of recovery since ‘Black Monday’
Updated 21 April 2021

New oil price surge caps year of recovery since ‘Black Monday’

New oil price surge caps year of recovery since ‘Black Monday’
  • Anniversary of US crude plunging to minus-$40 at start of pandemic recession

DUBAI: Oil prices resumed their surge on global markets on Tuesday as traders shrugged off the memory of “Black Monday” 2020, when some crude prices went into negative territory at the start of the pandemic recession.
Brent crude, the global benchmark, went above $68 a barrel for the first time in over a year, while West Texas Intermediate, which approached minus-$40 at the depth of the oil crisis exactly a year ago, leapt above $64.
The resurgence in the oil price — which has seen some experts suggesting the possibility of a “supercycle” in which crude goes back above $100 a barrel — is partly down to improved prospects as the global economy moves outs of pandemic lockdowns.
The global rollout of coronavirus vaccines has led economic experts to predict a sharp recovery in growth in 2021, with the International Monetary Fund recently forecasting a sharp rise in economic activity for the rest of the year. China last week said its economy had grown by 18.3 percent in the first quarter of the year.
But oil analysts believe the actions of OPEC+ — the producers’ alliance led by Saudi Arabia and Russia —had been the biggest factor in helping reduce the huge glut of oil that threatened to swamp the world market last spring.
Since last April, OPEC+ has taken more than 3 billion barrels of oil off the global market, through a combination of strong internal discipline and voluntary cuts by Saudi Arabia, the world’s biggest exporter.
Prince Abdul Aziz bin Salman, the Saudi Energy Minister and co-chairman of OPEC+, has repeatedly urged caution on the 23-member organization as COVID-19 cases re-emerge in some parts of the world. Europe and India are the latest causes of concern.
“The reality remains that the global picture is far from even, and the recovery is far from complete,” he told the last OPEC+ meeting.
The oil price bulls are encouraged by increasing demand from China, the biggest oil consumer in the world.
Figures from the country’s customs regulator, released on Tuesday, showed that crude oil imports from Saudi Arabia — its biggest supplier — had risen by nearly 9 percent in March, with strong domestic demand bolstered by a freeing up of supplies after port congestions.
Some analysts still believe Brent crude could hit $75 this year, and reckon $100 a barrel next year is a possibility.
But nobody appears to believe the volatile market conditions of last spring, and negative oil prices, will happen again.
Robin Mills, chief executive officer of consultancy Qamar Energy, told Arab News: “That was a pretty unusual set of circumstances.”
He added: “Never say never, and traders have short memories, but I think the fixes in place would make it unlikely to go negative again.”


Egypt targets investments of $80 billion

Egypt targets investments of $80 billion
Updated 21 April 2021

Egypt targets investments of $80 billion

Egypt targets investments of $80 billion
  • Plan forecasts 125 percent increase in funding for production sector

CAIRO: Egypt is aiming to raise EGP 1.25 trillion ($80 billion) as part of its investment plan for the fiscal year 2021/2022, according to the Egyptian Minister of Planning and Economic Development Hala Al-Saeed.

The investment plan forecasts a 125 percent increase in funding for the production sector, the minister said, along with a 30 percent increase for the country’s service sector.

Al-Saeed said the plan helps address the public spending commitments related to health and education and scientific research, as well funding for the continued efforts to combat the COVID-19 pandemic.

She said priority would be given to high-productivity sectors that drive sustainable economic growth in Egypt such as the manufacturing, communications, information technology and agriculture sectors.

According to the minister, the most important goals of the 2021/2022 sustainable development plan include addressing important social issues such as gender equality and public investments into green projects.


Korean envoy invites Saudi Arabia to GICC2021

Korean Ambassador Jo Byung-Wook during a meeting with Prince Saud bin Talal bin Badr and officials from Ministry of Municipal and Rural Affairs and Housing. (Supplied)
Korean Ambassador Jo Byung-Wook during a meeting with Prince Saud bin Talal bin Badr and officials from Ministry of Municipal and Rural Affairs and Housing. (Supplied)
Updated 20 April 2021

Korean envoy invites Saudi Arabia to GICC2021

Korean Ambassador Jo Byung-Wook during a meeting with Prince Saud bin Talal bin Badr and officials from Ministry of Municipal and Rural Affairs and Housing. (Supplied)
  • The annual conference provides an opportunity to present projects to potential Korean partners, and to hold personal consultations

RIYADH: South Korean Ambassador Jo Byung-Wook has invited Saudi Arabia to attend the Global Infrastructure Cooperation Conference (GICC2021).

The annual conference provides an opportunity to present projects to potential Korean partners, and to hold personal consultations.

The ambassador met Prince Saud bin Talal bin Badr, undersecretary at the Ministry of Municipal and Rural Affairs and Housing for housing subsidies, and general supervisor of the International Cooperation Department at the ministry in Riyadh.

GICC2021 is scheduled for “later this year,” the ambassador told Arab News, adding that the meeting “reviewed the close, friendly and cooperative relations” between the two countries, and “agreed to continue to expand bilateral cooperation in the housing sector.”

He said: “I commended the Saudi government’s efforts to help Saudi families own their house through the Sakani program, taking note of the signing of four agreements during the Sakani Forum held last Thursday in Riyadh.”

The Sakani program helped 70,000 families in the first quarter of 2021, surpassing its target of serving 51,000 families.

It was formed in 2017 by the Ministry of Housing and the Real Estate Development Fund, with the aim of facilitating home ownership in the Kingdom by creating new housing stock, allocating plots and homes to nationals, and financing their purchase. It has a goal of reaching 70 percent home ownership by 2030.

The program aims to serve 220,000 Saudi families this year by creating 50,000 housing units, facilitating the reservation of 30,000 residential land plots, and arranging 140,000 real estate loans. To date, Sakani has enabled more than 350,000 families to own homes.