Andreas Schwer, CEO, Saudi Arabian Military Industries: Interview

Interview: Andreas Schwer

What steps need to be taken when transferring knowledge and technology to new partners?

ANDREAS SCHWER: Transfer of technology and knowledge sharing are usually coupled with direct investment in Saudi Arabia. Foreign partners need to be assured that, upon sharing their technologies, they will receive a return on their investment.

Due to the sensitive nature of the defence industry, we also need to ensure that the knowledge shared with the Kingdom does not end up in the hands of competitors. This can be achieved by adhering to international data security standards and intellectual property rights (IPR) frameworks. It is also important to ensure that the government of the foreign company cannot retract permissions or terminate an ongoing contract. With this in mind, partnerships that include government-to-government frameworks are preferred, since they provide long-term access to IPR.

How can the aerospace industry be enhanced through international industrial partnerships?

SCHWER: Saudi Arabia’s aerospace industry has entered a new phase of growth, laying the foundations for the development of a thriving ecosystem. Strategic partnerships with international entities are bringing the benefits of new technology and attracting further investments. For example, the Kingdom enjoys strong strategic ties with the UAE. Recent decisions will further strengthen these links by building partnerships and leveraging shared resources and expertise, such as making use of facilities in the UAE for developing maintenance, repair and operation products for Saudi Arabian companies. In exchange, these products can also be supplied to the UAE. We are optimistic that its growing aerospace industry will significantly contribute to the Kingdom’s GDP and help realise the country’s goals of localising half of its military spending and creating new job opportunities for its citizens, in line with Saudi Vision 2030 goals.

To what extent can the Kingdom’s raw materials be used to support producers of military equipment?

SCHWER: It is highly important that the Kingdom’s existing raw materials be leveraged, in order to enhance production capabilities. Steps are being taken to ensure local resources and facilities are used across the entire supply chain, rather than being limited to the final assembly stage. When foreign partners are involved, they are invited to support local industries by establishing production lines and manufacturing processes within Saudi Arabia.

In addition, it is a contractual requirement for foreign partners to bring their existing supply chains into the Kingdom, allowing for the production of components to begin immediately, with no compromise on quality. This encourages local companies to participate, as they can benefit from access to the foreign partner’s expertise, technology, production components and materials. While it may take some time to set up a local supply chain, once the capabilities are in place, the process is greatly enhanced and greater efficiencies can be achieved.

How will the role of international defence firms and foreign investors evolve in the long term?

SCHWER: Foreign companies are expected to begin setting up local production lines, at first in the military industry, and then in the commercial market. In support of these efforts, the investment framework requires further enhancement to encourage increased activity. Since the development of local production lines by foreign firms will largely be driven by guaranteed military contracts, these companies stand to benefit from a reduced level of risk, relative to those they would face if they were entering the Saudi market from a purely commercial standpoint. These factors present exciting opportunities for foreign firms, and also generate more attractive conditions for investors in the local commercial market.