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Saudi Arabia Defence and Security Report Q1 2011
Business Monitor International, Dec 2010, Pages: 94
The Saudi Arabia Defence and Security Report provides industry professionals and strategists, corporate analysts, defence and security associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Saudi Arabia's defence and security industry.
Saudi Arabia has embarked on a massive arms deal with the US, indeed the largest ever between the two countries. On October 20 2010, US President Barack Obama notified the US Congress of the proposed US$60bn arms package to Saudi Arabia, which is expected to be approved.
The package includes: 84 new F-15 fighters (manufactured by Boeing), with upgrades for 70 more, and three helicopter types – 70 Apaches, 36 Little Birds (both also made by Boeing), and 72 Black Hawks (made by Sikorski). In addition, the US is discussing a US$30bn package to upgrade Saudi Arabia’s navy. Further, discussions are continuing on the upgrading of Saudi ballistic missile defences through the purchase of the THAAD – Terminal High Altitude Area Defence – system (built by Lockheed Martin with radars supplied by Raytheon). The deal helps to bolster the US ally’s strength in the region at a time when Iran’s power is also increasing, and also assists in dealing with terrorist threats in the region. On October 30 2010, two sophisticated bombs were detected on freight aircraft on their way to the US, that had originated in the neighbouring country of Yemen. The bombs were hidden in parcels sent via both UPS and FedEx. The parcel bombs, and others found like them, are widely regarded to have been the work of the Yemen-based branch of al-Qaeda. According to Research Director of the Centre for Asymmetric Threat Studies at the Swedish National Defence College Magnus Ranstorp: ‘Yemen has become the new Afghanistan.’
Saudi Arabia’s relations with other neighbouring states continue to improve, following its consistent support for flood-hit Pakistan. Adding to this, the Saudi king also highlighted the deep relations between Saudi Arabia and Jordan during a meeting with King Abdallah of Jordan. In September 2010, Saudi King Abdullah and Iranian President Mahmoud Ahmadinejad discussed regional affairs involving the two countries. Saudi Arabia is questioning Iran’s increasing influence in Lebanese politics. Last month, Iran’s President Ahmadinejad visited Lebanon, honouring Shiite militant group Hezbollah (seen as Iran’s Shiite proxy in the country for the 2006 war in Israel). This visit had been intensely criticised by the US and Israel as a provocation and a threat to regional stability and relations between Iran and the Gulf Cooperation Council (GCC).
Saudi Arabia is the largest economy in the Middle East. While the economy is currently awash with oil revenues, the kingdom has embarked on a major economic diversification programme. We expect the Saudi budget to comfortably return to surplus in 2010, which will be maintained through 2014. While the government has only recently turned more optimistic vis-à-vis its initial projection of a 4.8% of GDP deficit for 2010, we maintain our long-held view and forecast a budget surplus of 7.6% this year and averaging 5.6% of GDP from 2011-2014.
The main challenges threatening Saudi Arabia’s long-term development are being tackled through the government’s 5-year spending plan. Indeed, the reliance on oil exports will slightly decrease over the coming years. Further, the government’s plan flags the importance of investment in education for aiding the transformation into a knowledge-based economy that is less reliant on imported skilled labour force.
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