Non-Subscriber Extract
Interview: Ian King, Chief Operating Officer, BAE Systems
By Keri Wagstaff-Smith
23 April 2008
BAE Systems prides itself on being a prime contractor with a different approach to penetrating the defence market, acting as a domestic supplier in its home markets and maintaining its status as a "robust" player, according to Ian King, the group's chief operating officer in London.
"The slight difference in Saudi Arabia is that we have to create an industrial base ... Rather than it being a burden, we see this as a differentiator in our strategy," King said, discussing the group's presence in Saudi Arabia. "It's a country that wants to spend money on defence and you're creating what is - in UK parlance - a defence industrial base within the kingdom of Saudi Arabia and that's what they want us to do. That's our commitment.
"We've had lots of commitments for training and education; we've got investments in what are called the Economic Offset Companies over there - the companies with licences to trade in defence and aerospace - and we've been building up shareholdings in those. We have commitments to transfer [technology] on the back of Typhoon - the Salam [al-Salam programme] - to make sure support can be handled within the kingdom."
Discussing offset as a means to win contracts, King said: "Offset has always been a major part of defence and export contracting in truth, but I think there's a changing face of it. Generally you struggle to meet offset - certainly direct offset - because [in Saudi Arabia] there wasn't the industrial base to put the direct offset in... Saudi Arabia said: 'Fine, create the defence industrial base' and, far from being something that should deter us from doing business, [we see that as] an advantage and a discriminator to us, because it means that if we can do it, we are part of the industrial fabric from then on in and with a much stronger position in the country."
Through the group's recent acquisition - due to be finalised by the start of May - of Australia's largest domestically owned defence company, Tenix Defence, BAE Systems has found itself in a similar situation in Australia to that in Saudi Arabia in that it is now positioning itself as a local player and, according to King, has created a "mini-BAE Systems UK" in Australia.