Saudi Arabia has overhauled its industrial offset programme as the government works towards ambitious targets enshrined in its Vision 2030 programme.
Speaking to Jane's on 11 November, His Excellency Ahmed bin Abdul Aziz Al-Ohali, governor of General Authority for Military Industries (GAMI), explained that the new Industrial Participation Program (IPP) includes improved governance mechanisms and greater transparency, as well as incentives to manufacturers that commit to add value, transfer technology, and provide employment opportunities for Saudi nationals.
Al-Ohali was appointed as governor in March 2019 after 20 years as CEO of Saudi petrochemical company Sipchem. He reports directly to GAMI chairman Crown Prince Mohammad bin Salman bin Abdulaziz Al Saud, who is widely seen as the modernising force behind Vision 2030.
Al-Ohali said GAMI launched the IPP "a few weeks ago" with a series of internal workshops involving local companies and original equipment manufacturers (OEMs) with a Saudi presence. This will be followed by engagement with international OEMs.
GAMI has not released specific details of the IPP, although Al-Ohali said it will not be applied retrospectively to offset projects from procurement contracts that began under the previous scheme. Asked whether the IPP includes different performance metrics, he said plans to modify the parameters have been shared with OEMs operating in Saudi Arabia and "we will share it internationally". Feedback so far is positive "and we believe it will be more successful and more acceptable [to industry]. Our aim is to have a win-win programme for us, for OEMs, and for local industry", he added.
GAMI expects the IPP to be a cornerstone for its efforts to boost local defence production in line with government policy. Saudi Arabia has a target to spend 50% of defence procurement expenditure on companies inside the kingdom by 2030 (the total in 2016 was just 2%).
Want to read more? For analysis on this article and access to all our insight content, please enquire about our subscription options at ihsmarkit.com/janes