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Saudi plans to build aerospace industry

Saudi Arabia: Saturday, September 15 - 2007 @ 14:36

Diplomats say that both countries are committed to concluding the defence agreement which is expected to be the most ambitious and complex yet reached by the kingdom with the UK, or any other supplier of military equipment.

A history of deals

The core deal involves an estimated $40bn delivery of 72 Eurofighter aircraft, designated by the British Royal Air Force as the Typhoon. Another $9bn is thought likely to be spent on acquiring armaments, spare parts and training services for the aircraft.

BAE Systems, previously known as British Aerospace, has had a long and lucrative relationship with the kingdom since 1966, when Lightning fighter and Strikemaster trainer aircraft, as well as surface to air missile systems and support, were sold for the then enormous sum of $2bn.

Much larger contracts for the company followed notably in 1986 when 72 Tornado fighter bombers, 30 Hawk advanced jet trainer aircraft and 30 Pilatus PC-9 initial trainer aircraft were sold. A second phase of the deal, known as Al Yamamah, came in 1988 with an additional order for Tornado and Hawk aircraft, as well as helicopters and minesweepers.

Training and employing Saudis

BAE’s CEO Mike Turner says that the Al Yamamah programme has resulted in $43bn worth of orders since 1985. As a result, the company is a major employer in the kingdom, retaining almost 5,000 staff, more than half of them Saudis.

Since 1966, some 19,000 Saudis have been trained at the Technical Training Studies Institute run by BAE. The company says it has trained 2,000 Saudi pilots and other air crew and another 2,000 ground support officers.

A unique element in the new contract will involve at least half the aircraft being built in the kingdom at a purpose built aerospace industrial site that could ultimately provide employment for thousands more Saudis.

The nucleus of an aerospace industry does already exist in the kingdom. Maintenance of Saudi Tornado aircraft is, for example, carried out by the Alsalam Aircraft Company and the Aircraft Accessories and Components Company, established as part of a Boeing offset venture.

Developing the industrial base

BAE Systems has also been involved in orchestrating the establishment of new industries in the kingdom through an economic offset programme since 1985. The latest memorandum of understanding involves UK support for the development of a regional defence centre of excellence.

Unlike US and French defence procurement arrangements with the kingdom, the Al Yamamah deals though have not included offset contractual obligations. BAE Systems as the prime UK contractor has undertaken to use its best endeavours to achieve investment targets. Whether or not this will be sufficient in future remains to be seen, since the proposal to build Typhoon aircraft in the kingdom raises any new deal to a whole new level.

The aim, BAE says, is to develop an engineering and manufacturing footprint in the kingdom that will result in original equipment manufacture in Saudi Arabia and provide a platform for aerospace exports.

See also:
New era begins for Saudi aviation
BAE in $41bn Saudi deal

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Saturday, September 15- 2007 @ 14:36 UAE local time (GMT+4) Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Mediaquest FZ LLC.

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