Saudi Arabia: Defense Offsets and Development

At the beginning of the 21st century technology offsets have become commonplace for countries undertaking major overseas arms procurement. The purpose of offsets is to ensure that a proportion of funds spent are re-invested to achieve economic development goals. The development significance attached to offsets is such that after import substitution and export promotion strategies they are often viewed as a “third-way” for economic development of underdeveloped countries. Although this may be hyperbole, arms purchasing countries wield substantial market power. Market power has resided in the hands of arms importing developing countries for almost two decades now, coinciding with the draw-down in global defense expenditure and the consequent decline in defense procurement (reduced by 34 percent between 1987 and 1997).1