174 dead and more than 320 injured is the toll so far in the vicious terror attack in Mumbai, India's business capital, by a group calling itself the "Dekan Mujahedin." The terrorists launched their attack - which was reportedly connected to the ongoing dispute between India and Pakistan over the Kashmir province - at a number of locations throughout the city, throwing grenades and shooting indiscriminately with the goal of killing as many people as possible. Hostages were seized in two of the city's luxury hotels - The Taj Mahal Palace and the Oberoi - Trident, including a number of Israelis who were later released unharmed.
The prayers and hopes for the Chabad representatives in Mumbai, Rabbi Gavriel Holtzberg and his wife Rivka, and the kashrut supervisors Leibish Teitelbaum and Ben Zion Korman and the other hostages held together with them in the Chabad building finally faded last Friday when it emerged that they had all been murdered.
Officials in Israel believe that there will be economic consequences to the terror attack - which was different in modus operandi from previous attacks in India. India will waste little time in doing what the US did in the aftermath of the September 11 attack. It will conduct a thorough review, which is likely bring about an increase in demand for products, services, and knowledge related to security in general, and homeland security in particular.
The Israel Export and International Cooperation Institute (IEICI) believes that Israel, considered a supplier with an outstanding record in these fields, could benefit from India's misfortune. Says chairman David Arzi, "Presumably, because of what has happened, the Indians will allocate more funding for the purchase of sophisticated anti-terrorism security equipment, such as warning systems, cameras, control systems, electronic systems and more. Israelis sell them to the Indians anyway, but there's always room to sell more."
Israel believes that the terror attack in the heart of India is likely to bring a further deterioration in the already strained relations between the two neighboring nuclear powers, India and Pakistan, triggering a spike in demand for arms and military equipment. The scale of Israeli defense exports to India is unknown, although it is estimated at in the billions of dollars. Israel avoids disclosing information about its defense deals throughout the world, India included. However, "The Times of India" recently reported that Israel is India's second largest arms supplier. Security officials in Israel rank the US as the number one destination for Israeli defense exports; Asia, including India, is in second place, followed by Europe, Eastern Europe, and last, Africa.
Other estimates talk of defense exports to the sub-continent as accounting for 40% of Israel's total defense exports. Israel and India have struck a number of large arms deals over the years, including the Phalcon deal - the sale of Phalcon airborne early warning and control systems (AWACS) worth $1.3 billion, which went through after the US lifted its opposition to the deal. In another deal, closed in February this year, Israel Aerospace Industries Ltd. (IAI) (TASE: ARSP.B1) will develop and produce missile systems worth $640 million for India. It is also awaiting approval for a further dea,l worth $1.5 billion, for the development and production of missile systems and pilotless drones.
As mentioned earlier, Israel also has an outstanding track record as an exporter in the homeland security sector. The IEICI estimates that exports in this category to India have nearly doubled from $384 million in 2006 to $750 million today, although India is still considered underdeveloped as far as this industry is concerned. This market in India is expected to grow further thanks to development and construction in areas that require security and safety solutions, such as technology parks, commercial zones, petrochemical and industrial centers, hotels, hospitals, premises occupied by IT providers (a field that requires advanced security equipment), transport hubs, and airports. Aviation security is being currently being privatized in India. 20 small and mid-size airports have been privatized in India so far, and Israeli companies are among the bidders for the various tenders in this sector). India is due to host the 2010 Commonwealth Games, in which 10,000 athletes will participate, and Israel has solutions to offer when it comes to security for the event.
India - The fourth largest destination for Israeli exports
Israel and India have also developed very productive trade relations in areas other than defense over the years since the two countries established diplomatic relations in 1992. India is considered Israel's tenth largest trading partner. Trade with India from January to September totaled $3.2 billion ($1.85 billion in exports and $1.37 billion imports), 32% more than in the corresponding period in 2007. India is high on Israel's list of export destinations, and is ranked fourth behind the US, Belgium and Hong Kong, and second among export destinations in Asia after Hong Kong.
The productive collaboration between the two countries is especially marked in diamonds, which account for 48% of total Israeli exports to India. The figure is so high because diamonds are shipped from Israel for polishing in India (and then returned), because polishing costs are much lower there. India has in fact overtaken Israel in recent years as a diamond polishing empire. Lev Leviev is one of India's leading diamond traders.
Collaboration between Israel and India also takes place in other areas such as agriculture, water, computing, telecommunications equipment, medical equipment, and real estate. Among the companies that have spotted the potential of the Indian real estate market are Elbit Imaging (Nasdaq: EMITF; TASE: EMIT), Housing and Construction Holding Co.(Shikun u'Binui) (TASE: HUCN), Gazit-Globe (TASE: GLOB), and Electra Real Estate Ltd. (TASE:ELCRE). However "The Economist" says that India is the only Asian country now showing clear signs of a bubble in its property market.
According to IEICI figures, 1,094 Israeli companies operated in India in 2007, 11% more than in 2006. Analysis of the exporter mix reveals that 50% of the goods shipped to India are exported by 12 large exporters such as Dead Sea Works, ECI Telecom , and Comverse Technology (Pink Sheets: CMVT.PK). Among the other companies active in India are NICE Systems (Nasdaq: NICE; TASE: NICE), Netafim Ltd., Iscar Ltd., Palram Industries (TASE: PLRM), and Amdocs (NYSE: DOX). Israeli imports from India also consist largely of diamonds (after polishing), textiles, plastics and rubber.
The global crisis has caused growth in India to slow to 7.9% in the second quarter from 8.8% in the first, but the rate of growth its economy is enjoying is still far higher than the near zero growth in the West. According to the forecasts, India will continue to post impressive rates of growth in the coming years as well offering a tempting investment climate. But alongside the growth and high-tech revolution, 800 million people in India live in appalling poverty and the gap between rich and poor is just getting larger.
The attack will arouse demand
Uriel Bin, CEO of perimeter security systems company D-Fence Ltd. sells smart perimeter security solutions (fences) to the Indians. Over the past two years he has sold systems to wealthy Indians in Mubmai and New Delhi seeking to secure their private homes. D-Fence's systems are also suited for use in securing public buildings, factories, airports, prisons, military camps and border control.
Bin says that there has been no urgent wave of fresh orders from India in the aftermath of the terror attack. "It won't happen today and it won't tomorrow either," he says adding. "At the moment we have no intention of capitalizing on this tragedy and offering our products to the Indians. I presume that the terror attack will stimulate demand for protection and security on its own. Regrettably, the Indians have joined the list of countries that have suffered brutal terror, and I believe that will awaken something in them."
D-Fence, whose solutions protect Ben Gurion Airport, as well as dozens of private homes and communities, and which are also exported to South Korea, Mexico, Mongolia, and a number of European countries, is mindful of the increasing instability that India has been experiencing over the last two years. "The Indians are becoming increasingly concerned, especially about the ever widening social gaps between the rich and poor," says Bin.
Globes: Is it hard to sell security to the Indians?
Bin:"A spiritual country like India finds it difficult to think about security. So we had a tough job to penetrate the market. But they now realize that something is changing and are becoming receptive. We were lucky to be able to team up with a local agent who was ready for this."
A security situation and recession are usually good times for security products and services.
"True. A recession increases the crime rate and, accordingly, the need for all kinds of defense and protection products. So does a problematic security situation."
Published by Globes [online], Israel business news - www.globes-online.com - on December 3, 2008
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