Israel is the world's third largest defense exporter, after the US and Russia. Israeli defense companies signed $6.3 billion worth of new export contracts for weapons, munitions, technologies, and equipment during 2008, and $20.3 billion in 2005-08, according to the Ministry of Defense, disclosed by "Defense News" in this week's edition.
The Ministry of Defense figures are rather different from figures cited in a report by the US Congressional Research Service, a unit of the Library of Congress, which provides information, analyses, and other services to representatives and senators. A Congressional Research Service study says that Israel was the world's eighth largest exporter in 2008 and the ninth largest in 2005-08.
The Congressional Research Service says that Israeli companies signed new contracts worth $500 million in 2008, less than a tenth of the Ministry of Defense figure. It adds that Israeli companies signed new contracts worth $5.3 billion in 2005-08, a quarter of the Ministry of Defense figure.
The Ministry of Defense published the export figures simultaneously with the Association of the United States Army (AUSA) 2009 Annual Meeting and Exposition this week in Washington DC. Hundreds of defense companies from around the world are participating, including leading Israeli firms Israel Aerospace Industries Ltd. (IAI) (TASE: ARSP.B1), Israel Military Industries Ltd. (IMI), Rafael Advanced Defense Systems Ltd., and Elbit Systems Ltd. (Nasdaq: ESLT; TASE: ESLT), as well as numerous smaller companies.
Ministry of Defense officials and defense companies' executives cannot explain the difference between the ministry's export figures and those of the Congressional Research Service study. "Defense News" quotes a SIBAT Ministry of Defense Foreign Defense Assistance and Defense Export Organization official as saying that that the ministry's accounting procedures were strict and consistent, and that no contract was recorded unless it was signed and a down payment made.
Congressional Research Service analyst Richard Grimmet also found it difficult to explain the difference to "Defense News". He said that one possible reason was that the US military sources that provided his data focused only on sales of large platforms (such as ships, planes, and tanks), and did not include transactions for R&D, subsystems, training services, upgrades, and technical support.
He said that countries such as Israel, which except for a few cases do not manufacture large platforms. The methodologies used by the US administration could therefore result in large differences.
The Ministry of Defense states that the US was the largest customer for Israeli defense companies for the second consecutive year, with contracts worth $1.5 billion. The largest exporters to the US were Elbit Systems and its joint venture with Rockwell Collins Inc. (NYSE: COL), Vision Systems International LLC (VSI), signing $907 million in new contracts with the US in 2008.
IAI is another major exporter to the US, with $1 billion in contracts with US and Canadian customers. This figure includes civilian sales, such as executive jets. Rafael has only a small share of Israeli exports to the US, with $160 million in signed contracts, out of a total of $1.4 billion in total contracts signed in 2008.
Israeli defense exports to Asia, including India, totaled $1.5 billion in 2008, the same as to the US. The figure includes Rafael's $250 million contract with India for the Spyder low-level quick-reaction surface-to-air missile system.
Published by Globes [online], Israel business news - www.globes-online.com - on October 6, 2009
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