Israel's defense exports exceeded $7.3 billion in 2010, according to provisional calculations of new orders from defense companies. The final figure will probably reach $7.4 billion, the all-time high reached in 2009, according to "Defense News", quoting Ministry of Defense officials. The officials cautioned, however, that Israel's defense industries face harder times ahead.
A senior Ministry of Defense official told "Defense News" that the final calculation of new contracts signed by defense companies last year would be completed in April, following thorough checks by SIBAT Ministry of Defense Foreign Defense Assistance and Defense Export Organization and the Israel Export and International Cooperation Institute.
Provisional calculations made in mid-March found that the value of new contracts in 2010 reached $7.3 billion, but that the amount would probably rise to reach the record set in 2009, when the calculations for support and follow-on contracts are completed.
The official said that, for two consecutive years, Israel has passed the $7 billion threshold, and that Israel is very proud to a member of the premier league of exporters of defense products.
As in previous years, 80% of Israel defense production was exported. The official said that, for a small country under constant threat, such as Israel, exports were critical for the existence of the industrial establishment, maintaining the strength of the IDF, and creating diplomatic relations through arms sales and defense cooperation.
Israel's defense exports have been rising for the past five years: from $3.5 billion in new orders in 2005; $4.9 billion in 2006; $5.6 billion in 2007, and $6.6 billion in 2008.
However, Ministry of Defense officials say that this trend will likely stall in the coming years. The reasons include steep budget cuts in Western European countries, a halt in exports to Turkey, continued restrictions on most defense exports to China, and rising competition from US and European defense industries in the Indian market, one of the largest target markets of Israeli defense companies. Another important reason is the erosion of opportunities to supply arms to US and NATO forces in Iraq and Afghanistan, as Western forces reduce their presence in the two arenas.
The senior Ministry of Defense official said that, in recent years, India and North America were Israel's largest defense trading partners. He added that Israel does not expect this to change in 2011 or 2012, but that Israel would have to work harder to keep its market share.
"Defense News" says that Israel's growing diplomatic isolation is also having a chilling effect on its defense exports. At a conference on the licensing of defense exports held in Jerusalem on March 15, a SIBAT official said that the combination of increasing competition, budget constraints, and political factors were liable to affect SIBAT's efforts to maintain Israel's defense exports at a level of $7 billion a year in the coming years.
The official said, "We're studying the map to identify new target markets, and markets that are currently considered as marginal, but which have the potential of becoming important trading partners."
In a recent study, SIBAT identified Russia, Eastern Europe, Kazakhstan, Azerbaijan, and four Latin American countries as markets that should be fostered to become important trading partners.
Published by Globes [online], Israel business news - www.globes-online.com - on April 4, 2011
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