Foreign defense firms' offset purchases in Israel soar

Actual buybacks exceed pledges, as firms find Israeli suppliers' quality and reliability high, "Defense News" reports.

"Defense News" reports that commitments for reciprocal procurements by foreign companies doing business with the Israeli government tripled from $320 million in 2009 to nearly $1 billion in 2011. It adds that actual reciprocal procurements are larger than the pledges, benefiting a growing number of Israeli companies.

Reciprocal procurements are the purchase of goods and/or services, or investment in a particular country, in this case Israel, by foreign companies in exchange for large contracts, usually amounting to tens of millions of dollars (at least $5 million under Israeli regulations) by the country for the companies' goods or services. The value of the reciprocal procurements is set in negotiations between the parties at a percentage (usually 25% or more) of the value of the foreign company's sales to the government.

"Defense News" adds, "Data for 2012 are not yet available, but Israel’s Industrial Cooperation Authority, the agency responsible for initiating, coordinating and monitoring offsets, shows a considerable hike in local firms doing buyback business with overseas suppliers to the Israeli government.

In 2011, overseas suppliers fulfilled $2.3 billion in offset obligations with contracts to 554 local firms, 163 of them first-time recipients of government-mandated countertrade. A year earlier, the ICA recorded nearly $2 billion in buyback contracts with 399 local firms, 81 of them newcomers to government-generated offset awards." <

"Defense News" cites Industrial Cooperation Authority data from the past five years, which state that Israel’s computer, communications and electronic sector claimed 27% of actual offset orders, followed by aviation, metal, engineering and infrastructure, software and biotechnology.

In early January, Industrial Cooperation Authority director general Bina Bar-On told "Globes" said that it had created 15,000-20,000 domestic jobs in each of the past eight years. She said that each $100,000-120,000 of capital inflows from reciprocal procurements under the regulations saved or created one job in low technology industries.

Published by Globes [online], Israel business news - - on January 27, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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