The Ministry of Defense is trying increase the volume of Israel's defense exports. The Ministry of Defense International Defense Cooperation Directorate (SIBAT) is pushing this plan, which is based on focused seminars for senior commanders in foreign armies, IDF assistance for promoting sales of Israeli weapons, and subsidizing small and medium-sized defense companies seeking to sell arms around the world.
These new measures, which are scheduled to begin in early 2020, are led by SIBAT director Brig. Gen. (Res.) Yair Kulas. He revealed the plan yesterday, following lengthy staff work, at the annual SIBAT working conference in central Israel.
According to the plan, the main points of which "Globes" reveals for the first time, the Ministry of Defense will step up its efforts in the coming years in an attempt to expand the exports of small and medium-sized defense companies. "We have learned that the large defense companies are able to obtain SIBAT's resources by themselves, but the small companies have no such access, and there is a knowledge gap in promoting defense deals between countries and sending business delegations to the relevant exhibitions around the world," Kulas said.
Kulas says that the measures favored by SIBAT include a major expansion of defense deals between countries (G2G) that is expected to result in significant deals for the large defense companies in the coming years, especially Elbit Systems, Israel Aerospace Industries (IAI), and Rafael Advanced Defense Systems.
Such deals are made by senior political and military people in Israel and their counterparts in foreign countries. There were several such deals in recent years. In one of them, Italy sold used warplanes to Israel for training air force cadet pilots and bought an espionage satellite from IAI.
Strengthening the small companies
According to Kulas, as part of the efforts to expand the deals between countries, the share of the small and medium-sized defense industries will be ensured; if a large companies gets an order from another country as part of a G2G deal mediated by the Ministry of Defense, it will be obligated to transfer 20% of the contract to subcontracting by a small or medium-sized company.
One of the key elements in the new work plan is based on a strategic assessment for the coming years ahead of the large tenders expected to be published all over the world. "We have learned that there are countries with whom, if the Ministry of Defense does not take an active role, there will be no deals with Israeli companies. We are aiming at these countries, among others. When we aren't there, deals are channeled to US or French companies," Kulas says.
The new focus includes Asian countries with which Israel's ties have hitherto been kept on a low media profile. The potential procurement amounts to billions of dollars in the coming years, and the Ministry of Defense is considering appointing a military attache in one of these countries. Such an appointment, the Ministry of Defense believes, will expedite processes leading to defense deals between Israel and other countries that will enable Israeli companies to benefit from some of the big money that Asian governments are expected to spend on defense.
The Ministry of Defense will pay the most attention in the coming years, however, at least with respect to defense exports, to countries in Europe. An up-to-date mapping conducted by the Ministry of Defense in recent months cited 41 countries around the world considered important targets for Israeli defense companies. Half of the target countries are in Europe.
It is believed that one of the Israeli defense industry's target countries in the coming years is Finland, a large weapons purchaser that has already procured tactical UAVs from Israeli company Aeronautics, and more than a year ago signed a deal in excess of €190 million for the purchase of ship-to-ship Gabriel missiles from IAI.
As well as drawing up a new list of export targets for Israeli companies, the Ministry of Defense has also drawn up a list of six "core countries" to which Israeli defense exports have been extremely large and significant. As far as is known, this list contains the US, India, and Finland, plus three other countries, apparently in Asia. As a matter of policy, the Ministry of Defense does not disclose the names of the countries to which arms from Israel are exported.
"The defense export market is rapidly changing; traditional markets are contracting and new markets are opening," Kulas says. "Looking five and ten years ahead, we realized that we should focus on our relative advantages in expanding exports, through agreement mechanisms with defense ministries and armies around the world, and should improve our effectiveness as an agency."
Israel's defense exports totaled $7.5 billion in 2018, with 46% of them being to Asia. 26% of defense exports were to European countries, 20% to North America, 6% to Latin America, and 2% to Africa.
Published by Globes, Israel business news - en.globes.co.il - on November 26, 2019
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