Minister of Economy and Industry Eli Cohen has signed a range of new regulations that will make it easier for Israeli defense companies to work together rather than compete on world markets. When the new regulations come into effect, the Israeli defense companies will be able to bid together on overseas tenders. At present, companies wishing to cooperate on bids must request a special permit from the Ministry of Defense and the Israel Antitrust Authority. The new regulations were formulated by the Israel Antitrust Authority and its director Adv. Michal Halperin together with the Ministry of Defense. They will end situations in which Israeli defense companies compete with each other for overseas procurement tenders.
Many of these tenders are worth tens and even hundreds of millions of dollars. More than once Israeli companies such as Elbit Systems Ltd. (Nasdaq: ESLT; TASE: ESLT) and Israel Aerospace Industries Ltd. (IAI) (TASE: ARSP.B1), have found themselves competing on tenders for drones - unmanned aerial vehicles - a field in which both companies are world leaders. In several instances, the rivalry led to bitter recriminations between the two companies. Three years ago there was a scandal over a Polish tender, which required the intervention of the Ministry of Defense. IAI and Elbit were competing for the sale of 50 UAVs to the Polish army and the process provoked a barrage of accusations about propriety and integrity.
In the wake of these charges, Poland's Deputy Minister of Defense General Waldemar Skrzypczak was forced to resign. Israeli Ministry of Defense director general General (res.) Dan Harel responded by imposing the exceptional penalty of rescinding both IAI and Elbit's defense export permit to Poland for many months. Defense sources explained at the time that there was real concern that Israel-Poland relations would be damaged.
A government source said, "This is exactly the type of situation that the new regulations are supposed to prevent: two good Israeli companies battle each other and sling mud, and eventually a foreign company wins. It's about time that these companies learned to work together - without sullying each other in order to win the tender. Israel has a major interest in its defense companies selling worldwide, earning money, investing in R&D and providing solutions for the country's defense needs."
In 2016, Israel's defense exports amounted to about $6.5 billion and estimates are that this figure will be even higher in 2017 following major deals by IAI in India. Eli Cohen told "Globes" that, "the regulations are designed to make it easy for companies to cooperate and will therefore increase the chances of winning tenders worldwide. This measure will help many companies export."
One of the conditions imposed by the Israel Antitrust Authority ahead of formulating the new regulations is that the cooperation worldwide by Israeli defense companies will not lead to harming competition between them in the Israeli market.
Published by Globes [online], Israel business news - www.globes-online.com - on June 26, 2017
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