Israeli defense exports up despite fears

Elbit air defense system

Defense company chiefs saw a decline, but in the end contracts signed in 2015 totaled more than in 2014.

Israel's arms exports in 2015 were surprisingly high. Israeli defense companies signed export deals worth $5.7 billion last year, according to figures reported today by SIBAT (the International Defense Cooperation Directorate of the Israel Ministry of Defense).

The figures indicate a slight rise in Israel's defense exports in comparison with 2014, when exports totaled $5.6 billion.

Towards the end of 2015, the heads of Israel's four largest defense companies, Elbit Systems Ltd. (Nasdaq: ESLT; TASE: ESLT), Israel Military Industries, Rafael Advanced Defense Systems Ltd. and Israel Aerospace Industries Ltd. (IAI) (TASE: ARSP.B1), expressed concern that defense exports would fall to their lowest level in a decade because of the decline of the global economy, shrinking defense markets, and tough competition.

In a letter to Prime Minister Benjamin Netanyahu, the company chairpersons and CEOs said they feared that total defense exports could fall below the $5 billion level.

"At the end of a challenging year, and with joint determined work, we managed to keep the level of contracts signed stable," said SIBAT director Brig. Gen. (Ret.) Mishel Ben Baruch on the release of the 2015 figures.

The two leading categories in Israel's 2015 defense exports were upgrading of airplanes, mainly by Israel Aerospace Industries Ltd. (IAI) (TASE: ARSP.B1) and Elbit Systems Ltd. (Nasdaq: ESLT; TASE: ESLT), and the sale of ammunition and weapons platforms. Each of these categories accounted for 14% of exports by defense companies last year.

Demand for cyber systems

Ben Baruch told "Globes" today that one of the most prominent features highlighted by the Israeli defense export figures was the growing demand for cybersecurity systems, in addition to systems used in homeland security, such as tools for smart city management and components designed to prevent crime and terrorism and protect sensitive installations and sites where large numbers of people congregate. "We see that the markets are also changing during the working year itself, which affects our defense exports. If a security crisis develops in an African country, or a significant terrorism event takes place in a European country, we feel it in the volume of the companies' activity. In such situations, the markets react quickly," Ben Baruch said.

The main destination of the defense companies' export production last year was Asia and the Pacific; exports of products and systems to the region exceeded $2.3 billion. Europe received over $1.6 billion in Israeli exports of weapons and systems, the US and Canada over $1 billion, Latin America $577 million, and Africa $163 million.

SIBAT predicted today that despite the intense competition between defense companies for weapons tenders in the various markets, Israeli companies would maintain their levels of new contracts. Advanced negotiations are taking place between some of the companies and countries for the signing of deals, and some of these deals are significant and very valuable.

"I'm optimistic about the current year, and I sense a trend towards improvement," Ben Baruch said. "In exports of unmanned aerial vehicles, Israel is still a global leader, together with the US. Our technologies are sought after by many countries, which regard Israel as a leader in many fields. This is making Israel one of the world's ten leading defense exporters, and our companies continue to invest in research and development of technological solutions adapted to the dynamic worldwide security situation, including asymmetric warfare, increased use of precise weapons, and high-quality real-time intelligence gathering equipment, and all this while reducing injury to non-combatants."

Published by Globes [online], Israel business news - www.globes-online.com - on April 6, 2016

© Copyright of Globes Publisher Itonut (1983) Ltd. 2016

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Elbit air defense system
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