Israel's defense exports up 14% in 2016

2016 was a good year for Israeli defense companies. Figures published today by the Ministry of Defense International Defense Cooperation Authority (SIBAT) show that exports of weapons systems and technologies totaled $6.5 billion, an $800 million increase, 14%, compared with $5.7 billion in 2015.

The Ministry of Defense figures show that 20% of defense exports in 2016 came from companies upgrading airplanes and avionics systems, the leading subsector, followed by observation and optronics, missiles, rockets, and air defense systems.

Commenting on the figures, SIBAT head Brigadier General (res.) Michel Ben-Baruch said, "The growth in new contracts with Israeli companies reflects the global emergence from recession, especially in European and North American countries, with an increase in defense budgets in response to the rising defense challenges, following years of worldwide defense budget cuts. The change that has taken place in leading markets is causing a rise in exports by companies from Israel. We're competing with global powers in defense products, but we ourselves are regarded as a power."

A breakdown of 2016 defense exports by countries shows clearly that Asian Pacific countries continue to be the main export target for Israeli companies. Exports to these countries totaled $2.6 billion in 2016, $300 more than in 2015. Exports also rose to the European market, North American countries, Latin American countries, and African countries.

According to Ben-Baruch, last year's increase in defense exports was largely due to industrial and business cooperation by Israel companies in their target markets. "Last year, we saw more and more cases of Israeli companies moving production to the target markets, in line with the prevailing worldwide trend in recent years. There was also a substantial increase in projects between governments that made an important contribution to defense industries in Israel," Ben-Baruch commented.

Paying in installments

Together with the growing competition in the target markets of Israeli companies, the Ministry of Defense noted the financing difficulties in defense deals in developing countries as one of the challenges facing the local industry. These countries, most of which are in Africa, want to buy weapons systems from Israel, but are having difficulty paying for them. In an attempt to accommodate them, Ben-Baruch told "Globes" today, Israeli companies are offering special financing and credit plans to governments making it possible to spread the payments for defense deals over many years.

The Ministry of Defense figures show that Israeli defense exports to Africa totaled only $163 million in 2015, but leaped to $275 million in 2016, similar to the export figures for Africa from three years ago. Ben-Baruch refused to provide details about the structure of the financing plans offered by Israel companies to these countries, or to say whether there was a connection between them and the steep increase in defense exports to Africa in 2016.

8% of 2016 defense exports consisted of cyber systems and intelligence and information systems. Defense sources believe that the cyber systems involved were for defense against cyber attacks, not attack systems.

The Ministry of Defense today expressed satisfaction with the export figures, saying that in contrast to 2015, there was no single defense deal in 2016 worth more than $500 million.

Indian Prime Minister Narendra Modi is scheduled to visit Israel this summer, and defense sources said that he was expected to announce a number of substantial defense deals with Israeli companies during his visit. India is regarded as a key country for many Israeli companies, which have been waiting for a long time to speed up a series of substantial defense deals with that country. Defense sources said today that if these deals go ahead this year, it could not be ruled out that 2017 would see a dramatic rise in Israel's defense exports, perhaps similar to the figures for 2012, when Israel's defense exports totaled $7.5 billion. Ben-Baruch gave a more modest forecast for 2017 today, saying that it would "probably be a stable year.

Published by Globes [online], Israel Business News - www.globes-online.com - on March 29, 2017