31 December 1998

ISRAEL’S DEFENSE INDUSTRY IN 1998

(Communicated by Defense Ministry Spokesman)

Defense Ministry Director-General Ilan Biran today (Wednesday) 30.12.98, appearing before the Managers’ Club of the Kibbutz Industry Union, said, "In order to exist, develop and compete in the global economy, considering the decline in demand for defense related products, and to provide answers to the defense establishment’s needs, Israeli defense industries must export at least $2 billion annually. There has been a 50% decline in demand for defense related products over the past decade, from $60 to $30 billion annually.

In 1998, due to the global crisis, especially in Asia, and the decline in demand in Europe and the United States, Israeli defense exports amounted to $1.7 billion. In truth, we were afraid that the total would be far less, but coordinated action by industry and the Defense Ministry managed to increase export sales. In 1997, Israeli defense exports were $2.6 billion, due to a large deal with Turkey.

Defense industries must export 80% of their production, according to experts. Israel Aircraft Industries already reaches this target. In order to meet the challenges in the world and by the defense establishment, defense industries must continue carrying out structural reforms, including mergers and joint production in order to prevent redundancies. At least 80% of all products were joint programs, including drones and equipment upgrading.

In future, essential mergers and privatization will have to be carried out so as to compete with giant American and European conglomerates each of which have tens of billions of dollars worth of turnover. The world has already merged, and those who do not grow very large, will not survive.

The committee examining defense industries and their future, headed by Moshe Peled, has already reached its conclusions, and we are implementing them. The conclusions, which support the trends of structural reform and privatization, are still at the level of staff work and will be published only after decisions are made by the Israeli government."

Director-General Biran also said, "Israel faces three fundamental threats — terrorism, conventional arms and non-conventional weapons, which includes the nuclear threat. The conventional threat has been repressed, possibly because of the human factor. Our environment has not seen a diminishing of armies. Syria has sharpened its ballistic missiles and has been arming them with non-conventional warheads."

As for the IDF’s armaments, which have doubled and tripled in various fields since the Yom Kippur War — such as tanks and aircraft — Biran said, "Weapons have aged, including missiles and vehicles. They have to be upgraded, because not everything can be replaced. Each of these areas has to be budgeted, a regime of maintenance and upgrading has to be implemented, components’ life-spans have to be planned for based on each model, otherwise urgent upgrading will have to be carried out to restore the balance, and urgent action will be more expensive and problematical than continual, moderate deployment."