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News Analysis: Israeli arms industry a major economic engine

English.news.cn   2011-06-20 07:09:27 FeedbackPrintRSS

by Adam Gonn

JERUSALEM, June 19 (Xinhua) -- Israeli defense sales in 2010 totaled 7.2 billion U.S. dollars, making the small nation the world's fourth largest exporter.

Defense officials released the figure in an official report ahead of the Paris Air Show, which is scheduled to open on June 26. A bevy of Israeli firms hope to garner even more sales at the show, after a string of recent successes.

Most of the sales are from four leading companies: Elbit Systems, Israeli Aerospace Industries (IAI), Rafael, and Israel Military Industries, a Defense Ministry statement said.

Strong points of Israel's arms industry include unmanned aerial vehicles, armored vehicles, smart munitions, military and civilian aircraft avionics, weapons platforms and structural upgrades for foreign governments and private clients.

The Iron Dome anti-missile system, developed by Rafael, is expected to be one of the highlights of the Israeli pavilion. The system, which was deployed in southern Israel earlier this year, immediately proved its mettle on its first try, successfully intercepting several salvos of rockets fired by Palestinian militants in Gaza at Israeli towns and communities.

Local analysts, however, said that the true value of the defense export isn't the sector's direct contribution to Israel's economy. The main benefit is the role defense contractors play in developing technology and producing skilled personnel that will join the country's high tech industry after finishing their military services.

FOUR FACTORS

Maj.-Gen. (retired) Giora Eiland of the Israel Defense Forces ( IDF) told Xinhua that the defense industry is essential to Israel not only because of the huge export revenue, but also for its contribution to the Jewish state's armed forces.

Eiland listed four underlying reasons for Israeli defense industry's success.

"It begins with the importance of domestic development and production," he said.

Eiland added that since the need to develop advanced weapons is essential to Israel, "at the end of the day we can use and sell it to others."

"The second reason is that Israel manages to create a clear distinctions between a political and defense relationship regarding many countries," Eiland said. "There are many countries that are quite hostile to us in many international forums but they do appreciate the quantity of our products."

For instance, while Israeli-Turkish political relationship began to deteriorate in the last few years, Ankara still bought 10 Israeli UAVs (Unmanned aerial vehicle) in 2010.

Eiland argued that Israel has found the right combination of government and private cooperation, so that the country can enjoy all the benefits of government support and guarantees to the industry, but at the same time leave enough room for private creativity and incentives.

He also pointed out the very strong relationship between the armed forces and the defense industry, along with the fact that a large number of retired Israeli army officers seek employment in the defense industry. This revolving door leads to a lot of combat experience and knowledge being directly transferred into industrial fields.

This cross-fertilization leads to close cooperation, so that new lessons from the field can quickly be incorporated into the development of new defense systems, Eiland said.

HUMAN RESOURCES

Dr. Yaacov Lifshitz of Bar-Ilan University said that on a macro level, the defense industry isn't a key part of the Israeli economy. However, the ripple effect of the technologies and personnel that start out in the arms industry before moving on to civilian companies is very important.

"From the point of the national economy it's not so important - it only accounts for three percent of Israel's GDP. But it is important as a source of technologies that are later implemented in the civilian high-tech industry," Lifshitz said.

"Israel is good because of the close relations between the end- user and the developers and producers, which is absent in some other countries. This close relationship makes for a relative short development process," Lifshitz added.

He pointed out that over the years, a lot of experience has been accumulated in the defense industry, which in some cases were set up even before Israel was established in 1948.

In addition to this experience, Lifshitz argued, Israel has a relatively high supply of qualified manpower compared to its size, which may start out in the defense industry before moving on the high tech sector.

Editor: Mu Xuequan
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