from the May 2009 issue

An Export Industry that will Flourish

Even though Israeli defense exports are expected to fall by 10% for '08, Israel still ranks in the top 10 of global defense exporters. Depending on which list you go by, Israel is either in 4th or 8th place. Not bad for a small little country.

According to figures released by the US Congressional Research Service, Israel was the seventh largest arms exporter during the period 2000-2007 with sales worth an aggregate $10.8 billion. "Defense News" reports that Israel's defense companies signed contracts worth $5.6 billion in 2007 - an all-time high for the country's defense exports. According to the Ministry of Defense SIBAT - Foreign Defense Assistance and Defense Export Organization, and the ministry's Armaments R&D Administration, last year's sales were $700 million greater than the $4.87 billion in 2006, the previous record.

The US topped the rankings with an aggregate $123 billion in sales, followed by Russia with $62.2 billion, France - $29.2 billion, the UK - $25.2 billion, Germany - $12.6 billion, and China - $10.8 billion. In eighth place behind Israel, came Italy with $6.5 billion, followed by Spain with $6.5 billion, and Ukraine with $5.5 billion.

However, Ministry of Defense figures estimate Israel's total exports in 2000-2007 nearer to $29.7 billion, a figure which places Israel in fourth place behind Russia, France and the US."

Only 1/7 of Israeli defense sales are made in Israel, meaning that the country continues to gain market share around the world. In an Obama administration where everyone believes defense budgets are going to get cut, Israel may very well benefit as the country focuses on producing very smart technologies and technologies that are aimed at fighting terror, two sectors that should still have a strong demand.

Most impressive was the recent report that quoted Tussian Deputy Defense Minister Vladimir Popovkin as saying that the military has signed a contract to buy an unspecified number of pilot less drones from an Israeli company he did not identify.

India has also become a major client for Israel's defense industry. Besides conventional weapons India is buying AWACS and most recently satellites. tThe plane would be among three others acquired by India through a $1.1 billion deal signed in 2004.

Israel and India had been discussing military cooperation for several years now with Israeli promising to provide four more planes.

Key players in the defense export field are Israel Defense Industries and Elbit. The latter has a backlog of orders as of December 31, 2008 that totaled $5.0 billion, as compared with $4,872 million as of September 30, 2008 and $4,624 million as of December 31, 2007. Approximately 72% of the backlog relates to orders outside of Israel. Approximately 75% of the Company's backlog as of December 31, 2008 is scheduled to be performed during 2009 and 2010.

Reprinted from the Israel High-Tech & Investment Report May 2009

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