Arms exports hit record $7.5b in 2012

SIBAT director Shmaya Avieli: Israel is one of the top ten defense exporters in the world, and one of the top five exporters according to some criteria.

Israel's defense industries had a record year in 2012, with $7.5 billion in exports, the Ministry of Defense SIBAT - Defense Export and Cooperation reported today. The increase in defense exports is particularly noteworthy given the challenging global defense market last year in the face of sharp defense budget cuts in response to the economic crisis in Europe and the US, the reduced US military presence in the Persian Gulf, and the changes in international conflicts.

"The figure of $7.47 billion in defense exports at the end of last year surprised us," said SIBAT director Brig.-Gen. (res.) Shmaya Avieli. "Israel is one of the top ten defense exporters in the world, and one of the top five exporters according to some criteria. We are in the premier league in this area, and we aspire to more because defense exports contribute to Israel's economy and security."

The strong performance by Israel's defense industries in 2012 contrasts to its disappointing exports in 2011, which totaled $5.82 billion. Defense exports totaled $7.42 billion in 2009-10. Defense exports have more than doubled from the $3.5 billion in 2003.

Israel's main defense market in 2012 was the Asia-Pacific market. There were also large deals with countries such as India and Azerbaijan, mostly by Israel Aerospace Industries Ltd. (IAI) (TASE: ARSP.B1) Israeli defense exports to the Asia-Pacific market totaled $4 billion in 2012. Contracts worth $3.5 billion were signed with the US, Canada, and countries in Europe, Latin America, and Africa.

71% of Israel's defense output is exported, generating substantial revenue for companies, which enables them to invest heavily in the R&D needed for innovative combat systems.

Radars, missiles, and air defense systems (including anti-aircraft systems) accounted for 49% of defense exports in 2012. Naval systems accounted for 10%, and satellites, armor kits, electro-optical and observation systems, and communications systems accounted for the rest. Unmanned aerial vehicles (UAVs) accounted for 3% of defense exports. Israeli companies produce dozens of models of UAVs for a range of missions. Arieli said that Israel was ranked second in the world in UAVs, after the US.

Most defense exports are by big companies, including IAI, Israel Military Industries Ltd. (IMI), Elbit Systems Ltd. (Nasdaq: ESLT; TASE: ESLT), and Rafael Advanced Defense Systems Ltd.. While the big companies grew, small companies had disappointing results. Their exports fell from $650 million in 2010 and 2011 to $500 million in 2012.

The Ministry of Defense estimates that Israel has 600 small and mid-sized defense companies, and it attribute their drop in exports to fierce competition in the global market, and the preference of many countries for domestic production. Avieli said that the Ministry of Defense was seeking to boost the exposure of small companies' wares at international exhibitions in an effort to break into new export markets. 18 months ago, SIBAT established a new unit for small defense industries.

Equally strong defense exports in 2013

SIBAT predicts that Israel's defense exports in 2013 will equal the figures for 2012. SIBAT is taking focused action to enter new markets for defense companies, partly with the help of 22 military attaches around the world. Strong efforts are being made to reach defense deals with Vietnam, Malaysia, Indonesia, and Turkey, among others.

The Ministry of Defense believes that efforts to stabilize Israel's relations with Turkey will enable Israeli defense companies to renew ties with Turkey and sign new defense deals. Avieli unexpectedly said that defense exports to Turkey had never stopped in the past few years. "Even during the worst years, Turkey was never the smallest country in terms of Israeli defense exports. Turkey is seeking defense deals with Israel, and we're examining them," he said.

Avieli added that defense exports to Russia were also possible despite Israel's complaints about Russia's supplying of sophisticated arms to Syria, such as S300 long-range anti-aircraft missiles, and Yakhont anti-ship missiles.

SIBAT also disclosed that extensive efforts are being made to sell Rafael's Trophy active armor system for tanks and armored personnel carriers and its Iron Dome short range anti-missile system. There have been reports that several countries are interested in these systems, including India and South Korea. The Ministry of Defense declined to comment on the reports.

Published by Globes [online], Israel business news - www.globes-online.com - on July 23, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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