Military and defense spending in Israel totaled $17.5 billion in 2015, putting the country in 16th place on a list of the 25 countries with the highest military spending in the world, according to the annual report published by the Deloitte international accounting firm. As a proportion of GDP, Israel was in sixth place with 5.4%, compared with 5.2% in 2014, when it was in seventh place.
Deloitte analysts said that Israel had increased its defense and military spending by over $1.5 billion in 2015, compared with 2014, when its defense and military spending totaled $15.9 billion, putting it in 17th place for that year.
The US spent $595 billion on defense and the military in 2015, making it the leading country in this category. Far behind in second place was China with $214.5 billion, followed by Russia with $91 billion. Saudi Arabia came fourth with $85.4 billion, followed by France with $60.7 billion.
As in previous years, the leading country in 2015 in defense and military spending as a proportion of GDP was Oman with 16.2%, followed by South Sudan (13.8%), Saudia Arabia (13.7%), Iraq (9.1%), Algeria (6.2%), and Israel and Russia (5.4%).
The opportunity for Israeli companies
Deloitte's global review also includes an analysis of the performance of the world's 100 largest defense companies, set against the business strategies they used up until recent years. Deloitte Israel consumer and industrial products industry head Eli Tidhar says that the companies that adapted themselves to the changes that took place in the markets, while adopting new strategies and innovative models, had returns seven times as high as companies that stuck to their old strategies and "continue to run fast just to stay in the same place."
"What is involved is a change in strategy, such as geographic redeployment of business, expanding and adapting the portfolio of products, mergers, acquisitions, consolidation, etc. The companies' speed of response to the markets varies, and the market familiar to a company that has operated in it for many years changes because of the entry of new players, such as those coming from places that hitherto usually bought technology, such as Brazil and China. They are now increasing their involvement in more markets around the world. Companies that were used to traditional players in these markets now also find players from the same regions," Tidhar remarked.
According to Tidhar, young companies leading in innovation and offering service-based solutions are changing the rules of the game in these markets, and are forcing the older companies to adopt relevant strategies and new business models.
Tidhar added that the changes in the US administration and the election of Donald Trump as president were creating an opportunity for Israeli defense companies: "The defense cuts led by the Obama administration have been halted, and the Trump administration is promoting new investments in defense. This is an opportunity for Israeli industries," he said.
Tidhar also commented on the changes expected in the coming years in US policy on military aid to Israel, under which Israel will be unable to convert a quarter of the aid money into shekels, and will have to spend all the US aid money exclusively on procurement from US companies, starting in the middle of the next decade. "This change requires Israeli industry to formulate a strategy that will integrate and include more overseas business, while expanding cooperation and strategic partnerships with other companies in order to maintain their growth. The right thing to do is to regard this as an opportunity, and less of a threat. Israeli industry was once limited in the US market because of its geographic distance. Now, with the new platforms being created, Israeli companies have access to a country with the world's largest defense budget, at a time when it appears that the US is giving Israel strong backing."
Published by Globes [online], Israel Business News - www.globes-online.com - on March 1, 2017
© Copyright of Globes Publisher Itonut (1983) Ltd. 2017