Israel's Arms Industry Hoping Success of Iron Dome Will Bring It Sales

Favorable press alone will not boost sales; the global market has diverted defense spending to other needs since the global economic crisis in 2008.

The success of the Iron Dome system in intercepting rockets shot from Gaza this month has attracted positive attention to Israel's military industries. Several days into the recent fighting, the system was reported to have at least an 85% success rate in knocking out incoming rockets. But favorable press alone will not boost sales by the large number of military equipment firms here that rely on exports to generate most of their revenue.

The problem is that the market around the world for their wares has stagnated, particularly as governments have diverted defense spending to other needs since the global economic crisis began in 2008. Protectionism has also become an increasing problem for Israeli defense exporters who encounter a preference from potential customers abroad to buy domestically.

Sources in the defense establishment say government defense budgets around the world have been shrinking substantially over the past several years and that the trend is not expected to be reversed any time soon. Nonetheless, the thinking is that the major attention received by Iron Dome in the course of the Pillar of Defense military operation this past week will spark increased interest in military products manufactured here.

The pace of production at many of the leading players in the local industry has accelerated in recent weeks. These firms include Israel Military Industries, Israel Aerospace Industries, Rafael Advanced Defense Systems, Aeronautics Defense Systems and RT-LTA Systems. Sources say employees there have been working at full speed to meet demand for their products.

Rafael and Israel Aerospace Industries stepped up the pace of their production and development work to speed up the manufacture of a fifth Iron Dome battery, which was rushed into service about three months early and installed this past week in the Tel Aviv area. Even after the fifth battery was delivered, the demands on suppliers remained high. "We haven't stopped production," said Meni Cohen, the director of the Iron Dome project for IAI's ELTA subsidiary in Ashdod. "We are working around the clock on a sixth Iron Dome battery and on other things ELTA produces for the army."

Israel's military manufacturers employ tens of thousands of workers and are world leaders in the manufacturer of such products as radar systems, drone aircraft, satellites, missile systems and electronic warfare systems. The firms differ in the quality of their management and their financial results, but all of them have products that put them in the forefront of military technology around the world.

"The assessment in the defense establishment is that the [Pillar of Defense] operation will increase foreign interest in Israeli technology and products and subsequently increase exports," a defense industry source said, "but things require substantial time to ripen."

Success in the local market is not enough for the local military industrial sector. Unlike most of their counterparts in the West, where most of their products are purchased by their home countries, the Israeli military sector has been exporting about $7 billion per year in recent years or about 85% of their sales. Most of the Israeli sector's sales abroad are currently in Asia and Latin America.

Referring to the recent Pillar of Defense operation, the industry source said: "Rafael and the IAI have taken advantage of the fighting to promote exports of Iron Dome. In Latin America and Asia, they're starting to show interest, but it hasn't yet translated into any deals."

Sources throughout the defense sector here spoke of the pressure they are feeling due to shrinking government military budgets around the world. At IAA, which leases drones to Western governments operating in Central Asia, and at Plasan, which produces armored protection for vehicles, the effects of the Western forces' withdrawal from Iraq and the redeployment of forces in Afghanistan have also been felt.

Israeli defense industry sources this week called on the government to get more involved in promoting their wares and cited the United States as an example of a country in which a range of government officials, including cabinet secretaries and diplomats, promote the export of American military hardware.

Reuters
Haaretz