Recommendation: Encourage mergers in the security industries because of changes in US security assistance
While the Ministry of Finance and Defense are debating whether eliminating the possibility of using procurement assistance in Israel will result in the firing of 20,000 people or "only" a few thousand, the National Security Research Institute has examined ways to deal with the damage to the security industries in Israel.
Audi Etzion 08: 5609.06.20
Tags: Security IndustriesThe National Security Studies Institute Security Agency INSS Ministry of Defense
The defense industries still have five years to go until the big bang of US security aid: the moment when the possibility of converting the dollar into shekel aid conversion will begin for the benefit of companies in Israel.
Read more in Calcalist:
After long months of negotiations: the largest military aid agreement ever signed in Washington
American aid will cost $ 3.8 billion a year
The Defense Ministry warns about $ 1.3 billion in the defense industry
The current security assistance agreement, which Israel signed with the US in 2017 for 2019-2028, included a formal increase in aid from $ 3.1 billion a year to $ 3.8 billion, the largest that the United States grants to any country, including half a billion dollars A year to fund the Israeli missile defense system, from Iron Dome to Arrow-3.
The agreement signed between Obama and Bibi
The agreement signed between Obama and Bibi
Photo: AFI
But according to the US demand, the agreement also eliminated the possibility of converting up to 26% of annual purchasing aid in the country, claiming that the conversion option was born in the past to assist the defense industry in Israel, which has grown significantly over the past decade and no longer needs the assistance of the US taxpayer.
All that the Israeli negotiating team has succeeded in is to delay the cancellation of the conversion, so that in the first years of the agreement only a symbolic reduction of the conversion amount that stood before the agreement will be $ 815 million per year. By 2025, the IDF and industries will begin to feel the change, with the maximum annual amount converted Will drop from $ 725 million to $ 450 million. In the next two years it will be $ 250 million, and in the last year of the agreement will be $ 0.
Israel must preserve the security industries
The National Security Research Institute (INSS) at Tel Aviv University today publishes a report that examines in depth the effects of US aid on security industries, and provides recommendations for dealing with the Department of Defense and the IDF with them. Dr. Jacob Lipshitz, former CEO To the Ministry of Finance and Economic Adviser to the Ministry of Defense, Brig. Gen. (res.) Prof. Jacob Nagel, formerly the head of the NSC, and the head of the negotiating team on the agreement, Brig. Gen. Guy Panlin, the head of the Merkava program and the head of the Defense Ministry. And Daniel Shapiro, formerly the US ambassador to Israel. The report's editors are Brigadier General (res.) Sasson Hadad, former Chief Financial Officer and currently Head of the Economic Program at the Institute, and researchers of the Institute Dr. Shmuel Even and Tomer Fadlon.
Iron dome system
Iron dome system
Photo: AFI
The report states that Israel must preserve the defense industries, which directly and indirectly employ some 80,000 people. Government ministers disagree on the extent of damage to the employment agreement in Israel: The Ministry of Defense estimates that the implementation of the aid agreement could result in the dismissal of 20,000 people, about a quarter of industrial workers.
Beyond employment and their economic contribution, the report states that the security industry is necessary because Israel cannot always rely on external sources of procurement alone. In the battle field.
The importance of independent production capability is particularly important during a confrontation or other event where the supply chain is damaged or when there are policy restrictions on the use of certain types of weapons. Also on the political level, Israel's ability to provide advanced military solutions to other countries contributes to their support. Israeli annual defense exports have ranged from $ 7 billion to $ 9 billion in recent years, with the aerospace industry and Elbit exporting about 80 percent of their produce and Raphael about 50 percent.
There are those who are considering the IAA and Rafael merger
The report calls on the government to prepare for the sharp change in conversions as early as 2025, and has seven moves to deal with it.
While the defense establishment is once again trying to further the idea of merging the two major government industries, Air Industries and Raphael, the report proposes to examine mergers of small and medium-sized companies with the largest ones, in order to gain an advantage in size. Two such mergers have already taken place in recent years, when Elbit acquired IMI for NIS 1.8 billion, and Raphael Ironaotex for NIS 850 million.
The report proposes prioritizing local funding for survivorship and developing unique security industries, preserving research and development of strategic importance, and retaining key industry personnel. In addition - to assist local companies in increasing exports.
In order to overcome the need to switch to US dollar aid instead of the NIS, Israeli companies must be incorporated into US purchase orders, encourage cooperation with US companies, and even relocate production companies and subsidiaries of Israeli companies to the United States, a process that has already begun.
The authors also recommend encouraging American companies to make reciprocal purchases in Israel, even though they are not required by the aid agreement, to help companies transition from security production to civilian, and to provide information and assistance about the changes that are expected mainly to small companies in the security industry.
"There are weapons systems and capabilities that cannot be purchased overseas and the state will continue to purchase them from the security industries," Calcalist Brigadier General (res.) Sasson Haddad told Reuters. "The big industries are based on exports, do a lot of research and development, know how to work with suppliers abroad, and the harm to them will be smaller. But the situation of the small industries is different. The Treasury estimated that the harm to them and the economy would not be great, but that assessment was given under conditions of full employment, and that has changed. "
The research team states that the special relationship with the US must also be kept at a disadvantage in the short term for the security industry in Israel, because in the long run, the recommendations mentioned could prevent future harm. It was strong enough, and significant today, in an era when Israel is one of the most developed countries in the world.
But Haddad makes clear: "There are constantly voices on the American side that reflect on the justification for aid.
https://www.calcalist.co.il/local/articles/0,7340,L-3831810,00.html
While the Ministry of Finance and Defense are debating whether eliminating the possibility of using procurement assistance in Israel will result in the firing of 20,000 people or "only" a few thousand, the National Security Research Institute has examined ways to deal with the damage to the security industries in Israel.
Audi Etzion 08: 5609.06.20
Tags: Security IndustriesThe National Security Studies Institute Security Agency INSS Ministry of Defense
The defense industries still have five years to go until the big bang of US security aid: the moment when the possibility of converting the dollar into shekel aid conversion will begin for the benefit of companies in Israel.
Read more in Calcalist:
After long months of negotiations: the largest military aid agreement ever signed in Washington
American aid will cost $ 3.8 billion a year
The Defense Ministry warns about $ 1.3 billion in the defense industry
The current security assistance agreement, which Israel signed with the US in 2017 for 2019-2028, included a formal increase in aid from $ 3.1 billion a year to $ 3.8 billion, the largest that the United States grants to any country, including half a billion dollars A year to fund the Israeli missile defense system, from Iron Dome to Arrow-3.
The agreement signed between Obama and Bibi
The agreement signed between Obama and Bibi
Photo: AFI
But according to the US demand, the agreement also eliminated the possibility of converting up to 26% of annual purchasing aid in the country, claiming that the conversion option was born in the past to assist the defense industry in Israel, which has grown significantly over the past decade and no longer needs the assistance of the US taxpayer.
All that the Israeli negotiating team has succeeded in is to delay the cancellation of the conversion, so that in the first years of the agreement only a symbolic reduction of the conversion amount that stood before the agreement will be $ 815 million per year. By 2025, the IDF and industries will begin to feel the change, with the maximum annual amount converted Will drop from $ 725 million to $ 450 million. In the next two years it will be $ 250 million, and in the last year of the agreement will be $ 0.
Israel must preserve the security industries
The National Security Research Institute (INSS) at Tel Aviv University today publishes a report that examines in depth the effects of US aid on security industries, and provides recommendations for dealing with the Department of Defense and the IDF with them. Dr. Jacob Lipshitz, former CEO To the Ministry of Finance and Economic Adviser to the Ministry of Defense, Brig. Gen. (res.) Prof. Jacob Nagel, formerly the head of the NSC, and the head of the negotiating team on the agreement, Brig. Gen. Guy Panlin, the head of the Merkava program and the head of the Defense Ministry. And Daniel Shapiro, formerly the US ambassador to Israel. The report's editors are Brigadier General (res.) Sasson Hadad, former Chief Financial Officer and currently Head of the Economic Program at the Institute, and researchers of the Institute Dr. Shmuel Even and Tomer Fadlon.
Iron dome system
Iron dome system
Photo: AFI
The report states that Israel must preserve the defense industries, which directly and indirectly employ some 80,000 people. Government ministers disagree on the extent of damage to the employment agreement in Israel: The Ministry of Defense estimates that the implementation of the aid agreement could result in the dismissal of 20,000 people, about a quarter of industrial workers.
Beyond employment and their economic contribution, the report states that the security industry is necessary because Israel cannot always rely on external sources of procurement alone. In the battle field.
The importance of independent production capability is particularly important during a confrontation or other event where the supply chain is damaged or when there are policy restrictions on the use of certain types of weapons. Also on the political level, Israel's ability to provide advanced military solutions to other countries contributes to their support. Israeli annual defense exports have ranged from $ 7 billion to $ 9 billion in recent years, with the aerospace industry and Elbit exporting about 80 percent of their produce and Raphael about 50 percent.
There are those who are considering the IAA and Rafael merger
The report calls on the government to prepare for the sharp change in conversions as early as 2025, and has seven moves to deal with it.
While the defense establishment is once again trying to further the idea of merging the two major government industries, Air Industries and Raphael, the report proposes to examine mergers of small and medium-sized companies with the largest ones, in order to gain an advantage in size. Two such mergers have already taken place in recent years, when Elbit acquired IMI for NIS 1.8 billion, and Raphael Ironaotex for NIS 850 million.
The report proposes prioritizing local funding for survivorship and developing unique security industries, preserving research and development of strategic importance, and retaining key industry personnel. In addition - to assist local companies in increasing exports.
In order to overcome the need to switch to US dollar aid instead of the NIS, Israeli companies must be incorporated into US purchase orders, encourage cooperation with US companies, and even relocate production companies and subsidiaries of Israeli companies to the United States, a process that has already begun.
The authors also recommend encouraging American companies to make reciprocal purchases in Israel, even though they are not required by the aid agreement, to help companies transition from security production to civilian, and to provide information and assistance about the changes that are expected mainly to small companies in the security industry.
"There are weapons systems and capabilities that cannot be purchased overseas and the state will continue to purchase them from the security industries," Calcalist Brigadier General (res.) Sasson Haddad told Reuters. "The big industries are based on exports, do a lot of research and development, know how to work with suppliers abroad, and the harm to them will be smaller. But the situation of the small industries is different. The Treasury estimated that the harm to them and the economy would not be great, but that assessment was given under conditions of full employment, and that has changed. "
The research team states that the special relationship with the US must also be kept at a disadvantage in the short term for the security industry in Israel, because in the long run, the recommendations mentioned could prevent future harm. It was strong enough, and significant today, in an era when Israel is one of the most developed countries in the world.
But Haddad makes clear: "There are constantly voices on the American side that reflect on the justification for aid.
https://www.calcalist.co.il/local/articles/0,7340,L-3831810,00.html
