ISRAEL 
HIGH-TECH & INVESTMENT REPORT

from the October 2002 issue


Growing Confidence and Deepening Concern

We watched the deeply moving ceremonies at Ground Zero, the graveyard of 1,700 of the total of 2,800 people that perished, as a result of the terrorist attack on September 11, 2001. We saw the fly-past of American Air Force jets and were reminded of the many memorials and fly pasts we have witnessed in Israel. There was universal empathizing and it was obvious that most Israelis shared in a common feeling of unity and strength of purpose. For Americans, we compassionately understood, it is a new world, marked by changed attitudes and perceptions.

On that very same day, we learned that Israel is developing a new aviation defense technology that will enable it to identify planes with hostile intent. The new aircraft identification system would be ready for use within a year, Transportation Minister Ephraim Sneh announced: "The system has been developed. It is a system that can distinguish between 'friendly and unfriendly' aircraft," The Minister also said that Israel is preparing for the threat of missiles fired from rocket launchers at civilian airplanes. He said Israel Aircraft Industries was cooperating with Rafael - the Israel Armament Development Authority, in developing preventive measures against such attacks.

All of this was taking place, accompanied by a growing wave of rhetoric, emanating from Baghdad and Washington and suggesting the inevitability of a major conflict in which Israel would be involved. Aware of the need of maintaining a posture of deterrence, Israel's direct spending on defense advanced by 4.2% to $9.3 billion in 2001, as compared to its 2000 defense spending and reached the highest level since 1993, according to the Central Bureau of Statistics. The proportion of defense spending as a percentage of Gross Domestic product stood at 7% in recent years, after gradually dropping from 14.8% in 1982 to 7.2% in 1997.

Israel's spending on defense is two to six times that of other industrial nations. The U.S. and Britain, for instance, spend less than 3% of their GDP on defense. Even among free spending Middle Eastern nations, Israel is the leader, with 9%. Syria is spending less than 6% of GDP on the average while Kuwait spends 7.5% and Egypt 3%. Israelis tend to feel confident that defense spending is providing a high level of deterrence and therefore, leading to a heightened feeling of security.

Yet, there is the threat posed by suicide terrorism and "personal attack" with biological weapons. We are aware of individuals acquiring a potential for sowing mass destruction. This issue justifiably causes concern. "Personal power" has replaced the power that previously was in the domain of full scale armies. Yet Israel, which has labored and fought for so many years, has never been readier and more determined to maintain its way of life.



Reprinted from the Israel High-Tech & Investment Report October 2002

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