ISRAEL 
HIGH-TECH & INVESTMENT REPORT

from the July 1999 issue


"A Hit, a Very Palpable Hit!"

Prior to the opening of the Paris Air Show at Le Bourget held in the middle of June Maj.Gen. (Res.) Ilan Biran Director General of the Ministry of Defense held an in-depth briefing which covered Israel's defense capabilities. The platforms, systems and products displayed by Israeli companies reflect the country's body of expertise and experience acquired in combat. The thrust is to offer solutions for upgrades, modernization and add-ons whose aim is to provide new generation capabilities that extend the life cycle of existing platforms. These capabilities are in line with globally shrinking defense budgets. Many countries opt for modernization at a lower cost than buying "new". Unmanned vehicles were very much on display. The Hermes-1500 pilotless vehicle offers the possibility of staying 30 hours aloft, up to 30,000 foot altitude and a range of 120 miles. Air-to-ground guided weapons and the Python-4, Rafael's air-to-air missile as well as a new generation of anti-armor Sike missiles were offered for sale. Elisra's solutions for electronic protection for an aircraft while it gathers information appeared in its most advanced form.

However, it was the mock display of the Arrow Missile, which displayed in this manner for the first time outside of Israel reportedly attracted an unusually high number of visitors. The Arrow Missile is intended as a defense system against medium-range ballistic missiles. It can intercept missiles within a wide spectrum of ranges and altitudes, and providing protection over large areas. Simultaneously the system handles dozens of threats through multi-target racking and interception capabilities. The display at the Israeli pavilion includes the Fire Control Center, the launcher and the arrow interceptor. Israel last year successfully conducted the first comprehensive test launch of the Arrow 2 system, designed to shoot down incoming missiles at speeds up to two miles per second traveling 10 or 25 miles above the earth's surface. The test launch lasted for 97 seconds, and was deemed as most successful. US officials observing the test were most pleased and said everything went smoothly. The new defense system is scheduled to be operational by 2000. The Arrow-2's main contractor is one of the Israel Aircraft Industries' factories. The "green pine" firing system is produced by Elta, and the "golden citron" control module is made by Tadiran. A decision was reached by the Defense Ministry for the IDF and IAF to begin preparing for use of the Arrow-2 missile. The good news is that Israel's deterrence against potential missile attack is at an advanced stage as the $2.0 billion bet on the Missile Arrow program is progressing dynamically. The Arrow-2 Interceptor is the heart of the Israeli Anti-Ballistic Missile Defense System. Final development flight tests are being conducted, which will be followed by operational tests.General Biran stressed that though it is on display at the Air Show the Arrow Missile is "not for sale". However, Moshe Arens, Israel's outgoing Defense Minister has high hopes that the US, which is partnered with Israel on the Arrow project, will allow its sale to neighboring Jordan and Turkey.Mr. Arens, an engineer and a one time Vice President of the Israel Aircraft Industries, which is the main contractor on the Arrow project, envisions the Arrow anti-ballistic missile system as having the ability to provide regional protection for Israel and areas adjoining it.

The Arrow Missile Project has acquired several dimensions, among which its deterrence aspect and political implications are high on the list. Over the past decade localized skirmishes including the bombing of Libya and the "scudding" of Israel by Iraq during Desert Sand and Iran's acknowledged missile capability have created a pressing need for a security net.

Laurie Mylroie a research associate of the Foreign Policy Research Institute, Philadelphia PA has pointed out that winning an electronic war like Desert Sand or intensive bombing as on Serbia and Southern Iraq does not remove the threat of further violence against minorities nor does it eliminate the threat of use of nuclear, biological, or chemical weapons.

Israelis are highly sensitive to loss of life and since the country's founding, have gone to great lengths to minimize threats to its population and even its existence by creating a viable defense establishment. In addition to the threat of becoming a target for ballistic missiles such as the SCUDS the United Nations inspector teams in Iraq have uncovered a major arsenal of biological and chemical weapons and a basis for creating a nuclear warhead within twelve months.These are very real concerns for Israel and all countries in the Middle East. This country is doing something to counter the threat. General Biran points out when Israel could not acquire a tank to meet the needs of its defense forces it developed the Merkava tank which became a prototype for modern armies. The parallel is seen in the development of the Arrow Missile which began some eight years ago in cooperation with the US. By the time it is concluded in about two years it will have cost nearly $2.0 billion. The development of the Arrow has been fraught with trials, error and disappointment but the program has turned the corner and in the September 1998 trials all systems were tested together and its interceptor capability was proven effective without any doubt.

General Biran is confident of the Arrow becoming part of Israel's umbrella to protect its airspace from being invaded by missiles. "In a few weeks operational capability tests will get underway and will prove Israel's ability to deal with ballistic missiles and to meet the challenge of the most advanced systems which are being sent to countries in the Middle East," stated General Biran. The global defense business is a major one but in recent years has been hit with regressive sales. In 1997 Israels' defense exports stood at about $2.7 billion. In 1999 the defense industry establishment is looking forward to reach $2.0 billionin exports yet it is far from clear whether it will reach this objective. Details of defense system sales by country of destination are not readily available. However, General Biran commented that sales to China are minimal and last year amounted to only several tens of millions of dollars.

Trends are changing radically. " In 1982 75% of the defense industry budget for research and development was for the Israel Defense Forces and 25% for export. In 1997 the new trend was in place with 75% of the research budget for export items and 25% for the country's defense forces," according to Maj. Gen. Yosi Ben Chanan Director of SIBAT (Foreign Defense Assistance). He also pointed out that markets are shrinking, highly competitive and the demands of customers are changing. "The age of the supermarket off-the shelf sales is a thing of the past. Countries are seeking to do their own partial or full assembling of the end product. Many countries rather than buying our Uzi submachine gun or the world class Galil assault rifle are producing these items by license in their own countries".

The new government under Prime Minister elect Ehud Barak, a former chief-of-staff, is likely to further stress Israel's deterrence capability while promoting ways for resuming and advancing the peace program.



Reprinted from the Israel High-Tech & Investment Report July 1999

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