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November 24, 1989 - Image 46

Resource type:
Text
Publication:
The Detroit Jewish News, 1989-11-24

Disclaimer: Computer generated plain text may have errors. Read more about this.

I BUSINESS I

Israel Tackles Liberal
Countertrade Policies

HOLIDAY SALE

UP TO

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50 % (SELECTED
ITEMS)

JOEL BAINERMAN

Special to The Jewish News

W

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46

FRIDAY, NOVEMBER 24, 1989

EACH I

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1114: NUMOMMENONNIMIMOMONIN

ith a trade deficit

of $3.1 billion one
might expect
Israel's policy of countertrade
to be weighted heavily in
favor of its local industry. In
fact, the reverse is true.
The Israeli Ministry of
Trade and Industry has devis-
ed a set of policies relating to
countertrade which instead of
obliging foreign companies to
buy Israeli products, mirrors
the countries-' export
objectives.
The Industrial Cooperation
Authority in Tel Aviv is the
department within the
Ministry responsible for im-
plementing industrial
cooperation policies. Accor-
ding to its director, Zvi Alon,
the Israeli government is in-
terested only in industrial
cooperation pacts, and not
buy-back, off-set, barter, or
other types of countertrade
agreements. The difference is
that all agreements are ver-
bal understandings and con-
tain no obligations or
penalties if the foreign com-
pany fails to meet any of the
conditions. It also does not
define price or quantity.
Alon explains that Israel's
policy in the area of counter-
trade has nothing to do with
a shortage of foreign ex-
-change or trade imbalances,
but rather to give Israeli corn-
panies the opportunity to
penetrate' foreign markets
and enable them to come in
contact with large multina-
tionals. It is hoped that by do-
ing so it will lead to a future
joint-venture for research and
development of manufactur-
ing, thus further enhancing
Israel's overll industrial
objectives.
"All purchases are on a
competitive basis and thus
the intention of our efforts is
that Israeli companies only
be given a fair chance to com-
pete for contracts," he says.
"We don't believe that forcing
a company to buy a product
which can't compete on price
or quality, in the long run,
will enhance our trading posi-
tion. We're looking for a
customer, not an order?'
Israel's strategy is to drop
the companies on the front
door of the foreign firms and
hopefully after all the in-
dustrial cooperation structure
has been removed, exports
will follow.

This liberal strategy was
selected due to the political or
even psychological problems

of trading with a country
which is perceived to be in a
state of war. Israel's counter-
trade policies are very much
part of its overall strategy for
expansion of exports which
take into consideration the
small local market, its
distance from its major
markets, and the lack of local
marketing expertise.
About 150 U.S. companies
are involved in industrial
cooperation agreements with
Israeli companies, almost ex-
clusively in computers,
defense, or other high-tech
areas. Figures quoted recent-
ly in the local press estimated
that industrial cooperation
agreements comprise only 5
percent of total Israeli trade.
Alon doesn't see this figure
increasing substantially over
the next few years.
Many of the companies do
not work within the
framework of the Industrial
Development Authority, such
as IBM, which recently
awarded a $5 million sub-

Israeli companies
are trying to
penetrate foreign
markets.

contracting contract to Thlrad
Ltd., Israel's second largest
manufacturer of telecom-
munications equipment. As
part of IBM's commitment to
use sub-contractors from local
markets, 'Thlrad will produce
a controller to be used in the
AS 400 series manufactured
in Milan, Italy. It is the first
time a company outisde of
Europe is producing a part for
IBM Europe.
NCR Corporation also has a
firm commitment to buy from
Israel companies and in 1988,
doubled its purchases to $11
million.
In one of the largest deals to
date, General Dynamics sign-
ed a purchasing agreement
with Israel's Ministry of
Defense. Under the pact, the
American company agreed to
purchase $800 million of
Israeli defense and electronics
products over a ten year
period in exchange for the
Israel Air Force purchase of
F-16 fighter jet aircraft.
One of the major outcomes
of the first agreement was the
two companies bidding on
and winning a $300 million
U.S. military contract. The
U.S. defense firm will utilize
Tadiran's close cooperation
with the Israel defense Forces
to field-test certain military
products and use Israel's
overall lower production costs
to manufacture them.

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