Arms Race
It won't be easy, but Israel is trying to make inroads into the
lucrative British defense market.
STEVE RODAN SPECIAL TO THE JEWISH NEWS
A
fter more than 27 years
under blacklist boycott, Is-
raeli contractors are pre-
paring for an assault on
the British defense market.
With the lifting last May of the
British embargo, imposed after
the Six-Day War, Israeli defense
companies are examining a huge
and potentially lucrative British
market, which formally is much
more open than the United
States.
"We don't distinguish be-
tween UK and foreign suppli-
ers," a British defense official
said. "We don't have a 'buy
British' policy."
British defense officials
toured Israel last month and
extended a welcome to Israeli
contractors. They met with
representatives of leading de-
fense firms as well as those
from the Defense Ministry.
The meetings were private,
and-the British visitors did not
want to be identified.
Moreover, British defense
contractors are inviting their
Israeli counterparts on a UK
defense industry tour in
March.
The visit will include a look
at the latest technology at the
National Exhibition Center in
Birmingham.
The Cold War may be over, but
the British are still spending
plenty on defense.
Officials say procurement con-
tracts for the 'UK's armed forces
in 1994 totaled $13.5 billion. UK
defense companies won 78 per-
cent of the bids during that
period.
Those British sales accounted
for 17 percent of the world mar-
ket in arms exports. The U.S.
share of the export market was
55 percent. France achieved a
share of 13 percent.
For Israeli defense contractors,
the hope is that the British will
embrace their array of high-tech
weapons systems and compo-
nents.
Already, in the wake of British
Defense Secretary Malcolm
Rifkind's visit to Israel in Octo-
ber, Rafael has been invited to
submit a bid on a large shipyard
contract.
As a leading member of
NATO, Britain has numerous
projects that require a contrac-
tor. They include a medium-
range surface-to-air missile,
tactical trainer plane and a tac-
tical electronic communications
system.
Officials say the British De-
fense Ministry is looking for fresh
ideas for effective weapons sys-
tems at reasonable prices, an
area where Israelis excel.
greater pace than their Israeli
counterparts.
The game is also played dif-
ferently in London. The British
Defense Ministry, unlike the Pen-
tagon in Washington, insists that
virtually all of its contracts have
a firm price, with no addition for
inflation.
Small firms are not given any
preference in winning bids.
The British also stress they
want prospective contractors
to guarantee maintenance and
support of what they sell. Pay-
ments to contractors are made
according to progress of the
project, rather than the pas-
sage of time.
On paper, the process looks
simple. But British officials ac-
knowledge that their market
is far tougher than it looks.
First, competition for con-
tracts has been increasing
because defense spending in
the UK has been dropping
rapidly. Industry experts say
that over the past year, British
exports have declined to about
$5 billion annually.
Open and fair competition
notwithstanding, the officials
say, British companies win the
lion's share of the government
contracts.
British firms have the
knowledge, connections and rep-
utation that many foreign com-
panies lack. And, as outsiders,
the Israeli companies are prob-
ably on the bottom of the totem
pole.
High on the totem pole is the
United States, a major player in
the UK defense market.
Over the last year, officials say,
the US has won nearly $2 billion
worth of contracts. U.S. compa-
nies have captured more than 60
percent of Europe's offshore de-
fense market.
Britain has, in effect, locked
U.S. companies into a strong de-
fense relationship through Lon-
don's stringent offset policy..
British law demands that all con-
tracts awarded to foreign com-
panies of more than $10 million
guarantee that they buy British
products or services.
A decline in defense budgets
also means that Britain rarely
embarks on major projects with-
Often, the officials acknowl-
edge, the ministry's procurement
department simply advertises its
need without stating a specific
product. Such a request could
perhaps be fulfilled by one of
Israel's existing high-tech goods.
Israel and Britain are active
trading partners. In 1993, Britain
exported $880 million worth of
goods to Israel. Israeli exports to
the Mc. for that year were $550
million. During the first third of
1994, British exports to Israel
were about double those of
Israel's.
British defense officials stress
that their considerations in
awarding contracts are commer-
cial rather than political. Bidders
are judged by their track record
on punctuality and quality, size
and financial health.
Some British defense compa-
nies have slashed about two-
thirds of their workforce and
doubled production over the last
five years, streamlining at a far ARMS RACE page 54
Specially compiled by The erusalem Post
-- $1 EQUALS 2.8630 NIS (shekels) - Close Price 10/15/93 —
Airborne Contract Has jIAI Soaring
Israel Aircraft Industries (IAI)
announced it has won a
maintenance contract worth up
to $200 million from the
U.S. cargo firm Airborne
Express.
IAI officials say the contract
represents a major move into
the American market
Based on the agreement,
TAI win maintain jet engines
for Airborne's fleet of 1)C-8s
and DC-9s.
The Seattle-based firm, with
a fleet of 1.10 aircraft, special-
ize.s in cargo and express pack-
age delivery service.
"It's unprecedented.," IA1
president Moshe Keret said.
"It's one of the most successful
contracts we have achieved in
the United States."
Growth Homione Complaint Falls Short
Biotechnology General (BTG)
of Israel will be seeking over
$100 million in damages from
American firm Genentech fol-
lowing the 'U.S. International
Trade Commission's (ITC) clis
missal of Gen.entech's corn
plaint against BTG.
Genentech brought charges
against BTG in December 199
and tried to prohibit i rnpo
human growth hormone b
tinational Novo
Nordisk into the United States,
claiming the companies had
infringed process patents.
In making its decision, the
ITC refused to make any find-
s regarding infringement or
e:. validity_ nf Genentech's
Blades Technology Ltd., of Na-
hariya, Israel, owned by the
Wertheimer
family, has signed
.
a Joint venture agreement with
Pratt & Whitney of East Hart-
ford, Conn., to establish a com-
pany for worldwide production
and marketing of compressor
airfoils for gas turbine engines
for aerospace and land-based
applications.
Blades Technologies Inter-
national will be chaired:by Stef
Wertheimer and have its head-
quarters at Pratt & Whitney's
Columbus, Ga., facility.
Pratt &Whitney will own 50
percent of the company, while
the Wertheimer family and
Discount Investment Corpora-
tion will own 25 percent each.
If
.
residentFass
'*y intends to.:
s:product to e.
as pos;
Israel Shipyards Not Sold Yet
Despite a claim by the Admiral
Group that it has submitted the
successful bid for the sale of
Israel Shipyards, the Israeli
government intends to hold
talks with all three of the final
bidders in an attempt to raise
the price.
Marvin Nieman, one of the
six members of the Admiral
Group, returned to the United
States from Israel but came
back because of the planned
meeting.
Mr. Nieman said the only
way the Admiral group would
be willing to raise its offer
would be if the Israeli govern-
ment changed the conditions of
the sale.
Gas Project Targets Israe
Qatar officials have confirmed
that a letter of intent has been
signed with Enron Corp., to
develop a massive new liq-
uefied natural gas (LNG)
project aimed at the Israeli
market.
The officials said that ac-
cording to the pact, the United
States' largest gas transmis-
sion firm would produce 5
million tons of LNG a year
from early,1999.
The Israel Energy Ministry
has been aware of the negotia-
tions, according to spokesman
Mickey Lev. He added that
Israel, along with India and
japan, is one of Elron's three
target markets.
He said, however, that the
ministry has made no agree-
ments with the company.
53