AP PHOTO BY J OAO S ILVA
•
A line of Israeli tanks in the West Bank.
of. a -rociao-nr hni-xxnaan clicric.irNtLe a f
Elbit and IAI. The second would
handle commercial aviation and
include portions of IAI and
TAAS.
A third division would be elec-
tronics and space, including mil-
itary electronics. This would
include departments of IAI,
Rafael, TAAS, Tadiran Ltd., and
Elisra Electronic Systems Ltd.
The fourth would deal with am-
munition and include parts of
TAAS and Rafael.
The fifth would handle ar-
mored vehicles, including up-
grading and protection of
artillery and would merge parts
of TAAS, Rafael and lAl's Ram-
ta plant in Beersheba.
The final division would be re-
sponsible for tactical missiles and
include portions of Rafael and IAI.
Defense industry analysts say the
government is not taking this re-
organization proposal seriously.
Zev Bonen, former director of
Rafael and today a researcher at
Bar-Ilan University's Begin-Sa-
dat Center for Strategic Studies,
does not like Mr. Rein's ap-
proach. He has advocated that
first the government should re-
organize its own industries and
then sell off divisions it no longer
needs.
Mr. Bonen pointed to Tadiran
and Elta, IAI's electronics divi-
sion, advocating that the gov-
ernment sell Elta to Tadiran and
eliminate duplication in mar-
keting, production and research.
The government could first put
all electronics in one division,
missiles in another and then pri-
vatize, he suggests.
He is skeptical, however,
about making one huge corpora-
tion. "I don't think it's a good
idea," he says. "It would have
tremendous power and the De-
fense Ministry would not have
the force to control it."
Defense Ministry officials,
however, do not want to priva-
tize. When Lockheed Martin of-
fered to buy TAAS's heavy
munitions industry last May,
they objected. They forecast that
the defense industries, through
manpower cuts and efficient
management, can lower their
losses. In the end, Lockheed Mar-
tin was sold and the offer to buy
TAAS was dropped. 0
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government companies," he says.
"There is no rationalization. Is-
rael is 15 years behind the rest
]
of the world in terms of reorga-
/__ nization.
"The government is impotent.
It can't do anything except pass
the buck from person to person."
Mr. Rein warns that the govern-
ment is already spending $1 bil-
lion a year to keep the defense
industry from collapse. About
$850 million alone went to IAI
over the last three years.
In contrast, Mr. Rein says U.S.
/ -) defense contractors, which have
merged into three giant corpo-
rations, are now entering niches
that were once exclusively Is-
raeli, including unmanned air ve-
hicles, electronic warfare,
reconnaissance and executive
jets. He says the problem will be-
come acute after the year 2000.
That leaves the government
the owner of IAI, TAAS, Israel
%' Military Industries and Rafael.
Prime Minister Binyamin Ne-
tanyahu campaigned last year
on a pledge to rapidly sell-off gov-
ernment companies, including
defense contractors. In his early
months of office, he urged his
aides to do exactly that.
The results, however, have
been meager. The government's
• privatization plan is identical to
the 1996 plan submitted by the
Labor government of then Prime
Minister Shimon Peres to sell-off
13 companies. And when it
comes to the defense industry,
Mr. Netanyahu has no plans to
privatize for at least the next two
years.
Moshe Leon, Mr. Netanyahu's
economic adviser responsible for
\_„ privatization, says the defense in-
' dustries are the last on the list.
"The policy is that there must be
all sorts of steps taken before we
can discuss privatization," he says.
`There isn't the conception yet."
Mr. Rein's proposal calls for
the reorganization of both state
and privately-owned contractors
into six divisions under one man-
agement. Assets would total $2.5
billion and each division would
have an individual function.
The first would upgrade and
sell warplanes, as well as to pro-
duce unmanned air vehicles
(UAVs). This would be the result
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