General News Summary

Premier Under Heavy Fire

No formal charges have been filed against him in court, but the latest set of accusations swirling around Ehud Olmert have placed the prime minister in a serious crisis of his saturated two years in office. Testimony from Morris (Moshe) Talansky, a New York businessman and fundraiser for Israeli institutions who says he was the bagman who delivered envelopes stuffed with cash to Olmert over the course of about a decade, has shattered what faith the public and the political infrastructure had in him. Olmert's claim that the money, contributions from Talansky and unnamed others, were political campaign contributions seems to make no difference.

As it currently appears, even if the investigation, which has filled the headlines since the case became public, surprisingly just before Israel's 60th anniversary celebrations, fizzles and the case is dropped, Olmert's longstanding survival is a tough call. The question now when and how exactly Olmert will depart, resign or take leave of absence. Even during his visit to Washington in early June, to share the stage with Democratic candidate Barack Obama at the annual meeting of AIPAC – the America Israel Public Affairs Committee and meet President Bush at the White House, moves to replace him were under way back in Jerusalem.

Inside Kadima, a leadership race appears to be shaping up between Foreign Minister and Vice Premier Tzipi Livni, till recently considered Olmert's heiress-presumptive and Transport Minister Shaul Mofaz, a former defense minister and prior IDF chief of staff.

A lower probable scenario is that Olmert survives the current furor and continues as prime minister. He says he can bring it off. And those who count him out should remember that he survived the scathing Winograd committee report, which placed the primary responsibilities for the 2006 Second Lebanon War on him/on the former defense minister Amir Peretz, and then-chief of staff Gen. Dan Halutz. Olmert's personal standing reached unprecedented lows after the publication of that report, but – a year after the publication of the first part of that report, and six months after the final report – Peretz and Halutz are out of office. Olmert, on the other hand, is prime minister.

Indirect talks with Syria

Israel announced on May 21 that it was holding indirect peace talks with Syria, with Turkey as an intermediary. The announcement, confirmed by Syria, was perceived vocally by Olmert's opponents as an attempt to divert attention from the prime minister's political and legal troubles. But Syria was not deterred from continuing with the negotiations on a key issue. Recent polls show that Israelis, as they have in the past, strongly opposes return of the Golan Heights, captured in the 1967 Six-Day War, to Syria. Beyond that stand two deeply emotional issues – the Syrian precondition that Israel agree to allow Syria deployment on the shores of Lake Kinneret before talks can proceed, and the fate of the 10,000-odd Israelis living in the Golan, some of them for 40 years.

Prisoner negotiations

According to recent reports, prospects of a possible deal that would bring a temporary halt to the Palestinian rocket and mortar attacks on Israeli cities and communities along the Gaza-Israeli frontier, and Israeli stoppage of its blockade on Gaza, are still being conducted through mediation of the Egyptian Intelligence. Israel insists that the deal will include the return of IDF soldier Gilad Schalit, kidnapped by Hamas in June 2006. Any deal would involve substantial quid pro quo to the Palestinians, a political payment that would certainly be hard for Israel.

In early June, military sources discounted the possibility of a major Israeli thrust into Gaza, at least for a few weeks, to allow a cease-fire deal to ripen. And indeed, some Israeli sources viewed continued Palestinian shelling part of an effort by Hamas to extract more Israeli concessions to the Gaza negotiators. In a similar but separate vein, Palestinian negotiator Ahmad (Abu Ala) Qurei's report that Israel and the Palestinian Authority were drafting a paper that would be the basis for a peace deal.

Little is known about the state of talks, through German intermediaries, on the return of soldiers Eldad Regev and Ehud Goldwasser, whose kidnap by Hezbollah triggered the Second Lebanon War in July '06. There have been reports that those negotiations have taken a major step forward in late spring, and German Foreign Minister Frank-Walter Steinmeier said the June 1 return to Israel of remains of fallen IDF soldiers maintained by Hezbollah was a preliminary step, aimed to create a positive dynamism in the secret talks. Simultaneously, Israel released Nissim Nasser, a Lebanese-born son of a Jewish woman who converted to Islam and immigrated to Israel in 1991. On crossing the border into Lebanon just before the body parts were returned, Nasser said he had spied for Hezbollah “as a Lebanese patriot and a Muslim.”

Hezbollah has been demanding the release of Samir Kuntar, a Lebanese Druse serving four life sentences for the murder of an Israeli (Haran) family in their home, during a 1979 seaborne Palestinian terrorist raid on the coastal town of Nahariya. In late May, Hezbollah leader Hassan Nasrallah hinted that a deal for Goldwasser and Regev, believed in Israel to be dead, was imminent when he said that Kuntar would be returned to Lebanon “very soon.”

The Iranian Threat

Early-June statements by Transport Minister Shaul Mofaz, a former IDF chief of staff and defense minister, that military action against Iran's nuclear potential was now unavoidable drew fire from both the International Atomic Energy Agency and Israeli officials. Many viewed the statements, in an interview with the Yediot Aharonot newspaper, as an effort to stake out a hawkish position in advance of a leadership contest for the ruling Kadima party if or when Prime Minister Olmert left office. Others noted that Olmert and President Bush, meeting in Washington a few days earlier, had said that diplomatic efforts still should be allowed to run their course. Mofaz, they contended, were harmful to the case.

Happy Birthday, Israel, and Shalom

by Andrew Roberts, a British historian, published in London's Daily Express on May 8, 2008

The State of Israel has packed more history into her sixty years on the planet – which she celebrates this week – than many other nations have in six hundred. There are many surprising things about this tiny, feisty, brave nation the size of Wales, but the most astonishing is that she has lived to see this birthday at all. The very day after the new state was established, she was invaded by the armies of no fewer than five Arab countries, and she has been struggling for her right to life ever since.

From Morocco to Afghanistan, from the Caspian Sea to Aden, the 5.25 million square miles of territory belonging to members of the Arab League is home to over 330 million people, whereas Israel covers only eight thousand square miles, and is home to seven million citizens, one-fifth of whom are Arabs. The Jews of the Holy Land are thus surrounded by hostile states 650 times their size in territory and sixty times their population, yet their last, best hope of ending two millennia of international persecution – the State of Israel – has somehow survived.

When during the Second World War, the island of Malta came through three terrible years of bombardment and destruction, it was rightly awarded the George Medal for bravery: today Israel should be awarded a similar decoration for defending democracy, tolerance and Western values against a murderous onslaught that has lasted twenty times as long.

Jerusalem is the site of the Temple of Solomon and Herod. The stones of a palace erected by King David himself are even now being unearthed just outside the walls of Jerusalem. Everything that makes a nation state legitimate – bloodshed, soil tilled, two millennia of continuous residence, international agreements – argues for Israel's right to exist, yet that is still denied by the Arab League. For many of their governments, which are rich enough to have solved the Palestinian refugee problem decades ago, it is useful to have Israel as a scapegoat to divert attention from the tyranny, failure and corruption of their own regimes.

The tragic truth is that it suits Arab states very well to have the Palestinians endure permanent refugee status, and whenever Israel puts forward workable solutions they have been stymied by those who interests put the destruction of Israel before the genuine well-being of the Palestinians. Both King Abdullah I of Jordan and Anwar Sadat of Egypt were assassinated when they attempted to come to some kind of sane accommodation with a country that most sane people now accept is not going away.

The process of creating a Jewish homeland in an area where other peoples were already living – though far fewer of them than anti-Israel propagandists claim – was always going to be a complicated and delicate business, and one for which Britain as the Mandated power had a profound responsibility, and about which since the Balfour Declaration of 1917 she had made solemn promises.

Yet instead of keeping a large number of troops on the ground throughout the birth pangs of the State of Israel, Britain hurriedly withdrew all her forces virtually overnight on 14 May 1948, thus facilitating the Arab invasions the very day, one of which was actually commanded by a former British Army officer, John Glubb (known as Glubb Pasha). Less than four years earlier, Britain had landed division after victorious division in Normandy, now "Partition and flee" was the Attlee government's ignominious policy, whose consequences are still plaguing the world half a century later in Kashmir and the Middle East.

"We owe to the Jews," wrote Winston Churchill in 1920, "a system of ethics which, even if it were entirely separated from the supernatural, would be incomparably the most precious possession of mankind, worth in fact the fruits of all wisdom and learning put together."

The Jewish contribution to finance, science, the arts, academia, commerce and industry, literature, philanthropy and politics has been astonishing relative to their tiny numbers. Although they make up less than half of one per-cent of the world's population, between 1901 and 1950 Jews won 14% of all the Nobel Prizes awarded for Literature and Science, and between 1951 and 2000 Jews won 32% of the Nobel Prizes for Medicine, 32% for Physics, 39% for Economics and 29% for Science. This, despite so many of their greatest intellects dying in the gas chambers.

Civilization owes Judaism a debt it can never repay, and support for the right of a Jewish homeland to exist is the bare minimum we can provide. Yet we tend to treat Israel like a leper on the international scene, merely for defending herself, and threatening her with academic boycotts if she builds a separation wall that has so far reduced suicide bombings by 95% over three years. It is a disgrace that no senior member of the Royal Family has ever visited Israel, as though the country is still in quarantine after sixty years.

After the Holocaust, the Jewish people recognised that they had to have their own state, a homeland where they could forever be safe from a repetition of such horrors. Putting their trust in Western Civilisation was never again going to be enough. Since then, Israel has had to fight no fewer than five major wars for her very existence. She has been on the front line in the War against Terror and has been fighting the West's battles for it, decades before 9/11 or 7/7 ever happened. Radical Islam is never going to accept the concept of an Israeli State, so the struggle is likely to continue for another sixty years, but the Jews know that that is less dangerous than entrusting their security to anyone else.

Very often in Britain, especially when faced with the overwhelmingly anti-Israeli bias that is endemic in our liberal media and the BBC, we fail to ask ourselves what we would have done placed in their position? The population of the United Kingdom of 63 million is nine times that of Israel. In July 2006, to take one example at random, Hezbollah crossed the border of Lebanon into Israel and killed eight patrolmen and kidnapped two others, and that summer fired four thousand Katyusha rockets into Israel which killed a further forty-three civilians.

Now, if we multiply those numbers by nine to get the British equivalent, just imagine what WE would do if a terrorist organization based as close as Calais were to fire thirty-six thousand rockets into Sussex and Kent, killing 387 British civilians, after killing seventy-two British servicemen in an ambush and capturing eighteen. There is absolutely no lengths to which our Government would not go to protect British subjects under those circumstances, and quite right too. Why should Israel be expected to behave any differently?

Last month I visited Auschwitz-Birkenau, researching a book about the Second World War. Walking along a line of huts and the railway siding where their forebears had been worked and starved and beaten and gassed to death, were a group of Jewish schoolchildren, one of whom was carrying over his shoulder the Israeli flag, a blue star of David on white background. It was a profoundly moving sight, for it was the sovereign independence represented by that flag which guarantees that the obscenity of genocide – which killed six million people in Auschwitz and camps like it – will never again befall the Jewish people. Happy birthday, Israel and Shalom.

The Economy

Growth, Surprisingly

Despite accumulated global economic negative conditions, from the sub-prime crisis to the effect of the disproportionately strong shekel on exports and exporters, to predictions of movement towards recession by the Bank of Israel and the Treasury, Israel's economy showed near-amazing strength in first quarter statistics published by the Central Bureau of Statistics in late May. Gross Domestic Product for January-March grew by 5.4%, a rate comparable to the 5.3% of 2007; business product increased by a robust 6.1%. Per capita; GDP was up 3.5%. For all of 2008, the Bank of Israel had predicted GDP growth of 4.3%, while the Treasury's estimate was even lower, at 3.2%.

Another surprisingly positive statistic: the standard of living of Israelis rose by an unprecedented 12.2% in the first quarter, largely due to buying wave triggered by the strength of the shekel vis-a-vis the U.S. dollar. Exporters suffer badly and raise complaints that the weak dollar affects their income, because their local expenses are paid in “strong” shekels while their incomes fell as the dollar declined. Exports of goods rose by 12.6%, exports of services by over 33%. Negatively affected was agriculture as well, where exports fell by 40%.

Economic statistics for April and May, which have not been published, appear to show continuing strength, according to Ha'aretz economic commentator Motti Basok. Basok says, economic statistics for the first half of 2008 “may again prove a pleasant surprise. “Proper management of the economy, despite the current political crisis, an increase in the share of exports to developing markets, and taking advantage of opportunities will bring surprising statistics also at the end of the year,” Basok wrote.

Unemployment Low

Unemployment in the first quarter of 2008 reached 6.3%, the lowest figure in 11 years, the Central Bureau of Statistics announced on May 28. The CBS said that the number of unemployed, at 185,000, was the lowest since 1997.

Power from the People

Beginning in July, Israel will join the list of countries offering incentives to citizens who produce their own, “clean” electricity. The Public Utilities Authority says that any person who installs a photovoltaic system on his property can sell the electricity it produces to the national power grid for NIS 2.01 (currently more than 60 U.S. cents) per kilowatt-hour. Similar incentives have been offered to citizens by a number of countries, including the United States (in some states), Germany, France, Spain, Japan and Italy. The new rules allow for installation by private parties of photovoltaic systems with a capacity of up to 15 kilowatts; such a system currently costs about NIS 300,000, equaling a return on investment in 7-10 years.

Alternative Gas Source Eyed

National Infrastructures Minister Binyamin Ben-Eliyahu was due to meet with Gazprom officials in mid-June, to discuss Russian natural gas imports. According to Globes, there has also been progress in talks for the purchase of natural gas from Azerbaijan. Both potential deals would involve deliveries via the Turkish infrastructure corridor. The moves follow Egyptian officials' statements that Cairo planned to review its natural gas agreements with Israel.

Bioscience Conference in Tel Aviv

More than 6,000 delegates, many of them CEOs and scientific officials of life science and biomedical companies, attended the annual ILSI Biomed meetings in Tel Aviv in late May. Among those attending were two Israelis who have made significant contributions to the biomedical field – Dr. Aya Jacobovits, one of the founders of Abgenix, which was sold to Amgen for $2.2B, and Dr. Arnon Rosenthal, whose Rinat Neuroscience was sold to Pfizer for $500M. Jacobovits headed the team that developed the XenoMouse, a rodent with an immune system duplicating a human one. The mouse, developed by genetic manipulation, is an ideal place to develop and grow human antibodies. Rosenthal's Rinat Neuroscience, based in California, developed therapeutic proteins to treat diseases of the nervous system, and was acquired by Pfizer in 2006.

Mergers & Acquisitions

Microsoft-ZoomixInternational software giant Microsoft is planning its third Israeli acquisition of 2008, Ha'aretz said in early June. This target is Zoomix, a maker of software that deals with problems in data quality. Purchase prices is in the $25-$35M range. Earlier this year, Microsoft acquired Kidaro and YaData in separate transactions.

TPG-Strauss Coffee (25%)

The Texas Pacific Group is acquiring 25% of the coffee subsidiary of Israeli food giant Strauss for $288M, valuing Strauss's total global coffee operations at over $1B. According to Ha'aretz TGP, one of the world's largest investment groups, was chosen by Strauss over three other international competitors. Strauss reportedly plans to use the proceeds of the deal to expand its worldwide coffee operations, currently the world's seventh largest, with the goal of reaching fourth place globally. Last year, Strauss coffee had profits of NIS 231M, on sales of NIS 2.9B.

IBM-Diligent

IBM in late April made its third Israeli purchase of 2008, buying Diligent Technologies, a specialist in de-duplication systems for improving the efficiency of enterprise data storage. Purchase price for diligent, based in Tel Aviv and Framingham, Massachusetts, was variously reported at between $170M and $200M. Earlier in the year, IBM had purchased two other Israeli firms in the data-storage space, XIV of Tel Aviv for $300M, and FilesX of Haifa for $80M. The acquisitions apparently are part of IBM's designation of data storage and management – in small organizations as well as large ones -- as one of its core businesses, in which it plans to maintain a large or dominant position.

Microsoft-Farecast

Software giant Microsoft purchased Farecast, founded by Israeli Oren Etzioni, in April for $115M, more than five times the amount invested in the Seattle-based firm since its foundation in 2003. Farecast's online service, launched in 2006, uses data-mining technology to predict whether the price of specific air-travel itineraries will rise or fall, and whether a currently listed hotel-room rate is a good deal. It was the latest of several successful exits for Etzioni, a long-time U.S. resident who is now a computer science professor at the University of Washington. Others include NetBot, a price-comparison service purchased by Excite in 1997; MetaCrawler, a search engine now part of Infospace; the Israeli Clearpoint, sold to Reuters, and Go2Net, sold to Infospace in 2000. Interviewed by Ha'aretz's The Marker business section, he said that the key to success is finding what he calls “pain points,” representing the real needs of people, and to develop “cures” that deal with these pains.

Vmware-B-Hive

Vmware Inc. of Palo Alto, California, a leader in virtualization solutions, is acquiring B-hive Networks, a Herzliya and San Mateo, California-based maker of application performance management software. Price was not announced, but industry sources estimate it at more than $50M. Kalkalist, the economic magazine of Yediot Aharonot newspaper, quoted estimates that B-hive, founded by Yoav Dembek and Assaf Wexler, had raised about $7.5M from private and venture capital investors in two rounds of financing.

Finance & Investment

Teva on Top

Teva, the world-class pharmaceutical company, remained at the top of the annual Dun & Bradstreet Israel rankings for 2007, based on revenues of NIS 38.6B, up 11.9% from 2006. Oil Refineries, in second place, had revenues of NIS 21.3B, followed by the Israel Electric Corp. at NIS 19.3B, the Israel Corp. at NIS 16.8B, and Elbit Systems.

Dan Hotels Eyes India

The board of Israel's Dan Hotels, operators of the world-famous King David in Jerusalem and other hostelries in Israel, has decided to investigate the possibility of building a hotel in India, according to a report in Globes. In a notice to the Tel Aviv Stock Exchange, Dan did not indicate possible locations or identify possible partners. But Globes, citing its own business sources, said that the chain was considering a 250-room business hotel in an area with a high-tech orientation.

Delek Deals

Delek Real Estate, controlled by businessman Yitzhak Tshuva, has signed a memorandum of understanding for a joint venture with Indian real estate Sigrun. The venture, in which Delek is expected to invest about $500M, will build commercial and residential properties on some of the 30,000 acres in the Indian firm's “bank” of property.

In another development Elad, an investment arm of the Delek/Tshuva empire, is reportedly talking to Israeli and foreign investors about a $100-$200M fund for investment in China.

Vietnamese Oil Strike Share

Delek Energy, a subsidiary of Israel's Delek Group, has a 25% share in a potentially large oil and gas strike in Vietnam, the company told the Tel Aviv Stock Exchange in late May. Delek and its senior partners, Santos of Australia and British-based Premier Oil PLC, each of which have a 37.5% share, announced the success of test drilling in a portion of the Chim Sao North field in Vietnam. According to a report in Kalkalist, the field has a potential value, at current energy prices, of $10B.

Eyeing an IPO

Despite the current state of capital markets Mobile Access Networks, based in Vienna, Virginia in the U.S. and Lod, nearby Israel's Ben-Gurion International Airport, is contemplating a public offering of its shares at a company valuation of $250M, according to a report in the Kalkalist. Mobile Access, a designer and developer of wireless indoor networks providing multiple voice and data services on a single broadband infrastructure, previously raised capital at a $50M valuation. The company, previously called Foxcom Wireless, has a variety of installations, including the Hearst Tower, the Ft. Lauderdale International Airport, and the last three Super Bowls.

High Technology

IDE Asian Desalination

IDE Technologies, jointly owned by the Israel Corp. and the Delek Group, has won a tender to supply three desalination plants for an Asian client. According to The Marker, the client apparently is in India and the value of the deal, for plants with a daily capacity of 24,000 cubic meters a day (mcm), is $80M. Previously, IDE sold two other plants with a total capacity of 17mcm/day to the same client. IDE, which competes with international firms such as Veolia of France, General Electric and Siemens on the world desalination market, has installed a total of 370 desalination facilities with a total capacity of 1.4 billion mcm in 40 countries around the world.

Sunny Days

Solel, the specialist in solar-thermal systems for the generation of electricity based in Beit Shemesh, has sold 190,000 solar collectors to Iberolica Solar of Spain in a deal valued at $180M. The collectors will be used in eight separate 50-megawatt plants being built by Iberolica in southern Spain. Iberolica, which plans to build 1,000 megawatts of solar electricity-generating capacity in the Spanish provinces of Andalucia, Extremadura, Castilla la Mancha and Castilla Leon, has also asked Solel to bid on equipment for an additional 600 MW of capacity.

In the Right Direction

Under the terms of an agreement signed in late May, Hyundai of Korea, the world's fifth-largest automaker, will install GPS navigation systems developed by Israel's Nav N Go in all of the 4 million new cars Hyundai produces each year. Annual revenue to Nav N Go is $600M, according to a report in the Kalkalist. The agreement is the first for Nav N Go directly with an automaker, though the firm has strategic agreements with, according to the Kalkalist, “tens of companies” including HP, Samsung and Panasonic for the sale of its navigational products. Nav N Go is also negotiating with Apple on the possibility of installing its software in iPhones. Dudi Virnick, who with Koby Halperin founded the company in 2004, told Kalalist that he expects the Hyundai deal to open the doors to other automakers. According to one industry source, Nav N Go was the world's third largest supplier of navigation devices in 2007.

Wimax to Japan

Startup Altair Semiconductor, which develops WIMAX chips for fourth generation communications technology – G4 handheld devices – has signed a multi-million dollar, perennial contract with Willcom Inc. – Japan's largest wireless provider. Willcom is said to have chosen Altair, based in Hod Hasharon, northeast of Tel Aviv, after looking at several of the world's leading chip manufacturers. The contract calls for Altair to supply Willcom with chipsets for its "next generation Personal Handyphone System, XG-PHS; the company will be providing the Japanese communications giant with its ALTx150 series of high performance, low-power chipsets. Altair, which currently employs 85 people, has raised a total of $26M in two rounds of financing from investors who include BRM Capital, Giza Venture Capital, Jerusalem Venture Partners and Bessemer Venture Partners.

Aerospace & Defense

Arrow Funding

During his late-May visit to Israel for the country's 60 anniversary celebrations, President Bush promised Israeli leaders that he would push for continuing funding of the Arrow-3 anti-missile defense system, according to a report in the Jerusalem Post. Earlier this spring, the Israeli defense establishment had decided to push forward with development of the Arrow-3, a more advanced version of the anti-missile system currently deployed by Israel. Defense officials, according to the Post report, preferred an advanced Arrow 3 over the THAAD missile defense system being developed by Lockheed Martin and offered to Israel. They said that Arrow, developed with American funding and built by Boeing and IAI, was better suited to dealing with the threat of long-range Syrian and Iranian missiles. (Israel is seeking $150M in funding for Arrow-3, which according to the Post's sources could be fully operational within a year). At the same time, House Speaker Nancy Pelosi told the Post in an interview that Congress remained committed to maintaining Israel's military advantage over other countries in the Middle East.

In April, the Arrow system's Green Pine radar successfully tracked a Blue Sparrow missile. The missile, made by Rafael, mimics an upgraded version of Iran's split-warhead Shihab 3 ballistice missile.

After visits to Washington by Defense Ministry director general Pinhas Buhbut and Amos Gilad, head of the ministry's diplomatic-security bureau, the U.S. said it would hook Israel up to its worldwide missile warning system. In the past, Israel was linked to the American missile warning system during the first Gulf war in 1991, and prior to the Iraqi invasion in 2003.

Elbit Record Profits

Elbit Systems reported record profits of $32.2M for the first quarter of 2008, up 68% from the $19.1M of the parallel quarter in 2007. Revenues rose by 53% during the period, to $616M. Elbit said that its backlog of orders in late March totaled $4.9B, up from $4.6B at the end of 2007.

$127M Communications Sale

Tadiran Communications, a subsidiary of Elbit Systems, has sold high-frequency (HF) and very high-frequency (VHF) tactical radio communications systems to an unnamed European client in a deal valued at $127M, according to a report in Globes. Globes noted that though the equipment involved is very much standard and “off the shelf,” the deal is unusual because of its size. On May 21, Elbit said that its El-Op subsidiary was awarded three contracts from an unnamed Asian customer for the supply of cooled thermal imaging systems for reconnaissance and target acquisition systems.

Phalcon Deal Discussed

IAI and India reportedly were in advanced talks this spring on the possible supply of an additional three Phalcon AWACS (Airborne Warning & Control Systems), according to a report in the Jerusalem Post. The first of three similar planes ordered by India in 2004 in a deal valued at $1.1B is currently undergoing flight tests in Russia and is scheduled to be supplied in September. The other two aircraft, all of which are built on Russian-made and supplied Ilyushin-76 airframes, are due to be supplied in 2009 and 10. The planes currently under discussion, whose configuration is similar to those sold in 2004, includes electronic intelligence an radar systems designed and built by IAI's Elta subsidiary. The all-weather Phalcon system can act as a control system for combat jets, logging up to 60 targets within a range of 400 km.

Privatization Pushed

The Finance Ministry is allegedly pushing ahead long-delayed efforts to privatize IAI and Israel Military Industries - IMI, according to a report in Ha'aretz. Initially, according to the paper, 30% of IMI will be offered on the Tel Aviv Stock Exchange, with a proviso that for security reasons, any purchase of 5% or more requires government approval. Previous plans to privatize IMI were blocked when the previous defense minister, Amir Peretz, came under pressure from workers; current Defense Minister Ehud Barak has approved renewal of privatization efforts.

F-35 Request

Israel has made an official – LOR request to purchase an initial quantity of 25 F-35 fighters when the aircraft is available during 2012-15, Lockheed Martin deputy general manager Robert Trice confirmed during a late-May visit to Israel. The formal request for the aircraft, due to cost about $80-100M each, was made two weeks earlier, Trice said. The F-35s are due to complement new and aging F-16 aircraft, also made by Lockheed Martin, that are in IAF service.

Defense Budget Cut Advocated

A cut in the defense budget is necessary, Finance Minister Roni Bar-On told the cabinet in early June. Bar-On advocated the reduction despite increases in the defense budget approved as a result of recommendations made by a committee headed by former Treasury director-general David Brodet. He said that the government would pursue a “responsible” fiscal policy and free up funds to deal with social issues, and to maintain growth and economic stability “despite the global economic slowdown and political developments.” At the same time, Bar-On presented a plan to cut taxes, lowering maximum individual income tax from the current 47% to 42% in 2015, and corporate maximum taxes from the current 27% to 20% in 2014.

More Business Jets

A joint venture between Gulfstream Aerospace Corp. and Israel Aerospace Industries Ltd. will boost production of its business aircraft by at least 21% this year as soaring fuel prices fail to deter demand, Bloomberg reported in early June. The business news service quoted Joe Lombardo, president of Gulfstream, a unit of General Dynamics Corp. and the world's second-largest maker of business aircraft, speaking at a news conference at Ben-Gurion International Airport, upon IAI's delivery of its number 200 aircraft to Gulfstream.