Israeli MK seeks to protect local defense firms losing out in US aid deal

Until now, up to 26% of US military aid, adding up to billions of shekels each year, could be spent inside Israel but the new agreement requires all American military aid to be spent in the US.

October 11, 2018 20:35
2 minute read.
Ofer Shelah



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Less than two weeks after the record $38 billion US military aid package to Israel entered into force, MK Ofer Shelah (Yesh Atid) announced draft legislation to protect small - and medium-sized defense firms losing out from the agreement.

While the memorandum of understanding (MoU) negotiated between president Barack Obama and Premier Benjamin Netanyahu in September 2016 will see Israel benefit from the largest military aid package in US history, the Israeli arms industry could lose $1.3b. in annual revenue and 22,000 workers could lose their jobs.

The agreement came into force on October 2 with the beginning of the 2019 fiscal year.

Until now, up to 26% of US military aid, adding up to billions of shekels each year, could be spent inside Israel but the new agreement requires all American military aid to be spent in the US, resulting in losses for local industry.

Shelah says his proposal, due to be advanced next week as the Knesset’s winter session gets underway, aims to minimize losses suffered by Israeli defense firms and prevent thousands of Israelis losing their jobs, the majority of whom live in the periphery.

The Yesh Atid lawmaker is chair of the Knesset Foreign Affairs and Defense Committee’s Subcommittee for Security Perception and the Building of Forces.

The draft legislation includes provisions giving priority to small and medium-sized businesses in security establishment tender processes, including preventing the participation of Israel’s four largest defense companies in tenders worth less than NIS 10m.; obligating a percentage of more lucrative tenders, awarded to large companies, to be outsourced to external providers; enabling small and medium-sized businesses to improve offers for tenders where they have lost due to price alone; and mandating the Defense Ministry to allocate at least one-quarter of offset agreements to small and medium-sized companies.

“Despite two years passing by since the day the aid deal was signed and that is already come into force this month, the government has so far not taken one step to prevent the fatal blow to the small and medium defense industries,” said Shelah. “”My legislative proposal will save these places of work.

“If nothing is done, successful factories will simply crash. I am sure that members of the Knesset will join me in order to stop an economic and social disaster in the periphery and great damage to Israeli security.”

Lahav Harkov contributed to this article.

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