News Analysis – April 2017

General News Summary

Settlement, Restraint and a Letdown

The Israel government has approved creation of a new settlement “Amona”, the first official settlement on the West Bank in more than 20 years and the replacement to the destroyed Amona. Almost simultaneously, Prime Minister Benjamin Netanyahu announced a new policy of “restraint” in settlement-building, as a “show of good will” to the concerns of President Donald Trump.

In what would appear to be two contradictory actions, Netanyahu was trying to mollify two separate constituencies. On the one hand, he needed to satisfy the pro-settler community by keeping his promise made after the forced evacuation earlier this year of Amona, an outpost north of Jerusalem that Israel had been illegally built on Palestinian-owned land. On the other hand, the Israeli leader was seeking to remain in the good graces of the Trump administration, which has expressed reservations about settlements.

Netanyahu stressed that the decision was unilateral: Israel would restrict new construction almost entirely to existing communities. No new outposts, mini-communities, which eventually turn into full settlements, would be permitted. At the same time, he reportedly told the White House that the political price of reneging on his promise to “replace” the evacuated Amona, with a new settlement was too high for him to pay.

The settlement move comes against the background of the Trump administration’s increased activity on the Middle Eastern arena following Netanyahu’s high-profile mid-February visit to Washington where the show of cordiality stood in sharp contrast to Israel’s often-stormy relationship with the previous Obama administration. The atmosphere may have been cordial, but the message Netanyahu brought home to Jerusalem was less encouraging to his right-wing, nationalist supporters who may have been expecting carte blanche on the key issues of a Palestinian state, settlement construction and even possible Israeli annexation of parts of the occupied West Bank. Instead, Trump’s policy on the Israeli-Palestinian issue turned out to be all too familiar to the Israeli right, because of its resemblance to Obama’s. Instead of abandoning the idea of “two states for two peoples”, the American president was luke-warm, saying that he could live with a one-state solution if that was what the parties agreed on, that settlements were “not good” for peace and telling Netanyahu that he had to “hold back for a while” and be more flexible in dealing with the Palestinians.

The Americans followed up by sending an envoy to the Middle East. The emissary, however, was neither Trump’s son-in-law Jason Kushner, who the president had said would oversee Israeli-Palestinian affairs, or Secretary of State Rex Tillerson, who might have seen a logical choice following the example set by Obama, who utilized then secretary of state John Kerry in that role during his second term. Instead, Trump’s choice was Jason Greenblatt, a real estate attorney and chief legal officer of the Trump Organization. Like Trump’s tax lawyer David Friedman, who was recently confirmed as the U.S. ambassador to Israel, Greenblatt is an Orthodox Jew. On what was described as “a listening tour,” Greenblatt held meetings with Israeli officials, with Palestinian President Mahmoud Abbas, King Abdullah of Jordan and other Arab leaders, bringing with him a formal invitation for Abbas to visit Washington.

Greenblatt was back in the region in late March to attend – as an observer – the Arab Summit held on the Jordanian side of the Dead Sea, where Abbas, King Abdullah and others reiterated that the two-state solution and the Arab Peace Initiative of 2014 were still the only peace plans on the table.

That seems true enough, at least in the immediate future. Given what Greenblatt said was Trump’s “personal interest” in resolving the Israeli-Palestinian issue, and the concerted effort his government is making to revive the comatose peace process, it’s hard to predict what will happen in the longer run, whether Trump will persevere in the process which has frustrated so many before him or lose patience and abandon the whole effort. Either way, it is increasingly unlikely any outcome will bear much of a resemblance to the great expectations of the Israeli settler movement, which only six months ago was saying that a Trump presidency was a “unique opportunity” for attaining its nationalist, annexationist objectives.

Border Tensions

A missile fired by the Syrian army and the killing of a senior Hamas operative in Gaza have raised the potential for new outbreaks of violence on Israel’s borders.

The Syrian incident occurred on March 17, when the Israeli Arrow missile defense system successfully intercepted a Syrian missile over the occupied West Bank. Syria had fired the anti-aircraft missile, reportedly an older-generation Russian-made S-200, at Israeli aircraft attacking a convoy inside Syrian territory, which was carrying advanced arms to the Shiite Hizballah militia in Lebanon. The missile, which missed its Israeli target, was carrying a 200-kg warhead; some parts of the missile fell in Jordanian territory, but the explosion was heard in Jerusalem. In the aftermath, Syrian – communicating through a Russian intermediary – threatened to respond to further attacks by firing Scud missiles deep into Israeli territory.

According to some Israel sources, the firing by the Syrian army rather than one of the Russian air-defense systems deployed in that country, indicate some lack of coordination between Damascus and its Russian ally – particularly since the incident took place about a week after Prime Minister Netanyahu visited Moscow for consultations with Russian President Vladimir Putin. It also could indicate a new confidence in Damascus based on a feeling of victory in the country’s six-year civil war.

On the southern front, Israeli forces were on high alert in the wake of the March 24 assassination of Mazen Faqha, a senior Hamas leader, in the parking garage of his Gaza home. Hamas has blamed Israel, which has not claimed responsibility for the killing, and pledged retaliation.

Faqha, who Israel released in the 2011 prisoner exchange for soldier Gilad Shalit, was close to Yehia Sinwar, the hard-line new leader of Hamas in Gaza. According to press reports, he was responsible for organizing terror attacks against Israel from the West Bank, not from Gaza itself. The expectable retaliation, Israeli sources say, may come from attacks against Israelis in the West Bank or Israel itself, as it is generally thought that Hamas is not yet ready for an all-out military confrontation on the Gaza front.

Meanwhile, Israel is continuing construction of a new barrier along its 65-km border with Gaza. The barrier, which includes large underground segments, is designed principally as protection against penetration into Israel via underground tunnels built – and constantly being built – by Hamas. Together with funds spent on advanced tunnel detection sensors and other equipment, the fence represents an investment of more than NIS 4 billion ($1.1 billion) in defense against infiltration from Gaza. According to some commentators, the barrier’s anticipated completion in two years leaves Hamas with a relatively short window of opportunity for renewed hostilities with Israel, before its heavy investment in tunnels loses most of its value.

Crisis Averted

After weeks of bickering during which he threatened to dissolve his government over a planned change in the structure of Israel’ public radio and TV stations, Prime Minister Benjamin Netanyahu and Finance Minister Moshe Kahlon reached a deal which leaves the politicians in charge of news broadcasting.

At issue was the nature of a new broadcasting entity, known as Kan, to replace the troubled Israel Broadcasting Authority (IBA), which has controlled government-owned radio stations and Israel’s Channel 1 television since its founding as Israel’s first TV station of any kind, in the late 1960s. The idea of a new public broadcasting corporation was approved by Netanyahu’s previous government, but this time round the prime minister changed his mind, advocating rehabilitation of the old IBA, a move some observers suggest came from a desire to hang on to control of news broadcasting.

Kahlon opposed the move – partly on budgetary grounds – casting himself as a defender of press freedom in the broadcast media. In the compromise reached with Netanyahu, Kahlon apparently agreed to leave the news division out of the new broadcasting entity, with the news division remaining separate.

Opposition leaders were quick to jump on the compromise, calling Kahlon’s assent little more than a capitulation. Labor’s Isaac Herzog, the Opposition leader, called the separate news apparatus “Bibi’s Pravda,” while Zahava Gal-On of the leftist Meretz party said it would give the prime minister “unprecedented control over news broadcasts.”

Resolution of this immediate crisis, which was partly of his own doing, does not mean that there is smooth sailing ahead. He still faces several police investigations with possible criminal implications – including the acceptance of extravagant gifts from a millionaire friend, possible collusion with the publisher of one of Israel’s leading newspapers, and questions surrounding the purchase of submarines and naval corvettes from a German shipyard – all of which will take time to develop. Though opposition politicians still said that the ruling coalition’s days were numbered and early elections could be expected within the year, Netanyahu appears to have done it again, conjuring up more time for the battered, fractious alliance of parties that keeps him in office.

Restrictive Law

The Knesset, Israel’s parliament, has passed a new law preventing foreign supporters of the Palestinian-backed BDS (Boycott, Divest, Sanctions) movement from entering the country. Israel sees the attempt to isolate it economically as part of an attempt to delegitimize it, and that its economic effect is minimal.

Rivlin Visits Hanoi

President Reuven Rivlin met with President Tran Dai Quang and other officials during a late-March state visit to Vietnam. It was the second meeting between the two presidents; two years ago, Rivlin was host to Quang in Jerusalem. According to press reports, the Israeli leader, who was due to sign a bilateral trade agreement during the visit, urged the Southeast Asian to stop voting against Israel in the United Nations.

New FM Bureaus

Prime Minister Benjamin Netanyahu, who is also acting foreign minister, said in early March that he intends to open two new bureaus in the Foreign Ministry – one for India and one for China. Netanyahu made the announcement after meeting heads of Israeli missions in the Asia-Pacific region, saying the move shows the importance we place in these major powers.” It was, however, unclear when the bureaus would be established, party, due to budgetary constraints.

Air India Flights

Air India will begin direct flights between New Delhi and Tel Aviv in May. Formal announcement of the three flights per week was made during Air India head Ashwani Lohani’s recent visit to Israel, as a guest of Tourism Minister Yariv Levin.

Design Office

Karim Rashid, the international megadesigner, has opened an office in Israel. The 56-year-old Egyptian-born Rashid, who lives in New York, has designed many hotels, including the new Poli House boutique hotel in an historic Tel Aviv building, as well as for international brands like Samsung, Vevue Cliquot and Alessi.

Ofer Tops Rich List

Eyal Ofer, ranked 145th with a net worth of $9.2B, is the richest Israeli on the Forbes annual list of billionaires. Last year, Ofter (shipping) was deemed worth less ($8.2B), but ranked higher (135th). Other Israelies on the list of more than 2,000 billionaires: Stef Wertheimer (who sold Iscar Blades to Warren Buffet for $6B), 269th with $5.6, Arnon Milchan (movie producer), 303rd with $5.2B, Shari Arison (Bank Hapoalim), 334th with $4.9B, and Yitzhak Tshuva (Delek Drilling), 501st with $3.7B.

Olmert Pardon Denied

President Reuven Rivlin has turned down the request of Ehud Olmert, the former PM and Jerusalem mayor, for immediate release. Olmert began serving a 26-month prison sentence in February 2016; a parole board is due to hear his request for a one-third sentence reduction in June.

Hacker Attack Warning

A hackers’ organization called Anonymous has threatened to launch a cyber-attack on Israeli companies and even designated the date, April 7. However, while most companies are aware of the threatened attack, which has taken place at about the same date every year since 2013, few have taken special precautions against it. That is the conclusion of a survey by the People and Computers group, as reported by the Globes Hebrew business daily. The reason is simple: Many Israel firms consider say that the level of their year-round protection is sufficient to deal with the possible attack.

The Economy

Gas Flows to Jordan

With no publicity, Israel in January began exporting natural gas to Jordan after two Jordanian companies – Arab Potash and Jordan Bromine – were connected to Israel’s national pipeline network. Three years ago, state-owned Arab Potash and Jordan Bromine agreed to purchase gas from Israel’s Tamar gas field in a 15-year, $500M deal, with the U.S. State Department acting as an intermediary.

Income Gap Narrows

Israel was one of the two OECD countries in which the income of poor families was increased at a greater rate than the income of rich families, according to Yoel Naveh, the Finance Ministry’s chief economist. As reported by the Globes, Naveh said that the growth in net income of the country’s lowest five deciles was 1.5 times that of the top deciles – by 3.3% a year, compared to 2.1% in the wealthiest 50%. He attributed the growth partly to lowering of taxes on labor, government transfer payments to large families and an increase in the minimum wage.

Speaking at a cabinet meeting on the same day Naveh’s figures were released, Finance Minister Moshe Kahlon noted the economy’s strong performance, saying that Israel had one of the OECD’s fastest growth rates in the second half of last year and that unemployment was at record lows.

4% Growth in 2016

Israeli Gross Domestic Product (GDP) grew by 4% in 2016, according to revised figures published by the Central Bureau of Statistics in mid-March. GDP growth was 2.5% in 2015 and 3.2% in 2014. Per capita GDP, AT 2% IN 2016, was up from 0.5% in 2015 and 1.2% in 2014.

Tax Revenue Surplus

More than half of the surplus in government revenue from taxes in 2016 was due to growth, according to a mid-March Bank of Israel report. The surplus amounted to NIS 7.5B (about $2.1B), of which NIS 4.5B (over $1.2B) came from imports of consumer goods, especially automobiles, and real estate taxes.

Salaries Up

The average salary in Israel rose 2.4% to NIS 9,805 in 2016, according to a Central Bureau of Statistics report. At year’s end, Israel had 2.5 million wage earners, up 106,000 or 3.1% from the previous year.

Hyundai’s High

20,000 of the 75,000 new cars sold in Israel in January and February of 2017 were Hundai and Kia models from South Korea’s Hyundai Motors. Much of the rise came from two hybrid models, Hyundai‘s Inoiq and Kia‘s Niro.

Huge Housing Project

Planning authorities have approved construction of about 23,000 housing units and commercial properties on the site vacated by Israel Military Industries (IMI) in the Sharon area northeast of Tel Aviv. About a third of the tract, which covers about 7,500 dunams (1,850 acres), will be devoted to metropolitan parkland. The land was vacated as part of IMI‘s move of main production facilities to southern Israel.

Rail Line to Open this Summer

A new rail line linking Karmiel with the coastal city of Acre (Akko) is due to open this summer. Work on the line, which cost NIS 2.8B to construct, was completed this spring. It will connect with the existing Tel Aviv-Nahariya rail line north of Haifa and provide direct rail service from Karmiel to the center of the country. Another new track, providing fast service between Tel Aviv and Jerusalem, is scheduled to open sometime in 2018.

New Air Routes

Ryanair, the Irish low-cost airline, began flights from Ben-Gurion International Airport in March. The airline, which has operated routes from Uvda airport in the Negev since last year, began flying from BGI in the wake of new government financial incentives for airlines opening routes to new destinations.

Another budget airline, Wizz Air of Hungary, is adding new Israel routes and increasing the frequency of existing ones. In addition, Cathay Pacific began flights on the Tel Aviv-Hong Kong route in March.

Chinese Workers on the Way

Twenty thousand Chinese construction workers are on their way to Israel, under the terms of an agreement signed during Prime Minister Netanyahu’s mid-March visit to Beijing. 16,000 Chinese workers will arrive during the first six months. Contractors and the Finance Ministry agree that the import of Chinese workers will increased productivity and bring down building prices.

In another deal signed during the Netanyahu visit, Haifa University, the Hangzhou Wahaha Group, and the Chinese Academy of Science agreed to open three joint artificial intelligence centers in Haifa, Hangzhou and Beijing. Hangzhou Wahaha Group Chairman Zong Qinghou is investing $10M in the project, whose principal aim is development of IA applications for commercial use.

Tel Aviv’s Tallest

The Tel Aviv District Planning and Building committee has given preliminary approval to a plan for a 100-story building in Tel Aviv. The building, on the current site of a parking lot near the Savidor railroad station and not far from the Ramat Gan Diamond District, will have 165,00 sq. m of commercial, office and hotel space. Original plans for the site called for a building of “only” 75 stories.

Food-Saving Plan

Israel’s Ministry of Agriculture is launching a new program designed to reduce the NIS 18B ($5B) annual waste cost of food wasted on the farm and by Israeli retailers. The plan includes harvesting crops that farmers don’t want to pick because prices are too low and distributing the food to needy families, encouraging improved packaging that extends shelf-life of fresh produce in supermarkets, and reducing prices to market of perfectly edible fruits and vegetables that are perfectly edible but aren’t sold because of their appearance.

Gas Pipeline to Turkey?

Natural gas from Israel’s offshore Leviathan field could be flowing to Turkey by 2020, according to an Israeli energy executive. Yossi Abu, CEO of Avner Oil and Delek Drilling, says a 500-km pipeline to Turkey could be built within four years, about a year after Leviathan gas reaches the Israeli market. Delek and Avner are also looking at other possible customers for the gas, including Egypt, the Palestinian territories and the Gaza Strip, and Europe.

Diary to China

Israel will export cheese and dairy products to China under the terms of an agreement signed by Agriculture Ministry director-general Shlomo Ben Eliyahu and his Chinese counterpart in late March. Most of the exports will consist of hard cheeses and powdered milk. Agriculture Minister Uri Ariel said the pact was part of Israel’s efforts to expand exports of its farm products outside the usual markets in Europe.

Finance and Investment

SodaStream Profits Soar

SodaStream, the Israeli manufacturer of home carbonation systems for making soft drinks, has reported 2016 income of $476M, up 14% over the previous year. The company, which has its operational headquarters near Ben-Gurion International Airport, moved its main factory from the West Bank to Lehavim, near Beersheba, two years ago, under threats of an international boycott – a move that cost the plant’s 500 Palestinian workers their jobs.

Lowered Teva Ratings

Standard & Poor’s has maintained its negative outlook for Teva Pharmaceutical Industries, Israel’s most prominent stock, and downgraded the company’s management and governance score from fair to satisfactory. In publishing the ratings in early March, S&P said that Teva “faces a number of challenges, including threats to its Copaxone (multiple sclerosis treatment) business, continued generic pricing pressure” and strategic risks in the wake of the recent loss of two key executives, including CEO Erez Vigodman.

Crowdfunding Rules

The Knesset Finance Committee has approved new rules enabling Israeli start-ups to raise up to NIS 4M (about $1.1M) through authorized local Internet platforms. Israelis with declared annual income of NIS 350,000 (about $90,000) or less will be authorized to make investments of NIS 10,000 shekels per investment and a combined cap of 20,000. Limits on investment are higher for Israelis with larger incomes.

Strauss Buys Back Texan Share

The Strauss Group, one of Israel’s largest food and beverage manufacturers, is paying Texas Pacific Group Capital, Euro 257M for the 25.1% in its Strauss Coffee subsidiary held by the U.S. private equity firm.

Mergers and Acquisitions

Intel Buys Mobileye in Biggest-Ever Deal

International chipmaker Intel‘s $15.3B purchase of Mobileye, the Jerusalem-based developer of computer vision-based automotive safety technology makes it – by far – the biggest single acquisition in the history of Israel high-tech. However, all indications are that it represents a quantum step for Israeli technology.

Intel plans to use Mobileye, whose lane-detection and crash-warning technology is already integrated into vehicles made by 27 automakers around the world, as the springboard for development of driverless cars – efforts in which Intel and Mobileye have already teamed with BMW and Delphi over the past few years. Mobileye, which raised $890M in a New York Stock Exchange initial public offering back in 2014, is said to already hold as much as 70% of the driver-assistance market.

Equally significant is Intel‘s decision not to move its new acquisition: Mobileye, and the international giant’s driverless car efforts, will remain in Jerusalem under the guidance of Profs. Amnon Shashua and Zvi Marom, who developed the technology and founded the company in 1999. Founder Shashua formerly headed the Computer Department at the Hebrew University of Jerusalem.

Sapiens-Stone River

Sapiens International, the Israeli provider of software for the insurance industry with headquarters in Holon, just south of Tel Aviv, has acquired SoftRiver for $102M. The U.S. company, with offices in Denver, has developed a portfolio of administrative and management solutions for insurance companies.

Glencore Buys Gertler Mines

Glencore of Switzerland is paying $534M for Israeli billionaire Dan Gertler’s holdings in two African copper mines.

Kalytera-Talent Biotechs

Klaytera Therapeutics of Canada has purchased Israeli medical cannabis developer Talent Biotechs for about $30M in cash and shares. Talent, based in Bnei Brak just outside Tel Aviv, develops technology using cannabis in the treatment of graft vs. host disease (GvHD). Kalyteria officials called the purchase “a transformational transaction,” citing the potential of CBD, a non-psychoactive component of cannabis, in treating a wide range of diseases and disorders.

Palo Alto Networks-LightCyber

Palo Alto Networks, the U.S. cyber-security firm, has purchased LightCyber for $130M, including $105M in cash. LightCyber, based in Ramat Gan outside Tel Aviv, has developed a behavior attack-detection platform using sophisticated machine-learning technology. It is Palo Alto‘s second Israeli acquisition, after yjr $200M purchase of Cyvera three years ago.

Apple-Realface

Apple has purchased Realface, a Tel Aviv-based machine learning and cybersecurity firm specializing in face-recognition technology. Purchase price was estimated at several million dollars.

Realface is the fourth Israeli acquisition of Apple, which bought Anobit, a flash memory specialist, for $400M in 2011; 3-D sensor firm PrimeSense for $345M in 2013; and LinX for $20M in 2015.

Midea-Servotronix

Midea of China has purchased a controlling interest in Servotronix Motion Control, based in Petah Tikva, which specializes in automation technology, for about $170M. The purchase includes $50M for the 30% of Servotronix shares held by Ruth Wertheimer, daughter of industrialist Stef Wertheimer. Several years ago Stef Wertheimer sold Iscar, the precision engine blade maker headquartered in northern Israel, to U.S. mega-investor Warren Buffett for a total of $6B.

Bioline-Agalimmune

BiolineRX, a drug development technology company based in Modi’in, about halfway between Jerusalem and Tel Aviv, has purchased private U.K. company Agalimmune, developer of an anti-cancer immunotherapy platform. Purchase price for Agalimmune, which says it has developed immunotherapy that both kills tumor cells at the site of injection and stimulates durable, follow-on, anti-metastatic immune response, was about $6M in cash and Bioline shares.

Altana Buys Landa Technology

Altana of Germany has purchased the Landa Group‘s metallography technology from the Israeli company for a reported $100M. The technology is an alternative to the foil-transfer technology for metallized graphics. The Landa Group, based in Rehovot southeast of Tel Aviv, was founded by Canadian-born Israeli Benny Landa, a pioneering developer of digital printing who sold his first company, Indigo, to Hewlett-Packard in 2002.

Dahner-AVT

U.S.-based Dahner Corp. has purchased Advanced Vision Technology of Hod Hasharon, northeast of Tel Aviv, for $100M. AVT develops automatic print inspection systems replacing the human eye for the packaging and labeling market.

Automakers Eye Israel

Israel, which once had a very small domestic automobile manufacturer, no longer makes its own cars. However, that has not stopped international automakers and automotive technology firms from exploring Israeli technology. According to a report in the Globes, the list includes General Motors, BMW, Intel, Samsung, ON Semiconductors (which recently opened a center in Haifa for R&D on automotive sensors) China’s Alibaba (whose partner, Shanghai Automotive Industry Corp., plans to open a similar center.

Science and High Technology

Sarana Chooses 9

Sarana Ventures, a healthcare incubator set up in Ra’anana by Phillips Healthcare and Teva Pharmaceutical Industries, has chosen nine projects for special investment, out of 750 candidates. The selected companies include MeWay,- a hand-held nebulizer for improved pulmonary drug administration; Myhomedoc a smartphone-based remote checkup and diagnosis; Breathme, an asthma management solution; Purecare, a home gum treatment’ Lensfree – which lowers CT device radiation by 50%; Lifegraph, migraine monitoring and prevention technology; Lidus for improved stitching up of small blood vessels’ SpirCare, a device that measures lung capacity.

Singapore Incubator

Israel’s Trendlines, one of the first Israeli companies to be listed on the Singapore Stock Exchange, is a partner in a new incubator established in the Asian country. Other partners in the incubator, which will invest mainly in medical devices, include Germany’s Braun and Prime Partners, a Singapore investment bank with ties in Israel to Discount Investment.

Volcani Move Studies

Prime Minister Benjamin Netanyahu has appointed a government committee to study a possible move of the Volcani Institute, Israel’s top agricultural research center, to the northern part of the country. The move, which has the strong backing of Agriculture Minister Uri Ariel of the Bayit Hayehudi party, has drawn opposition from the scientific community, which argues that a move would impair agricultural research because most of Volcani’s professional staff would not make the move. The institute, which is almost 100 years old, currently is located in Rishon Lezion, southeast of Tel Aviv.

Iron Dome Tops List

The Israeli public chose the Iron Dome anti-missile system as the country’s top technology development, in a survey sponsored by the Ministry of Science. Waze, the driver information application, was given second place in the survey, held in honor of Israel National Science Day (which is Albert Einstein’s birthday), followed by the disk-on-key data storage mini-drive; Copaxone, Teva Pharmaceutical Industries‘ multiple sclerosis treatment; the drip irrigation system developed by Netafim, owned at the time by three Israeli kibbutzim; and computer processors developed by Intel in Israel.

Tata Recruits Israelis

Tata, the giant Indian concern, is recruiting about 100 Israelis to staff the new R&D centers in Jerusalem and Petah Tikva operated by its TCS subsidiary.

Cyber Blooms in the Negev

The cyber ecosystem developing in the Negev will be one of Israel’s principal economic growth engines in the future, says Esther Luzatto, one of Israel’s leading patent attorneys. The system is developing around the Advanced Technology Park, established in the city of Beersheba in cooperation with nearby Ben-Gurion University. Several thousand Israelis and foreigners who have moved to Beersheba recently, are employed in the park, in the facilities of the JVP Cyber Labs incubator, the Deutsche Telekom Innovation Labs and other companies. The cluster includes government laboratories, defense and civilian-oriented firms dedicated to what Luzatto and others see as Israel’s industry of the future.

Medical Cannabis Firm Raises $12M

Therapix Biosciences, a Tel Aviv-based specialist in medical cannabis, has raised $12M in an issue of ADR (American Depository Receipt) securities on the NASDAQ stock exchange. The company is currently developing two drugs based on synthetic THC, (tetrahydrocannabinol, cannabis’s main psychoactive component), one for Tourette’s syndrome and one for early-stage Alzheimer’s disease. (ADRs are an instrument used to sell some non-U.S.-listed shares to American investors).

Digital Health Investment Up

Investment in Israeli companies specializing in digital health reached $183M in 016, up 30% from the previous year. The sector includes both personal health tools and digital analytics. According to a report in the Times of Israel, Israel now has 385 digital health companies, almost half of which (45%) are sofware-based tools that allow patients to monitor, and in some cases manage, their own health treatment.

Defense and Aerospace

David’s Sling Joins Missile Defense

Israel formally deployed David’s Sling in late March, completing the three-tier missile defense system that already includes Iron Dome against short-range rockets and Arrow 2 and 3 systems, whose mission is to intercept and destroy long range missiles before they reenter the atmosphere.

Though David’s Sling provides protection against rockets, missiles and aircraft at ranges up to about 200 km, its deployment came a few days after Israel fired an Arrow 3 in a successful intercept of a large Syrian missile that had entered Israeli airspace. The missile, which press reports suggested was an older model Russian-made SAM anti-aircraft weapon carrying a 200-kg warhead, was intercepted somewhere over the West Bank. Its explosion, in the air, was heard in Jerusalem. The Syrians apparently fired the missile at Israeli aircraft, which had attacked a weapons convoy destined for the Hizballah terror organization in Lebanon. Defense Minister Avigdor Lieberman, noting that David’s Sling had considerably enhanced Israel’s missile defense, issued a warning to Damascus: “The next time the Syrians use their air defense systems against our airplanes, we will destroy all of them without thinking twice,” he said.

Air Force officials pointed out that David’s Sling provides protection against tactical missiles like the Iranian Fateh 110 and the Syrian M600, which have a range of around 300 km and are generally considered beyond the capabilities of Iron Dome and below those the Arrow is designed to deal with. It was developed by Israel’s Rafael Advanced Defense Systems, in cooperation with Raytheon, the U.S. defense contractor.

Barak Deal Approved

Indian Prime Minister Narendra Modi has approved his country’s $2.5B purchase of Barak 8 anti-aircraft missiles. According to Indian press reports, the Indian security cabinet authorized the purchase of 40 units of the medium range surface to air missile system, in the process of joint development by Israel Aerospace Industries (IAI) and India’s Defense Research and Development Organization. Other joint Israeli-Indian projects under development include a long-range air defense missile system for Indian warships.

Defense Exports Rise

Annual exports of Israeli weapons systems and technology rose 14% in 2016, totaling $6.5B. That was $800 more than 2016, according to figures released in late March by SIBAT, the Defense Ministry’s International Cooperation Authority which is responsible for regulating defense exports. About 20% of the total came from upgrades of airplanes and avionics systems.

Defense Export Reforms Mooted

A new set of proposed regulations governing the export of defense products from Israel includes revised exemptions on exports to 98 countries and permits for exhibiting systems at foreign defense shows has been disclosed by Racheli Chen, the new head of the Defense Ministry’s Export Controls Agency. Chen says that in the future she will also introduce stiffer penalties against violators of defense export regulations.

Defense Spending

Israeli expenditure on defense and the military reached $17.5B in 2015, the Deloitte international accounting firm said. The report for the year before last, issued on March 1, placed Israel 16th on a list of 25 countries, which spend the most on defense. Israel held a much higher place in rankings of spending as a proportion of GDP: sixth, at 5.4% of GDP, up from 2014’s figure of .2%.

IDF Reductions

Israel’s regular army has grown smaller over the last three years, Chief of Staff Gadi Eizenkot said in late March. At a meeting on the IDF’s multi-year program reported in the Haaretz, Eizenkot said that 5,000 regular army officers and NCOs had retired since 2014, that the average retirement age and financial benefits were lower, and that the regular army now amounted to about 40,000 men and women.

Huge Spike Deal on the Way

India has taken a step forward towards a long-delayed purchase of Spike anti-tank guided missiles from Rafael, according to a report in Defense News. The authoritative publication quoted an Indian Defense Ministry official as saying that the purchase, delayed since 2014 due to Indian rules against single-vendor purchases, had been passed on to the relevant cabinet committee on March 29, and that approval could be expected shortly.

India will acquire 321 Spike missile launchers, almost 8,400 missiles and 15 training simulators, with an option to build another 1,500 launcher systems and about 30,000 additional missiles under technology transfer to state-owned Bharat Dynamics Limited. Deliveries are due to begin about five years after a formal contract is signed.

U.S. Deals in Works

The Israel Defense Forces is preparing for two major U.S. procurements using part of the annual $3.3B in U.S. defense aid, according to a report in the Globes. Prospective purchases include upgraded Boeing F-15 warplanes and either SikorksyLockheed Martin CH-35 or Boeing CH-47 Chinook transport helicopters. The exact budget will be determined based on the Gideon multi-year plan, according to the Globes report.

Tunnel Threat

In the past year, Israel has invested NIS 2.4B in efforts to counter the threat of attack tunnels, mainly from the Gaza Strip, Chief of Staff Lt. Gen. Gadi Eizenkot told the Knesset Foreign Affairs and Defense Committee in late February.

The IDF is paying special attention to Gaza, Eizenkot told the committee, due to the election of hard-liner Yahya Sanwar as head of Hamas. The choice of Sanwar, he said, eliminated any previous distinction that may have been made between the “political” wing of the Islamic organization and its “military” (i.e. terrorist) wing.

At the same time, Eizenkot said that the army’s first priority was being prepared for war on any front. In addition, he noted, operational changes in the second half of last year had caused a considerable reduction in terror attacks against Israel and Israelis.

IMI Privatization Halted

Defense Minister Avigdor Lieberman said he had ordered a halt to the privatization of IMI, due to differences with Uri Yogev, director of the Government Companies Authority. It’s not clear what significance Lieberman’s statement, to the Knesset Foreign Affairs and Defense Committee on March 6, actually has: The privatization, in which Elbit Systems currently is the only bidder meeting government qualifications, has been stalled for over a year due to a dispute on the company’s valuation.

Iron Dome Upgrade

The Defense Ministry, in conjunction with the Missile Defense Command and prime contractor Rafael conducted multi-layered tests of an upgrade to the Iron Dome missile-defense system in late February. The test included U.S.-made components, which were tested for the first time. Held in southern Israel, the tests focused on the Tamir interceptor and the ability to deal with multiple targets fired simultaneously from different locations. Manufacture of the Tamir, which has Israeli and American components, was moved to a plant in the United States of Raytheon, the American defense contractor, as part of an agreement signed by the U.S. and Israel in 2014.

IAI Bribery Case

Israel Police have arrested about two dozen suspects, including retired IDF Brig. Gen. Amal Asad and the son of Likud Social Welfare Minister Haim Katz, in a widespread investigation into alleged bribery and fraud at Israel Aerospace Industries, the government-owned defense contractor. The case centers around suspicion that IAI employees, including board of directors member Asad, accepted bribes from companies providing services to IAI, Israel’s largest defense firm. Yair Katz, 36, is a member of IAI‘s worker’s committee, an organization his minister father held before taking political office.

In a statement released shortly after the arrests were made public in mid-March, IAI said: “IAI became aware of an Israel Police investigation regarding the company. IAI’s management has no further details regarding this issue. IAI’s CEO has directed all relevant parties to cooperate fully, as and where necessary, with the Israel Police, to act in accordance with its regulations, and help to bring the current investigation to a successful conclusion and charge all those who may have committed an offense.”

Amos 7 Goes to Work

Israel’s Spacecom has begun operating its Amos 7 satellite. Amos 7, which was purchased from Asia Satellite Telecommunications and has been in orbit since 2014, will carry out many of the tasks designed for Spacecom‘s Amos, which was destroyed in an explosion of its SpaceX launch vehicle on the launch pad last September. In addition to losing Amos 6, Spacecom lost use of its orbiting Amos 5 satellite, which stopped operating in 2015.

Israelis at India Defense Show

Israel was heavily represented by 20 companies at Aero India, the annual defense show held in Bangalore in mid-February. There were 11 in the Israeli pavilion – government-owed IAI and Rafael, and private contractors Elbit Systems, Aeronautics, Astronautics, Contro, AeroMaoz, Al Cielo, Hydromechanical, NirOr and Physical Logic, and nine others – Orbit, Accubeat, Elmo, More, Opgal, Orbit FR, Orion, SGD and Video Inform – operating outside the Israeli pavilion.

One of the stars of the show was TP-XP, a reduced-size long-range version of IAI‘s Heron unmanned aerial vehicle. According to an IAI source, the TP-XP’s reduced payload of 450 kg, compared to the 1,000-kg carried by the Heron deployed by the Israel Air Force, allows countries which are members of the Missile Technology Control regime to purchase it just as they previously could acquire IAI‘s smaller Heron 1 UAV.

IAI also said it had completed deployment of a system designed to protect Indian ports, the most recent of which was at Mumbai. The intelligence systems developed by IAI‘s Elta subsidiary facilitate the detection of small and undersea vessels, swimmers and divers.

Israeli companies are taking advantage of a new policy announced by Indian Prime Minister Narendra Modi, which gives priority to joint ventures of foreign and Indian companies provided production is carried out in India and data is exchanged.

Mortar Contract

The U.S. subsidiary of Israeli defense contractor Elbit Systems has been awarded a U.S. Army contract to supply mortar control systems. Maximum value of the 5-year contract is $102M.

Elbit also won an $82M contract to provide its Condor 2 electro-optic intelligence systems to an unnamed country in the Asia-Pacific region.

Protecting the Peacemakers

The Ministry of Defense is supplying unmanned aerial reconnaissance vehicles and surveillance balloons to United Nations peacekeeping forces in the Central African Republic. According to a report in the Israel Today, Israeli U.N. Ambassador Danny Danon expressed satisfaction that the international body has recognized Israel’s security expertise. Danon anticipates that cooperation with the international body will expand in the future.

Spanish Deal

Beit Shemesh Engines has enlarged its engine parts contract with Spain’s Industria del Turbo Propulsores (ITP) group by $37M, bringing total value of the contracts to $100M. ITP is owned by Rolls Royce.

IAI’s New Payloads

IAI has unveiled two new EO/IR (electro-optical/infrared) payloads designed for tactical unmanned aerial vehicles and robotic applications by homeland security and ground forces. The payloads, developed by IAI‘s electro-optical Tamam division, were due to go on display at a Brazilian defense show in early April. The upgraded MicroPOP, which weighs 1.1 kg, is designed for use with tactical UAVs and loitering munitions; the lighter NanoPOP, at 200 grams, is suited for day and night surveillance and is equipped a 24-hour camera.

IAI will also show its ELM-2112FP persistent surveillance penetration radar, developed by its Elta Systems subsidiary. The system, which can detect potential threats in heavily foliated areas which have been impenetrable to conventional radars, has a range of several kilometers and can detect threats beyond the line of sight.

IAI Joins Polish Tender

IAI has joined IMI in a joint bid for a $500M Polish Ministry of Defense contract for high-precision rockets. The two government-owned companies are competing against U.S. defense contractor Lockheed Martin, offering precision rockets capable of being launched from a Linx mobile launcher, including Predator Hawk missiles, with a range of 250 km, and Extra missiles, whose range is 150 km.

Major Asian Deal

IAI has signed a $200M contract to provide intelligence systems with an unnamed Asian country, through IAI‘s Elta Systems subsidiary. The contract, for advanced location and observation pods, is a follow-up order to the same country, which still deploys similar pods from a previous order. The system was developed in cooperation with the Elop subsidiary of Elta, which is both IAI’s competitor and a subcontractor on the Asian contract.

Aeronautics IPO Due

Aeronautics, the Israeli developer and manufacturer of unmanned aerial vehicles, is planning a Tel Aviv Stock Exchange based on a company value of NIS 1B, according to Israeli press reports. The company, controlled by KPC, the Bereshit fund and Viola Private Equity, is based in Yavne south of Tel Aviv.

Eizenkot Term Extended

The government has approved extension of Lt. Gen. Gadi Eizenkot’s term as chief of staff beyond the standard three-year term. At Eizenkot’s request, the term was extended by only 10 months rather than the year that is usually given to chiefs of staff so that his term will end on December 31.

Landau Gets Rafael Post

After an effort extending over about eight months, Defense Minister Avigdor Lieberman has succeeded in getting the appointment of one of his confidants, Uzi Landau, as head of Rafael. Landau, who has held several ministerial portfolios including Public Security, Energy and Tourism, joined Lieberman’s Israel Beitenu party as a Knesset member in 2009, after previously served as an MK for the Likud. Landau replaces Yitzhak Gat, an appointee of former defense minister Moshe Ya’alon to head the government defense contractor.

In mid-March, Rafael reported sharp increase in 2016 sales, profits and orders backlog: sales (45% of which were outside Israel) were $2.2B, up from 015’s $2B, with net profit rising to $123M from $118M the previous year. The order backlog increased to $5.7B in 2016, compared to $5B during the previous year.

Elbit Revenues Up

Revenues of private defense contractor Elbit increased in the fourth quarter of 2016, rising 7% from the corresponding quarter of 2015, to $954M, for all of 2016, revenue – at $3.26B – was up slightly from $3.1B in 2015. The year-end orders backlog, $6.9B, increased from $6.5B at the end of the previous year.

Singapore Heron Fully Operational

The Singapore Air Force has declared its new Heron 1 unmanned aerial vehicles fully operational. Defence Minister Ng Eng Hen said the IAI-made UAV brings his country’s unmanned aerial capabilities “to the level of advanced militaries internationally.” The Heron 1 replaces IAI Searcher UAVs deployed by Singapore since 1994.

Nanosatellites Launched

Two made-in-Israel nanosatellites were placed in orbit by an Indian Space Agency rocket in mid-February. One of them, the 5-kg BGUSAT — a joint project of Ben-Gurion University of the Negev in Beersheba, IAI and the Ministry Of Science – is designed to monitor climactic phenomena; the other, called DIDO, was developed by Israel’s SpacePharma to remotely control scientific experiments taking place anywhere on Earth.

Engine Deal Extended

Beit Shemesh Engines has signed a $173M agreement to supply engine parts to MTU of Germany until 2030. The deal is the extension of a previous agreement between the two companies, which was due to expire next year.

Beit Shemesh Engines, controlled by the FIMI private equity fund, recently said that its 2016 revenues totaled about $82M, up 11.5% from the previous year, while net profit, at $9M, rose by 15%.

Unique Educational Program

IAI recently launched an innovative program training dropouts from ultra-Orthodox Jewish religious education in advanced CNC (computer numerical control) programming. Enrollees in IAI‘s ORT program, from Jewish religious communities, typically have completed lower levels of schooling but find themselves “lost” and drop out of yeshiva religious seminaries. IAI Chairman Yossi Weiss calls enrollment in IAI ORT “a significant step” in providing opportunities for young people from the ultra-Orthodox community, which generally has a low level of participation in the labor force.

South American Deals

IAI announced two South American deals in late March. The contracts are a border defense system – incorporating BirdEye 650D tactical unmanned aerial vehicles, BirdEye 40 mini-UAVs, and HoverMast 100 mini-UAV systems, plus advanced intelligence gathering technology – to an undisclosed South American country. The second involves a $50-60M contract for a cyber center to a different country in South America.

Robots Deployed

Roni, the Israel Defense Forces dedicated portable robot, has been deployed in a variety of elite combat units. Until now, the Israeli army’s use of robot has been confined mostly to specialized units including the Combat Engineers and elite anti-terror units. In recent months, though, the new robot has begun being assigned to the Egoz, Maglan, Duvdevan and Rimon commandos and the Golani, Givati, Nahal and Paratroop infantry brigades. The Roni, which weighs only 15 kg, is an all-terrain vehicle equipped with advanced sensors and cameras, capable of deployment in light and darkness, inside buildings and in underground tunnels.

Portuguese Pods

The Portuguese Air Force has integrated four of the 12 Litening G4 advanced targeting pods into its F-16 aircraft. The pods purchased for about $23M two years ago, were designed by Rafael and manufactured by U.S. defense contractor Northrop Grumman.

Oil Field Defense

Israel has increased the number of short-range missile launchers on the Saar-6 corvettes being built to bolster the Israel Navy’s defense of the country’s offshore oil fields. According to a report in the Defense News, the vessels, currently under construction at the ThyssenKrupp Marine Systems shipyards in Kiel, Germany, each will be fitted with two Iron Dome launchers capable of firing up to 20 Tamir missiles to defend against shore-launched rockets including Grads, together with Barak-8 missile protection against attacks from the air.

The four vessels being built in Kiel are at the center of an investigation into possible conflicts of interest, including close associates of Prime Minister Netanyahu, in their $430M purchase.