Israel's more than 150 defense and defense-related firms (thousands
of other firms were engaged in subcontracting) fell into one of
three ownership categories: state-owned enterprises, privately
owned firms, and firms with mixed state and private ownership.
One firm, Armament Development Authority, commonly known as Rafael,
was the main military research and development agency responsible
for translating the ordnance requirements of IDF field units into
development projects. Rafael had a unique status under the direct
supervision of the Ministry of Defense.
Total employment in the defense sector reached a peak of 65,000
persons in the mid-1980s, more than 20 percent of the industrial
work force. By 1988, however, retrenchment of the defense budget
and shrinkage of the world arms market had exposed the defense
industry to severe financial losses and layoffs that reduced the
work force to about 50,000 employees.
The largest of the defense firms was the government-owned conglomerate,
Israel Aircraft Industries (IAI) that manufactured the Kfir and
Arava aircraft, the Ramta light armored car, Gabriel antiship
missiles, and high-speed patrol boats. IAI began in 1933 as a
small machine shop, later catering to the maintenance and upgrading
of the motley collection of aircraft acquired during the War of
Independence. It continued to specialize in the overhaul and retrofitting
of the whole range of aircraft in the air force inventory. Until
the cancellation of the Lavi project in 1987, IAI had been entrusted
with the development of the advanced fighter aircraft.
The factories of Israel Military Industries (IMI), another government-owned
conglomerate, produced the Uzi submachinegun, the Galil rifle,
explosives, propellants, artillery shells, and light ammunition.
IMI also specialized in the upgrading and conversion of tanks
and other armored vehicles. Tadiran Electronic Industries was
the largest private firm engaged in defense production, notably
communications, electronic warfare, and command and control systems,
as well as the pilotless reconnaissance aircraft of which Israel
had become a leading manufacturer. Soltam, another private firm,
specialized in mortars and artillery munitions.
Growth of the defense industry was achieved by a mixture of imported
technology and Israeli innovation. Israeli firms purchased production
rights and entered into joint ventures with foreign companies
to manufacture both end products and components. Nearly every
electronics firm had links of some sort with United States producers.
Purchase agreements for foreign military equipment frequently
specified that production data and design information, together
with coproduction rights, be accorded to Israel. Nevertheless,
American firms often were reluctant to supply advanced technology
because of fears that Israel would adapt the technology for use
in items to be exported to third countries on an unrestricted
basis. Some American firms also feared that collaboration would
encourage Israeli competition in already saturated world markets.
Data as of December 1988