The Ministry of Defense is in talks with South Korea's Daewoo Shipbuilding & Marine Engineering Co. Ltd (KSX: 42669) to purchase four patrol boats for the Israel Navy to protect Israel's exclusive economic zone. If the $400 million deal goes ahead, the ministry is expected to demand reciprocal procurements by Korea of the advanced missile interception system made by Rafael Advanced Defense Systems Ltd.
Earlier this year, Korean Aerospace Industries Ltd. (KAI) lost the Ministry of Defense tender for the Air Force's new jet trainer to Italy's Alenia Aermacchi, to Korea's bitter disappointment. Sources close to the issue believe that the new deal to buy Korean patrol boats could ease the disappointment in Seoul. In the bidding for the jet trainers, Korea offered reciprocal procurements centered on the Iron Dome missile interceptor. The offer is partly because of the threat to South Korea from North Korean missiles.
Ministry of Defense director general Udi Shani is reviewing the matter. In addition to buying patrol boats from Daewoo, the ministry is considering other reciprocal procurement offers, including from Lockheed Martin Company (NYSE: LMT), which produces the F-35 stealth jet fighter, which the Air Force will use; a German shipyard; or for the patrol boats to be built by Israel Shipyards Ltd. The Ministry of Defense has already considered and dropped the idea of procuring US patrol boats, because of their high cost. Production of the boats in Israel was also dropped after staff work by the Ministry of Defense and Ministry of Finance because of the need for heavy investment in the necessary infrastructure.
Unveiling Iron Dome to the world
The Navy's new ships will carry state-of-the-art technologies, command and control systems, and combat systems built by Israeli companies. The decision which shipyard will build the ships will be made in a few weeks.
Defense sources say that, regardless of the ships deal, the Ministry of Defense will continue its efforts to sell Iron Dome to other countries, and it has displayed the system at defense shows around the world for this purpose. The sources say that South Korea is a market for the Iron Dome regardless of the deal for patrol boats.
The Ministry of Defense said today, "Manufacturers in four countries are bidding to sell patrol boats for the Israel Navy's needs. Belying the reports, the Ministry of Defense makes it clear that no decision has been made on the matter. The defense establishment is examining the various offers in order to obtain the best result for the needs of the Navy and the State of Israel. When a decision is made, we will announce it through the usual channels."
Published by Globes [online], Israel business news - www.globes-online.com - on November 18, 2012
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