19 July 1998

DM MORDECHAI DISCUSSES FUTURE OF DEFENSE INDUSTRIES
(Communicated by Defense Minister's Media Adviser)

Defense Minister Yitzhak Mordechai has held a series of meetings in recent
days with Professor Amnon Pazi, who heads the Advisory Committee on
Defense-Related Research and Development, and senior Defense Ministry and
IDF personnel, on matters related to Israel's defense industries and the
future of defense-related R&D.

Professor Pazi presented his conclusions on the necessary changes from a
security perspective on higher technological education in Israel and on
obtaining technological manpower for the IDF. He emphasized that in order
for the defense establishment to maintain and strengthen its advanced
research and development system, it must place special efforts on
maintaining and fostering quality personnel in the IDF and defense
industry branches, by providing competitive incentives to engineers and
scientists.

DM Mordechai instructed the IDF to present him with a program that will
significantly increase the scope of the academic reserve, which enables
qualified candidates to defer military service until after completing
their university degrees.

Mr. Mordechai emphasized the importance of defense- related R&D, while
focusing on the unique future strategic needs of the defense
establishment. He also instructed the IDF and defense industries to
present him with the ways and means needed to maintain their technological
manpower's qualitative advantage.

At a separate meeting, the minister's adviser on industry, Moshe Peled,
presented the conclusions of the committee examining the future of
Israel's defense industries, which he heads, and its recommendations
regarding the Defense Ministry's policies regarding the future of Israeli
defense industries in order to maintain and even improve their
capabilities in light of increasing global competition and declining
defense budgets.

The recommendations are based on the following principles:

* The continued, and even increased, need of the existence of an advanced
defense industry as a necessary cornerstone of Israel's security;

* The desire to enable the defense industries to realize their unique
technological potential in order to compete with foreign competitors, on
the basis of a great deal of cooperation between them, in a world of
mergers between large defense companies.

* The defense industries must protect their advanced qualitative edge in
technology by maintaining a close relationship with their main end-user --
the IDF. Such a relationship will enable industry to survive and develop
in the future.

Mr. Mordechai said that Israel's defense industry must accommodate itself
to a changing reality, while continuing to guarantee its essential role in
supplying advanced and unique weapons systems to the IDF. He emphasized
the defense industries' centrality to the country's security. Finally, he
approved the committee's main recommendations and instructed that the
necessary details be worked out, in cooperation with industry management
and employees, before presenting the conclusions and recommendations to
the Government Companies Authority and the cabinet.

.


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