The Defense Ministry has failed to properly assess the implications the defense aid memorandum of understanding Israel signed with the US in 2016 would have on national security, State Comptroller Matanyahu Englman warned Monday.
The $38 billion MOU, inked between Jerusalem and Washington in 2016, spans 10 years and includes various stipulations about defense deals that must prioritize American defense firms over the Israeli military industries.
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The MOU came into effect in 2018 and Englman's report reviewed the defense establishment's preparatory work and relevant projections for 2019-2028.
Since the MOU was put in place, some of the annual $3.8 billion aid has been converted into shekels and used for procurement from local defense firms. But the MOU states that this process is to be gradually phased out, especially in the period between 2025 and 2028.
This means the state will be sending far less business in the Israeli military industries' way.
The comptroller noted that the Defense Ministry "did not fully assess the implication of this move on the local defense industry, not did in fully account for the impact this move would have on the IDF's force-building plans or its emergency readiness.
"Moreover, the Defense Ministry failed to properly assess the potential damage this practice would cause to national security, nor did it outline alternatives to reducing procurement from the Israeli military industries," the report said.
The ministry has also yet to determine which research and development areas would maintain their independence and operational continuity at wartime. The IDF, for its part, has not provided the Defense Ministry with its priorities in terms of munitions the production of which must remain local.
The comptroller's audit also concluded that the ministry has no contingency in place for when procurement from local military industry shrinks.
"The fact that no alternatives have been presented to preserve 'blue and white' production lines, as well as the costs incurred over dual production lines and the logistics they require impeded the [Defense Ministry's] ability to harness other relevant government ministries and national resources to resolve these issues."
The Defense Ministry issued a statement saying, "Once the MOU was signed in 2016 the Defense Ministry began reviewing the implication of diminished [local] procurement.
"The comptroller has commended the work done on the subject by a committee formed in 2017 with the IDF and the Finance Ministry. The committee's recommendations have been implemented since 2018 and are included in the ministry's work plans.
"This includes multi-year procurement from local industries for major projects; providing assistance to small- and medium-industries in procurement and export; the optimal utilization of the shekel budget in favor of local procurement, especially from industries in the periphery; networking efforts promoting dozens of Israeli industries with large American firms, and more."
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