Procurement: Bribes As A Cost Of Doing Business

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April 18, 2009: There's yet another corruption scandal involving Israeli arms sales. A deputy defense minister in the Central Asian nation of Kazakhstan was recently arrested for taking bribes to facilitate the $190 million sale of Israeli artillery and UAV equipment and technology. This follows Indian charges that bribes were involved in a recent purchase of over a billion dollars worth of arms from Israel. There have been several similar, but smaller, scandals in other parts of the world, involving Israelis sales agents.

Arms exports (over $4 billion a year) are an important segment of the Israeli economy. The U.S. is biggest customer for Israeli military gear, accounting for nearly 20 percent of Israeli exports. India is becoming an even larger customer. But an equally large quantity of exports consists of many small deals to parts of the world (Africa, Latin America, Asia) where bribes are considered a traditional way to close the deal.

The Israeli attitude is that the bribes are a cost of doing business or, as the accounts put it, "a sales expense." Israeli prosecutors rarely go after Israelis doing the bribing. But on the other end, the buyer nations tends to regard these bribes as another form of corruption.

 

 

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