Israel built the rivalry between Israel Aerospace Industries (IAI) and Rafael Advanced Defense Systems to produce superiority. It should not discount its own assets for a foreign buyer. Shay Gal, formerly Senior Adviser to Israel’s Minister of Economy and Industry and later Vice President for External Relations at IAI and Chief of Staff to its Chairman, where he helped advance the company’s proposed IPO, sets the ownership doctrine: compete relentlessly in development, testing and domestic procurement; activate a narrow Export Collision mechanism when overlapping bids destroy state value; protect minority shareholders; and codify the framework before the first share is sold. Competition remains the default. Cannibalisation does not.

The rivalry between IAI and Rafael produces alternatives, breakthroughs and technological superiority. When they compete for the same requirement abroad, that advantage becomes leverage against their common shareholder: the State of Israel.

The buyer gets two Israeli bidders with substitutable solutions and extracts concessions on price, financing, local production, technology transfer, maintenance, spare parts, warranties, offsets and payment terms. One company can win while Israel loses.

This is economic autoimmunity: rivalry that produces superiority at home erodes the value of two state assets abroad for the buyer’s benefit.

The answer is not a merger. It is a boundary.

Israel needs two centres of expertise, two engineering answers and the competitive pressure that prevents technological stagnation. For a country whose security depends on indigenous capability, technological duplication is insurance. In development, testing and domestic procurement, IAI and Rafael should compete fully. The boundary is crossed when competition stops increasing Israel’s odds of winning and starts increasing the buyer’s bargaining power.

Finland shows the problem clearly.

In 2020, its armed forces invited five companies to compete for a new high altitude ground based air defence capability. By 2022, the final round had narrowed to two Israeli systems: IAI’s BARAK MX and Rafael’s David’s Sling. Finland selected David’s Sling in 2023 in a procurement worth approximately €316 million.

Rafael won the prime contract. Yet IAI did not disappear from the winning architecture: its ELTA division supplies the sensors. The case is instructive precisely because rivalry and workshare proved compatible.

The public record does not show how much the direct contest affected pricing. What it does show is the structural problem: a foreign government reached the final stage with two alternatives supplied by companies owned by the same foreign state and could compare one Israeli state asset directly against another.

Slovakia provides a second illustration. Its assessment considered Rafael’s SPYDER alongside IAI’s BARAK MX among the medium range options. The process ultimately selected BARAK MX, and in 2024 Israel and Slovakia concluded a Government to Government agreement worth approximately €560 million for........

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