State-owned arms manufacturer Israel Military Industries (IMI) would deliver "within a few years" an advanced integrated system "allowing precise hits by remote launching", he said in a statement.

Lieberman added that the contract with IMI was budgeted at "hundreds of millions of shekels".

The Israeli shekel is currently trading at 3.63 to the US dollar.

"The project for setting up a precision rocket and missile system is underway," Lieberman said in the statement.

"Part of it is already in production and part is in the final phases of research and development.

"We are acquiring and developing precision fire systems that will allow... the Israel Defence Forces to cover within a few years every point in the region."

Israel is considered the leading military power in the Middle East and believed to be the only country in the region to possess nuclear weapons.

Foreign military experts say it has several batteries of its Jericho ballistic missile, capable of delivering nuclear warheads.

IMI said in 2004 that it had produced a cruise missile, the Delilah, with a range of 250 kilometres (150 miles).

It also has an array of anti-missile rocket systems but Monday's statement quoted IMI chairman Yitzhak Aharonovitch saying that the new armament would "reflect the company's technological capabilities, which specialise in the ability to fire accurately, to strike at a variety of ground targets".

Israel faces a variety of threats and considers Iran its most dangerous foe in the region.

It is regularly targeted by rockets and mortar fire from the Gaza Strip, ruled by Islamist movement Hamas.

Another of its enemies is the Iran-backed Shiite group Hezbollah based in neighbouring Lebanon.

Israel also shares a border with Syria, where Iran and Hezbollah are fighting alongside President Bashar al-Assad in his country's civil war.

Netanyahu has pledged to prevent Tehran from further entrenching itself in Syria and a series of recent strikes that have killed Iranians there have been attributed to Israel.

Lieberman did not reveal details of the planned new system or its potential targets and his office did not respond to AFP requests for information.

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IMI PLC