CTO Newsletter

Main headlines from this issue

“Bull on the loose” at Kuwait’s NOC

Chairman tramples another CEO

The National Offset Company’s Chairman, Anwar Abdul Rahman Al-Jawdar, has fired the newly appointed CEO, Othman Al Quraishi. The warm weather putsch took everyone by surprise, occurring well within Mr Quraishi’s 100 day trial period. No reason was given.

Poland surrenders!

Polish Defence Minister Tomasz Siemoniak has confirmed that an additional five C-295M transport aircraft ordered on June 29th 2012 from Airbus Military do not have any offset arrangements.

Japan’s F-X evaluation: Defence White Paper says all three bidders fared well in industrial participation

Japan’s annual Defence White Paper dedicates several pages to explaining the decision to select the F-35A for its F-X fighter requirement.  All three bidders fared well in industrial participation.

U.S. defence firms lobby for an ASEAN-wide defence offset programme

A major grouping for U.S. businesses has proposed the creation of an ASEAN-wide defence offset programme to spur technology transfer while helping to boost U.S. arms sales to the region.

EDA puts out tender to assess offset impact on EDTIB

The European Defence Agency has invited proposals for a ‘Study on the Impact on the European Defence Technological and Industrial Base (EDTIB) of Defence Offsets Requested by Third Countries.’

Main headlines from this issue

UAE: Duel in the sun as passions boil over

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The Tawazun Economic Council has robustly rejected criticisms raised by several prime contractors about the quality of its work. The Council has instead hit back at contractors “who are here to just sell and leave.”

Oman’s new offset policy introduces input and output credits

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Revisions to Oman’s ‘Partnership for Development’ offset policy have been approved and await a Royal Decree before details are released. Oman will appoint a PFD Board of Governors under the Ministry of Commerce and Industry and create a dedicated offset organisation.

India looks to private sector to support DOMW – agency to expand

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An Additional Secretary will be appointed as its head with a Joint Secretary and six full-time director-level officers under him.....

CSIS finds India’s new offset rules lacking in vision, calls for a National Commission on Offsets

Amidst all the back patting a member of one organization has looked at India’s new offset rules considered the wider picture — and found them wanting.

Opposition promises to scrap Venezuela’s oil barters

The opposition candidate in Venezuela's upcoming presidential election said he will scrap all deals that subsidize oil exports to other countries in the region or under which oil is bartered for other goods or services.

Main headlines from this issue

India revises the offset policy – DOMW replaces DOFA

And finally it happened! India has addressed many of the long-standing concerns that have been troubling obligors. The MoD has introduced a revised offset policy. A single organisation is to ensure a smooth post-contract offset process; at least, that is the theory.

UK signs first industrial participation commitment under its new policy

Boeing has become the first foreign prime contractor to sign up to a new British industrial participation policy. The policy encourages overseas-based companies to make a firm commitment to continue business activities in the country for the long term....

Blenheim returns to prime time with Sharia-compliant offset solutions

Blenheim Capital is emerging from a tough year with a new source of funding that will allow it to introduce an original financial model. Terms have been agreed for a Strategic Partnership Agreement with the Qatar Islamic Bank. The deal will provide Sharia-compliant Islamic finance within Blenheim as an offset solution.

Mexico prepares to roll out a formal offset policy across the board

ProMexico, the Mexican government’s trade and investment arm and author of a detailed offset policy road map, has devolved responsibility for launching the policy to the Ministry of Economy. The ministry will be the management authority.

Malaysia: BAE’S Typhoon pitch promises a wealth of industrial benefits

The Eurofighter consortium, led by BAE Systems, is ready to invest $2bn in offset programmes designed specifically for Malaysia within the next five years if the country selects the Typhoon.

Main headlines from this issue

Indonesia’s offset policy trapped by red tape

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Morocco demands more industrial participation – with a policy that lacks detail

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Morocco is increasingly inserting industrial participation clauses into international tenders for both military and civil purchases. … the requirement is mandatory when mentioned in the RfP and points will be allocated as part of the qualification criteria. 

European Commission says one quarter of Member States have yet to fully transpose the directive

The European Commission has informed CTO that seven member states face possible infringement proceedings. They are....

Bombardier adopts new approach to Chinese market

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Bombardier is trying a new approach to gaining further access to China’s rail market. The company plans to sell the blueprints as well as build the trains. 

Value of offset obligations to reach $500bn by 2016

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A study by Avascent a Washington DC-based service providersuggests that governments will have imposed about $500bn worth of global offset obligations on foreign aerospace and defence companies through 2016.   

Main headlines from this issue

Inconsistencies in Brazil’s approach to offsets examined – Navy sets penalties at 5 percent per month

Presentations at the GOCA/ADS Global Industrial Cooperation Conference in Izmir in May and the subsequent ECCO conference held during the Eurosatory exhibition in Paris in June were meant to depict an intimate relationship across Brazil’s armed forces. Instead, the conferences exposed the country’s approach to offsets as fractured and inconsistent.....

Norway approves BAE Systems contract with 100 percent offset

BAE is to initiate industrial cooperation with Norwegian industry equal to the value of the “main body” of the project.

India: Leaked document says some obligors receive gratuitous offset credits

A document leaked to India’s Business Standard newspaper suggests that the MoD is violating its offset regulations by awarding unjustified credits. The obligors identified in the document include Finmeccanica, Fincantieri, and Rosoboronexport.

EC commences infringement proceedings against Estonia

The European Commission gave Estonia two months to notify it of the measures the country is taking to transpose EU Directive 2009/81/EC on defence procurement.

Opportunity beats risk despite complex arrangements and long memories

“Have you turned down a deal because you were worried about that risk?” asked an official at the Bloomberg Government Defence Conference on Defence Globalisation. The answers were instructive.

Main headlines from this issue

EC commences infringement proceedings against Poland and Austria

The European Commission has given Poland and Austria two months to notify it of the measures they are taking to transpose EU Directive 2009/81/EC on defence procurement. Austria is accused of not transposing the directive's provisions with regard to Carinthia.

Kuwait: NOC’s new GM brings strong financial background

Othman Al-Quraishi, the newly appointed General Manager of Kuwait’s National Offset Company, has acknowledged that the NOC has encountered “a period of instability\.....
His background is in finance… He is expected to bring a new professional focus to project management.

UAE: OPB turns into TEC

The UAE Offset Programme Bureau (OPB) has been renamed the Tawazun Economic Council (TEC)…. The negotiation phase would now start earlier.

Malaysia spells out civil offset process for MRT

Malaysia’s Mass Rapid Transit Corporation is opening a tender evaluation process for the acquisition of rolling stock for the Klang Valley Mass Rapid Transit line. Civil offset benefits will feature prominently in the third and fourth stages.

Czech Republic: last of the old time offset agreements nears its end on a high

The Gripen consortium, which supplied 14 fighters to the Czech military, has met its offset targets ahead of schedule. The obligation was for 130 percent of the fighters' lease price … something no longer permissible under the offset code of conduct.

Main headlines from this issue

Prohibition sends offsets underground – with record turnout for offset conference

More than 400 delegates attended the fifth GOCA/ADS Global Industrial Cooperation Conference in Izmir… The EC boycotted the event, unravelling a panel discussion that focussed on the directive. Lee Furter, Snr Manager for Offsets at Ruag, valiantly stepped in at short notice to present a humdinger on EC defence procurement policy and the directive, and picked it apart.

Turkey’s IP/O policy has been hugely rewarding – but low threshold is exasperating

Murad Bayar, SSM’s Undersecretary, told conference delegates that SSM’s project portfolio has reached an impressive cumulative value of about $27bn since 2002.

Poland: can ‘Polonisation’ survive the directive?

Poland’s response to the restriction on offsets is to say: “Okay, we don’t need offsets. We could make offsets go away… as long as all products are produced in Poland.” Conference delegates chuckled, but the speaker wasn’t joking.

The loneliness of the civil offset manager

Iwan Bannwart, ABB’s Group VP for Offset and Countertrade, told conference delegates that the civil offset industry as such has little voice. “I am part of this club here, and this is defence and aerospace…. “Sometimes I feel a bit lonely.”

NATO contract for Northrop Grumman will bring IP to 13 member states

Thirteen participating NATO nations will share in an industrial participation programme for the purchase of five RQ-4 Global Hawk unmanned aircraft.

Main headlines from this issue

Offset policies face legal minefield –

How to master the minecraft and comply with the directive

The European Commission declined invitations to address the GOCA/ADS Izmir offset conference, leaving many questions concerning Directive 2009/81/EC unanswered. CTO is taking this opportunity to address the directive from a legal standpoint.....

France battles UK and Germany over EC’s juste retour proposal

The European Commission has adopted a draft regulation to allow EU public bodies to exclude certain bids from outside the EU where such tenders comprise a significant element of non-EU goods and services.  The adoption of the proposal gave rise to contentious discussions and intense negotiations.

Bulgaria relegates its offset department

Bulgaria’s Ministry of Economy, Energy and Tourism (MEET) has transferred responsibility for offsets to another body, the Department for Investment, Innovation and Entrepreneurship.

India’s offsets: $4.27bn and counting

India’s defence offset policy has achieved more than $4.27bn in benefits from arms contracts signed since October 2007, Defence Minister AK Antony declared in a written reply to Parliament.

South Africa: DTI makes an admission

Trade and Industry Minister Rob Davies has acknowledged that usual departmental practice was widely flouted in calculating offset credits awarded to contractors in the South African Strategic Defence Procurement Programme.

Main headlines from this issue

Kuwait’s NOC: Reem takes charge – new GM to be named

In the latest of a series of developments at Kuwait’s National Offset Company Reem Al-Khudur has been appointed to head a newly established committee to oversee projects. She replaces Abdullrahmin Al Ibrahim. Mr Al Ibrahim remains a committee member. They both carry on as Assistant General Managers.

EC says no to Izmir offset conference – offset Czars stay away – but record turnout likely

The European Commission on May 4 informed GOCA/ADS that it would not be represented on a panel at the Izmir conference to discuss the EU Stance on Offset, citing other commitments. The Commission was invited last December and has been chased for a response ever since. The Global Industrial Cooperation Conference (GICC) takes place from May 20.

South Africa: new focus on directs and revised multipliers

–battle ahead over “actual performance” of previously awarded credits

South Africa’s DTI has provided Parliament with a detailed report on arms deal offsets under the National Industrial Participation Programme (NIPP).

THE DIRECTIVE: UK’s TURN FOR AN EU MISSIVE

The European Commission has warned the UK that it must transpose the Directive's provisions with regard to Gibraltar.

Italian corruption inquiry leads to Indian offset “slush fund”

A consultant whose offices in Switzerland were raided last month by Italian authorities as part of a probe into corruption in a helicopter deal with India is an offsets service provider who has been very active in the Indian defence sector.

Main headlines from this issue

Kuwait: Leadership crisis at NOC General Manager dismissed, questions raised in Parliament

Abdullah Ghaith Al-Mutawaa has been removed from his post as General Manager of Kuwait’s National Offset Company, triggering a debate in Parliament and leaving the NOC functioning by committee, for a time with no-one in charge. After the parliamentary hearing a Committee Chairman was appointed by the Board of Directors.

India: National Offset Policy faces strong resistance

An ambitious plan by the government of India to consolidate all major civil and defence imports and leverage them through mandatory offsets may not take off thanks to strong opposition from several ministries and the Planning Commission.

European Union keen to invoke ‘Juste Retour’

A draft regulation, issued by the European Commission will allow EU public bodies to exclude certain bids from outside the EU where such tenders comprise a significant element of non-EU goods and services.

Japan pays for Defence Department study into component manufacture in Japan

Studies led by the Defence Department and two Joint Strike Fighter contractors will outline options for Japanese companies to manufacture components and play a role in assembling F-35 aircraft.

Canada: Auditor-General finds fault with IRB promises for F-35

Two years after Canada’s Department of National Defence pressured other departments to back the F-35 programme by warning that $15.4bn in regional spinoffs could be lost if there were any delays, criticism of the industrial regional benefits are addressed in a hard-hitting report by the Auditor-General.

Main headlines from this issue

India’s revised offset policy released –FDI increase ruled out

The only positive statements made at India’s DEFEXPO summit were entirely negative. The 26 percent FDI cap would not be raised, and the revised offset regulations were not ready. A poorly attended seminar discussed procurement procedures and offsets; little was new and the event fizzled. DEFEXPO closed, everyone went home — then Defence Minister A.K. Antony announced the changes.....

Bulgaria and Luxembourg formally warned to transpose directive 2009/81/EC

The European Commission has acted to ensure that Bulgaria and Luxembourg comply with their obligations to implement EU rules on defence procurement. They join Germany and the Netherlands, who faced infringement proceedings served on January 26th.

Czech Republic to transfer offset administration to MOD

The Czech government is set to transfer responsibility for the management of future offset contracts from the Ministry of Industry and Trade (MIT) to the MoD. The guidelines will be scrapped and all offset negotiations between the MoD and defence contractors will take place on a case-by-case basis.....

It’s witchcraft – South Africa’s formula for arriving at job creation

The government said 16,917 direct jobs and 33,834 indirect jobs had been created through the NIPP programme. Analysts soon twigged that an entirely theoretical factor of two had provided the government with exactly 16,917 direct jobs.

PPP in Asia: How to resolve infrastructure problems

According to DLA Piper, a global law firm, economic growth in Asia has created an enormous demand for financing solutions for economic and social infrastructure projects in the region.....

Main headlines from this issue

DAPA: “We will blacklist Eurocopter”

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South Korea’s DAPA is threatening to blacklist Eurocopter. The company says DAPA is refusing to close an offset agreement for a follow-through purchase under the KHDP. A senior DAPA source told CTO: “We are so upset with them we are taking steps to possibly bar them from all arms procurement.”

Italy’s post-directive policy is emerging

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Italy’s industrial participation policy remains under review pending changes to comply with Directive 2009/81/EC. We are told it will be several months before they are ready. Some details however are already emerging.....

Slovenia prepares new guidelines – multipliers are both up and down

Slovenia’s Ministry of Economic Affairs has submitted new draft offset guidelines for approval by the National Assembly...

Nigeria to base ‘industrial partnership’ policy on the South African model

Foreign companies benefiting from lucrative public sector contracts and the nation’s massive market will have to start setting up factories to manufacture some equipment in Nigeria.