CTO Newsletter

Main headlines from this issue

Blenheim restructures – new board and listing to be announced

Blenheim Capital, a provider of structured finance offset solutions, is emerging from a challenging period with a company reorganisation and expansion into new markets. Discussions are under way with four banks that are looking to take a slice of the equity.

Bulgaria to rely on Article 346, approves offset fund

Bulgaria, which is among a significant group of European countries that regards the EC Directive 2009/81 as if it were a vial of smallpox, has decided in principle to cite Article 346 as grounds for requiring offsets for most future defence procurements.

In the nick of time – IP required for British Chinook purchase

By signing the contract award for the purchase of fourteen new CH-47 Chinook helicopters just before the August 21 application date for Directive 2009/81/EC, British Defence Secretary Dr Liam Fox has qualified the £1bn ($1.64bn) purchase for industrial participation.......

Troubled Vincent Tchenguiz revives offset model

Vincent Tchenguiz’s Consensus Business Group has launched a $60m ‘clean technology’ fund in South Korea to invest in renewable energy businesses at the request of the governments of Korea and Israel. The fund does not yet qualify for offset credits, but that is certain to be addressed down the line, we are told.

Poland delighted with offset projects outcome

Poland signed sixteen offset contracts worth more than $8bn by the end of 2010, Deputy Prime Minister and Economy Minister Waldemar Pawlak disclosed.

Main headlines from this issue

Greece says EC Directive has no influence on ‘offset contracts of a new type’

The saga of Greece’s expired offset contracts has taken an unexpected turn. A senior MoD executive has told CTO that the ministry does not regard the EC Directive prohibiting offsets as having any influence on the country’s resolution of the problem.

“Be prepared – global financial crisis heralds return of countertrade”

Economic and financial volatility in the U.S., Europe and parts of Asia, may lead to the rise of various forms of countertrade in the global market, according to Prof. Michael Czinkota...... after decades of dormancy, countertrade is on track to become a vital part of the global market.

Indonesia’s emerging offset policy: “forget Australia and India, emulate Singapore”

Indonesia’s preparations for the launch of its first national offset policy are misdirected, says a group of Asia-based academics. Instead of looking at the offset policy experiences of Australia and India it should consider instead crafting an offset policy appropriate to its own unique conditions.

Malaysia: insider rates MIGHT’S offset initiatives, knocks government ministers

A Canadian who has recently taken a position at MIGHT claims to have had sat ringside to some of the highest level discussions between industry heavyweights like Boeing, EADS and Rolls-Royce, and the Government of Malaysia.

Main headlines from this issue

As the EC Directive approaches no-one knows how to cope

The EC has rejected reports that the European Commission might delay the implementation of Directive 2009/81/EC because so many member states are not ready for the changes the Directive demands. CTO has been informed that.......

CTO’s European Community Review

Details of every member state’s progress in complying with the Directive 2009/81/EC

Comment – the EC Directive – Europe’s lost opportunities will benefit every global competitor

The challenge with Directive 2009/81/EC is to find signs of intelligent life..... Some countries approved the Directive because it did not mention offsets......

Transparency International: “EC Directive is an opportunity to make offsets transparent”

With the transposition of the EC Defence Procurement Directive into national law comes an ideal opportunity for member states to ensure that offsets are finally made transparent and accountable to the public, says Julia Muravska of Transparency International UK.

Portugal’s Offset Commission rudderless as Pedro Catarino is posted to the Azores

The President of Portugal’s Offset Commission has been appointed Portugal’s official representative in the Azores, a speck of volcanic rocks in the North Atlantic Ocean.

Main headlines from this issue

Australia’s “listening minister” announces seven AIC program amendments

Australia’s Minister for Defence Materiel, Jason Clare, has moved to reassure disaffected SMEs by introducing seven changes to the Australian Industry Capability (AIC) program. The AIC is Australia’s equivalent to an industrial participation policy.

Turkish credit delays raise spectre of Greek debacle

Concerns that Turkey may be replicating the Greek route to offset credit shenanigans seem to be misplaced.....

India: civil aerospace product list eligible for offsets is changed

India’s MoD has amended the list of civil aerospace products that are eligible for offsets, removing technical manuals, raw materials, and training. The ministry has added .....

Indonesia’s pursuit of fighter plane indigenisation is a huge gamble

Indonesia has taken a huge gamble in a deal with South Korea by agreeing to manufacture the KFX, a new type of fighter plane, according to Connie Bakrie, a defence analyst at the University of Indonesia. The project could well end in disaster, he warned.

Malaysia: MIGHT seeks higher technology role through industrial participation

Malaysia must leverage international partnerships in global science, technology and innovation to gain a competitive advantage in areas of high technology, declared MIGHT Joint Chairman Tan Sri Dr Ahmad Tajuddin Ali.

Main headlines from this issue

Mexico’s offset ‘road map’

The Mexican government has produced a road map for the development of the country’s aerospace industry. The plan recommends the establishment of an offset policy to provide benefits for both the defence and civil sectors......

Argentina implementing a counterpurchase policy to head off trade imbalances

Argentina is demanding that corporations operating in the country sell Argentinean products overseas for a value higher than the goods introduced to the local market.

*Have You Seen Hlognwane?

Pressure builds as new cache of documents link BAE/Saab to South Africa’s IP scandal

Drama tends to follow drama whenever South Africa’s opposition party and the domestic press get their teeth into a new revelation about the country’s 2000 Strategic Defence Package (SDP).

Boeing strengthening presence in Morocco through partnerships

Boeing is stepping up its relationship with Morocco in anticipation of significant orders from Royal Air Maroc, the national airline. Boeing will conduct a trade summit in Casablanca .....

Norway wants 100 percent IP for four F-35s

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Rear Admiral Arne Røksund said that Norway wants a return on investment on its purchase of four F-35 Lightning II training aircraft equal to the amount of money it is putting into the aircraft.

Main headlines from this issue

Poland Declares War – First Test Case Looms Over the Directive

Poland will plead Article 346 as justification for a decision to demand offsets for a purchase of training planes. The government will state that it is not breaching the ban on offsets under EC Procurement Directive 2009 because the planes are essential for its security interests. Poland’s deliciously irreverent Ministry of National Defence has decided to take on the European Commission directly.....

The UK’s IP policy and the law of diminishing returns

The level of industrial participation in the UK is undergoing a sharp decline. The value of direct IP work placed in Britain for the fiscal year April 2010 to March 2011 was only £153m ($250m).

CSDP policy will oblige foreign OEMS to make South Africa a manufacturing hub

The next step in South Africa’s Competitive Supplier Development Programme (CSDP) will be to build a global manufacturing hub by implementing fleet procurements through strategic partnerships with a global original equipment manufacturer (OEM).

Japan wins domestic production offer for f-35

Lockheed Martin says it is willing to outsource some production of its F-35 Joint Strike Fighter to Japanese firms if the country's government decides to buy them.

Pakistan making serious efforts to attract foreign investors to BOT projects

Pakistan has decided to constitute a ten-member high-level inter-agency forum to pursue implementation of major infrastructure projects by the private sector, particularly involving international firms.

Main headlines from this issue

Barnier given an easy ride as he lays down the law on European offsets

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Michel Barnier the European Commissioner for Internal Marketstold a high level conference on ‘Defence and Security Industries and Markets’ that the EC should ban the “abusive and completely discretionary” use of Article 346 to demand offsets.

U.S. Dept. of Commerce examines the EC Directive, finds ‘security of supply’ conditions “remarkable”

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The briefing paper considers “the real risks to business” under the new Directive.

Philippines: outbreak of tenders wanting countertrade puts PITC back in the game

The Philippine International Trading Corporation (PITC) has resuscitated its countertrade policy and introduced obligations into some military and penal procurement tenders.

Malaysia calls for regional engagement in offset programs – barbed reminder to Indonesia on countertrade agreements

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Greece: indictment as witnesses shun and dissemble at submarine inquiry

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The parliamentary committee investigating the purchase of four German submarines by the Greek Navy a decade ago issued a unanimous decision for the ex-minister to be indicted on criminal charges of bribe taking and money laundering.

Main headlines from this issue

South Korea: DAPA refines its guidelines

South Korea’s Defence Acquisition Programme Administration (DAPA) indicated in February that it would soon be changing its offset guidelines. The Administration has now published an English translation. The translation however is not straightforward.

Australia: If it walks like a duck and quacks like a duck, it must be an offset!

Malcolm Taylor, CEO of C&I Projects Group, applied with significant effect an Australian offset version of the duck test in his address to the GOCA offset conference in Amsterdam last month. He also predicted that Europe, too, may soon start waddling like an Antipodean duck.

Greek parliament to investigate former defence minister over German submarine contract

An extraordinary plenary session of the Greek parliament voted 226-9 for a probe into the contract awarded in 2000 to Hellenic Shipyards of Greece and Germany’s HDWand Ferrostaal for four submarines. Fifteen legislators abstained.

Philippines details proposed BOT rule changes

The Philippines government has presented planned changes to the implementation of the 20-year-old Build- Operate-Transfer (BOT) law in a bid to move the centrepiece public-private partnership (PPP) program forward.

Brazil obliges Rolls-Royce to boost local content in commercial sector

Rolls-Royce will invest $120m in Brazil in 2011 and 2012 to raise the volume of locally produced components in the equipment it supplies to the oil and gas industry.

Main headlines from this issue

Turkey’s 5th directive moves policy to a new level

SSM is placing greater emphasis on the scope of the IP, revising the multiplier table, lowering the threshold, and raising the quota. It is also offering new incentives for engaging with SMEs in defence projects ........

Structured trade finance will survive the directive, with a geographical shift

Colin Heritage, Managing Director of Stemcor Trade Finance, predicted that the EC Procurement Directive will reduce offset obligations in Western Europe but that Asia, Latin America, South Africa, and in particular the Middle East and India, will see a rapid growth in the practice.

Kuwait: primes baulk at sharing offset feasibility study with other parties

What has changed is the offset project process. Foreign companies may satisfy their offset obligations by proposing direct and indirect projects and selecting a local partner, which may or may not be involved in the project......

Greek procurement law expected by June

A new Greek Procurement Law, which will show how Greece will adapt to the EC Procurement Directive, has to be ready before Parliament rises for its summer break in June.

Kazakh barter default laid to rest after 18 years in Indian court system

The Indian Supreme Court has ruled that Export Credit Guarantee Corporation of India must honour its commitments resulting from a countertrade agreement.

Main headlines from this issue

Oh! Calcutta!

The aim of the current Indian Defence Minister, A. K. Antony, has been to raise the level of indigenous defence production and reduce the level of inputs. DPP 2011 was published in January and contained very significant changes, particularly in the area of offset. So far, those changes have yet to be felt on the ground......imported defence equipment has increased and the percentage of programs procured offshore is now 75 percent.

EU Directive: implications on offsets

Discussion on the EU directive continued at the GOCA conference, once again producing plenty of heat, but lots of smoke and little clear vision.

Russia drafts legal changes to regulate offsets

The Russian Ministry for Economic Development has drawn up amendments to the 94th Law on State Procurement. The amendment introduces the concept of offset deals in which ........

Poland prepares amendment

Poland is adapting its law to comply with EU directive and practices in the use of offsets. It is not a process that is undertaken with relish. The proposed wording is.....

Polish Treasury probes Bumar’s Malaysian contract

Bumar is to undergo an audit by the Treasury Ministry, which is investigating an agreement signed in 2003 for the sale to Malaysia of 48 PT-91M tanks.... The $380m offset contract is part of the largest export deal ever signed by the Polish arms industry...

Main headlines from this issue

Greek proposal to settle expired offset contracts derided as unrealistic

The Greek MoD has published a draft ‘Ministerial Decision’ to end the country’s expired offset contracts saga. The Greek defence industry has been invited to comment. Some proposals may find their way into the document but informed sources say that the MoD is unlikely to make any fundamental changes.

Indonesia intends to live the dream – policy ready by 2012?

Dr. Ir. Irnanda Laksanawan, Indonesia’s Deputy Minister for State Owned Enterprises, told the JIDD conference that Indonesia will make significant arms procurements in the period to 2014.....

Oman approves higher multipliers and tighter monitoring

Oman will soon announce new offset guidelines. The ‘Partnership for Development’ program is intended to..... The policy is expected to be announced within the next three months, but is subject to final review.

How Malaysia’s ‘MIGHT’ is putting a contrary offset model on the right track

Mohd Yusoff Sulaiman, President and CEO of the Malaysian Industry- Government Group for High Technology (MIGHT), explained that a study in 2001 found that fifty percent of companies in Malaysia participating in offset programs later shut down.....

RAND report takes the shine off those critical of China

Yet another U.S. report critical of China’s relationship with the domestic aerospace industry has been published. The conclusion however also contains some unusually favourable comments that might weaken the impact of the carping community.

Main headlines from this issue

Portuguese court gives go ahead for offset fraud case

A Portuguese court has ruled that three German executives and seven Portuguese businessmen are to face trial charged with robbing the Portuguese state of €34m ($48m). The case centres on the offsets that Man Ferrostaal allegedly promised to deliver with regard to a submarine contract.

India: yet another leak of offset documents meets with the usual refrain: “the file was not sensitive”

The Indian Defence Ministry has launched another inquiry after receiving an anonymous envelope containing four pages of a leaked draft field trial report of 145 M777 Ultra-Light Howitzers to be procured for the army.

Greek Defence Minister: “nasty offsets have corrupted Greece”

“When I talk about the need to have an autonomous defence industrial base I am referring to common defence projects that address the vicious policy of offsets, and the vague and problematic notions of internal defence industrial participation and Greek added value”.....

What are they afraid of? EC refuses to be held to account at GOCA’S Amsterdam conference

The European Commission has refused to send a representative to speak to GOCA delegates on the guidance note the EC published on offsets under the Procurement Directive. A GOCA delegate described the decision as bizarre .........

ECCO INAUGURATED IN PARIS AS OFFSETS FACE EC CHALLENGE

A new offset association, the European Club for Countertrade and Offset (ECCO), held its first board meeting in Paris this March.