CTO Newsletter

Main headlines from this issue

Subdued response from U.S. Defence Industry to reworked annual report

The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) has received just three comments in response to its proposals to update the information American companies must supply each year...

“ARMAGEDDON” for Western civil aircraft production as China reaps rewards of offset programmes

“Why do Western airframers such as Airbus and Boeing continue to donate know-how and tribal knowledge to China?” The answer is that technology transfer is required to sustain Western aircraft sales to China. This is tantamount to borrowing time.

Trade subcommittee for foreign affairs hears aerospace union’s pitch to ban offsets

Owen Herrnstadt, Director of Trade and Globalization Policy for the powerful trade union, the International Association of Machinists and Aerospace Workers, has appeared before the Trade Subcommittee for Foreign Affairs on Capitol Hill to argue against offsets.

Saab offers Brazil unique manufacturing opportunity

In a gambit that may throw Boeing’s offer into a tailspin, Saab said it is prepared to shift up to 50 percent of future Gripen production to Brazil if Saab wins the order for 36 fighters. The order is worth about €1.8bn.

Malaysia’s defence minister envisions Malaysia as a ‘Production Hub’ for Asean

Malaysia’s Defence Minister, Datuk Seri Ahmad Zahid, said several defence producers from Europe and the U.S. have agreed to make Malaysia their marketing base.

Main headlines from this issue

Secret German-Italian IP discussions under way

                                               ‘BIZARRE’ OFFSET LEFTOVER EXPOSED

A ‘special team’ in Division C of the German Federal Office of Defence Technology and Procurements (BWB) has begun discussing industrial participation benefits with Italian counterparts. The talkswhich started on July 1 concern the Italian MoD’s demands regarding a submarine programme.

UK MoD admit Oshkosh Truck Corporation “Failed to fulfil its IP commitment”

Britain’s Information Commissioner has allowed an appeal by CTO and ruled against the refusal of the UK Trade & Investment, Defence & Security Organisation (UKTI DSO) to disclose the identity of an allegedly delinquent industrial participation obligor.

Australia’s Defence Capability Plan 2009 identifies capabilities “To ensure self sufficiency”

The government’s concern is that Priority Industry Capabilities (PICs) remain in Australia. An overseas-based company can establish a local workforce...

Using Offsets as a financial instrument – The Blenheim model attracts government interest

Governments are now showing greater flexibility regarding the financing of defence purchases, claims Grant Rogan, Chairman and CEO of Blenheim Capital Services. As prime contractors find that they have less of a product to sub-contract, so governments are responding by agreeing to measures that have previously been regarded as off-limits.

Korean prospects in Indonesia rely on former industrial cooperation relationship

Korea’s Daewoo International Corp. is bidding to export two submarines to the Indonesian navy this year.

Main headlines from this issue

Greece may face potential violation code of conduct

Greece appears likely to find itself in conflict with the European Defence Agency’s (EDA) Code of Conduct on Offsets. The dispute stems from the Hellenic Ministry of Defence’s interpretations of industrial participation and offset under the Code. One of the Code’s principal objectives is to cap the quota at 100 percent of purchase contract value.

Industry Canada to announce significant policy changes

Canada will soon announce significant changes to its Industrial and Regional Benefits (IRB) guidelines. There will be a new approach to credit banking and multipliers.

In Bulgaria there’s a document for everything

Bulgaria’s bid process — as well as its negotiation and implementations processes — are being held back by reams of paperwork and endless bureaucracy.

Netherlands revises objectives and adjusts multipliers

The Netherlands’s Ministry of Economic Affairs (MEA) has introduced changes to its offset policy. The changes reflect a higher focus on the requirement for R&D projects in the defence sector.

“Offset, What’s Offset?” – Gordon Brown promotes Ainsworth to the cabinet

Bob Ainsworth, Britain’s Minister of State for the Armed Forces, who admitted he didn’t understand what an offset is, has been promoted by Gordon Brown to the post of Defence Secretary.

Main headlines from this issue

Significant changes transforming South Korea’s offset outlook

Korea’s Defence Acquisition Law was revised on April 1 and will come into effect on July 3, bringing new benefits for offset service providers. The law allows for exports of Korean non-defence products to qualify as offsets if they are below 50 percent of the total commitment.

MoD is the weak link as Taiwan adapts to WTO rules on industrial cooperation

Jim Grzella, Raytheon’s Director for Global Partnering, told conference delegates in Las Vegas that the Industrial Development Bureau at Taiwan’s Ministry of Economic Affairs will retain ownership of the industrial cooperation process, continue to specify commercial projects, and still do commerce-related offsets with suppliers that have obligations under a defence contract.

Hungary introduces new offset policy

Hungary has introduced significant changes to the offset rules to reflect the new EDA Code of Conduct on Offsets and to account for the country’s new economic priorities. The changes will …

Poland has found offsets to be beneficial – code of conduct receives lukewarm welcome

Poland has missed some projects but in general offset has had a positive effective on the economy and delivered real R&D benefits to the defence sector. The feeling is that performance has been quite good. Poland has concluded sixteen offset agreements to date…

Slovenia to raise threshold and lower multipliers

The threshold of €400,000 is considered to be too low and is soon to be raised. Offset credits may now be banked for up to three years but multipliers will be slightly reduced…

Main headlines from this issue

UK Minister fails to understand importance of offset; Scotland asks for a devolved offset policy

 A debate in the House of Commons on Britain’s defence industrial strategy provided a flawless illustration of the British government’s perception of offsets. Angus Robertson of the Scottish National Party took the opportunity to quiz Bob Ainsworth, Minister of State for the Armed Forces, about the significance of the country’s requirements.

Rosoboronexport furious at Pakistani “PIRACY” at Istanbul International Defence Industry Fair

Anatoliy Aksenov, Chief Adviser to the General Director of Rosoboronexport, reportedly took exception to a display of Kalashnikov assault rifles in the Pakistani display at the Istanbul International Defence Industry Fair last month.

South Africa’s paramount agrees license build with Jordan’s KADDB

Jordan’s King Abdullah II Design and Development Bureau (KADDB) and the Paramount Group of South Africa are to establish a $40m production facility in Jordan for the manufacture of mine-protected armoured vehicles.

Bahrain imitates the China approach by seeking buy-back ventures in Thailand

Bahrain has approached Thailand’s Charoen Pokphand Group to invest in the country's livestock, aquaculture, and rice agricultural businesses to improve its position as the food hub for the Gulf Co-operation Council (GCC) nations.

Vietnam to pay for Russian submarines under barter and debt arrangement.

The Russian state news service Novosti has revealed that negotiations have been taking place with Vietnam for the delivery of six Project 636 Kilo-class submarines.

Main headlines from this issue

EDA code of conduct on offsets Romania stays out – Norway steps in

In a dramatic eve of deadline development the Romanian MoD delivered a letter to the European Defence Agency (EDA) asking for more time to consider its position on the Code of Conduct on Offsets…… The Norwegian government has subscribed to the Code of Conduct on Offsets under an Administrative Arrangement…..

The EDA’s real message – “The codes of conduct on procurement and offset are ‘All or Nothing’ Ultimatums”

Dr. Aris Georgopoulos was surprised to learn that seven subscribing Member States (sMS) were apparently having second thoughts on membership of the Code of Conduct on Offsets. Three months ago he would have predicted that all sMS would accept it. His assessment is that……

Brazil turns the screws: Harsh F-X2 terms centre offset as a differentiator

Brazil has shocked contenders for its fighter aircraft tender with a severe interpretation of the offset stipulations. The Air Force is insisting that …

China’s “investment for food” initiatives may become an expensive disappointment

China’s agricultural countertrade policy may be running into difficulties. Over the past few years, China has sealed some 30 cooperation deals with developing countries in Africa and Southeast Asia. The agreements give Chinese companies access to farmland in exchange for technology, training and money.

Swaps having major impact on trade in asia – Indonesian telecom provider rides Chinese swap to build network

Indonesia’s largest telecom services provider, P.T. Telekomunikasi, has said it will use a currency swap to back a technology deal with Chinese providers.

Main headlines from this issue

Six contracts with armed forces mark revival of Philippines countertrade programme

Countertrade is undergoing a significant revival in the Philippines following several years of stagnation. The Philippines International Trading Corporation (PITC) is supporting a number of countertrade contracts for military accounts, particularly the Armed Forces of the Philippines and the National Police. 

India’s ‘National Offset Policy’ breaks for general election

India’s general election, which lasts for one month from April 16, has already claimed a casualty: the country’s national offset policy. R. Gopalan, Additional Secretary at the Ministry of Commerce, and the policy’s principal architect, has informed CTO that …

Ernst & Young and Assocham predict favourable outcome for India’s defence offset policy

India’s defence offset policy is expected to bring in $10bn during the 11th five-year plan, a joint statement by Ernst & Young and the Associated Chambers of Commerce and Industry of India (ASSOCHAM) predicts. 

Bell rings for Taiwan’s commercial offset programme

Taiwan is about to surrender its exemption under the WTO’s Government Procurement Agreement (GPA). This allows Taiwan to demand industrial benefits for purchases made for the rolling stock industry and for power projects. 

Regrets, he’s had a few – Now it’s fast forward for Brazil’s technology transfer revolution

Brazil’s Defence Minister, Nelson Jobim, re-stated a wish expressed many times of late…... Brazil has been slow to develop its defence industry, he acknowledged, and the government is now taking measures to catch up.

Main headlines from this issue

Countdown begines – seven Member States go to the wire on decision to “OPT OUT” of code of conduct

With the May 1st deadline for opting out of European Defence Agency’s (EDA) Code of Conduct on Offsets ticking away, a survey by CTO shows that at least seven Member States may choose to opt out, despite unanimously agreeing to the Code only last October.

UK refuses to identify obligor – admits to errors in disclosure

The UK Trade & Investment, Defence & Security Organisation (UKTI DSO), the successor to DESO, has again rejected CTO’s request to disclose the identity of a delinquent obligor under Britain’s Freedom of Information Act, declaring that disclosure is likely to be prejudicial to the interests of both the Government and the obligor…

Russia invites Guatemala to pay for arms with soft commodities

Guatemala's Vice-President said the Central American country is interested in buying Russian military hardware in exchange for soft commodities. The deal would involve Russia helping Guatemala modernize its obsolete arsenal. 

Denmark – Vulture convention yields benefits for Terma

 A get-together with local industry for competitors bidding for Denmark’s combat aircraft requirement, organised by CenSec, the Danish defence and security association, provided an initial opportunity for Danish companies to meet with potential offset obligors. CenSec has about 70 members.

Canada faces flack as leopard spots fade

Canada’s Defence Department wants to rebuild its newly acquired Leopard 2 tanks at facilities in Germany, cutting Canadian companies out of the work.

Main headlines from this issue

Pakistan asks the West for support through barters and swaps

Pakistan’s President, Asif Ali Zardari, has prepared concept papers to persuade the international community to assist Pakistan “in these troubled times” through mechanisms such as barter trade, debt swaps, oil supplies on deferred payments, and market access for Pakistani goods.

Algeria prepares a formal offset policy

Dialogue is currently ongoing between Algeria and certain GCC countries concerning the development and implementation of a formally structured offset programme.

Czech Republic snubs EDA with 153 percent offset requirements

Czech officials have announced that Austria’s Steyr-Daimler-Puch will deliver offsets worth 153 percent of the 14.4bn korunas ($670m) purchase price for 107 Pandur II armoured personnel carriers. The agreement appears to flout the imminent European Defence Agency’s Code of Conduct on Offsets.

Russia to supply military hardware – Bolivia to allow access to energy resources

Bolivia will receive helicopters from Russia and assistance to develop energy resources, Russian President Dmitry Medvedev said during Bolivian President Evo Morales’ Moscow visit in February. Morales said he would discuss the immediate purchase of Mi-17V-5 helicopters and loans of other aircraft to fight coca production.

Koran / Iraqi barter will secure Korea’s oil supplies for three years

South Korea and Iraq have signed a bilateral agreement according to which South Korea will help rebuild Iraq and …. Korea will receive enough oil to supply the entire nation for almost three years.

Main headlines from this issue

Abu Dhabi International Offset Conference 2009 reviewed

In a dramatic eve of deadline development the Romanian MoD delivered a letter to the European Defence Agency (EDA) asking for more time to consider its position on the Code of Conduct on Offsets…… The Norwegian government has subscribed to the Code of Conduct on Offsets under an Administrative Arrangement...

Waha Capital and Blenheim set up another offset investment fund

Waha Capital has been mandated to arrange and manage a financing programme to purchase military aircraft worth AED 11bn ($3bn). The deal includes the procurement of advanced Super Hercules from Lockheed Martin along with four C17 military transportation jets from Boeing.

Kuwait outlines business plan – Offset obligor committee established

Mazen Madooh, Managing Director of Kuwait’s National Offset Company (NOC), described his country’s offset business plan and announced the formation of an Offset Obligor Committee…

Joel Johnson: “Treat foreigners fairly”

Although Johnson sang the same song at the SMi conference in Turkey, he did add a new variation by declaring that offsets now are much more difficult to do — and there just may be a role for the U.S. Government.

Main headlines from this issue

Conference Report – India

The India Regional Offset Conference held in New Delhi in February was pure political theatre: entertaining, with high audience participation, and the ultimate demonstration of public accountability. DPP 2008 was neatly dissected…

India – Credit Banking

Discussing credit banking, Shashi Kant Sharma, Director General for Acquisition at the MoD, admitted that “certain issues” have not been fully answered but believes that vendors have misunderstood the new facility.

India – Technology Transfer

 If indirects represented one point of dissatisfaction for OEMs, technology transfer was a challenge for India, especially when it came to deciding their value.

India – “Mysterious DOFA” and the Chairman Who Knows Nothing

“DOFA to many of us is a rather mysterious organisation,” began David Wolf innocently. “Can you take us through the steps of obtaining pre-approval for an offset project? Secondly, how will DOFA monitor specific offset programmes and evaluate those programmes and issue credits to those obligors?”

Switzerland: Armasuisse drags its feet over Government’s insistence on policy changes

The contentious report on Switzerland's industrial participation and offset process prepared by the Swiss Audit Authority following its probe of Armasuisse, leaked last July, has so far failed to provoke the company into making the policy changes demanded of it by the government.

Main headlines from this issue

Malaysia to announce national countertrade policy, allows credit banking

Malaysia will compel its ministries to engage in the country’s countertrade process when purchasing from foreign contractors. The government will announce a national countertrade policy within the year.  Malaysia has also introduced new countertrade guidelines, effective now, that allow for the banking of offset credits…

Turkey’s new evaluation formula

Turkey has changed its evaluation score for offset proposals, with a variation in the coefficient category and preference for design projects that benefit SMEs.

Slovakia: The new offset law will have to be amended

Slovakia is considering amending its new offset policy. The policy was conceived as recently as December 2007 and became mandatory a month later...

Czech Republic doubles threshold and signals further policy review

The Czech Republic has significantly altered its priorities for offset fulfilment and is to revise its guidelines in preparation for compliance with the EDA Code of Conduct on Offsets. The threshold, presently €18m, is...

EDA: Transparency in all but name

CTO considers the reference to transparency to be insincere, paradoxical and duplicitous. We put it to a senior official that confidential information is to be submitted to the EDA by each SMS, later to be circulated amongst members, but not to be available for publication...