CTO Newsletter

Main headlines from this issue

13th report to congress on the impact of offsets in defence trade slimmed down

The thirteenth annual report to Congress on the impact of offsets in defence trade has shrunk. The US Department of Commerce’s Bureau of Industry and Security (BIS) has made substantive changes to the report’s structure, acceding to concerns raised by US prime contractors.

A patriotic reflex has occasioned two annexes for the first time to be designated Not for Public Release. The information is considered competitive and sensitive, but without it the report’s jewels are missing.

US Interagency team anticipates spring dialogue on “Limiting the adverse effects of offsets”

The US interagency team that consults with foreign nations on ‘Limiting the Adverse Effects of Offsets in Defence Procurement’ submitted its third and final report to Congress in February 2007...

Malaysia revives its preference for bilateral barters – approaches made to several governments

Malaysia will barter $70m worth of palm oil for fertiliser with North Korea and Russia. Malaysia’s Minister of Plantation Industries and Commodities has also put forward proposals for bilateral barters with countries such as Morocco, Jordan, Syria and Iran.

Main headlines from this issue

Brazil begins military and civil regeneration through industrial participation

President Luiz Inacio Lula da Silva has launched a national policy to establish Brazil’s defence industrial base and support industries in the civil sector through enhanced industrial participation. A National Defence Strategy document lays down a timetable for various ministries to prepare for legislation to “stimulate participation by civil society.”

France and Brazil agree far-reaching technology transfer terms for helicopters and submarines

Brazil has signed contracts worth $12bn to buy 50 EC-725 military transport helicopters and five submarines from France under a bilateral cooperation agreement covering the extensive transfer of French technology.

Goca chairman resigns – new board takes over

Global Offset and Countertrade Association (GOCA) Chairman Neil Rutter and several Executive Committee members have resigned, with new appointments taking effect from 1st January.

Korea is preparing new version of offset guidelines

South Korea’s offset policy will change in 2009. CTO has learned that a new version will be issued perhaps as soon as May.

Russia rejects Cambodian claim that debt is forgiven

Cheam Yeap, Chairman of the National Assembly’s Committee of Finance, Banking and Audits, assured other legislators that Russia will cut 70 percent of Cambodia's debt. The Russian Finance Ministry denied that Russia agreed to forgive any debt.

Main headlines from this issue

Special Report: UK industrial participation in serious decline – MOD blocks enquiries

The number of industrial participation agreements implemented in the UK is in progressive decline. At the current rate it will be terminal within a few years. This is evidence, it seems, of restrictive budget cuts for defence acquisitions and a lack of political will in implementing an IP policy, even during a worsening recession and with unemployment in the defence industry on the rise...

Poland signs a blizzard of offset contracts as the year closes

Poland’s Ministry of Economy signed three offset contracts on December 10, 2008. By the end of the month, the country will have added offset contracts worth ZL1bn ($331m), representing an obligation of 100 percent of supply contract value in each case...

Recession bites into Turkey’s offset-generated defence exports

Turkish defence companies, which rely heavily on offsets for exporting their already limited products, will face a 25 percent decrease in Turkey’s overall exports because of the global financial crisis, say Turkish defence industry sources. This is despite the Turkish currency’s 25 percent decline in value against the dollar since the beginning of September...

Bulgarian industrialists complain “Offset programs are just a delusion” – demand protectionist policy

Chief executives of several Bulgarian defence sector companies have complained that the public procurement procedures of the Bulgarian Defence Ministry were formulated in a way that excludes Bulgarian firms from participating...

Main headlines from this issue

Israel lowers civil offset quota and allocates multipliers – policy “A victory for employment and investment”

Unless it can negotiate a new Government Procurement Agreement (GPA), 2009 will be the last year that Israel may demand industrial cooperation for civil procurements. Israel must also lower its 28 percent quota to just 20 percent with effect from January 1, 2009 for civil acquisitions made from countries that are signatories to the WTO agreement. Civil acquisitions from companies in countries which are not signatories to the GPA will continue at the 35 percent level...

Chinese company to discharge offsets in Israel

The Haifa Port Company, which tried its best to resist the Industrial Cooperation Authority’s imposition of an industrial cooperation commitment in the company’s tender documents for dockside cranes and equipment, has signed the winner - the Chinese company ZMPC - to a 35 percent industrial cooperation agreement...

Poland: Thales offset contract suspended as shipyard faces insolvency

Poland’s Deputy Defence Minister, Zenon Kosiniak-Kamysz, disclosed the shipyard's financial problems have caused the Defence Ministry to delay signing a contract with Thales Nederland for an electronic combat system for a corvette. The contract was understood to be for more than Z600m ($201m). The decision places in jeopardy construction of the first warship in free Poland, estimated to cost Z1.2bn...

Sri Lanka: Tea Association rejects government barter proposal

The Sri Lankan government has spoken of trying to arrange “some kind of barter deal” with major buying countries for its tea, but the Colombo Tea Traders Association (CTTA) warned that such an approach is an outdated concept. \The avenue of barter trade between friendly countries is not available anymore\" the CTTA said in a statement...

Main headlines from this issue

Australia raises threshold – Industry capability programme working well

Australia has raised its threshold for industrial participation. All tender responses to Australian defence equipment RfP’s worth more than A$50m ($34m) should now include plans that maximise opportunities for local industry where cost-effective. The requirement will be particularly important when adapting existing products to meet Australia’s requirements since local firms will have to provide through-life support. The previous threshold was A$10m but was not a fixed entry level...

New Zealand: MoD must campaign for foreign primes to engage with domestic suppliers

New Zealand’s Defence Industry Committee will be asked to confirm annually that the MoD and its agent, the Industry Capability Network (ICN), have appropriately promoted domestic suppliers’ capabilities to prospective overseas prime contractors...

India: Bell withdraws, citing an impossible offset requirement

Bell Helicopters has withdrawn its bid from the competition for India’s 197 light utility helicopters, citing expected to be implemented under an offset programme, the Ambassador noted...

Offset conference in UAE boycotted

The conference organised by IQPC on Defence Industry Partnerships in the Middle East flopped badly when speakers and delegates apparently boycotted the event. We hear that speakers who had taken exception when asked to pay attendance fees rang delegates to express their displeasure...

Main headlines from this issue

Special Issue: EDA announces code of conduct on offsets “This is a breakthrough decision”

100 PERCENT CAP COVERS NON-SUBSCRIBING MEMBER STATES, INCLUDING THIRD COUNTRIES

The Steering Board of the European Defence Agency (EDA) has agreed a voluntary code of conduct on offsets. The Code is intended to ensure greater transparency, help to shape the European Defence Technological and Industrial Base (EDTIB), and reduce reliance on offsets. Described as “a first step in dealing with a very complex issue,” the EDA’s goal is ultimately the creation of market conditions in which offsets will no longer be needed...

South Korea: DAPA to consider awarding credits for nondefence offsets

South Korea's Defence Acquisition Program Administration (DAPA) may award credits for non-defence products made by registered SMEs. The government is also considering foreign investments made “in the national interest” as another method of indirect offset implementation...

Consensus winds down its offset activities – staff are cut back and re-deployed

If you were ever planning to weep for the masters of the universe, then this would be the moment. The global financial crisis and the shortage of liquidity are taking its toll of the offset service sector. The first company to fall victim is Consensus Business Group (CBG). There are other major players rumoured to be in difficulty...

ECCO or ECHO? An intriguing initiative to involve the global offset community

Offset executives at Areva, the French specialist energy conglomerate, are backing the launch of a European industry group, named ECCO, for the global offset community. An email to several corporations invited comments and suggestions, and gave notice of a meeting to be held at Areva’s premises in Paris on December 17...

Main headlines from this issue

India: “DPP 2008 has been misread” – New light thrown on interpretations

The offset credit banking provisions sanctioned under India's Defence Procurement Procedure 2008 (DPP 2008) have not been well received and are seen as too restrictive, admitted Maj. Gen. Mrinal Suman during an address to a Defence Manufacturers Association (DMA) seminar in London. Many vendors have misread them, he claimed...

Arguments over basic requirements of India’s civil offset policy to be resolved

Inter-ministerial consultations over the terms of India’s future national policy on civil offset have stalled over differences of opinion on at least three crucial features. The policy is intended to cover the entire commercial sector...

British offset and industrial participation associations to merge under joint patronage of DMA and SBAC

The British Industry Offset Group (BIOG) and the Industrial Participation Forum (IP Forum) are planning to merge into a single new industry body that would address all offset and industrial participation matters under the joint management of the Defence Manufacturers Association (DMA) and the Society of British Aerospace Companies (SBAC)...

Brazil: Three remaining contenders for fighters are down to the wire with offsets

Three of the six bidders for Brazil’s F-X2 fighter competition have been eliminated and the focus has now shifted to the offset proposals of the remaining competitors. The Eurofighter Typhoon, Lockheed Martin’s F- 16BR, and Sukhoi’s Su-35 have lost out; Boeing’s F/A- 18E/F Super Hornet, Dassault’s Rafale, and Saab’s Gripen remain in the running...

Main headlines from this issue

French Ambassador expresses concerns at India’s offset procedures

Jerome Bonnafont, the French Ambassador to India, told a Confederation of Indian Industry (CII) seminar that India’s offset policy is too complex to implement, and called on the government to review it...

Romania positive on offsets as new development phase begins

Romania’s Minister of Defence, Teodor Melescanu, told an offset conference at Bucharest’s Parliament House in September that Romania is about to enter a new phase for the development of the armed forces, with offset as an absolutely necessary tool for the expansion of the country’s economy. He underlined the important role offset plays in defence acquisitions by obtaining state of the art technologies and foreign investments...

“Southeast Asia wants the whole gamut of extremely complex offset packages”

Perhaps he was having an off day, or perhaps he was making it up as he went along, but Dr. Richard Blitzinger, Senior Fellow at Singapore’s Rajaratnam School of International Studies, told delegates to a Defence Finance conference in London that Southeast Asian countries want the whole gamut of extremely complex offset packages, and require a great deal more innovation than before. He was referring to Thailand, Malaysia, Singapore and Indonesia...

Publication of the ‘Offset Service Providers Directory’ service providers directory’ is suspended

The global financial crisis has taken its toll of several offset service providers, with some asking to be removed from the CTO’s Offset Service Provider Directory for 2009/10. Inclusion in the directory is subject to payment...

Main headlines from this issue

Special Report: EDA workshop on offset code of conduct splits into two main camps

European Defence Association (EDA) workshop that convened in Brussels this month to discuss the draft Code of Conduct on offsets amongst member states split into two main camps, with Spain surprising those present by taking a position contrary to expectations. It was a closed meeting, and press briefings were not permitted...

Taiwan: Defence companies may now discharge obligations with entirely civil projects

Taiwan is increasingly looking to countries other than America to provide new technologies, and now accepts civil offset solutions for defence acquisitions. Jack Tang, the Industrial Cooperation Programme (ICP) Program Director, told CTO the ICP is expected to recommend an increase in indirect offset projects to support local industries...

US-Taiwan business council petitions USTR to relax on Taiwan

The US-Taiwan Business Council has written to Jennifer Choe Groves, the Director for Intellectual Property and Innovation for the Office of the US Trade Representative (USTR), supporting the removal of Taiwan from the USTR Special 301 Watch List. The Special 301 annual review examines in detail the adequacy and effectiveness of intellectual property rights protection in 87 countries and classifies countries accordingly...

South Korea: DAPA presses for Co-Development and export licenses

Defence Administration Program Administration (DAPA) Deputy Chief, Kim Jong-min, called on the head of France’s General Delegation for Ordnance to discuss ways to improve the countries' cooperative relationship and to request that France simplify its export authorization process to help Korea export to third parties the defence goods it builds with French technology, DAPA said in a press release...

Main headlines from this issue

Russia surrenders to India’s offset therapy

The eighth meeting of the India-Russia working group on shipbuilding, aviation and land systems was held last month and discussed issues relating to offset arrangements in various armament deals contracted between the two countries. Indian negotiators expressed concern that Russia has so far declined to engage with the concept of offset even though Russian arms sales to India have amounted to more than $5bn over the past five years.

India: Government to “Strike a balance” as union opposition mounts against private sector defence production

Predictably, India’s trades unions are threatening to frustrate the MoD’s decision to lift restraints on India’s private sector and allow private companies to compete for work with Defence Public Sector Undertakings (DPSUs).

Poland to agree alternative projects with obligors

Poland’s Economy Ministry has reported to the Council of Ministers that offset projects implemented in 2007 were worth $700m. Most of them were attributable to Lockheed Martin.

Lockheed secures global servicing facility with offset potential

Lockheed Martin has awarded MAG Maintenance Technologies a broad-reaching purchasing agreement that covers global service and support of manufacturing equipment at major Lockheed locations around the world.

Main headlines from this issue

“MAN Ferrostaal bribed Thabo Mbeki, Jacob Zuma, and the ANC” Newspaper goes for the kill in “Offset con”

President Thabo Mbeki is threatening legal action against South Africa’s Sunday Times after the newspaper published agonizingly detailed allegations of corruption concerning the German conglomerate MAN Ferrostaal and the country's submarine contract. The newspaper claims that there has been what it calls “an offset con.\...

India: “DPP 2008 fails to clarify technology policy

Deba R. Mohanty, Senior Fellow for Security Studies at the Observer Research Foundation, a New Delhi-based think tank, said Indian industry would remain backward in gaining technology unless the government clearly spells out its policy on technology transfer. \I don't think the latest DPP has thrown clarity on this\" he said...

Saab’s ‘Improved’ offset offer to Norway is 20% lower than before

Saab's apparently generous offer to Norway in connection with its Gripen project might not be as big-hearted as it appears. \TodayI can state that Saab and the Norwegian business community have identified collaboration projects to such an extent that we can now increase our commitment regarding industrial collaboration projects to at least 180 percent [by way] of the offset value over a period of ten to fifteen years\" promised Ake Svensson CEO and President of Saab. \"Our discussions will continue.\"...

Gripen completes Hungarian obligations early and to mutual satisfaction

Hungary’s Ministry of Economy and Transport has signed off the final offset achievements submitted by the Saab/Gripen team. The Gripen obligation in Hungary has now been completed. The total value of the offsets delivered is 7419m SEK ($45.5m), a company statement declared...

Main headlines from this issue

Business plan brings sweeping changes to Kuwait’s national offset company

Kuwait’s National Offset Company (NOC) is refreshing its code of practice. The business plan is calculated to have a positive influence on offset programs, particularly the civil infrastructure sector. Special attention will be given to technology transfer and the creation of job opportunities, training, and educational services for Kuwaiti citizens. The changes envisage the company playing a much larger role in the country’s economy...

DPP 2008 is revolutionary for India, A missed opportunity for contractors

Defence Minister A. K. Antony was clearly in his element. Announcing the release of the Defence Procurement Procedure document for 2008 (DPP 2008) on August 1, he practically declared a revolution. “We are doing away with the licence raj,” he proclaimed...

India: Trade unions unite to protect state sector against RURs

The MoD is facing stiff resistance from a number of significant trades unions to plans to allow private sector participation in defence programs. The unions are supported by the powerful Indian National Trade Union Congress and are determined to protect state industries.

Israel helps Kazakhstan develop and indigenous defence industry

With the assistance of Israeli defence companies Israel Military Industries (IMI), Soltam, and Elbit, Kazakhstan’s Ministry of Defence is developing an indigenous defence industry to manufacture three modern artillery systems at its Petropavlovsk PZTM industrial complex to equip the Kazakh army.