CTO Newsletter

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United Kingdom: Social values weighting “haphazard and uncoordinated”

Despite the release of two new policy documents this month, the United Kingdom’s industrial participation policy has made limited progress, industry experts inform CTO. The “social values” criterion in particular, a requirement that runs parallel to IPP, has been applied inconsistently across tenders and sometimes deviates entirely from the policy’s original purpose. Industry’s confusion persists as the Ministry of Defence prepares to launch its first pilot programme under the policy.

Macron approves 100 percent ToT for AMCA engine

French President Emmanuel Macron has approved Safran’s offer to jointly design, develop, test, manufacture, and certify an engine for India’s twin-engine advanced multi-role combat aircraft (AMCA) with 100 percent transfer of technology. The process is expected to take ten years and the cost is “pretty much in the ballpark of” Safran’s competitors, explains Safran officials.

Safran pledges to “revolutionise” helicopter engine production in India

Safran is offering India its first-ever in-country helicopter engine production facility, as well as 100-percent transfer of technology linked to the Shakti engine, a mainstay of India’s helicopters across all services.

France to expand obligations for Indian Rafales

Seven years after India’s controversial purchase of 36 Rafale aircraft from Dassault Aviation, the Defence Acquisition Council (DAC) has approved the purchase of an additional 26 Rafale-M fighters for the Indian Navy. Dassault declined to comment on whether the deal would create additional offset obligations for the company, but its partner Safran, responsible for the Rafale’s engines and electronics, has confirmed that it will expand its own existing obligations.

Australia to export Boxer 8x8s back to Germany

Five years after Rheinmetall first agreed to transfer technology to Australia for a Boxer 8x8s armoured fighting vehicle (AFV), Australia is preparing to export over 100 locally-produced versions of the vehicle back to Germany, in an arrangement akin to buyback.

General Electric partners with Toshiba in bid for offshore wind power

General Electric has confirmed a new partnership with Toshiba to develop offshore wind farms in Japan. The move would support Kishida’s government’s goal to boost the domestic production of wind turbines by 2026, according to a company statement.

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South Korea reaps USD 772m in offset benefits

South Korea oversaw 42 offset projects worth USD771.8m in the last five years, according to a new report by DAPA. Of the 46 Korean offset beneficiaries, SMEs received the lion’s share of value – but next-generation technologies often remain elusive.

Saab and Dassault wrangle over offset in Colombian jet competition

Colombian President Gustavo Petro’s state visit to France has sparked commotion among contractors vying for the country’s decade-old requirement for 16 fighter aircraft. France’s Dassault Aviation and Sweden’s Saab have refined their offers for industrial cooperation while America’s Lockheed Martin has drawn attention to its cost advantages.

Airbus exports first Chinese-made A321neo to Europe

Airbus has confirmed that the A321neo aircraft, assembled at the Tianjin Final Assembly Line (FAL) since last year, will be exported and delivered to Hungary’s Wizz Air. The deal marks the first time a Chinese-assembled A321neo will be exported to a European client.

Czech Republic and Ukraine to co-produce munitions, armoured vehicles

The Czech Republic and Ukraine have finalised a memorandum of understanding to jointly research and manufacture small arms, ammunition, and armoured vehicles. The news comes as Ukroboronprom, Ukraine’s defence-industrial vehicle, undergoes a complete overhaul.

Germany to manufacture F-35 fuselages, sensor systems

Germany is set to join the F-35 supply chain with the manufacture of centre fuselages, wing skins, and sensor systems in-country. Lockheed Martin and Northrop Grumman have partnered with Rheinmetall to build a plant in Weeze, western Germany, in a move which will support supply chain gaps dating back to 2019, according to aviation experts.

Qatar eyes C2 tech in quest for American drones

Barzan Holdings, Qatar’s defence-industrial consolidation vehicle, has reportedly approved “technical and administrative arrangements” to facilitate the transfer of advanced electronic warfare (EW) technologies from at least two US companies.

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Highlights: GICA spring conference

The Global Industrial Cooperation Association (GICA) held its spring conference in Oslo, Norway, on 14–15 June. Nearly 260 delegates from 30 countries were in attendance, the largest turnout since before the pandemic emerged in 2020. CTO provides the highlights.

Malaysia renews focus on design, systems integration

Malaysia’s new industrial cooperation guidelines will renew its emphasis on technology-sharing, according to Dr Sharoul Jambari, CEO of Malaysia’s offset authority, the Technology Depository Agency (TDA). The agency is now helping local industry to better absorb these opportunities.

Swiss offset law promises “certainty and transparency”

Following several government reviews, armasuisse is preparing to ratify its offset policy into law. Speaking with CTO, Simon Hufschmid, Head of International Law & Compliance at armasuisse, explains why the government has taken this step.

India, US break deadlock over predator drones

India has finalised a USD3bn contract to acquire 31 MQ-9B (Predator B) drones from General Atomics with transfer of technology. The Indian Ministry of Defence (MoD) approved the acquisition under a government-to-government framework on 15 June, one week before Prime Minister Narendra Modi’s state visit to the United States.

Ukraine in talks with European firms, insists on co-production

Ukraine is in talks with companies in France, Germany, Italy, and Eastern Europe to manufacture critical platforms in Ukraine as the country continues to fend off the Russian invasion, according to Sergiy Boyev, Deputy Minister for Strategic Industries in Ukraine.

President Macron: EU should avoid “what’s on the shelves”

French President Emmanuel Macron is urging European nations to reduce their dependence on US-made weapons. The president’s comments come as the European Union rolls out new defence funds and select European countries envisage re-adopting offset-like policies.

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Philippines’ PITC under fire for mismanagement

The Philippines’ Commission on Audit (COA) has raised concerns that the Philippine International Trading Corporation (PITC), the agency responsible for managing the country’s offset obligations, is straining to perform its tasks and draining government funding. the COA has advised the government to reassess the PITC’s purpose “as a going concern” and to consider repurposing or reforming the Countertrade Department.

Philippine submarines hinge on technology transfer

Philippine President Ferdinand Marcos Jr. has restated the country’s plans to acquire diesel-powered submarines – on the condition that they are developed locally. The two leading competitors, Naval Group and Hanwha Ocean (formerly DSME), have both prepared “complete offset packages” with promises of technology transfer.

General Electric “breaks all the china” to transfer engine tech to India

General Electric proposal to co-manufacture F414 engines with the Defence Research and Development Organisation (DRDO) is making headway. It is is now in “final discussions” with Hindustan Aeronautics Limited (HAL) to jointly manufacture the engines not just for the Tejas MK-II light combat aircraft (LCA).

AUKUS pushes United States to revise ITAR regulations

Senior US officials have outlined plans to “clear a path” for technology transfer under AUKUS, the trilateral security pact between the United States, the United Kingdom, and Australia. Speaking to the US Foreign Affairs Committee on 30 May, assistant secretaries from the US Department of Defense (DoD) described a three-pronged approach to overcoming bureaucratic hurdles and export controls.

White House warns against Iran-Russia drone coproduction

The White House has released new details on Russia’s cooperation with Iran for the production of military drones, as part of declassified intelligence aimed at increasing sanctions.

US DoD prepares to adopt Buy American Amendments

The US Department of Defense (DoD) is requesting defence-specific exemptions to the new local content requirements that have been implemented by the Federal Acquisition Regulatory (FAR) Council since October 2022.

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Romania prepares new industry strategy amid bureaucratic challenges

As Romania ramps up defence spending and top officials call for stricter localisation, practitioners have expressed concern about bureaucratic hurdles and fractured oversight. Octavian Bujor Raclaru, head of the defence practice at Băncilă, Diaconu și Asociații SPRL, warns against Romania’s “exceedingly low” threshold and uncoordinated management.

Iran and Indonesia sign off on countertrade scheme

Following seven rounds of talks, Indonesia and Iran have signed a Preferential Trade Agreement (PTA) which includes a countertrade scheme for the exchange of goods and services. The countertrade scheme aims to help Iran circumvent US-led sanctions as well as promote Indonesian commodities on international markets.

Japan and UAE sign first-ever defence industry agreement

Japan and the UAE have signed an agreement to support the export of defence equipment with transfer of technology. The cooperation agreement establishes a legal framework for the transfer of defence equipment and technology between nations – including through joint R&D and co-production – and will regulate "any subsequent transfer to a third party or any extra-purpose use."

Paramount Group offers Greece first-ever indigenous loitering munition

Hellenic Defence Systems (EAS), the state-owned defence company, and Paramount Industries Greece, the local subsidiary of South Africa’s Paramount Group, have signed a strategic partnership for the local production of next generation, long-range loitering munitions. The loitering munition system, known as IRIX, would be the first to be manufactured in Greece.

Czech Republic confirms 40 percent offset for CV90s

The Czech Republic has confirmed 40 percent industrial participation for the purchase of 246 CV90 armoured combat vehicles from BAE Systems Hägglunds, Defence Minister Jana Cernochova told reporters on 24 May. The announcement came just as the Czech government approved CZK22bn (EUR2.2bn) for the procurement.

Indra to supply Indian radars with tech transfer

Spain’s Indra Sistemas is making progress on its offset obligations linked to a INR12bn (USD145m) contract for 23 naval radar systems. The company has partnered with Tata Power SED, a subsidiary of Tata Advanced Systems Ltd (TASL), to install Spanish-designed Lanza 3D radars onto the Indian Navy’s guided-missile destroyers (DDG) with transfer of technology.

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German MPs call for reinstatement of offset

Top officials in in AfD, Germany’s most prominent right-wing political party, have submitted an application to the German Federal Government (Bundesregierung) requesting the introduction of mandatory offsets in defence imports. The party is urging the German government to disregard Defence Directive 2009/91/EC to better promote Germany’s defence capabilities.

Russian suppliers make breakthrough in New Delhi

Russia is leaning offsets to retain its presence in the Indian defence market. The two countries have agreed to a new plan for Russian suppliers to localise 50 to 60 percent of military equipment and spare parts production.

Iran inches towards parts production of Sukhoi-35 jets

Iran is preparing to manufacture parts of the Sukhoi Su-35 aircraft under license from Russia, according to Iranian state media. The comments come one month after Iran is rumoured to have taken receipt of Sukhoi aircrafts at its Air Force base in Mehrabad.

Poland secures local production for CAMM systems

Poland has finalised a deal with the British wing of MBDA to co-produce CAMM missiles and iLaunchers in-country. Under the GBP1.9bn (USD2.4bn) contract, 44 iLaunchers and “several hundred” CAMM missiles will be manufactured domestically by Polish armaments group, Polska Grupa Zbrojeniowa (PGZ).

Poland requests co-production on HIMARS

Poland is in talks with American giant Lockheed Martin for a follow-up order for 484 HIMARS rocket launchers worth up to USD10bn. The negotiations now reportedly focus on how Poland will co-produce the system for domestic use and export to European allies.

FMS and offset contracts vulnerable to exploitation, argues US Air Force Judge Advocate

The ambiguous relationship between Foreign Military Sales (FMS) and offset agreements may leave the door open to financial malpractice, warns a senior officer in the US Air Force Judge Advocate General Corps.

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Lithuania calls for “elegant” offset strategy

The Baltics have joined the call to revive offset transactions in the European Union. During this year’s Baltic Miltech Summit, the biennial conference on Eastern European defence-industry development, Lithuania’s political leaders described offset as a “key tool” for national defence despite restrictive EU legislation.

UK parliament: “It’s no good getting the building work done elsewhere”

British officials have raised concerns that OEMs’ offset activities abroad are rerouting construction work away from British suppliers. The concerns first emerged following reports in early April that components for the HMS Active, a Type 31 frigate under construction for the Royal Navy, would be manufactured by Polska Grupa Zbrojeniowa (PGZ) in Poland, despite the British government describing the purchase as a “renaissance” for UK industry.

Indian-Dutch partnership for semiconductors stalls over technology transfer

Vedanta-Foxconn, the Indian–Taiwanese consortium vying for semiconductor contracts in New Delhi, has run into disagreements with its foreign technology partner, STMicroelectronics. The negotiations throw a wrench in Vedanta-Foxconn’s plans to secure government funding.

Australia: Defence Strategic Review glosses over industry participation

The public version of Australia’s Defence Strategic Review (DSR), released on 26 April, provided very little by way of industrial strategy. The omission is all the more surprising given that industrial participation is one of the three “priorities” the DSR identifies for Australia’s modernisation, alongside the Guided Weapons and Explosive Ordinance (GWEO) Enterprise and better bureaucratic processes.

Saab and Embraer team up for exports to Europe, Latin America

Saab and Embraer have signed a new agreement to cooperate in business development and engineering opportunities on two fronts: Embraer’s C-390 Millennium efforts in Europe, and Saab’s flagship Gripen fighter in Latin America. The two parties announced their partnership during the LAAD Defence & Security exhibition (11–14 April) in Rio de Janeiro.

Edge Group launches presence in South America

EDGE Group, the UAE’s defence-industrial vehicle, is setting its sights on South America. The conglomerate came out in force during the LAAD Defence and Security Exhibition (11–14 April) in Rio de Janeiro, Brazil, announcing not only the creation of a regional office but also four collaboration agreements with local suppliers.

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Switzerland prepares to pass offset into law

Switzerland is aiming to complete a draft consultation for its potential offset law by the end of June, an official from the Federal Office of Defence Procurement (armassuisse) has informed CTO. The new ordinance will likely come into force in 2026.

EU threatens to withdraw defence funding over industry participation

The European Commission is threatening to withdraw its €500m proposal to fund short-term defence procurements over concerns that the purchases will sideline European suppliers in favour of “transatlantic partners.” Thierry Breton, the internal market commissioner, stated this month that the EC reserves the right to withdraw its support for EDIRPA at any stage if it runs contrary to the interests of local defence suppliers.

PwC study finds Eurofighter will inject €1.7bn into Spanish economy

Auditing giant PwC has released new findings on the Eurofighter’s industrial benefits to Spain. The firm was commissioned by Airbus and ITO Aero to trawl through six months of data between October 2022 and March 2023, focusing on the latest-generation Eurofighter’s manufacturing maintenance phases.

Islamic Development Bank prepares region-wide countertrade system

The Islamic Development Bank (IsDB), the Muslim world’s largest multilateral finance institution, is launching a countertrade system for its 57 member states to exchange civil goods. The “Smart Countertrade System for the Organisation of Islamic Cooperation” will build on e-contract technology and a “smart voucher” system to facilitate countertrade deals, IsDB said in a statement.

Finland and Sweden to jointly procure assault rifles

Finland and Sweden have entered a framework agreement to jointly procure NATO-standard infantry weapons from Sako, the Finnish arms manufacturer. It is one of many recent bilateral initiatives between the two countries to coordinate training, development and ammunition procurement.

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Netherlands: Industrial participation is “essential instrument” for a safe Europe

The Netherlands is unabashed in its support for industrial participation and its frustration with the European regulations restraining it. At the DKF’s spring conference, nearly 80 delegates heard from the Dutch government on their views of offset – and how it may coexist with European efforts towards an “open” strategic autonomy.

DSEI Japan shines spotlight on industrial cooperation

This year’s DSEI Japan placed a novel emphasis on Japanese industrial growth. The exhibition came three months after Japan published a new collection of national security documents which overhauled the country’s approach to national security and defence production.

GCAP makes headway on sensors, engines

The UK, Japan and Italy joined forces to showcase the Global Combat Air Programme (GCAP) at DSEI Japan on 15–17 March, marking the partners’ first-ever joint exhibit since GCAP was announced in December 2022. The team is ramping up to support the start of full development in 2025.

Blenheim fights court dismissal, denounces conflict of law on offsets

Is a foreign government’s procurement of goods for a military purpose through a contract with a US company defined as commercial activity within the meaning of the Foreign Sovereign Immunities Act? That is the question raised by a petition to the US Supreme Court in response to a recent ruling by the Fourth Circuit that a 2016 offset transaction with South Korea is immune to litigation.

UAE prepares new training initiative “EGAP”

Tawazun is preparing to formally launch its new education and training initiative, the Emirati Global Acceleration Program (EGAP), by the end of the year. Dr Al Marzooqi, Tawazun’s executive director of collaborations and skills development, speaks to CTO about the programme's objectives.

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Malaysia awards one of its final countertrade tenders

Malaysia has awarded its first-ever open international tender for military aircraft to Korea Aerospace Industries (KAI), in what we are told will be one of Malaysia’s last-ever defence contracts to include countertrade requirements. From this year onwards, the new ICP policy [3rd edition] will not have countertrade requirements,” explains a senior manager at the Technological Depository Agency (TDA).

UAE and Dassault haggle over Rafale offsets

Dassault Aviation’s €14bn (c. US$15bn) contract to supply 80 Rafales to the UAE is stalling over offset negotiations. The French prime has reportedly made the unusual request to reroute its obligations to India, a move one expert says could work if the UAE receives higher-value local component production or systems assembly.

TKMS rejoins race for Indian submarines

Nearly two years after it had dropped out, Germany's ThyssenKrupp Marine Systems (TKMS) has reentered the race for Project-75 India (P75I), the programme to expand India’s submarine fleet by adding six attack submarines. The company put in a $52bn offer during German Chancellor Olaf Scholz’s visit to India on 25–26 February.

AUKUS: Australia wrestles with tech transfer, pressures UK to “Buy Australian”

AUKUS, the trilateral alliance to manufacture Australia’s first-ever nuclear-powered submarines, has yet to overcome its biggest hurdle: transfer of nuclear propulsion technology. The programme came under intense scrutiny on 13 March, when officials issued the first major updates since AUKUS’s announcement in September 2021.

Australia: Primes home in on guided weapons requirement

Australia’s ambition to create a domestic ecosystem for munitions took centre stage during Avalon 2023, Australia’s biennial international air show. BAE Systems, MBDA, Raytheon, and Lockheed Martin used the occasion to showcase their latest initiatives under the Guided Weapons Ordnance Enterprise (GWEO)

Boeing joins Airbus bid for British helicopters

Airbus has selected Boeing as its partner to supply the United Kingdom with a British-produced H175M, a medium-utility helicopter. Despite partnering with an American manufacturer, Airbus has assured CTO that it will keep the majority of production and assembly in-country.

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Tawazun embraces ICV requirement, but leaves industry uncertain

The UAE’s in-country value (ICV) programme has made its way to the defence sector. One year after Tawazun joined the programme, ICV requirements have emerged in public conversation and offset negotiations. But the dust has not settled. During IDEX 2023, four defence contractors described very different experiences with ICV, with some still confused about how it will interact with the existing offset guidelines.

India still open to Russian suppliers, the more “accommodating” offset partner

Rosoboronexport, Russia’s sole state arms exporter, came out in force at Aero India (13–17 February). The conglomerate had a clear strategy: generous offset packages in exchange for the Indian government’s continued consideration. After all, Russia is almost always more flexible that its western counterparts in supporting indigenisation, says Amit Cowshish, former financial advisor to the Ministry of Defence.

Rolls-Royce offers to co-create engine IP with India

Rolls-Royce is offering to co-produce new engine technology for India’s advanced medium fighter (AMCA), in an offer that sets it apart from its competitors, Safran and General Electric, which have both opted for the more traditional route of transferring existing technology.

Despite Russian strikes, Ukraine and UK in talks for weapons co-development

Executives from BAE Systems travelled to Ukraine this month to discuss the possibility of manufacturing weaponry and military vehicles under licence in the war-torn country. The move puzzles some analysts, who are concerned that Ukraine will be unable to protect is production lines and personnel from Russian strikes.

HAL challenges KAI over Egyptian LCAs

Hindustan Aeronautics Limited has committed to a “complete transfer of technology” and local manufacturing if it is selected to supply Egypt with 20 Tejas light combat aircraft (LCA). “We are willing the build the Tejas ecosystem for them, right from raw materials to the final production,” the company said at Aero India.

Fincantieri in final race for Greek corvettes

Fincantieri, one of the two final contenders in Greece’s €1.6bn contract for four corvettes, has teamed up with Leonardo, MBDA Italia, and Elettronica to sign MoUs with eight Hellenic suppliers. The agreements were signed on 12 February in Elefsis, where Fincantieri’s main partner, Onex Elefsis Shipyards, is based.

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Spain closes industrial cooperation directorate

Spain has shut down the Directorate for Industrial Cooperation (DICOIN), the specialised unit responsible for advising the Ministry of Defence (MINISDEF) on industrial cooperation. Sources close to MINISDEF have advised CTO that the closure forms part of a broader restructuring in industrial policy.

GCAP: Sweden wants in

Sweden is requesting access to the Global Combat Air Programme (GCAP), the intercontinental alliance between Italy, Britain, and Japan to develop a sixth-generation fighter. Within two months of the programme’s announcement, Sweden met with two of the three partners to showcase Swedish industry and ink parallel deals.

Rheinmetall negotiates HIMARS production in Germany

As European nations purchase HIMARS multiple rocket launchers en masse, German giant Rheinmetall is inviting Lockheed Martin to shift production into the EU bloc. The move would not only relieve Lockheed Martin’s backlogs, but may also pave the way for further sales in European states seeking greater self-sufficiency and shorter delivery times.

South Korea loses Norwegian tanks to Germany

Krauss-Maffei Wegmann (KMW) has prevailed over Hyundai Rotem in the bid to supply Norway with 54 Leopard 2A7 main battle tanks for NOK19.7bn (US$1.6bn). Hyundai lost out despite a showy offset package which would have seen Norway build Black Panther MBTs in-country.

Greece requests local content for potential C-390 contract

Brazilian aerospace manufacturer Embraer met with the Hellenic Air Force on 28 January to discuss the possibility of Greece procuring the C-390 Millennium as a replacement for its ageing C-130Hs. The Hellenic Manufacturers of Defence Material Association (SEKPY) is already moving to request local content on the potential contract

Argentina negotiates armoured vehicles with Brazil, Iveco

Brazil has agreed to help Argentina purchase 156 6x6 Guarani armoured personnel carriers (APCs) from Iveco Defence Vehicles, the Italian multinational manufacturer. The Brazilian Army and Iveco have been jointly developing and exporting the vehicles for nearly 15 years and have agreed to relocate component production to Argentina under a potential export contract.