CTO Newsletter

Main headlines from this issue

Saudi Arabia: headquarters requirement in doubt

Contrary to formal policy, OEMs looking to operate in Saudi Arabia do not need to establish local entities to secure contracts, local advisors tell CTO.

UK social values requirement in flux

Two years after it was first unveiled, the UK’s “social values” provision featured in nearly every British-themed panel at this year’s edition of DSEI [Defence & Security Equipment International 2023]. When probed on the topic, however, no industry representative could explain the provision’s scope or implementation.

GCAP yet to untangle workshare

The Global Combat Air Programme’s (GCAP) “biggest advantage” – workshare distribution – is precisely its “biggest challenge,” says Takamasa Iba, aircraft division director at the Acquisition, Technology and Logistics Agency (ATLA). The programme’s three partners – Leonardo, BAE Systems, and Mitsubishi Heavy Industries – have not yet finalised cost-sharing arrangements or the scope for modifications.

US and Ukraine agree to joint development, joint production

Ukraine and the United States have agreed to jointly produce weapons and co-develop new technologies. President Volodymyr Zelenskyy hopes to focus on the local production of air defence capabilities and job creation.

India requests 60 percent local content for Su-30 jets

Hindustan Aeronautics Limited (HAL) has confirmed it is prepared to manufacture and assemble over 60 percent of Sukhoi-30 jets in-country if an order is finalised with Russia’s Sukhoi Aviation Corporation (SAC). In addition to the aircraft, HAL would also develop related ground systems at its facility in Nashik, Maharashtra.

Vietnam: experts call for reforms in tech transfer policies

Vietnamese officials are debating new regulations which would relax R&D restrictions and incentivise technology transfer. Despite growing offers for technology transfer, local suppliers are struggling to keep pace with collaboration and are stifled by excessive red tape, according to experts.

Main headlines from this issue

Korea releases component list with “offset potential”

DAPA, the agency responsible for South Korea’s military procurements, has published this year’s “prospective list” of technologies it would like OEMs to purchase from Korean suppliers as a form of offset.

Japan: OEMs nudged towards local partners

Japan may not yet be ready to systematise industrial participation, but defence contractors are still expected to partner with local suppliers to secure contracts in the country, industry experts tell CTO.

Korea offers to buy back Polish robotics

Defense Korea partnered with Polish state-owned research institute Łukasiewicz–PIAP to showcase robotics technology and optical nano-sensor explosive detectors at MSPO 2023 (5–8 September).

Hanwha pitches production centre for Canadian submarines

Hanwha Ocean has announced that it will build its first submarine production centres in North America as part of its efforts to secure a contract for up to 12 Canadian submarines, including MRO.

Raytheon rolls out offset for first-ever export of LTAMDS

Poland’s order for 12 Lower Tier Air and Missile Defence Sensors (LTAMDS) will see Raytheon partner with five Polish industry partners to “components and subassemblies,” a spokesperson tells CTO. The collaboration will build on the industrial participation projects from Phase I of the WISŁA programme.

Thailand to review countertrade policy

Thailand’s new defence minister, Sutin Klungsang, intends to “reform” the country’s arms procurement policy to make countertrade policies more “flexible,” the official told Thai outlets. Any weapons procurement plan will have to be accompanied by a deal to import agricultural products from Thailand.

Main headlines from this issue

“The misunderstood policy” Retired executive comes to the defence of offset

Why would offsets be any more taboo than other preferential economic policies? That is the question Dr Alan Colegrove, retired business development executive formerly with Boeing, Northrop Grumman, and Textron, explores in his most recent book, Offsets on the Offensive.

Babcock and PGZ announce joint venture for Miecznik frigates

Poland is one step closer to securing technology for its three Miecznik (Swordfish) multi-mission frigates. Babcock International has now signed a framework agreement with its Polish partner PGZ to launch a joint venture to “establish sovereign capability in Poland,” a spokesperson informed CTO.

Raytheon and Lockheed Martin finalise offset for Phase II of WISŁA programme

Raytheon and Lockheed Martin signed a PLN1bn (USD241.4m) agreement with Poland on 25 August to expand manufacturing and MRO facilities in-country. The American primes will partner five Polish companies for eight projects spanning “technology, training, and technical assistance.”

Brazil turns to India to co-manufacture C-390 Millennium

Brazil’s Embraer and India’s state-owned Hindustan Aeronautics Limited (HAL) are close to finalising a joint venture to supply the C-390 Millennium medium transport aircraft (MTA) to the Indian Air Force (IAF), in what could be Brazil’s largest-ever deal for the aircraft.

Chinese-Russian wide-body JV collapses under international pressure

Russia’s United Aircraft Corporation (UAC) has withdrawn from its 7-year joint venture with Commercial Aircraft Corporation of China (COMAC) to manufacture CR929 widebody aircraft, citing us-led international sanctions.

Main headlines from this issue

South Korea strays from offset in FMS

The Korea Institute for Industrial Economics and Trade (KIET), a government-funded entity, has issued a warning that South Korea will fall short of the “top four global exporters” of military hardware unless it urgently reinforces its offset policy. KIET released its findings on 28 July in a 14-page report on the policy’s weaknesses and loopholes.

Senate extends “Buy American” laws to all military ships

The US Senate has passed legislation mandating that one hundred percent of components for all US Navy ships must be manufactured in the US by 2033. The legislation was passed as an amendment to the 2024 National Defense Authorization Act (NDAA) in late July.

Saudi Arabia and Brazil agree to tech transfer and buyback

In its quest to build its defence-industrial capabilities, the Kingdom of Saudi Arabia is turning to Brazil. Brazilian manufacturers Avibrás Indústria Aeroespacial and Taurus Armas have each signed agreements with SCOPA Defence. SCOPA will save Avibras from bankruptcy in exchange for support on a Saudi-made Multiple Launch Rocket System (MLRS), while Taurus will establish a joint venture for the production and export of weapons.

Azerbaijan joins turkey’s national jet programme

Turkey and Azerbaijan have signed a “cooperation protocol” to facilitate joint production of defence hardware, including the fifth-generation TF-X fighter, known in Turkey as the Milli Murharip Uçak (MMU). The two nations “will determine working procedures and principles of cooperation on joint production and development.”

Chinese telecom giant leans on tech transfer re-enter India

Three years after a blanket ban on Chinese apps in India, Chinese state-backed telecoms conglomerate ZTE has initiated talks with Indian partners for a potential joint venture on the subcontinent. The move may help ZTE circumvent the freeze on its business activities and build a “critical trust factor” with the Indian government, according to an unidentified company official.

US and Australia to kickstart missile production by 2025

Australian Defence Minister Richard Marles has confirmed that the US will help Australia develop a “missile manufacturing and exporting industry” from scratch “within two years.” As part of joint development, Australia will undertake MRO for critical US-sourced munitions, while the US will work on streamlining an acquisition process for priority munitions for Australia.

Main headlines from this issue

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.

Main headlines from this issue

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.

Main headlines from this issue

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.

Main headlines from this issue

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.

Main headlines from this issue

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.

Main headlines from this issue

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.

Main headlines from this issue

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.