CTO Newsletter
News and analysis of offset and countertrade, twice a month, 24 times a year. Log in and search our archives to find the trade intelligence you need.
Our online database provides 24 months’ worth of issues. Researchers and long-term subscribers who would like to access older issues are welcome to reach out at subs@cto-offset.com.
Please note that the search bar does NOT recognise spaces. Please use _ instead. For instance, Saudi Arabia may be searched as Saudi_Arabia.
Volume 2018
Main headlines from this issue
Grant Rogan emerges in the Congo
Grant Rogan, chairman of the offset service provider Blenheim Capital, and one of the offset community’s most controversial characters, has emerged in the Republic of the Congo. According to Mr Rogan, the prime minister and the president of the central African country have approved Blenheim’s proposals for establishing formal commercial offset guidelines. The guidelines will be modelled on the Omani policy...
Turkey revises commercial offset policy, increases penalties
Turkey’s Ministry of Science, Industry and Technology has amended the guidelines for implementing industrial cooperation partnerships through commercial procurement agencies. The ministry has raised non-performance penalties, and reconstructed the categories for discharging offsets, reducing them from four to three.
Minister: “‘Make in India’ policy is a failure”
India’s minister of state for defence, Subhash Bhamre, has called the country’s ‘Make in India’ policy a failure. In a recently leaked presentation made to the Prime Minister’s Office in November last year, Mr Bhamre outlined a number of major areas in which the policy has failed to live up to expectations.
Gang of Three prepare ‘forced technology’ case against China
The U.S., EU, and Japan are jointly working to file a case against China through the World Trade Organisation. The case concerns forced technology transfers. The parties allege that China forces companies that want to enter the Chinese market to transfer key technologies as part of a wider strategy to acquire foreign expertise.
Dassault AND Eurofighter Consortium furious over EU ban on Malaysian palm oil
A European Union ban on importing palm oil into Europe threatens to block Malaysia’s purchase of defence equipment from France, the UK, Sweden, and Italy. France is opposing the ban, which could hinder both the Dassault and Eurofighter consortium’s offers of fighter jets. The UK is instead offering Malaysia export credit and industrial participation.
Main headlines from this issue
Netherlands snubs European Commission with new IP tender
The Netherlands has issued a new military tender that is likely to attraction the attention of the European Commission. The tender calls for the building of 1,434 mobile offices and workplaces for the Ministry of Defence. It includes an industrial participation requirement... “Of course it is legal because it is based on Article 346,” said...
Freedom of Information’ request reveals lower IP Target for Australia’s Future Frigate Programme
The Australian government has hit back at critics within the Senate who have accused it of lowering the minimum percentage of local participation on the Future Frigate Programme.
Germany shoves policy aside, demands IP for helicopters
Rheinmetall and Sikorsky will together lead a team of German industrial providers to offer helicopters for the German Air Force’s “Schwerer Transporthubschrauber” (STH) programme. The formation of the joint venture was a demand of the German government. “Essentially it is an offset, but in practice they will just give it another name, like ‘teaming agreement,’” a well-placed source told CTO.
Trump’s offset policy takes root
The U.S. State Department has told America’s allies and partners that when they buy American arms, they also receive training, support, and stronger security relations in addition to equipment – America’s equivalent to an offset programme. “You are getting a package that nobody else offers.”
“Dassault has not yet selected an Indian offset partner”
India’s government is undergoing another pant-wetting session. The inexperience of recently appointed defence minister Nirmala Sitharaman forced the government to clarify the deal for the acquisition of Rafale jets from Dassault Aviation.
Main headlines from this issue
European Commission bares its teeth, bites Denmark and The Netherlands
The European Commission has launched infringement procedures against Denmark and the Netherlands. The two countries are accused of imposing unjustified offset requirements by demanding compensation from non-national suppliers when purchasing defence equipment. The member states have two months to respond. Asked if he believes there was any wrongdoing by Denmark...
Defence Acquisition Council simplifies ‘Make II’ procedure
India’s Defence Acquisition Council has announced significant changes to the country’s Make-II policy. Only Indian vendors are eligible for participation under this acquisition category. Suppliers may now use the ‘Make’ procurement category either in isolation or with any of the five other bands. Offsets apply to the ‘Buy (Global)’ or ‘Buy and Make’ categories...
Malaysia-Singapore HIGH-speed rail project brings rich benefits for Malaysia, shrugs for Singapore
The governments of Malaysia and Singapore have agreed to collaborate on a multi-billion dollar high-speed rail project connecting the two nations' capital cities. Malaysia will call for local industry participation and technology transfer as a mandatory part of any bid under the country’s Economic Enhancement Programme. Singapore has no such policy.
Us-India Business Council enters ‘productive dialogue’
The US-India Business Council is now upbeat on the potential for U.S. companies to work with India’s defence sector, despite earlier unease. A productive dialogue with the Indian government is now addressing the concerns raised in a USIBC letter sent last August.
President Trump’s Davos speech echoes EU on offsets
President Donald Trump told global finance leaders at Davos he will always put the U.S. first when it comes to trade, but his comments regarding reforms to the international trading system may foreshadow policies that will influence how American prime contractors will react to demands for offsets.
Main headlines from this issue
DAPA offset rule update faces delays and political upheaval
South Korea’s Defence Acquisition Programme Administration has again delayed the implementation of its offset policy changes. So far only the demerit table, announced last June, has come into effect. Approval of the changes has been deferred until the end of this year. The new policy will include alterations to both the new demerit table and the country’s localisation quota...
Mystery regarding UAE/South Korea 'double contract’
New information has emerged in South Korea regarding a reported ‘double contract’ with the UAE. The deal was signed in 2013 and concerns a mutual logistics support agreement (MLSA) between the two countries' militaries, according to The Hankook Ilbo. The report contends that the deal includes reciprocal provision of logistical support, supplies and services in return for either cash payments or provisions.
Sanctions boomerang as Russia embarks on a tech revolution
The Kremlin has responded to sanctions imposed on Russia by the West following the country’s annexation of Crimea in 2014 by launching a ‘Make in Russia’ revolution. The initiative is principally for new technologies.
Airbus deepens industrial cooperation with China ahead of A-320 order
Airbus has signed a new agreement deepening its level of industrial cooperation with China for the production of new aircraft. Initial reports suggested that Airbus received little in return for the increase in local production, however...
Indo-Korean minesweeper deal collapses
A large deal between India and South Korea for the production of minesweeper vessels for the Indian Navy has collapsed at the final stage of negotiations. The vessels were stipulated to contain at least 60 percent indigenous content.
Main headlines from this issue
Countdown begins as Philippines military prepares for mandatory offsets
The Philippines has taken another step towards mandatory offset demands for foreign OEMs in military and aerospace purchases. At an offset summit held last month the Secretary of National Defence, Delfin Lorenzana, joined more than 115 people, including some of his undersecretaries and assistant secretaries, officers and executives of the various armed forces, members of the bids and awards committees and the technical working group.....
Turkey: SSM to sanction major guideline changes
Turkey’s Undersecretariat for Defence Industries (SSM) is considering revoking the requirement for domestic defence contractors to provide offsets. Other recommendations include reducing the 6 percent bank guarantee on offset performance to 4 percent and to halve the weighting in the evaluation criteria for industrial participation from 40 percent to 20 percent.
WHY Korea can’t cope when defence customers demand offsets
South Korea, whose Defence Acquisition Programme Administration (DAPA) imposes exacting and stringent demands on foreign contractors selling defence equipment, struggles when buyers make similar demands. The challenge is costing valuable orders.
India’s 50 percent local content requirement hits railway buffers
Nripendra Misra, principal secretary to Prime Minister Narendra Modi, has asked all government agencies to give preference to domestically manufactured products over imports for public-funded programmes. The command was issued after the Steel Ministry complained about the railway’s global tender for rails as part of its track replacement programme.
Brazilian RfP allows OEM to build one corvette abroad, three in Brazil
The Brazilian navy has issued a Request for Proposal (RfP) for four general-purpose Tamandaré-class corvettes. Three of the ships must be built by local shipbuilders, whether state-owned or private. The first vessel may be built abroad. The estimated cost is about $1.6bn.
Volume 2017
Main headlines from this issue
“The Boeing effect”— Canada marks down “harmful” corporations
Canada has broadened its criteria for winning bids for defence programmes to include the “harm” a corporation might cause to the Canadian economy as well as the benefits the company offers. Contenders deemed to be harming the country’s economic interests will find themselves at “a distinct disadvantage.”
Thai government selects ten commercial sectors for ip deals with foreign OEMS
The Thai government has extended its industrial participation approach into the commercial sector. Ten industries have been selected for inclusion, starting with the commercialisation of locally-made defibrillators for hospitals.
Left’s cunning plan challenges European Commission’s inaction on the defence directive
The European Parliament’s Committee on the Internal Market and Consumer Protection (IMCO) has asked the European Commission to exert greater control over exemptions applied to the defence directive. A proposed amendment to Directive 2009/81/EC on defence and security procurement requires the exemptions to “be duly justified.” Igor Šoltes, a Slovenian lawyer and Green Party MEP, said that after eight years of inactivity he is calling for....
Eurofighter offers Belgium investments and a voice
The European consortium promoting Eurofighter has revealed further details of its industrial offer to Belgium as part of its bid to replace the Belgian air force’s F-16 aircraft. Anthony Gregory, Campaign Director for Belgium at BAE Systems, said the proposal ensures that every Euro invested by Belgium in Eurofighter would help sustain more than 100,000 direct jobs across the continent, including in Belgium.
Russia’s four-stage programme for building helicopters in India
Russian Helicopters will produce 200 Kamov lightweight multi-role military helicopters for India in four stages. The approach is meant to ensure the transfer of technology for the aircraft’s main components to the Indo-Russian joint venture, a senior official for the programme said. The first stage includes....
Main headlines from this issue
“My government is stupid” - Romania’s Patriot contract ignites a firestorm
Romania’s agreement to purchase Raytheon’s Patriot air and missile defence system has angered the country’s defence community. Although a statement issued by Raytheon suggests otherwise, the agreement makes no reference to domestic industrial participation. In calm and measured insults, the Executive Director of the Romanian Defence Trade Association accused his government of being “stupid,” and Raytheon and other American companies of lacking vision for the future.
Watchdog reprimands Portuguese agencies over execution mismanagement
Portugal’s Court of Auditors has accused the Ministry of Economy and Employment of not properly considering the interests of the state when negotiating offsets. The criticism concerns the 2012 discussions for the C-295 tactical transport aircraft programme.
The Rafale fighter sleaze circus gets under way
Rafale International, comprising Dassault Aviation, Safran, and Thales, is facing the time-honoured convention of an Indian outburst. A landslide of political and media conspiracy theories has insinuated that something shady is behind the procurement of the Rafale fighters, the offsets, and the joint venture partner. The accusers have failed to provide any evidence.
Peru: A steady policy showing $2bn in benefits over its first six years
Peru launched its offset policy only in August 2010 but has already seen the execution of projects worth almost $2bn. General Wolfgang Dupeyrat, Director General of Material Resources at the MoD, said that only one country is missing from states whose defence industries are supporting Peru with offsets; the United States.
European Union issues decision concerning Article 346 TFEU, changes nothing
The Joint Committee of the European Economic Area (EEA) has amended an annexe to the agreement known as XVI (Procurement). The committee has decided that references to Article 346 TFEU shall be read as references to Article 123 of the EEA Agreement. Article 123, like Article 346 TFEU, provides a loophole for EEA members that want to demand offset.
Main headlines from this issue
Thailand and China to set up joint defence facilities, include other countries
Thailand’s Defence Technology Institute (DTI) plans to establish a joint centre with China to produce and maintain military equipment. The Defence Ministry said the government is also holding preliminary discussions with Ukraine, Russia and South Africa about joint defence manufacturing facilities. The DTI recently signed an MoU with Leonardo covering technology transfer and the establishment of...
Taiwan: Science and Technology Institute prepares new guidelines
Taiwan’s Ministry of National Defence is focusing on a ‘buy local’ policy to enhance the country’s defence capabilities, with the spotlight on sustainment and capability. The National Chung-Shan Institute of Science and Technology (NCSIST) is drafting new industrial cooperation guidelines.
GPA phase-out overshadows significant increase in Israel’s commercial obligations
Israel has enjoyed a boom in reciprocal procurement over the last two years; the number of local SMEs benefitting from the programme increased by 17 percent to 204. The growth continues a trend that began more than eight years ago. Industrial cooperation in the country continues to be “significant in scope” and its impact on the economy “has been considerable,” said Ziva Eger, Director General of the Industrial Cooperation Authority (ICA).
Russia planning for civil aircraft production In UAE
Russia and the UAE are planning to jointly develop a civil aircraft based on Russia’s MC-21 jetliner, according to Rostec’s CEO, Sergey Chemezov. He said joint production could be placed in the UAE. In February Mr Chemezov announced that Russia had initiated talks with the UAE to co-develop a new generation fighter jet.
Philippines parliament to debate bill making countertrade contracts simpler
The Deputy Speaker of the Philippines’ House of Representatives, Raneo Abu, is backing a bill to amend the country’s outdated countertrade regulations. The bill seeks to exempt all government countertrade transactions concerning the import of some items and services in the statutory procurement process and bidding requirements.
Main headlines from this issue
India’s policy full of ambiguities, empty of credits
The perspective on India’s offset policy offered by Ben Schwartz, Senior Director for Defence and Aerospace for the U.S.-India Business Council, was far from positive. A lack of clarity affects a number of issues including the definitions of an eligible defence item and value addition, Mr Schwartz said. The scope of the offset work is also unclear, as are the identities of eligible offset partners...
Saudi 2030 plan releases new localisation policies
Saudi Arabia is in the process of preparing new offset rules. In addition to the requirements enforced through formal agreements, the kingdom is proposing localisation and local content. “There are new offset guidelines being developed but we do not know when they are going to be released. We also don’t know, for those of us who are under current agreements, what that means,” said Lockheed Martin executives.
Romania searches for technology programmes
Romania’s Supreme Council for National Defence is to proceed with the acquisition of the country’s first Patriot missile defence system at an estimated cost of $700m. The deal will require investments in the Romanian defence industry.
Poland: Delayed offset contract blamed for blocking Wisla and Narew programmes
The absence of an offset agreement is delaying supplies to the Polish Army of essential equipment, says a report by General Adam Duda. With delays expected to last until the end of the decade, the report argues that Poland’s Defence Ministry should implement the short and medium-range air defence systems codenamed Wisla and Narew in stages. In Poland liquidated damages will be set at 100 percent of the non-performed or under-performed offset commitment.
Armscor: Local defence industry in decline, but DIP performance is on target
Armscor’s 2016/17 financial year saw “a significant and concerning decline” in the performance of the local defence industry, according to CEO Kevin Wakeford. On the other hand, the company exceeded its objectives in Defence Industrial Participation (DIP). Armscor is currently managing twelve existing DIP agreements and...
Main headlines from this issue
Greek government tables legal amendment to authorise Raytheon offset agreement
Raytheon has reached an agreement with Greece’s Defence Ministry to discharge offset commitments under the Offset Benefit Contracts (OBC) scheme. The agreement has the unique distinction of requiring parliamentary approval. The government has tabled Article 30 of the Greek Armed Forces bill....
Saudi purge under way as missile deal with Russia riles America
Saudi Arabia has announced that it will join Turkey in buying Russia’s S-400 surface to air missile system. As part of the agreement Russia will transfer technology and localise the manufacturing and sustainment of the armament systems in the Kingdom. The agreement signals Russia’s growing influence in the Middle East and its willingness to use technology transfer as a magnet. Meanwhile Mohammed bin Salman has launched a major review of all contracts signed or under negotiation with...
South Africa’s newest offset scandal: the non-assembly of rail cars
A public inquiry is set to begin into Transnet’s R 50bn ($3.8bn) locomotive contract. The contract obliged China South Rail to assemble locomotives in South Africa under a local content and assembly requirement. The locomotives were made in China.
Hungarian revolution as IP makes a comeback
Hungary’s new military development programme is breathing new life into the country’s IP programme. A conference held in Budapest and sponsored by an Emirati company heard that the government would begin approving the country’s ten-year planning cycle known as Zrínyi 2026 later this month. Hungary would then start to draw up detailed programmes for armoured vehicles and... Hungarian industrial participation will be a key requirement.
Australia’s Future Frigate Programme links benefits to a non-governmental contract
Fincantieri’s subsidiary, Vard Holdings, has signed a contract with the Australian cruise operator Coral Expeditions to design and build an expedition cruise vessel. Vard has agreed to construct the blocks in Australia. Chairman Dario Deste said that the move will benefit both the Australian defence industry and the oil and gas industry...
Main headlines from this issue
Australia to emulate Spain, commissions new defence export strategy
Australia’s Minister for Defence Industry, Christopher Pyne, has said that he is looking to Spain’s 60-year shipbuilding strategy as a model for industrial participation. He disclosed he has commissioned a new defence export strategy for Australia designed to help strengthen its defence industrial base. The new strategy is due before the end of the year, together with a new Defence Industry Capability Plan.
Omani MoD shocked to discover offsets cost money – demands reimbursement from RaytheonOmani MoD shocked to discover offsets cost money – demands reimbursement from Raytheon
The Omani MoD has suspended Raytheon Missile Systems’ offset projects. The ministry has discovered that the government is paying for them. The MoD is understood to have admonished the Omani Authority for Partnership for Development for agreeing to the contract, and has called for Raytheon to reimburse the money spent.
Colombia to announce policy revisions at GOCA’S Key Biscayne conference – 300 delegates expected
Colombia’s National Ministry of Defence is perfecting changes to the offset rules. The country will unveil a revised directive at the GOCA Fall Conference taking place October 29th-November 1st at Key Biscayne, Florida. Confirmed speaker presentations to date include the government representatives of Colombia, Peru, Norway, Israel, Malaysia, Korea, Turkey, and South Africa.
India: USIBC raises concerns on liability and technology transfer
The US-India Business Council has written to India’s new defence minister regarding the status of U.S. firms as junior joint venture partners with Indian firms. The letter seeks assurances that American companies will retain control over sensitive and proprietary technology. The letter was submitted on August 3rd but was unreported until reviewed by Reuters.
Furious confrontation as Austrian government and Airbus go head to head over Eurofighter
Airbus has filed a submission to the Vienna Public Prosecutor in response to allegations of deception in the 2003procurement of Eurofighter combat aircraft. The submission denies all allegations made in February by the Austrian Defence Minister, Hans Peter Doskozil. Mr Doskozil argued that the costs for the offset transactions undertaken by Eurofighter were not stated separately in a proposal dated 2002, which amounted to deceit.
Main headlines from this issue
Philippines – military agrees to serious increase in countertrade volumes
The Philippines International Trading Corporation (PITC) has signed a Memorandum of Agreement that it predicts will have “a huge effect” on countertrade volumes. PITC head Dave Miranda Almarinez won the backing of President Duterte by convincing him that the Philippines also needs to begin establishing a domestic defence industry.
Another twist as Russia’s intelligence services object to Turkey’s missile deal
A Russian security report indicates that Russian intelligence services are opposing a deal to supply Turkey with four S-400 batteries. The services question the wisdom of allowing a NATO member access to the technology transfer. Turkish President Erdogan has said that his government has signed a contract with Rosoboronexport for delivery of the batteries and paid a deposit.
Polish lawyer unravels a legal mystery: are subcontracts to a foreign prime liable for offsets?
Poland’s new offset law may now be more than three years old but it’s still showing little sign of practical application. One of the issues that may raise doubts is the law’s scope, says lawyer Tomasz Zalewski. It’s unclear, for example, whether a foreign supplier must commit to an offset agreement when a Polish supplier to the government subcontracts to a foreign company.
Tawazun’s ‘Defence Contractors Council Meeting’ in London - “No-one would dare raise anything controversial”
About 130 delegates heard how Tawazun has fostered eighteen successful offset partnerships and that since its establishment in 1992 Tawazun has become “a centre of excellence” in the development and fast-track execution of new and diverse commercial projects. Contractors who were present told CTO that no-one raised any issues. No-one would dare.
Belgium in a legal pickle over French offer
French Armed Forces Minister Florence Parly has offered Belgium an “in-depth partnership” to favour the Dassault Rafale for the Air Combat Capability Programme. Belgian Defence Minister Steven Vandeput confirmed that France did not respond to the call for tenders. “We must first consider the legal status of this proposal,” he told Belgium’s Radio 1.