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Volume 2016
Main headlines from this issue
Kuwait’s offset policy set for relaunch?
Kuwait, facing diminished oil revenues and the need for economic reform, may be reconsidering the cancellation of its offset policy. A key official told CTO that unsigned contracts for which Kuwait required offset when negotiations began can now expect a new demand.
Britain’s largest trade union demands offsets from Boeing
Britain's biggest trade union, Unite, said it was worried about the lack of offset agreements in Defence Secretary Michael Fallon’s decision to buy from Boeing. Mr Fallon has serious questions to answer about the UK’s secretive procurement policy, the union said.
Israel’s new policy includes countertrade
Ziva Eger, CEO of Israel’s Foreign Investment and Industrial Cooperation Authority, has decided that counterpurchase is an acceptable choice for the discharge of obligations. Ms Eger spoke of a Chinese company that submitted a proposal for a tender and asked if it could buy olive oil. “Sure, why not?” she said.
Oman’s programme makes serious headway
The Omani Partnership for Development programme embraces defence and civil offset, and is currently working with more than 39 Omani government and semi-government units. More than 25 obligors from eleven countries have commitments.
India’s new offset scandal becomes a cause célèbre
Investigators are awaiting information from the British Virgin Islands, Dubai and the UK about companies that Sanjay Bhandari used to channel funds and buy properties abroad. The tax authorities are asking whether the money was meant for the offset business, and whether it was meant for kickbacks.
Main headlines from this issue
French MEPs petition to repeal Directive 2009/81/EC
Three French MEPs have petitioned the European Parliament to repeal Directive 2009/81/EC. Sophie Montel, Dominique Bilde, and Florian Philippot of Marine Le Pen’s National Front contend that the directive jeopardises the French arms industry by obliging public procurement procedures to take place “at the European level”.
Switzerland amends IP regulation, demands “substantial” sales increase as a requirement for full credits
At the request of the Federal Finance Auditing Authority, Switzerland is amending a section of its industrial participation regulations. The government has changed the so-called ‘additionality code’..... The required amount of Swiss added value has also been raised.
Offset in Central and Eastern Europe is alive, well and dysfunctional
Every country in Europe has its own offset policy, and each country is interpreting Article 346 TFEU and the defence directive in a different manner. As a result, offsets in Europe have become increasingly dysfunctional, particularly in Eastern Europe. That was the grim impression made during a presentation on Europe’s offset environment.
Avascent survey: government partners are too secretive
The management consulting firm Avascent’s second survey of offsets in the aerospace and defence sector found that only 31 percent of respondents are satisfied with the transparency and openness of government partners; a full 69 percent are dissatisfied.
Colombia revises its approach to offsets
The Colombian government has declared its offset policy a success and is preparing to make revisions. The policy was introduced eight years ago. The new focus will be on technologies that are not available in the general market and which do not carry high costs.....
Main headlines from this issue
Romania drafts new offset policy - “Non-defence offsets acceptable until now”
The Romanian government is in the process of changing its offset policy. The new policy awaits approvals from the ministries of Defence and the Interior, as well as from other relevant organizations. The regulations will focus on the application of Article 346 and will be “modified from head to toe.”
‘Offset India Solutions’ raided by tax officials –Pilatus implicated
Income tax officials have searched eighteen premises used by the service provider Offset India Solutions (OIS). A Hindustan Times investigation reported that Sanjay Bhandari received Rs 69.38 crore ($10.4m) from 35 shell companies between 2009 and 2014 and that the government was concerned over “the unusually high growth of his business in recent years.”
South Africa: Transnet threatens penalties over localisation obligations
Transnet, South Africa’s state-owned freight transport company, has implemented a new series of governance, control, and monitoring measures. The move is intended to ensure that OEMs meet the company's localisation obligations and supplier development commitments.
“Shameful” Australian ship deal goes to Spain
Australia has signed a contract for Spain to build two new navy supply ships. Prime Minister Malcolm Turnbull has defended the decision, saying that Australian industry would have substantial involvement.
India: Latest data shows two obligors fined
Defence data released to India’s parliament discloses that the country has signed 29 offset contracts since the offset guidelines were introduced in 2005. Nineteen were for the Air Force, seven for the Navy, and three were for the Army. The total value of all obligations is about $6.13bn.
Main headlines from this issue
Saudi localisation blueprint to increase demands for offsets
Saudi Arabia has laid out a sweeping plan to put its armaments industry under a holding company as it prepares for the post-oil era. The kingdom will seek to restructure several military contracts to tie them to Saudi industry. The initiative will lead to increased demands for offsets and technology transfers, and place further burdens on joint ventures.
“Whitewash, cover-up” – but some say findings on South Africa’s ‘strategic defence procurement packages’ were honest
President Jacob Zuma backed the commission’s findings that offsets meant to flow from the arms procurement have substantially materialised and ordered the report to be released in full, generating tremors of disbelief but not surprise. It made no recommendations because it found no wrongdoing.
DCNS to build Australia’s submarines: “Decision driven by corporate welfare rather than defence needs”
Prime Minister Malcolm Turnbull has chosen the state-controlled French DCNS consortium for the contract to build twelve submarines. The submarine fleet will be built in Adelaide. The French media hailed it as the contract of the century. “It offers meaningful workshare and technology transfer”.
Election ahead - Australia launches liferaft to sustain sovereign naval shipbuilding
Prime Minister Malcolm Turnbull has announced a policy for “the salvation” of its naval shipbuilding industry. He said offshore patrol vessels would be built in Adelaide. Forty-eight hours later he confirmed he intends to call an election for July 2nd. Up to three seats are in doubt for the government in South Australia.
Concern over covert IP deal between South Africa and Saudi Arabia
South Africa’s opposition Democratic Alliance party wants to know why a South African company has set up a factory in Saudi Arabia to manufacture shells and ammunition and why neither South Africa’s parliament nor media were informed.
Main headlines from this issue
Dentons finds South Africa’s NIPP policy let down by poor implementation
The local office of global law firm Dentons has published its opinion of South Africa’s National Industrial Participation Programme (NIPP). The mild critique of the policy’s regulatory framework and the NIP Revised Guidelines of 2013 comes as NIPP prepares for review..... lack of contract management skills…. lack of commitment by obligors.
Pakistan backdates offset regulation
Pakistan has backdated the offset regulation placed recently on the online portal of the Directorate General for Defence Purchase. The defence offset policy became effective October 15th, 2014, the regulation says. The date had been left blank.
Uganda demands joint ventures, says companies must understand “rules of the game”
Uganda’s Public Procurement and Disposal of Public Assets Authority has informed visiting representatives of the Nordic Business Association that Uganda is encouraging joint ventures and they should rely on local content. Each delegate gave a personal account of their encounter with corrupt individuals or officials.
Indonesia pursues two joint ventures and a tolling deal with western primes
On her return from a European visit Indonesia’s Minister of State-Owned Enterprises, Rini Soemarno, announced that three co-operation agreements with Western prime contractors are under negotiation.
Canada launches public consultations on F-35 decision – questions role of IP
“We are committed to ensuring that manufacturing contracts for whichever aircraft is chosen will go to Canadian companies”
Main headlines from this issue
India’s DPP-2016 creates new preferred category
India’s DPP-2016 gives priority to a new category of procurement. Indigenous Design, Development and Manufacturing (IDDM), first mentioned in January, replaces ‘Buy (Indian)’ as the most preferred category. The policy document remains incomplete with various annexures and appendices yet to be released, including the offset provisions.
DPP-2016 – COMMENT. A serial killer or a workable blueprint?
DPP-2016 is meant to simplify the procurement process but it is a document of formidable complexity and is incomplete. Buried among the 100 pages of eternal acronyms is a policy that might just work.....
Annual report to Congress reveals strength of offset transactions in Europe
The twentieth annual report to Congress on the impact of offsets in the defence trade reveals that European Defence Agency (EDA) members accounted for 34.62 percent of all offset transactions reported by U.S. firms in 2014 based on quantity…..a statistic that will give the European Commission nightmares.
Turkey’s policy drives domestic added value but fails to generate exports
Turkey’s SSM does not always request domestic added value in defence contracts. While Turkey usually contributes about 70 percent of domestic added value to each defence contract, for some projects SSM is too short of money and time to make the request.....
Indonesia: MoD chief outlines technology approach, suggests SOE ministry is uncooperative
The Chief of the Indonesian Defence Ministry’s procurement centre said that his government would implement a technology transfer requirement if the Defence Industry Policy Committee (KKIP) identifies in a purchase any of the seven weapon systems included in the country’s offset policy.
Main headlines from this issue
EC shakes the tree - Member states told to explain procurement decisions
A letter sent by the European Commission last month to the defence ministers of thirteen member states is causing the industry some emotional turbulence. The letter states that the EC is reviewing examples of recent procurements and asks each country to explain its purchasing decision. The EC later issued a notice explaining that.....
Left wing MEPs demand EC investigation of Spain
The spokesman of the United Left party in the European Parliament, Marina Albiol, and MEP Javier Couso of Spain’s Nordic Green Left, a member of the Sub-Committee on Security and Defence, have drawn the attention of the EC to a possible infringement of directive 2009/81/EC by the Spanish government.
UK’s DSIEP policy wanders into the civil sector
AECOM, a major American company known more for its clean water and energy projects and for building iconic skyscrapers than for defence programmes, has become the tenth signatory to the UK’s Security Industrial Engagement Policy (DSIEP).
India: DEFEXPO announces offset seminar
A seminar on offsets has been scheduled for Defexpo India 2016. The land, naval and internal homeland security systems exhibition takes place between March 28th and 31st at Goa.
Navantia’s Australian win ignites local outburst over industrial participation
Australia, which actively seeks to leverage its buying power to create opportunities for Australian firms in international programmes, has been censured by local industrialists and the media for awarding a contract to the Spanish shipbuilder Navantia.
Main headlines from this issue
Israel prepares new regulations, will link undertaking to purchase agreement
Obligors will have to sign detailed undertakings under new regulations being prepared by Israel’s Industrial Cooperation Authority. The rules will also include milestone penalties and holdbacks on procurement payments. Obligors will work with one set of personnel at the ICA and another set at the Investment Promotion Centre.....
Australia introduces a complicated “clearer and simpler framework”
The Australian government intends to replace its Priority Industry Capability (PIC) and Strategic Industry Capability (SIC) plans with “a clearer and simpler framework.” A new Centre for Defence Industry Capability (CDIC) will assume a key role in managing the Australian defence industry.
Implementation delays will lead to cost escalation: “That is why everybody wants to do a programme in India.”
European firms operating in India’s offset environment want supply chain partners to work at 8, 10, or 12 percent margins. In India the cost of capital is 16 percent and no firm operates below 24 percent. “That is a very big challenge that we face when structuring offset programmes,” said.....
Polish Major General: “The defence ministry either does not know what it is doing or it is not being honest”
A retired Major General of the Polish Armed Forces has called for the defence ministry to conduct an urgent analysis of the preparation and execution of the tender for multi-role helicopters….. companies are forced to submit offset proposals which are then not taken into consideration.
China to provide $10bn in financing for Petrobras in exchange for oil
The Brazilian state-controlled oil company Petrobras said it has reached an agreement with the China Development Bank (CDB).....
Main headlines from this issue
Pakistan publishes “impenetrable” offset policy, ignores it
Pakistan has placed a formal offset regulation on the online portal of the Directorate General for Defence Purchase. The regulation states that offset is mandatory for defence procurements over $15m but the effective date of the policy is left blank….. “There is a lot of confusion about the policy.”
Defence expert: Canada’s procurement system is “ramshackle and stuck”
Two years after a new drive to its procurement system the Canadian federal government is officially stuck, says David Perry, the senior analyst and a Fellow with the Canadian Global Affairs Institute. “Nothing has been delivered yet, which is ridiculous,” he says…. “Value propositions remain just an idea”.
Japan offers to build amphibious aircraft in India
The Indian Navy has expressed interest in purchasing six US-2 amphibious aircraft. ShinMaywa Industries, the Japanese equipment manufacturer that produces them, has offered to set up plants in India to help cater to international demand.
Brazil readies legislation to ease public-private partnerships
Brazil’s Finance Ministry has published a draft bill for partnerships between Brazilian public entities and the private sector for the implementation of strategic projects of national significance. The bill, when approved, will create a programme called ‘PPP Mais.’
Brazilian Air Force bombs Sweden
The Brazilian Air Force has acknowledged that by 2022 more than 350 Brazilians will work on the Gripen NG project in Sweden.
Main headlines from this issue
Offset frustrations in Taiwan set to continue as new president takes over
Defence contractors with obligations in Taiwan continue to be deeply frustrated with the difficulties they say they encounter while implementing the industrial cooperation programme. Obligors complain of a lack of administrative clarity…….. The Industrial Development Bureau rejects accusations of political influence and retorts that.....
India ends uncertainty over the national offset policy: “It’s gone!”
India has scrapped plans for a national offset policy. A government official told the local media: “We realized that all departments have different requirements, and having a one-size-fits-all policy may not be prudent.”
Transparency International's 2015 report takes a selective look at offsets – omits Malaysia, includes Scandinavia
Transparency International's Government Defence Index for 2015 has focused selectively on the offset policies of several countries, omitting a number of countries with poor reputations.
Poland raises the temperature with Airbus and concedes it could face claims for damages
Poland’s deputy minister of defence, Bartosz Kownacki, has set Airbus Helicopters a deadline to reach an agreement over industrial offsets for the supply of 50 H225M Caracal helicopters.
Indonesia capitalises on technologies received
PT PAL, Indonesia’s state-owned shipbuilder, is set to deliver the first warship to be exported by the country’s domestic shipbuilding industry, a Strategic Sealift Vessel. The warship was built and developed entirely by PT PAL in collaboration with Damen Schelde Naval Shipbuilding through a transfer-of-technology mechanism.
Main headlines from this issue
The ‘Make in India’ makeover takes shape – new ‘IDDM’ policy announced
India’s Defence Acquisition Council is set to raise the country’s offset threshold from Rs 300 crore ($45m) to Rs 2,000 crore ($300m). The mandatory requirement for indigenous content will remain at a minimum of 30 percent. Defence minister Manohar Parrikar said that the threshold is changing because offsets increase the cost of the product by 14-18 percent.
India: A pivotal moment still in the balance
Offset practitioners have largely welcomed the reported changes to India’s offset policy but any champagne corks remain stoppered at least until the formal publication of DPP 2016. Whether the revisions mark a new day and better opportunities for India, its local industry and foreign suppliers will depend largely on the language of the final draft.....
High quota and tough performance penalties characterise Turkish Health Ministry’s new offset policy
Turkey’s Ministry of Health has published regulations concerning its Health Industry Partnership Programme. The regulations remain faithful to traditional offset principles, laying down the threshold, quota, penalties, and multipliers. They are as lengthy, specific, and unyielding as the opus published by India.
U.S. government calls for report into impact of technology transfer to China
The U.S. government has called for a report on “The qualitative and quantitative nature of the transfer of United States production activities to the People's Republic of China.”
Russia sees Indonesia as alternative to Western component suppliers
Russia continues to deliberate over the extent of technology transfers and component production in Indonesia concerning the sale of MS-21 aircraft.
Main headlines from this issue
India changes offset rules: restores services and predicts defined projects
In response to frequent amendment requests from vendors, India is releasing a series of important policy revisions. The changes come as the MoD prepares to publish a new Defence Procurement Procedure (DPP)…. Quality assurance services and training remain suspended and do not yet qualify for credits.
Russia marches into India
President Vladimir Putin signed sixteen deals with Prime Minister Narendra Modi during a meeting at the Kremlin. The deals include an agreement for the joint manufacture of 226 military helicopters and the construction of twelve atomic energy plants with involvement of local companies in India.
Influential Egyptian agency “well placed to become the offset authority”
The Arab Organization for Industrialization, a key agency linked to the Egyptian defence ministry, has signed an array of partnership agreements with Western defence companies over the past few weeks and reportedly seems well placed to become the Egyptian offset authority.
Mixed blessing for the Philippines’ countertrade policy as volumes reach new highs
The Philippines International Trading Corp (PITC) has responded to a significant increase in government procurement by recording countertrade contracts worth at least 1.5 billion pesos ($33m) in 2015, about four times the level of previous volumes.
Political imperatives tempt Japanese into maritime ventures with Indonesia
Japan and Indonesia will begin talks on the transfer of defence technology to Jakarta. Agreement was reached during discussions between the respective defence and foreign ministers. “Future military deals will only be with partners who embrace this approach”.