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Volume 2015
Main headlines from this issue
Huge relief as DoD waves indirect offset ‘cost analysis’ on FMS contracts
The U.S. Department of Defence has introduced an interim rule, effective immediately, that will ease the bureaucracy required for foreign military sales (FMS). The new rule no longer requires contracting officers to analyse indirect offset cost agreements between a U.S. defence contractor and an international FMS customer. One U.S. defence contractor described the change as “a blessing.”
Oman regulation confirms input/output approach and launches milestones
Oman has finally published its new Partnership for Development (PFD) regulations, the sultanate’s equivalent of an offset program. Although termed ‘regulations’, the PFD has structured a model designed to offer flexibility based upon a collaborative approach and.....
India is still seeking views for policy changes
Although India is due to publish its Defence Procurement Procedure policy document, DPP 2015 on June 30th, a Committee of Experts convened a meeting this month and listened in silence to recommendations.A delegate described the session as “technical” and “boring” with the usual points hung out to dry.
Airbus Group consolidates Indian operations as it pledges support for 'Make in India'
The Airbus Group has brought all of its Indian operations under one entity, Airbus Group India Private Ltd., in a move which the company said would allow it to greatly support the 'Make in India' initiative. India is the first international market where local operations are being brought under a single company as part of the Group's 'one roof' policy, the company said.
Australia launches bid to join GPA – offset policy may be at risk
Australia has formally launched its bid to join the Agreement on Government Procurement (GPA). The country said it planned to submit an initial market access offer for GPA accession within the coming months, which will trigger the negotiations on its entry terms.
Main headlines from this issue
Canada announces key policy changes and a new banking approach
The Canadian government has announced a number of enhancements to its Industrial and Technological Benefits (ITB) policy. The banking provision will be changed to boost the attractiveness of investing in Canada in advance of a contractual requirement…..The Investment Framework will increase from 5 percent to 25 percent of contract value the cap on investments in SMEs.....
Russia on course for a formal offset policy
Russia convened a meeting of the Council of Ministers in March to consider the development of offset legislation. The ministries of Economy, External Trade, and Finance were asked to produce a report on ways to increase knowledge of offset practice and to recommend a policy. The report is expected.....
India: D-Day is June 30th; DPP 2015 has stringent penalties, new nodal agency
On June 30th the Indian government will give contractors some good news. It will announce that an amendment to the country’s DPP 2013 will allow the offset policies introduced gradually between 2006 and 2013 to be applied retrospectively. India will also release a new plan: DPP 2015.
Poland: obligors should take an anxiety pill before approaching the MoD
The MoD has acquired just one person from the Ministry of Economy, and contractors will notice when they go for meetings that the offset team is completely new to offsets. Consequently they are inclined to require the obligor to come up with proposals and to figure out how the MoD wants to satisfy the obligation.
Australia to move all ‘Industry Engagement’ matters to the Department of Industry
In April the Australian government released a report proposing the abolition of the Defence Materiel Organisation (DMO) that that all industry engagement matters associated with defence procurements, currently Australian Industry Capability (AIC) and Global Supply Chain (GSC) plans, be moved to the Department of Industry to align with broader industry policies. The government has said the review will be implemented over the next two years.
Main headlines from this issue
South Africa lays out new plans for civil and defence industrial participation
The South African government has set out new strategies for its offset policies. The Industrial Policy Action Plan affects both civil and defence industrial participation. The new strategies will be developed in conjunction with sector desks, and will either become part of the general National Industrial Participation (NIP) guidelines or will be included as annexures to tender documents.
European Parliament committee censures EC’S stance over misuse of Article 346, calls for tougher action
The European Parliament’s ‘Committee on the Internal Market’ has published a report that severely criticises the approach of the European Commission and member states towards Directive 2009/81/EC. The committee, comprising MEPS from every member state.....
India circulates draft offset policy
A ten-member committee from India’s MoD has put a draft offset policy into limited circulation for comments by industry associations. The draft suggests that India will request ‘directed offsets’ with compulsory investment by obligors in selected manufacturing capabilities.
Kuwait: Another battle begins as minister decides to wind up ‘National Offset Company’
Kuwait’s Finance Ministry has said it will ask the Council of Ministers to approve the appointment of a liquidator to wind up the National Offset Company. The company’s former CEO told CTO he would oppose the move because the NOC was not properly established and cannot therefore be subject to liquidation.
Hotchpotch Ukrainian transporter to crash land in Saudi Arabia
Saudi Arabia is to manufacture aircraft under a joint venture with the Ukrainian manufacturer Antonov. The joint venture will build transport planes for military and civilian use in a deal strengthening the kingdom's drive to develop a domestic military industry.
Main headlines from this issue
Behind the shadows of Transparency International’s attack on defence offsets
Transparency International UK has landed another volley on the defence offset industry with a combination of poorly aimed punches….. Although the report reads as if approaching the climax of a disaster movie, a closer look reveals shortcomings in the methodology, and raises questions about the questions and the credentials of the reviewers.
Oman: New CEO will soon release new guidelines
Dr. Dhafir bin Awad bin Bader Al Shanfari, the recently appointed CEO of Oman’s Partnership for Development (PfD) authority, is approaching the final stages of an internal review of new policy guidelines.
India may curb indirect defence opportunities under offset contracts
Indian Defence Ministry officials said that the MoD is finalising an offset policy that will require foreign companies to set up manufacturing bases in India. The plan is to link the offsets policy to the 'Make in India' campaign because the conditions surrounding foreign investment have not been productive.
Australia: Union muscle likely to preclude economic benefits of a foreign submarine build
A report by a group of independent consultants has found that building naval warships in Australia would cost 30 to 40 percent more than in comparable overseas shipyards, but suggested the price premium could be halved with improved productivity. Australia’s shipbuilding industry is highly unionised.
MEP revives tirade against EC’S stand on Portuguese offsets
Ana Maria Rosa Martins Gomes, a Portuguese Member of the European Parliament (MEP), has restarted her crusade against the European Commission’s refusal to take action against the Portuguese government over alleged irregularities in the performance of offsets. The contracts relate to an historic submarine purchase.
Main headlines from this issue
Bilateral countertrade stumbles back from the dead
Bilateral countertrade, long thought to have died and been buried, appears to have won a second life. The appearances, though, may be no more than phantoms….. Now Thailand has stepped up engagement with Russia and China…. For Russia and China, a deal that exchanged rusting steel for eternal shipments of rubber, rice, and frozen chickens would be highly desirable.
Confusion as ministers give different takes on Russian missile and oil-for-goods deal with iran
The ghost of bilateral countertrade has been heard again in Russia. According to Deputy Foreign Minister Sergei Ryabkov, Moscow is supplying Tehran with grain, equipment, and construction materials in exchange for Iran's crude oil.....
U.S. closes eyes to the ‘Buy American Act’ and attacks Philippines for restrictive countertrade practices
The Philippines has made little progress towards opening up its market to American goods and services, according to the 2015 National Trade Estimate report published annually by the Office of the United States Trade Representative (USTR).
Poland’s Wisła program is full of empty promise, says former minister
Andrzej Karkoszka, Poland’s former Deputy Defence Minister, has cast doubt on the commitment of foreign suppliers to meet their requirements in the supply of the Wisła AMD program.
Turkey’s civil offset law is a paper tiger
Turkey’s Public Procurement Law on civil industrial participation/offset may have little practical value. The new regulations contain many ambiguities and inconsistencies, making the legal basis for the law untenable.
Main headlines from this issue
Civil offset stress test as Malaysia implements new policy
Malaysia has revised its approach to civil offset. The country now requires at least 40 percent of the projects to be identified and agreed before an Industry Collaboration Program main agreement is signed. The balance must be identified and agreed.....
South Korea: DAPA launches web site and introduces ‘Offset Challenge Products’
DAPA, Korea’s offset agency, launched a new English-language website on April 1 to provide information on Korean defence companies, their products, and the recently announced ‘Offset Challenge Products’ policy. OCPs is a confusing name but means.....
Kuwait’s Finance Minister: “National Offset Company referred for prosecution”
An audit had found suspected manipulation of public funds and the case will be referred for public prosecution…. A court has dismissed a case brought by the former NOC Chairman, Anwar Al-Jawdar, against Othman Al Quraishi, the CEO that he fired.....
“Malaysia’s defence offset policy has largely failed”
A report in a Fitch Group publication claims that while the government is looking to reduce Malaysia's dependence on imports and increase the capabilities of local manufacturers, its defence offset program to date has largely failed to deliver sustained growth.
India revises threshold for imminent national offset policy
India’s Commerce Ministry is finalising a national offset policy. The quota will be 30 percent of purchase contract value. The new threshold has not been disclosed but is believed to have been raised following inter-ministerial consultations.
Main headlines from this issue
Turkey opens civil offset law to all ministries
Turkey’s Public Procurement Law on civil industrial participation/offset now allows procurement agencies to decide whether imports qualify for the program. It also lets them subject those imports to the civil offset regulation. The ministries of health, energy, communications, and transport are the procurement agencies most likely to exploit the law but any ministry may do so.
Surprise decision sees academic appointed to run Oman bureau
The contest between the two principal contenders to head Oman’s Partnerships Development Program is over. Support for the incumbent, Saleem Bin Qasem Bin Ahmad Al-Zawawi, fell away, leaving Dr. Dhafir bin Awad bin Bader Al Shanfari to be appointed CEO.
Austrian spy kept Eurofighter informed during offset negotiations
The Eurofighter Typhoon offset team allegedly received sensitive information from a spy in the Austrian Ministry of Economy before an agreement was reached on the offset contract.
Offset is alive and flourishing within NATO
Despite Directive 2009/81/EC curtailing offsets for defence procurement by European member states, and although U.S. policy also considers offsets ‘market distorting,’ NAPMO is continuing to follow a policy on behalf of its members that requires industrial returns in recognition of those nations’ contributions to the program.....
Indonesia’s GCI radar contract will set the pace for guidelines
Indonesia’s offset and countertrade guidelines are far from complete although multipliers have been decided….Some principle guideline features are a long way from resolution. For instance, a tussle over the penalty provisions.....
Main headlines from this issue
Offset community tells UAE: “Your financial models do not work”
Dov Hyman, GOCA’s Conference Director, opened his presentation to the Abu Dhabi International Offset (ADIOC) conference by announcing that he was speaking at the request of the Tawazun Economic Council. He then proceeded to address a sensitive topic, hoping he could do so without getting blood on the carpet. The invitation is unlikely to be repeated.....
Twenty projects in the pipeline - TEC introduces “Work Packages”
Matar Ali Al Romaithi, CEO of TEC's Industrial Development Unit, disclosed that more than twenty industrial cooperation projects are in different phases of development, including some in the concept phase.
Korea: DAPA’S multipliers to change this month
DAPA, Korea’s offset agency, is adjusting its multipliers in an attempt to boost defence exports. The new multipliers will become effective this month. A pilot scheme is being introduced for credits to be awarded to foreign contractors when they hire Korean interns.
Turkey launches its civil offset program
Turkey has launched a Public Procurement Law on civil offsets. The law allows procurement agencies such as the ministries for health, energy, communications, and transport to decide for themselves whether purchases qualify for the program and become subject to the offset regulation.
Malaysia introduces a new approach for “Impactful Outputs”
Malaysia has introduced a new ‘Policy and Guideline on Industrial Collaboration Programs (ICPs) in Government Procurement.’ The policy is the third edition of this initiative since 1987.
Main headlines from this issue
India set to approve a civil offset policy
India’s Committee of Secretaries is set to finalise the country’s national offset policy. The new policy is expected to require foreign firms selling goods worth over Rs 300 crore ($40m) to the government or public sector undertakings (PSUs) to source part of their supplies from domestic manufacturers.
Airbus cuts royalties, UK saves jobs
Airbus has quietly persuaded the British government to accept a big cut in royalty payments in return for a guarantee that the company will keep work in Britain. A spokesman for the Department for Business, Innovation, and Skills told CTO the deal is exclusive to the commercial work that Airbus performs in the UK.
The new Buy American minefield
The Republican Senate Majority Leader, Mitch McConnell, has promised to expand in 2015 Buy American constraints for federally-funded procurement projects. A multitude of Buy American laws are already on the books and several new rules are planned.
Polish group faces default penalty for Indian contract
The Polish Weapons Group is facing default under a contract to supply India with 204 WZT-3 armoured recovery vehicles worth $275m. Should a default occur, the Polish Defence Holding will face contractual penalties on non-performance of both the sales and the offset contracts.
SSM fines Thyssen Krupp
Turkey has fined Thyssen Krupp Marine Systems €100m for delays in the construction of six submarines contracted in 2009. The value of the contract is estimated at €2.5bn and includes an offset commitment for 80 percent of purchase contract value.
Main headlines from this issue
France turns a blind eye to deception by China’s “forced technology transfers”
Concerns about illegal copies of French systems manufactured by China are rarely publicized and the French companies involved have never publicly criticized China for doing this. If there are any battles over China’s dark arts, they are hardly bloody.
Argentina demands local assembly
Argentine Defence Minister Agustín Rossi has announced that any company supplying military aircraft to Argentina must agree to develop the country’s aviation industry. He gave the example of the recently acquired.....
Peru: Agency opens this month
Peru’s newly established defence procurement agency will commence operations in February, Emilio Cohayla Escudero, Director for Social and Industrial Offsets, told CTO. The agency was scheduled to have begun work last October.
Kuwait’s offset regime remains unstable - its future looks worse
The situation in Kuwait remains in flux, with publication of the new offset guidelines likely delayed until July at least; the end of the year appears more likely. The current guidelines remain suspended.
Poland takes final breath under the old offset rules
Poland’s Economy Ministry has begun its evaluation of offset proposals for bids to supply 70 helicopters. The acquisition will be the final tender to qualify under the old offset law.
Main headlines from this issue
A new mood in India as Defence Minister sets date for policy review – BAE Systems joins campaign for change
Defence Minister Manohar Parrikar said the government will tackle inconsistencies in Defence Procurement Procedure (DPP) 2013 by March when it will announce changes to the process. The issues that need to be addressed include having a clear offsets policy.
Czech Republic winds up its offset policy
The Czech Republic has decided that it would no longer require offsets when procuring defence equipment although some procurements would qualify under the exemptions to Directive 2009/81EC afforded by Article 346.
Japan’s offer to help build submarines in Australia may be torpedoed
A proposal for Australian industry to be involved in the construction of the Navy’s new submarines, with Japan to be responsible for assembling the boats, has ignited a fierce debate in Australia.
Russia to build Anglo-Italian helicopters
Rostec Corporation and Finmeccanica have entered into a joint venture to produce AW189 helicopters. The companies’ subsidiaries, Russian Helicopters and AgustaWestland, will establish a facility on the HeliVert plant near Moscow. Rosneft will also become a partner.
Israel’s new ICA chief faces work overload following merger
Ziza Eger has taken over as Director General of Israel’s Industrial Cooperation Authority (ICA) following the retirement of Acting Director General Gabriel Golomb.
Main headlines from this issue
Canada’s new ‘Value Proposition Guide’ is a crossword wrapped in a puzzle
Industry Canada has released its Value Proposition Guide. Canada has chosen a points-based approach, repeating the complexities of the Greek and Turkish strategies that bamboozled the offset community a decade ago.
Korean audit uncovers undelivered technology transfers – someone will be fined
An investigation by Korea’s Audit Board has found that the Surion helicopter project has failed because the technology transfer agreement with Airbus Helicopters covers only 134 out of the 450 components necessary to assemble the power delivery system.
Egypt intends to swap a Russian tourist for a banana
President Abdel Fattah Al-Sisi of Egypt has instructed the cabinet to study how to apply a barter system to correct the tourism drought from Russia following the sinking of the rouble.....
Poland settles “difficult” offset agreement with Kongsberg
The Polish Defence Ministry has signed an agreement with Kongsberg Defence Systems for 24 naval strike missiles and equipment worth 800m zlotys ($175m). The missiles will be manufactured in Norway but.....
“Dutch industrial participation clinches JSF acquisition”
The Netherlands Ministry of Defence has told the Lower House that it is ready to order the first eight F-35 fighter jets. The Defence Minister asserts in a letter that the involvement of Dutch industry is a major reason for the decision.