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Volume 2015
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.
Volume 2014
Main headlines from this issue
UAE merger widens opportunities for obligors
Matar Ali Al Romaithi, Chief Officer for Tawazun’s Industrial Development Unit, told CTO that the merger of a number of state-controlled defence companies, announced this month, “would provide defence companies with a wider platform to fulfil obligations and provide even greater opportunities of collaboration and growth.”
Oman turf war continues to prolong publication of offset regulations
A tug of war between principal contenders to head Oman’s Partnerships Development Program appears to have turned nasty.
Not much cheer for Swiss offset volumes
Little has come to Switzerland by way of offset volumes over the last few years. The 2014 armour program will provide some new opportunities if approved by parliament, but 2013 was very flat, with less CHF 100m ($104m) agreed.
India: U.S. Calls for offset policy to change ahead of Obama’s visit – but “India has to stand on its own feet”
The U.S. is making a strong pitch for India to overhaul its offset policy for defence purchases ahead of President Barack Obama’s visit next month. The U.S. has raised concerns that American firms could be penalised for delays when Indian firms are found unsuited to enter global supply chains.
Canada: Unclear Value Propositions – “you have just ten days to protest”
Industry Canada has launched a global initiative to brief the defence community on the new Defence Procurement Strategy and ‘value proposition’ procedure. Obligors should be aware of the deadline to file objections if the ‘value proposition’ requirement is unclear...
Main headlines from this issue
Lockheed’s runaway Korean offset
A CTO investigation has uncovered a problem that is giving Lockheed Martin a mighty headache. A service provider has been signed to a package that comprises three satellite communication systems, only one of which is going to Korea, and Lockheed’s space division will not supply any of them.....
Korea: DAPA policy faces annual quota ramp
DAPA wants the offset program to support the opening of new export markets and intends to augment the policy on an annual basis. That will include mandatory export quotas, backed by multipliers.
Offsets are the poisoned chalice
“For ethics and compliance no country is off limits anymore. There is the U.S. legislation, there is the EU legislation, but you will have to cover all the other possible legislations where you are active. As a result, corporate law is really dressed up in new clothes.”
Denmark: Three tenders issued under Article 346
The first tender documents requiring industrial cooperation have been published under Denmark’s new guidelines. They have been issued for three separate requirements.
Canada: key industrial capabilities “are bonkers”
Canada’s Postmedia News takes the Stephen Harper government to task over a “long history of incompetence and waste” in military procurement. The focus is on so-called ‘industrial and regional benefits’ rather than simply getting the best equipment at the lowest price,” the article asserted.
Main headlines from this issue
UK’s DSIEP policy making steady progress as ninth contractor signs up
Safran has signed up to the UK MoD’s Defence and Security Industrial Engagement Policy (DSIEP), the fourth prime contractor to join this year. A total of nine foreign prime contractors have now joined the policy. A Freedom of Information request by CTO revealed that.....
SAAB offers Australia offsets to avert submarine open tender
Saab has launched a pre-emptive bid to build the Australian navy's future submarines amid concern that Prime Minister Tony Abbott will buckle to political and union pressure to have an open tender.
Offset compliance concerns – “Follow the money” says ex Lockheed VP
A former VP and Associate General Counsel at Lockheed Martin said that the only way to identify proposed offset projects that raised FCPA compliance concerns was by conducting risk-based FCPA due diligence on each project.
Sino-Russian joint venture foresees new market penetration
AVIC and Rostec have reached an agreement regarding strategic cooperation that both say will significantly increase interaction between the two companies. Negotiations are under way regarding joint projects in aircraft, helicopter, and engine production, as well as in.....
China to construct Thai railway network in return for rubber and rice
China is to finance the construction of a regional dual-track railways system over three routes for Thailand. Thailand will repay the investment costs to China with rubber and rice.