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 2013

01 May 2013

Volume 31, issue 9

Headlines

Main headlines from this issue

Australia legislates for civil offsets “Plan is a return to Soviet Russia with the commissars”

A bill to be introduced shortly to Australia’s parliament calls for civil projects with a capital expenditure of A$500m ($514m) or more to submit an Australian Industry Participation Plan. A new body, the AIP Authority, will oversee the regulation.

Kuwait: NOC challenges study that finds negligible offset fulfilment – “The limits of governance should be made clear”

The total value of Kuwait’s offset obligations fulfilled since 2008 amounted to only $3.5m spread over 126 contracts, the Kuwait Economic Society says. The NOC has challenged the accuracy and validity of the data used.

India: DPP 2013 relegates “Buy (Global)” to the dumpster – receives mixed reaction

India’s DPP 2013 will chiefly concern revised procurement procedures rather than changes to the offset regulations. The amendments to DPP 2011 in the current review have received mixed reviews.

Frost & Sullivan forecasts significant growth for offsets – seven EC member states in top 20

Military offset obligations in the top twenty markets are expected to increase from $36.3bn in 2012 to $49.6bn in 2021. The report predicts that seven of the top twenty countries to engage in offset practices over the next ten years will be from Europe.

Why Vietnam’s technology transfer rules are failing

Foreign companies undergoing civil sector contracts in Vietnam have to explain to the state management agencies the technologies they employ. They must also prove that the technologies are fit for purpose.

15 April 2013

Volume 31, issue 8

Headlines

Main headlines from this issue

Norway says Lichtenstein vetoed decision to transpose defence directive; Lichtenstein denies accusation

Norway believes that Liechtenstein blocked its implementation of the defence directive at a recent meeting of members of the European Economic Area. The corollary is that Norway’s offset policy remains in play.

South Africa: localisation programmes and ‘BEE’ essential for new nuclear power plants

Nuclear companies seeking to sell their reactor designs to South Africa should ensure that they offer localisation programmes incorporating black economic empowerment (BEE).

Indonesia’s Law On The Defence Industry places obstacles in industrial participation

The new law obliges the government to prioritize the domestic industry in arms procurement. For foreign contractors, partnership with industry will be imperative but a lack of policy guidelines makes a cautious approach crucial.

Portugal’s transposition of the directive was incomplete – receives warning

Portugal has only put part of the required provisions in place. The EC has given Portugal two months to put an end to the violation.

New Brazilian law regulates partnerships and technology transfers

The new regulations are meant to oblige foreign companies interested in bidding to build plants in Brazil or commit to the transfer of technology to Brazilian counterparts.

01 April 2013

Volume 31, issue 7

Headlines

Main headlines from this issue

Annual Report to Congress on the Impact of Offsets in Defence Trade shows more offset agreements with more countries than ever

The 17th Annual Report to Congress on the Impact of Offsets in Defence Trade shows an astonishing rebound in the number of offset agreements signed with U.S. defence contractors in 2011. In spite of the restrictions in place with the European Community, the report also records the highest number of countries involved in offsets.

“Algeria is forming a defence offset policy”

Unconfirmed reports suggest that Algeria is in the process of forming a defence offset policy. The objective is to increase the country’s indigenous manufacturing capability.

Canada’s military spending must create economic opportunities

The Canadian government in its federal budget plans endorses a report that urged the government to use the hundreds of billions of dollars of projected military spending for a job-creation strategy for the Canadian defence industry.

Have China’s technology transfer demands scared off Russia from deal of the decade?

China's new leadership has agreed to buy 24 Su-35 fighter jets and four submarines from Moscow, China’s state media said. But the Russian media has denied the purchase, saying no agreement had been reached.....

GOCA conference may have to have breakout sessions

GOCA’s ‘Spring Industrial Partnership Conference’ at Boca Raton, Florida, looks set to break new ground with presentations on at least seventeen countries. So great is the number of presentations that breakout sessions will be used to accommodate them all within the time available.

15 March 2013

Volume 31, issue 6

Headlines

Main headlines from this issue

India’s offset policy at a crossroads?

Under a proposed “Buy and Make (Indian)” plan, Indian companies, including those in the private sector, will receive preference in all purchase contracts; procurement from foreign suppliers will be the last option. Indian companies are likely to seek foreign joint venture partners.l..... The government is also likely to disqualify software and consultancy services from offset credits.

CADSI supports Canada’s national shipbuilding procurement strategy; others less sure

Canada’s C$35bn national shipbuilding programme has ignited a debate about the effectiveness of its provisions. CADSI rejected the notion that Canada was likely to only accomplish assembly, with no additional benefits for the industry. Tim Page told CTO that that was not the intention of the federal government and that Canada’s marine industrial sector is “ready to go” to support the government’s initiatives.

More smears mire South Africa’s Commission of Inquiry

The Seriti commission probing allegations of corruption in the South African government's R70bn arms deal and the fraudulent offset contracts has suffered a further blow to its credibility…. Judge Seriti has indicated that the commission had received no evidence implicating the ANC in the matter, which observers find incredible.

Chávez death could rock barter deals across the Caribbean and Cuba

The demise of Venezuela's president, Hugo Chávez, raises questions over the future of generous subsidies that Venezuela provides Cuba under a countertrade programme. Venezuela provides oil to Cuba on subsidised terms in exchange for Cuban professional services, mainly doctors, teachers, and healthcare workers.

01 March 2013

Volume 31, issue 5

Headlines

Main headlines from this issue

Canada amends IRB policy to reward risk with multipliers

It has taken the Canadian government four years, but the last of seven phased policy changes to the Industrial and Regional Benefits policy has now been settled. The changes introduce a muscular multiplier-led approach to SME involvement in the IRB process.

UAE moves from transactional relationships to a strategic partnering approach

With the significance of partnerships as their central theme, Emirati speakers dwelt on the importance of corporate enterprise between UAE entities and foreign contractors for the future development and support of their military assets. There was also talk of mergers and acquisitions.....

Poland’s new law will be sneaky – “expect offsets”

Significant changes to Poland’s public procurement law came into force on February 20th, bringing the country into line with EC directive 2009/81/EC. \They say there will be no offset but there will be you can be sure.\"

INDIA: USIBC petitions for 76 percent FDI cap and civil offsets

The U.S.-India Business Council (USIBC) has written to Finance Minister P. Chidambaram requesting an uplift of India’s FDI cap in the defence sector from the present 26 percent to 74 percent. The letter was written by USIBC President Ron Somers.

Estonia revises offset guidelines, lowers threshold

Estonia has transposed the defence directive into national law and implemented revised offset guidelines with a significantly lower threshold.

15 February 2013

Volume 31, issue 4

Headlines

Main headlines from this issue

Poland: The new procurement process is explained

Poland has transposed the defence directive into national law. From February 20 most military procurements will be subject to the country’s Public Procurement Law which prevents the Polish government from obliging contractors to deliver offsets. That at least is the theory....

Why does the EDA offset web portal use bad language?

The European Defence Agency web site is meant to bring transparency to the offset policies of all 26 subscribing members to the Code of Conduct by giving details of each country’s policies. DKF chairman Gerd Müller discovered incoherent language and implausible statements....

Directive 2009/81/EC: Netherlands face hefty fines; UK’s new policy under investigation

Of 27 EU member states only four — Denmark Greece Spainand Luxembourg — transposed the defence procurement directive 2009/81/EC on time. Two countries Slovenia and the Netherlands have not yet officially notified transposition measures.

Denmark continues to ask for offsets – but can they?

Denmark has set a 100 percent offset requirement in an RfP for new APCs and will also demand offsets for both the helicopter and the forthcoming fighter aircraft requirements. Danish sources and foreign contractors speak of a slew of defence contracts awarded recently with offset clauses.

Iran establishes private sector barter committee

Iran has established a barter committee for the private sector in response to new U.S. sanctions.

01 February 2013

Volume 31, issue 3

Headlines

Main headlines from this issue

Switzerland: Europe’s last citadel prepares for wide-ranging Swedish benefits

Switzerland, almost alone among European countries unencumbered by EC injunctions, has clinched a major offset commitment from Saab. The Swedish firm will undertake direct and indirect offset commitments to Switzerland equivalent to 100 percent of supply contract value for the delivery of 22 Gripen combat aircraft.

Transparency International exposes corruption risk in government offset processes

Thirty percent of governments that use offsets fail to impose any due diligence or auditing requirements on their contracts. Transparency concerning the contracts is very restricted at best in 60 percent of these countries while the financing package.....

India: DPP 2013 will be released by April

India’s MoD is still in the process of revising its Defence Procurement Procedure (DPP), said India’s Defence Minister AK Antony. The revised DPP will apply from the next financial year, beginning April 1st.

South Africa: Arms deal judge loses patience as offset inquiry nears

A war of words is breaking out between members of South Africa’s Commission of Inquiry into the country’s 1990s arms deal involving Judge Willie Seriti, head of the commission, Terry Crawford-Browne, the activist whose crusade against corruption brought the commission about, and Norman Moabi, a dissenting member.

RUSI: India’s offset policy has “acute problem with regulatory environment”

If India wishes to use offsets to create a strong indigenous defence industry it needs to foster a transparent and streamlined regulatory environment, says the Royal United Services Institute (RUSI), a British independent think tank engaged in defence and security research.

15 January 2013

Volume 31, issue 2

Headlines

Main headlines from this issue

Turkey’s civil offset ambitions turn serious. “Offset is good for your health”

Turkey is evaluating all options but is on course to introduce a mandatory civil offset policy for major purchases for the healthcare, transportation, and energy sectors. The Ministry of Health has already prepared a draft offset guideline for approval.

South Africa’s cabinet signs off new NIP alliance with CSDP

South Africa’s cabinet has accepted a policy review of the National Industrial Participation Programme (NIPP). The review aligns the NIPP with the Customised Sector Development Programme (CSDP), aimed at state-owned companies in the civil sector.

Sandeep Verma: Offset guidelines put Indian bidders under unfair discrimination

A defence expert is claiming that Indian bidders for domestic defence procurements face discrimination as a result of an oversight in DPP 2008. The policy was written at a time when offsets were not well understood by policy-makers in India.....

Canadian policy review calls for benefits plan to be given weight in the selection criteria

A review of Canada’s aerospace industry suggests that the current Industrial Regional Benefits (IRBs) policy is falling short of its objectives.....

Mexico’s offset initiative suspended

Mexico’s plan to roll out its defence offset policy has been suspended pending the appointment of ministers by the administration that took over in December.

01 January 2013

Volume 31, issue 1

Headlines

Main headlines from this issue

A law suit and a mysterious replica offset company bring new problems to Kuwait’s NOC

Othman Al Quraishi, who was sacked soon after his appointment by the National Offset Company’s former chairman, has launched an action for unlawful dismissal and abuse of authority. He seeks reinstatement and damages. Separately, his law firm has drawn to the attention of the Minister of Finance and the Kuwait Investment Authority, owners of the NOC, copies of documents that have come into its possession suggesting that a replica company was set up in suspicious circumstances.

Reluctant Poland prepares for change – and EC aggravation

At the beginning of November 2012 the president of Poland approved an amendment to the Public Procurement Law which comes into force on March 1st. How Poland will interpret its responsibilities under the directive is far from clear.....

Russia to review contracts, lands military and civil industrial participation programmes from Italy

Russia plans to review all the contracts concluded on the import of armaments and military equipment. Although the agreements may not be cancelled, they will be “corrected”.....

China’s “Opportunist” barters are damaging Iran’s domestic industries

A report prepared for the U.S -China Economic and Security Review Commission (USCC) on China’s relationship with Iran finds that Tehran sees China’s approach as an opportunist attempt to exploit Iran’s economic isolation.

Events Diary 2013 is in issue CTO 1

Volume 2012

15 December 2012

Volume 30, issue 24

Headlines

Main headlines from this issue

India: “Scrutiny of offset proposals is going to be significantly enhanced” – Taxes can be taxing

Companies selling to India can expect closer scrutiny of their offset proposals — and a closer relationship with their tax advisers suggested Dhiraj Mathur Executive Director of Pricewaterhouse Coopers (India).....Manufacturers of defence equipment will need a license. Unfortunately it’s not clear what “defence equipment” really means.

How to plot a course for joint ventures in India

Sunil Seth Senior Partner with the Delhi law firm Seth Dua & Associates considered the implications of having to enter into joint ventures with Indian partners and recommended negotiating the standard offset contract as a way around the policy’s lack of clarity.

Canada: seventy-two companies have won contracts on JSF

Industry Canada has announced that as of July 201272 companies in Canada have secured US$438m in contracts ahead of the troubled F-35 Joint Strike Fighter Programme.

India: ‘Institute for Defence Studies and Analysis’ calls on DOMW to get its act together

/* Style Definitions */ table.MsoNormalTable {mso-style-name:\Table Normal\"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-parent:\"\"; mso-padding-alt:0cm 5.4pt 0cm 5.4pt; mso-para-margin:0cm; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:10.0pt; font-family:\"Times New Roman\"\"serif\";}India’s Institute for Defence Studies and Analysis has declared that four months after the new defence offset guidelines came into force interest generated by the guidelines seems to be ebbing having delivered few achievements.

The pleasures of developing a programme in India

Michael Messina VP Industrial Cooperation Programmes BAE Land and Armaments Systems (USA) told the conference the complexity of the offset requirements makes an early start vital.....

01 December 2012

Volume 30, issue 23

Headlines

Main headlines from this issue

South Africa: New Armscor board to clean up DIPs

In a pejorative commentary on its predecessors the Armscor board has declared that it is not satisfied with Armscor’s management of South Africa’s Defence and Industrial Participation (DIP) agreements. One company has to date failed to discharge its obligation while others seemed to have chosen for themselves the areas and manner in which to discharge theirs.

Taiwan’s ICPO rejects foreign criticism of its offset practice

The Deputy Director of Taiwan’s Industrial Cooperation Programme Office (ICPO) Jesse Ho has rejected as unwarranted the concerns raised by some foreign defence contractors that the offset selection and management processes are seriously flawed.

India: “Obligors took advantage of weak monitoring” – expect DPP 2013 in January

India’s Comptroller and Auditor General has found that in five contractsworth R3410 crore the government accepted \"ready-built equipment\" as offsets bringing in no added value.

Offsets may be a face-saver for FMS sales to Korea

“Perhaps we won't get a discount but we can at least ask for more attractive offset deals.”

Poland AND Patria to go head-to-head in court

Finnish defence contractor Patria is resorting to international arbitration to resolve a dispute concerning offset obligations with the Polish government. Patria faces severe non-performance penalties if it loses.....

Austria: 200 percent offset deal lands EADS in double trouble

A €1.75bn contract with Austria in 2003 for the purchase of fifteen Eurofighter jets from EADS is heading for trouble over the offsets that were supposed to have been fulfilled.

15 November 2012

Volume 30, issue 22

Headlines

Main headlines from this issue

Nuclear sales to China generate direct offsets, danger of proliferation…and profits

Peter Felton gave a blow-by-blow account of the painful difficulties faced by Areva when the French firm built a nuclear power station in China. The challenges ran from…to the risk of shared technology spreading to countries such as Pakistan.

China’s defence offsets: when influence overtakes profit

China’s defence offset programmes are varied customized and intended to spread influence as much as generate profit……China adopts more of a peer-to-peer alliance rather than the buyer/seller relationship.

China: Localisation and technology transfer…on a railway contract

The Ministry of Railways reminded Alstom of the size of their market and made it clear that “if you are nice to us you will get it.” Political pressure on the French government was again applied at the highest level.

Professor Krolikowski explains Poland’s position to CTO

Poland might have a problem with the defence directive but Hubert Krolikowski was not being controversial when he told CTO that Poland has no difficulty with the EC.......

Indonesia: Lots of ambition, not a lot of policy

A significant number of industrial participation announcements at the 2012 Indo Defence Expo and Forum in Jakarta brought sharply into focus Indonesia’s defence procurement ambitions but took them no further along the road to a formal IP policy.

Welcome back!

CTO Newsletter

Volume 2013

Main headlines from this issue

Australia legislates for civil offsets “Plan is a return to Soviet Russia with the commissars”

Kuwait: NOC challenges study that finds negligible offset fulfilment – “The limits of governance should be made clear”

India: DPP 2013 relegates “Buy (Global)” to the dumpster – receives mixed reaction

Frost & Sullivan forecasts significant growth for offsets – seven EC member states in top 20

Why Vietnam’s technology transfer rules are failing

Main headlines from this issue

Norway says Lichtenstein vetoed decision to transpose defence directive; Lichtenstein denies accusation

South Africa: localisation programmes and ‘BEE’ essential for new nuclear power plants

Indonesia’s Law On The Defence Industry places obstacles in industrial participation

Portugal’s transposition of the directive was incomplete – receives warning

New Brazilian law regulates partnerships and technology transfers

Main headlines from this issue

Annual Report to Congress on the Impact of Offsets in Defence Trade shows more offset agreements with more countries than ever

“Algeria is forming a defence offset policy”

Canada’s military spending must create economic opportunities

Have China’s technology transfer demands scared off Russia from deal of the decade?

GOCA conference may have to have breakout sessions

Main headlines from this issue

India’s offset policy at a crossroads?

CADSI supports Canada’s national shipbuilding procurement strategy; others less sure

More smears mire South Africa’s Commission of Inquiry

Chávez death could rock barter deals across the Caribbean and Cuba

Main headlines from this issue

Canada amends IRB policy to reward risk with multipliers

UAE moves from transactional relationships to a strategic partnering approach

Poland’s new law will be sneaky – “expect offsets”

INDIA: USIBC petitions for 76 percent FDI cap and civil offsets

Estonia revises offset guidelines, lowers threshold

Main headlines from this issue

Poland: The new procurement process is explained

Why does the EDA offset web portal use bad language?

Directive 2009/81/EC: Netherlands face hefty fines; UK’s new policy under investigation

Denmark continues to ask for offsets – but can they?

Iran establishes private sector barter committee

Main headlines from this issue

Switzerland: Europe’s last citadel prepares for wide-ranging Swedish benefits

Transparency International exposes corruption risk in government offset processes

India: DPP 2013 will be released by April

South Africa: Arms deal judge loses patience as offset inquiry nears

RUSI: India’s offset policy has “acute problem with regulatory environment”

Main headlines from this issue

Turkey’s civil offset ambitions turn serious. “Offset is good for your health”

South Africa’s cabinet signs off new NIP alliance with CSDP

Sandeep Verma: Offset guidelines put Indian bidders under unfair discrimination

Canadian policy review calls for benefits plan to be given weight in the selection criteria

Mexico’s offset initiative suspended

Main headlines from this issue

A law suit and a mysterious replica offset company bring new problems to Kuwait’s NOC

Reluctant Poland prepares for change – and EC aggravation

Russia to review contracts, lands military and civil industrial participation programmes from Italy

China’s “Opportunist” barters are damaging Iran’s domestic industries

Events Diary 2013 is in issue CTO 1

Volume 2012

Main headlines from this issue

India: “Scrutiny of offset proposals is going to be significantly enhanced” – Taxes can be taxing

How to plot a course for joint ventures in India

Canada: seventy-two companies have won contracts on JSF

India: ‘Institute for Defence Studies and Analysis’ calls on DOMW to get its act together

The pleasures of developing a programme in India

Main headlines from this issue

South Africa: New Armscor board to clean up DIPs

Taiwan’s ICPO rejects foreign criticism of its offset practice

India: “Obligors took advantage of weak monitoring” – expect DPP 2013 in January

Offsets may be a face-saver for FMS sales to Korea

Poland AND Patria to go head-to-head in court

Austria: 200 percent offset deal lands EADS in double trouble

Main headlines from this issue

Nuclear sales to China generate direct offsets, danger of proliferation…and profits

China’s defence offsets: when influence overtakes profit

China: Localisation and technology transfer…on a railway contract

Professor Krolikowski explains Poland’s position to CTO

Indonesia: Lots of ambition, not a lot of policy