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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.

01 November 2012

Volume 30, issue 21

Headlines

Main headlines from this issue

Kuwait’s ‘Mary Celeste’ is rescued – new team in charge of the National Offset Company?

In yet another round of changes the Chairman and the Board members of Kuwait’s National Offset Company tendered their resignations to the Kuwait Investment Authority (KIA). According to an informed source who is close to the Finance Minister they were persuaded to do so. The new NOC Chairman is.....

Thai MoD opts for countertrade over offset — “We don’t know how to negotiate an offset.”

The Thai MoD set up an ad hoc committee to investigate forming a formal offset policy but decided that counterpurchase suits the country better.

Rosoboronexport offers Croatia more than 400 percent in offsets

A Russian political and economic delegation has visited Zagreb to press an offer of industrial and trade cooperation if Croatia chooses Russian aircraft as replacements for worn out Mig-21s.

ECCO launches offset academy

Industry experts and academics have joined forces to establish the first Academy for Countertrade and Offset. Courses will be conducted in English at the ESSEC International Business School near Paris.

Offset consultant held by Swiss federal police

A consultant whose offices in Switzerland were raided in April by Italian authorities as part of a probe into corruption in a helicopter deal in India has been arrested.

15 October 2012

Volume 30, issue 20

Headlines

Main headlines from this issue

How the UK’s new policy of ‘Industrial Engagement’ evades directive 2009/81/EC.

/* 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\";}“It’s different from anything we’ve ever done before.”

The UK has devised an ‘industrial engagement’ policy shrewdly designed to overcome the barriers on offset imposed by EU defence directive 2009/81/EC. The new policy is not linked to individual procurements......

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Saudi Arabia introduces non-fulfilment penalties

Saudi Arabia is introducing a non-fulfilment penalty. Meetings are currently under way with contractors to prepare them for changes to the offset guidelines.

ECCO conference will address offsets in China and the defence directive

ECCO the European Club for Countertrade and Offsetwill present on November 14^th-15^th a symposium that will focus on offsets in China a country that has neither formally sanctioned nor published an offset policy.

Alstom in pre-performance bid for railway contracts in Thailand

Alstom is conducting a feasibility study on establishing a plant in Thailand to manufacture electric train parts. The company expects to reach a conclusion on the proposal within a year.

Peru’s preference switches to direct offset

Peru is to change its requirement for a 40/60 percent direct/indirect fulfilment ratio to 80/20. The change reflects a reassessment of an offset policy launched only in August 2010.

01 October 2012

Volume 30, issue 19

Headlines

Main headlines from this issue

European Commission calls time – court asked to fine four member states

The European Commission has asked the Court of Justice in Luxembourg to fine Poland, the Netherlands, Luxembourg, and Slovenia for failing to fully implement Directive 2009/81/EC, the directive regulating offset practices.

American and Indian perspectives on India’s new guidelines are broadly positive – DOMW chief named

To say India moves goalposts in the middle of the game is a charitable description of what’s been happening with the offset guidelines, said Ron Somers, President of the U.S.-India Business Council. “It’s been an evolving programme.”…. The key role of Joint Secretary in the DOMW will be taken initially by…

Industry Canada introduces a demanding SME requirement

Most of the offset programmes now under way in Canada will have a 15 percent requirement for SME transactions which obligors will find difficult to sustain. Prime contractors are to provide a minimum of 5 percent of the value of their IRB activities with......

Differences over Korean offset policy reach impasse

A rather heady panel discussion on the different perspectives of the South Korean offset programme divided conference delegates into two camps; those who supported the rolling out of a chunky inventory recommending changes; and those who considered that so detailed a list placed the Koreans in a disagreeable face-saving situation.

Australia seeks Japanese submarine technology

Australia is considering the use of Japanese technology to power its new submarine fleet under a weapons technology swap deal announced by the two countries.

15 September 2012

Volume 30, issue 18

Headlines

Main headlines from this issue

The UK’S new offset policy – where ‘encouragement’ is a persuasive consideration

The MoD’s own definition of its policy relies on the same threads in the DSIEP that existed beforehand. This is what the definition says with the ‘threads’ in italics.....

Taiwan: more directs, no credit banking, and a frustrating approval process

Credit banking has been discontinued and credits can’t be transferred between the armed services. A negotiation task force has recently been set up. Pre-project approvals have started though not as yet final approvals to begin implementation.

Territorial dispute with China revives Philippines’ countertrade programme

The settling of a difference of opinion over the meaning of ‘best efforts’ and a row with China are expected to result in a surge of countertrade agreements with defence contractors selling to the Philippines.

Mexico homes in on a policy to support the aerospace sector

Mexico is preparing an offset policy to support the country’s defence and aerospace industries through technology transfers. The goal is to boost employmentand to establish the aerospace sector as a global force in exports by 2020. The plan to roll out the offset policy across the board including all federal procuring agencies has been dropped.

Norway remains beyond the Directive’s scope – for now

Norway is blessed; it is not a member of the European Union. The EU Commission regards Directive 2009/81 EC as relevant for Norway but the EEA committee is the body that decides and they have not yet placed the directive on their agenda.

01 September 2012

Volume 30, issue 17

Headlines

Main headlines from this issue

“Bull on the loose” at Kuwait’s NOC

Chairman tramples another CEO

The National Offset Company’s Chairman, Anwar Abdul Rahman Al-Jawdar, has fired the newly appointed CEO, Othman Al Quraishi. The warm weather putsch took everyone by surprise, occurring well within Mr Quraishi’s 100 day trial period. No reason was given.

Poland surrenders!

Polish Defence Minister Tomasz Siemoniak has confirmed that an additional five C-295M transport aircraft ordered on June 29th 2012 from Airbus Military do not have any offset arrangements.

Japan’s F-X evaluation: Defence White Paper says all three bidders fared well in industrial participation

Japan’s annual Defence White Paper dedicates several pages to explaining the decision to select the F-35A for its F-X fighter requirement. All three bidders fared well in industrial participation.

U.S. defence firms lobby for an ASEAN-wide defence offset programme

A major grouping for U.S. businesses has proposed the creation of an ASEAN-wide defence offset programme to spur technology transfer while helping to boost U.S. arms sales to the region.

EDA puts out tender to assess offset impact on EDTIB

The European Defence Agency has invited proposals for a ‘Study on the Impact on the European Defence Technological and Industrial Base (EDTIB) of Defence Offsets Requested by Third Countries.’

15 August 2012

Volume 30, issue 16

Headlines

Main headlines from this issue

UAE: Duel in the sun as passions boil over

The Tawazun Economic Council has robustly rejected criticisms raised by several prime contractors about the quality of its work. The Council has instead hit back at contractors “who are here to just sell and leave.”

Oman’s new offset policy introduces input and output credits

Revisions to Oman’s ‘Partnership for Development’ offset policy have been approved and await a Royal Decree before details are released. Oman will appoint a PFD Board of Governors under the Ministry of Commerce and Industry and create a dedicated offset organisation.

India looks to private sector to support DOMW – agency to expand

An Additional Secretary will be appointed as its head with a Joint Secretary and six full-time director-level officers under him.....

CSIS finds India’s new offset rules lacking in vision, calls for a National Commission on Offsets

Amidst all the back patting a member of one organization has looked at India’s new offset rules considered the wider picture — and found them wanting.

Opposition promises to scrap Venezuela’s oil barters

The opposition candidate in Venezuela's upcoming presidential election said he will scrap all deals that subsidize oil exports to other countries in the region or under which oil is bartered for other goods or services.

01 August 2012

Volume 30, issue 15

Headlines

Main headlines from this issue

India revises the offset policy – DOMW replaces DOFA

And finally it happened! India has addressed many of the long-standing concerns that have been troubling obligors. The MoD has introduced a revised offset policy. A single organisation is to ensure a smooth post-contract offset process; at least, that is the theory.

UK signs first industrial participation commitment under its new policy

Boeing has become the first foreign prime contractor to sign up to a new British industrial participation policy. The policy encourages overseas-based companies to make a firm commitment to continue business activities in the country for the long term....

Blenheim returns to prime time with Sharia-compliant offset solutions

Blenheim Capital is emerging from a tough year with a new source of funding that will allow it to introduce an original financial model. Terms have been agreed for a Strategic Partnership Agreement with the Qatar Islamic Bank. The deal will provide Sharia-compliant Islamic finance within Blenheim as an offset solution.

Mexico prepares to roll out a formal offset policy across the board

ProMexico, the Mexican government’s trade and investment arm and author of a detailed offset policy road map, has devolved responsibility for launching the policy to the Ministry of Economy. The ministry will be the management authority.

Malaysia: BAE’S Typhoon pitch promises a wealth of industrial benefits

The Eurofighter consortium, led by BAE Systems, is ready to invest $2bn in offset programmes designed specifically for Malaysia within the next five years if the country selects the Typhoon.

15 July 2012

Volume 30, issue 14

Headlines

Main headlines from this issue

Indonesia’s offset policy trapped by red tape

/* 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\";}The Indonesian MoD has still not released official details of its new offset policy. A number of problems in formalising offset procedures including bureaucratic red-tape continue to delay publication…. The future offset policy will oblige foreign suppliers to…

Morocco demands more industrial participation – with a policy that lacks detail

Morocco is increasingly inserting industrial participation clauses into international tenders for both military and civil purchases. … the requirement is mandatory when mentioned in the RfP and points will be allocated as part of the qualification criteria.

European Commission says one quarter of Member States have yet to fully transpose the directive

The European Commission has informed CTO that seven member states face possible infringement proceedings. They are....

Bombardier adopts new approach to Chinese market

Bombardier is trying a new approach to gaining further access to China’s rail market. The company plans to sell the blueprints as well as build the trains.

Value of offset obligations to reach $500bn by 2016

A study by Avascent a Washington DC-based service providersuggests that governments will have imposed about $500bn worth of global offset obligations on foreign aerospace and defence companies through 2016.

01 July 2012

Volume 30, issue 13

Headlines

Main headlines from this issue

Inconsistencies in Brazil’s approach to offsets examined – Navy sets penalties at 5 percent per month

Presentations at the GOCA/ADS Global Industrial Cooperation Conference in Izmir in May and the subsequent ECCO conference held during the Eurosatory exhibition in Paris in June were meant to depict an intimate relationship across Brazil’s armed forces. Instead, the conferences exposed the country’s approach to offsets as fractured and inconsistent.....

Norway approves BAE Systems contract with 100 percent offset

BAE is to initiate industrial cooperation with Norwegian industry equal to the value of the “main body” of the project.

India: Leaked document says some obligors receive gratuitous offset credits

A document leaked to India’s Business Standard newspaper suggests that the MoD is violating its offset regulations by awarding unjustified credits. The obligors identified in the document include Finmeccanica, Fincantieri, and Rosoboronexport.

EC commences infringement proceedings against Estonia

The European Commission gave Estonia two months to notify it of the measures the country is taking to transpose EU Directive 2009/81/EC on defence procurement.

Opportunity beats risk despite complex arrangements and long memories

“Have you turned down a deal because you were worried about that risk?” asked an official at the Bloomberg Government Defence Conference on Defence Globalisation. The answers were instructive.

Welcome back!

CTO Newsletter

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

Main headlines from this issue

Kuwait’s ‘Mary Celeste’ is rescued – new team in charge of the National Offset Company?

Thai MoD opts for countertrade over offset — “We don’t know how to negotiate an offset.”

Rosoboronexport offers Croatia more than 400 percent in offsets

ECCO launches offset academy

Offset consultant held by Swiss federal police

Main headlines from this issue

How the UK’s new policy of ‘Industrial Engagement’ evades directive 2009/81/EC.

Saudi Arabia introduces non-fulfilment penalties

ECCO conference will address offsets in China and the defence directive

Alstom in pre-performance bid for railway contracts in Thailand

Peru’s preference switches to direct offset

Main headlines from this issue

European Commission calls time – court asked to fine four member states

American and Indian perspectives on India’s new guidelines are broadly positive – DOMW chief named

Industry Canada introduces a demanding SME requirement

Differences over Korean offset policy reach impasse

Australia seeks Japanese submarine technology

Main headlines from this issue

The UK’S new offset policy – where ‘encouragement’ is a persuasive consideration

Taiwan: more directs, no credit banking, and a frustrating approval process

Territorial dispute with China revives Philippines’ countertrade programme

Mexico homes in on a policy to support the aerospace sector

Norway remains beyond the Directive’s scope – for now

Main headlines from this issue

“Bull on the loose” at Kuwait’s NOC

Chairman tramples another CEO

Poland surrenders!

Japan’s F-X evaluation: Defence White Paper says all three bidders fared well in industrial participation

U.S. defence firms lobby for an ASEAN-wide defence offset programme

EDA puts out tender to assess offset impact on EDTIB

Main headlines from this issue

UAE: Duel in the sun as passions boil over

Oman’s new offset policy introduces input and output credits

India looks to private sector to support DOMW – agency to expand

CSIS finds India’s new offset rules lacking in vision, calls for a National Commission on Offsets

Opposition promises to scrap Venezuela’s oil barters

Main headlines from this issue

India revises the offset policy – DOMW replaces DOFA

UK signs first industrial participation commitment under its new policy

Blenheim returns to prime time with Sharia-compliant offset solutions

Mexico prepares to roll out a formal offset policy across the board

Malaysia: BAE’S Typhoon pitch promises a wealth of industrial benefits

Main headlines from this issue

Indonesia’s offset policy trapped by red tape

Morocco demands more industrial participation – with a policy that lacks detail

European Commission says one quarter of Member States have yet to fully transpose the directive

Bombardier adopts new approach to Chinese market

Value of offset obligations to reach $500bn by 2016

Main headlines from this issue

Inconsistencies in Brazil’s approach to offsets examined – Navy sets penalties at 5 percent per month

Norway approves BAE Systems contract with 100 percent offset

India: Leaked document says some obligors receive gratuitous offset credits

EC commences infringement proceedings against Estonia

Opportunity beats risk despite complex arrangements and long memories