CTO Newsletter

Main headlines from this issue

Seventeen EU member states to receive final warning in January to transpose Directive; court beckons.

Only one third of EU Member States have so far transposed Directive 2009/81/EC into their legislation, more than four months after the August 21st deadline has passed.....

EDA’s advice on Article 346 is conspicuously unreciprocated by EC – rift opens

The EC has, in effect, rebuffed the advice given by the EDA’s Senior Officer for Industry and Market to Member States searching for a way to continue to ask for offsets.

“Greece was blackmailed into transposing the Directive”

Dr. Athanasios Potsis, Epicos’s Senior Manager for Industrial Cooperation, questioned the EC’s right to oblige his country to bring in the directive as part of the financial support package given to Greece.

GPA gives Israel given 16 years to phase out civil offsets

New terms agreed under the WTO’s Agreement on Government Procurement (GPA) have given Israel more than sixteen years to phase out its civil offset program and domestic content requirements.

Burkard Schmitt: “EDA Code of Conduct on Offsets is Irrelevant”

There is only one “at least theoretical possibility” to justify offsets, and that is under Article 346....

Main headlines from this issue

Azerbaijan goes global in search for industrial participation partners

Azerbaijan has announced the establishment of a military industrial complex to reduce dependence upon foreign military procurement. The country, whose defence industry was founded only in 2005, has also produced an informal policy that requires many basic defence procurements to demand domestic industrial participation.

India amends DPP 2011 – permits tier-1 discharge of offsets

.....The revision does not address the position with regard to earlier procurements or clarify whether the MMRCA program will qualify.

British MP rages at BAE’s decision to transfer Hawk production to India

A government MP has heavily criticised BAE Systems in the House of Commons. The company had announced that 3,000 jobs would be lost and a historic Hawk jet manufacturing plant would be closed because production in Britain was moving to India.

Algeria’s experiment with reciprocal investment may be short-lived

Tender documents issued by Algeria’s Ministry of Energy make some big demands but offer little in the way of detail. The tender obliges contractors to invest in Algeria by up to 20 percent of the value of the purchase contract…

Court backs Philippines government in Manila airport terminal BOT dispute

The losing party in a legal dispute to operate Terminal 3 at Manila’s airport is looking into other options after experiencing a setback, an official said.

Main headlines from this issue

Australia’s AICP goes into showbusiness

Brazil evaluates changes to its guidelines

Brazil’s local commercial content requirements are progressively more demanding

Italian / Korean competition for Israeli order turns nasty

South Africa: German law firm exposes Ferrostaal’s roll-call of dubious offset credits

Main headlines from this issue

Mexico committed to introducing formal offset guidelines – aspects revealed

Mexico is well on the way towards developing formal offset guidelines. Congressional approval is expected by April 2012. The policy aims to bring technology transfers and employment mostly for Mexico’s aerospace sector, with the slack taken up by commercial projects.

South Africa: “DTI granted Ferrostaal multiplier of 100”

South Africa’s Sunday Independent has ignited a new firestorm over the German Submarine Consortium’s offset program……

Leading personalities call for Australia to replace Industry Capability Program with an offset policy

Two leading Australian academics and the head of a defence trade association have called for the government to consider re-introducing an offset policy to encourage the development of SMEs and the capture of manufacturing skills.

Wikipedia gets offset all wrong —“if you’re not writing it, who is?”

Much of the fourteen pages of explanation on the site is old, inaccurate and over-stated…… Boles and Hyman took the middle road, a stab at humour followed by an attempt to bring the explanations back into focus.

Risk assessment worries Russia as it extends Venezuela $4bn credit line

Russia has agreed to extend a $4bn credit line to Venezuela through 2013 for defence spending in return for gaining access to heavy crude oil and offshore gas fields, according to President Hugo Chavez.

Main headlines from this issue

Indonesia earnestly negotiates technology transfer programs with wider range of countries

In a further illustration of the direction of Indonesia’s emerging industrial participation policy, the Indonesian Navy has declared that it will install C-705 missiles to be jointly produced by Indonesia and China.  Indonesia and Russia have begun exploring the possibility of joint production.....

Finland: thresholds die, some SMEs may follow

Finland has removed its offset threshold. Tuija Karanko, Secretary General of the Association of Finnish Defence and Aerospace Industries, told conference delegates that the offset trigger is gone. “We had a threshold for €10m.  We don’t have that anymore,” she said.

The EC regards Norway’s traditional offset approach as unacceptable

Knuth Herrefoss, Senior Adviser to the Norwegian Defence Logistics Organisation (NDLO), told the conference that the Norwegian authorities do not practice traditional offset. “We prefer indirect industrial cooperation – and the directive regards that as one of the worst things that you can do.”

Suddenly “a kinder, gentler, Ministry of Defence” rises in Greece

A Parliamentary Committee must now review and approve all Greek defence procurements, and a Court of Audit will monitor all phases of the procurement, not just the contract award.....

Thailand: Thaksin urges Yingluck to use barters to pay for water management system

Thailand’s former Prime Minister, Thaksin Shinawatra, has called for the government, led by his younger sister, Prime Minister Yingluck Shinawatra, to......

Main headlines from this issue

Poland’s response to the EC directive: “The new regulations will be even more demanding than before”

Poland’s discomfort with the implementation of Directive 2009/81/EC has given rise to significant distress for its government and for its industries. What is clear is that sellers pitching to Poland will have to ‘Polonise,’ and without a promise to build in-country the probability of selling is low.

Saudi Arabia introduces banking and ponders penalties

A liberal credit banking facility has been introduced as one of many significant changes to the Saudi Arabian offset regulations. The changes came into play in September. The volumes to be executed are increased, multipliers are more specific, and .......

Canada: primes to fulfil five percent of IRB obligation with investments derived from priority technology list

Canada’s offset business is booming. The country currently has more than 60 defence and security procurements subject to IRB — the Industrial and Regional Benefits policy that manages offset.  The IRB is now “one meeting away” from being able to release the sixth change.

EDA on Article 346: “It is enough just to show that there is a link”

“[Member states] do not have to explain their national security interest, and they do not have to provide any further information to say why there was this link,” the envoy said. “It’s enough just to show that there is this link.”

Pakistan raises currency swaps and trading accounts with South Korea

President Asif Ali Zardari of Pakistan told the Korean Ambassador the two countries should seriously consider starting barter trade and a currency swap agreement to facilitate trading in local currency.

Main headlines from this issue

Taiwan: offset credit banking faces closure

Taiwan is planning to revoke its offset credit banking facility with effect from January 1, 2012. The decision, which has yet to be formally approved would apply to....

South Korea’s new ‘Defence Industry Development Council’ to focus on offsets

The Korean government has launched a new planning body, the Defence Industry Development Council, tasked with orchestrating offset projects, boosting exports of military equipment, and .......

India announces return of the rupee trading account

India is to set up a rupee trading account to make payment to exporters for goods sold to Iran. Companies importing goods from Iran will pay into this account, creating a mechanism where only the net amount will need to be paid over.

China pressures GM to transfer engineering secrets

The Chinese government is refusing to let General Motors’ new car, the Chevrolet Volt, qualify for subsidies unless the company agrees to transfer the engineering secrets for one of the Volt’s three main technologies.

Spain strikes out at EC directive – “Code of Conduct is enough”

Manuel García Ruiz, Director of Spain’s Industrial Cooperation Directorate, has launched a strong attack on Directive 2009/81/EC. Speaking in a personal capacity he argued that a number of issues remain unresolved .......

Main headlines from this issue

Blenheim restructures – new board and listing to be announced

Blenheim Capital, a provider of structured finance offset solutions, is emerging from a challenging period with a company reorganisation and expansion into new markets. Discussions are under way with four banks that are looking to take a slice of the equity.

Bulgaria to rely on Article 346, approves offset fund

Bulgaria, which is among a significant group of European countries that regards the EC Directive 2009/81 as if it were a vial of smallpox, has decided in principle to cite Article 346 as grounds for requiring offsets for most future defence procurements.

In the nick of time – IP required for British Chinook purchase

By signing the contract award for the purchase of fourteen new CH-47 Chinook helicopters just before the August 21 application date for Directive 2009/81/EC, British Defence Secretary Dr Liam Fox has qualified the £1bn ($1.64bn) purchase for industrial participation.......

Troubled Vincent Tchenguiz revives offset model

Vincent Tchenguiz’s Consensus Business Group has launched a $60m ‘clean technology’ fund in South Korea to invest in renewable energy businesses at the request of the governments of Korea and Israel. The fund does not yet qualify for offset credits, but that is certain to be addressed down the line, we are told.

Poland delighted with offset projects outcome

Poland signed sixteen offset contracts worth more than $8bn by the end of 2010, Deputy Prime Minister and Economy Minister Waldemar Pawlak disclosed.

Main headlines from this issue

Greece says EC Directive has no influence on ‘offset contracts of a new type’

The saga of Greece’s expired offset contracts has taken an unexpected turn. A senior MoD executive has told CTO that the ministry does not regard the EC Directive prohibiting offsets as having any influence on the country’s resolution of the problem.

“Be prepared – global financial crisis heralds return of countertrade”

Economic and financial volatility in the U.S., Europe and parts of Asia, may lead to the rise of various forms of countertrade in the global market, according to Prof. Michael Czinkota...... after decades of dormancy, countertrade is on track to become a vital part of the global market.

Indonesia’s emerging offset policy: “forget Australia and India, emulate Singapore”

Indonesia’s preparations for the launch of its first national offset policy are misdirected, says a group of Asia-based academics. Instead of looking at the offset policy experiences of Australia and India it should consider instead crafting an offset policy appropriate to its own unique conditions.

Malaysia: insider rates MIGHT’S offset initiatives, knocks government ministers

A Canadian who has recently taken a position at MIGHT claims to have had sat ringside to some of the highest level discussions between industry heavyweights like Boeing, EADS and Rolls-Royce, and the Government of Malaysia.

Main headlines from this issue

As the EC Directive approaches no-one knows how to cope

The EC has rejected reports that the European Commission might delay the implementation of Directive 2009/81/EC because so many member states are not ready for the changes the Directive demands. CTO has been informed that.......

CTO’s European Community Review

Details of every member state’s progress in complying with the Directive 2009/81/EC

Comment – the EC Directive – Europe’s lost opportunities will benefit every global competitor

The challenge with Directive 2009/81/EC is to find signs of intelligent life..... Some countries approved the Directive because it did not mention offsets......

Transparency International: “EC Directive is an opportunity to make offsets transparent”

With the transposition of the EC Defence Procurement Directive into national law comes an ideal opportunity for member states to ensure that offsets are finally made transparent and accountable to the public, says Julia Muravska of Transparency International UK.

Portugal’s Offset Commission rudderless as Pedro Catarino is posted to the Azores

The President of Portugal’s Offset Commission has been appointed Portugal’s official representative in the Azores, a speck of volcanic rocks in the North Atlantic Ocean.

Main headlines from this issue

Australia’s “listening minister” announces seven AIC program amendments

Australia’s Minister for Defence Materiel, Jason Clare, has moved to reassure disaffected SMEs by introducing seven changes to the Australian Industry Capability (AIC) program. The AIC is Australia’s equivalent to an industrial participation policy.

Turkish credit delays raise spectre of Greek debacle

Concerns that Turkey may be replicating the Greek route to offset credit shenanigans seem to be misplaced.....

India: civil aerospace product list eligible for offsets is changed

India’s MoD has amended the list of civil aerospace products that are eligible for offsets, removing technical manuals, raw materials, and training. The ministry has added .....

Indonesia’s pursuit of fighter plane indigenisation is a huge gamble

Indonesia has taken a huge gamble in a deal with South Korea by agreeing to manufacture the KFX, a new type of fighter plane, according to Connie Bakrie, a defence analyst at the University of Indonesia. The project could well end in disaster, he warned.

Malaysia: MIGHT seeks higher technology role through industrial participation

Malaysia must leverage international partnerships in global science, technology and innovation to gain a competitive advantage in areas of high technology, declared MIGHT Joint Chairman Tan Sri Dr Ahmad Tajuddin Ali.

Main headlines from this issue

Mexico’s offset ‘road map’

The Mexican government has produced a road map for the development of the country’s aerospace industry. The plan recommends the establishment of an offset policy to provide benefits for both the defence and civil sectors......

Argentina implementing a counterpurchase policy to head off trade imbalances

Argentina is demanding that corporations operating in the country sell Argentinean products overseas for a value higher than the goods introduced to the local market.

*Have You Seen Hlognwane?

Pressure builds as new cache of documents link BAE/Saab to South Africa’s IP scandal

Drama tends to follow drama whenever South Africa’s opposition party and the domestic press get their teeth into a new revelation about the country’s 2000 Strategic Defence Package (SDP).

Boeing strengthening presence in Morocco through partnerships

Boeing is stepping up its relationship with Morocco in anticipation of significant orders from Royal Air Maroc, the national airline. Boeing will conduct a trade summit in Casablanca .....

Norway wants 100 percent IP for four F-35s

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Rear Admiral Arne Røksund said that Norway wants a return on investment on its purchase of four F-35 Lightning II training aircraft equal to the amount of money it is putting into the aircraft.