CTO Newsletter

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.

Main headlines from this issue

Poland Declares War – First Test Case Looms Over the Directive

Poland will plead Article 346 as justification for a decision to demand offsets for a purchase of training planes. The government will state that it is not breaching the ban on offsets under EC Procurement Directive 2009 because the planes are essential for its security interests. Poland’s deliciously irreverent Ministry of National Defence has decided to take on the European Commission directly.....

The UK’s IP policy and the law of diminishing returns

The level of industrial participation in the UK is undergoing a sharp decline. The value of direct IP work placed in Britain for the fiscal year April 2010 to March 2011 was only £153m ($250m).

CSDP policy will oblige foreign OEMS to make South Africa a manufacturing hub

The next step in South Africa’s Competitive Supplier Development Programme (CSDP) will be to build a global manufacturing hub by implementing fleet procurements through strategic partnerships with a global original equipment manufacturer (OEM).

Japan wins domestic production offer for f-35

Lockheed Martin says it is willing to outsource some production of its F-35 Joint Strike Fighter to Japanese firms if the country's government decides to buy them.

Pakistan making serious efforts to attract foreign investors to BOT projects

Pakistan has decided to constitute a ten-member high-level inter-agency forum to pursue implementation of major infrastructure projects by the private sector, particularly involving international firms.

Main headlines from this issue

Barnier given an easy ride as he lays down the law on European offsets

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Michel Barnier the European Commissioner for Internal Marketstold a high level conference on ‘Defence and Security Industries and Markets’ that the EC should ban the “abusive and completely discretionary” use of Article 346 to demand offsets.

U.S. Dept. of Commerce examines the EC Directive, finds ‘security of supply’ conditions “remarkable”

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The briefing paper considers “the real risks to business” under the new Directive.

Philippines: outbreak of tenders wanting countertrade puts PITC back in the game

The Philippine International Trading Corporation (PITC) has resuscitated its countertrade policy and introduced obligations into some military and penal procurement tenders.

Malaysia calls for regional engagement in offset programs – barbed reminder to Indonesia on countertrade agreements

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Greece: indictment as witnesses shun and dissemble at submarine inquiry

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The parliamentary committee investigating the purchase of four German submarines by the Greek Navy a decade ago issued a unanimous decision for the ex-minister to be indicted on criminal charges of bribe taking and money laundering.

Main headlines from this issue

South Korea: DAPA refines its guidelines

South Korea’s Defence Acquisition Programme Administration (DAPA) indicated in February that it would soon be changing its offset guidelines. The Administration has now published an English translation. The translation however is not straightforward.

Australia: If it walks like a duck and quacks like a duck, it must be an offset!

Malcolm Taylor, CEO of C&I Projects Group, applied with significant effect an Australian offset version of the duck test in his address to the GOCA offset conference in Amsterdam last month. He also predicted that Europe, too, may soon start waddling like an Antipodean duck.

Greek parliament to investigate former defence minister over German submarine contract

An extraordinary plenary session of the Greek parliament voted 226-9 for a probe into the contract awarded in 2000 to Hellenic Shipyards of Greece and Germany’s HDWand Ferrostaal for four submarines. Fifteen legislators abstained.

Philippines details proposed BOT rule changes

The Philippines government has presented planned changes to the implementation of the 20-year-old Build- Operate-Transfer (BOT) law in a bid to move the centrepiece public-private partnership (PPP) program forward.

Brazil obliges Rolls-Royce to boost local content in commercial sector

Rolls-Royce will invest $120m in Brazil in 2011 and 2012 to raise the volume of locally produced components in the equipment it supplies to the oil and gas industry.