CTO Newsletter

Main headlines from this issue

Embraer’s agreement with China’s CDB masks a fight between orders, deliveries and offsets

Embraer has agreed terms for CDB Leasing Co. to finance the leasing and purchase of aircraft for up to $2bn over three years. Without the agreement Embraer would not have been able to sell more aircraft to China...

Switzerland: Armasuisse forced into private sector partnership – Multipliers swept away

Armasuisse, the body responsible for managing Switzerland’s offset programmes, has been formally relieved of some of its functions. It will now share responsibility with two trade associations. The guidelines have been revised and multipliers will no longer be awarded.

Local content discrimination in South Africa rattles Areva

Deconstructing the title might have caused a few headaches, but the meaning of a presentation on ‘Local Content: An Abstract Combinatorial Game of Strategy’ soon became painfully clear.

South Africa: “Controversy on the SDP has compromised fruitful debate” – “Shipbuilding was a missed opportunity”

Professor Richard Haines said that controversy surrounding the SDP has compromised fruitful debate and an exchange of ideas about the conception and implementation of NIPP and DIP. The relevant government agencies often feel under unfair fire.

“Industrial partnership programmes for Sub-Saharan Africa are long overdue”

Dov Hyman, CEO of Dolin International, decried the fact that very few countries in sub-Saharan Africa have developed industrial participation programmes...

Venezuela invites Uruguay to exchange goods for oil

\It would have been unimaginable only a couple of years ago to think that Venezuela would turn to Uruguay for support but times have changed.\"

Main headlines from this issue

Special Report on South Africa: Armscor raises the BEE barrier – COTS might escape DIP

Armscor, which manages Defence Industrial Participation (DIP) programmes on the defence side, is presently rolling out new policy initiatives. The new approach will require further support by foreign prime contractors for the Black Economic Empowerment (BEE) programme and close some loopholes in the offset guidelines.

DTI introduces ‘Direct NIP’

National Industrial Participation (NIP) projects, which used to be unrelated to the tender, must now match the policy of S. Africa’s Competitive Supplier Development Programme (CSDP).

BEE, NIPP and DIP – It really is a complex mix as the CSDP takes root

South Africa’s Competitive Supplier Development Programme (CSDP), a Department of Public Enterprises initiative (DPE), was introduced only a year ago and is now starting to take effect…

GEN. SCHÜR says SDP offsets “Brought incredible benefits to South African industry” – and Denel has reached break even

Maj. Gen. (ret’d.) Otto Schür, formerly Chief Director of Acquisitions at the Department of Defence, presently Denel’s Chief Technical Officer and very much an insider as events unfolded, told conference delegates …

A400M offsets were on ‘Best endeavours’ basis

Maj. Gen. Schür said the contract received for Denel Saab Aerostructures and Aerosud as well as for Saab Grintek Communications for certain components on the aircraft are one-on-one contracts under a “best endeavour” industrial participation clause.

Main headlines from this issue

SPECIAL REPORT: Portugal at war

First it was the Greek honey trap, now Portugal is at war. Weapons are involved but so far the battles have been restricted to legal offices—as well as police raids, wire taps, and public allegations of fraud. The source of the conflict is the German Submarine Consortium’s (GSC) alleged failure to discharge offset commitments. Germany’s MAN Ferrostaal is the prime contractor.

Russia to pay for Thai rice with crude oil or ammunition

Thailand’s Commerce Minister, Pornthiva Nakasai, has disclosed that Russia....

Brazil asks Israel to establish local defence production facilities

Israeli President Shimon Peres and Brazilian Defence Minister Nelson Jobim have discussed expanding the two countries’ economic cooperation.

Danish confederation of industries is upset with lockheed

The Danish Confederation of Industries (DCI) has written to the defence and industry ministers demanding guarantees that the Danish government insists on both industrial participation and buy-back when it buys its next generation of fighter aircraft. 

Main headlines from this issue

India’s DPP 2009 shifts technology burden to beneficiaries

India’s MoD has added a new provision to its procurement procedure, allowing the Request for Proposal (RfP) to be issued to Indian companies. The companies must have the financial and technical ability to absorb technology and undertake indigenous manufacture.

Blenheim: “We are raising the bar on offset service providers”

The Blenheim group of companies, which established its reputation through offset-structured financial solutions in the Middle East, has expanded further with the creation of two new wholly-owned subsidiaries.....

South Africa faces arms purchase scandal, risking $1bn of industrial participation

If South Africa cancels the A400M contract, the country risks losing the 2.9bn rand it has already invested in the project and a further 8bn rand ($1bn) pledged in industrial participation packages.
 

Nedbank to provide commodities trade financing in Southern Africa

More than one global bank has withdrawn from the commodity finance market in Sub-Saharan Africa in the last few months, preferring to refocus their efforts on domestic markets. Nedbank Capital is looking to fill the void......

South Korea responds to loss of UAE contract – with a trade centre

The centre will provide assistance to the defence industry regarding government-to-government contracts, offset programmes and industrial cooperation plans in weapon sales overseas.

Main headlines from this issue

EDA releases hostile study on offset and juste retour practices

The European Defence Agency has finally released its study on offset and juste retour. The report is solid, predictable, unlikely to threaten the agency’s hostile reputation in respect to offset practices, and reads like a Communist manifesto.

Tunisia: “We are not really mastering offsets”

The Tunisian government stepped tentatively into offsets in 2007 with an agreement with Airbus……. Another target is the auto industry, but the policy has not moved beyond those two sectors……

Is Russia to be the next major defence equipment importer to require offsets – and will deals be clean?

The idea that Russia could import foreign-made weapons seemed absurd until recently. The country that invented the Kalashnikov saw itself as an exporter, not an importer. Those purchases however are now being seriously discussed.

South Africa: Armscor’s annual report reveals setbacks, delays and successes with DIP commitments

Agusta Westland is shown to be in serious arrears with its industrial participation programme for the Maritime Patrol Helicopters.  The Airbus A400M programme is also in difficulty.  The report registers the over-achievement of …

Thailand to revive countertrade policy?

Thailand’s reputation for inconsistency is back on track as a government countertrade initiative shows signs of rising from the ashes.

Main headlines from this issue

SPECIAL REPORT: The Greek honey trap – Crisis as MOD cashes in offset performance bonds

The Greek MoD has cashed in a number of performance bonds for non-fulfilment of offset commitments after turning down requests for extensions. The ministry has issued more than 70 letters warning defence contractors that once contracts have expired, offset commitments that have failed to meet milestones cannot be renegotiated and will face liquidated damages.

The Director of the MoD’s Offset Benefits Department said....

SPECIAL REPORT – Canada introduces phased approach to sweeping IRB policy changes – Cadsi sees “Real Opportunities”

Canada has revised its Industrial and Regional Benefits (IRB) Policy. The new policy introduces seven steps which will be implemented in two distinct phases between now and the winter of 2010.

Main headlines from this issue

Taiwan: IC regulations under review, organisational structure to be squashed

Taiwan’s Ministry of National Defence is reviewing the regulations governing the country’s Industrial Cooperation Programme. Jesse Ho, Deputy Director for the ICP Project, informed CTO that the MND is working on the update now. Changes may include...

It’s no joke – Luxembourg wants what the big boys get

The Grand Duchy of Luxembourg seems to believe in fairies and has established offset guidelines. It signed one offset contract last year for €100m and is currently negotiating the final stages of another for about the same amount.

Jordan: Kaddb wins license build from BAE as IP policy takes hold of APV industry

BAE Systems has agreed a licence for Jordan’s King Abdullah II Design and Development Bureau (KADDB) to manufacture parts for the CV90 Armoured Combat Vehicle for domestic use. The requirement, we were told, launches a new policy...

Indonesia seeks technology transfer to upgrade outdated hardware

Indonesia is looking to upgrade its military hardware through a technology transfer programme that would benefit local industries and reduce the country’s dependence on external suppliers.

UK: Conservative government will withdraw from EDA and re-install DESO

Britain’s Defence Export Service Organisation (DESO), which was responsible for IP until it was controversially disbanded by the current Labour administration, will be revived if, as expected, the Conservative Party wins the general election. 

Main headlines from this issue

Russia turns to west for warship IP programme

The demand for a domestic-build programme in Russia is a significant shift in policy that now sees industrial participation as a cornerstone of naval production, and potentially for other defence materiel too.

Germany and Italy square off as Rome demands defence projects

Negotiations between the German and Italian governments have deadlocked over demands from the Italian MoD that Germany provide substantial and entirely defence-related workshare benefits...

Poland to pass exemption to the offset law

Poland is amending its law on offsets. The change will remove the requirement for offsets in contracts for the supply of military equipment for Polish forces serving overseas.

South Korea: Dapa stalls on FDI – eligible commercial offsets listed

South Korea’s Defence Acquisition Programme Administration (DAPA) has informed CTO that the government is formulating a plan to permit foreign direct investment (FDI) in the country’s defence sector but has not yet decided how the plan will be implemented.

Feingold favours countertrade to get Harleys into India

Senator Russ Feingold (D-Wis.) has asked the Obama administration about a trade swap that would allow Harley-Davidson Inc. to export bikes to India in exchange for India exporting mangoes to the United States.

Main headlines from this issue

India’s civil offset policy faces fatal setback

Ambitions for a National Offset Policy (NOP) in India have crumbled after ministers who had previously agreed to implement the civil policy backtracked.

Canada: Boeing has already identified 60 percent of benefits for $1.2BN Chinook obligation

Boeing has sold fifteen new CH-47F Chinook helicopters to Canada for about $1.2bn and has contracted to provide Canadian industry with contracts and investments of equal value. The Chinooks will be built in Delaware County, Pennsylvania.

Ukraine to transfer hovercraft technology to China

China's navy is to purchase four Ukrainian military Zubr class hovercrafts in a $315m deal that will see a second pair built in China under the supervision of Ukrainian technicians.

Novel financial terms to provide Thailand with shipbuilding capability

BVT Surface Fleet (BVT) has sold Thailand a license to build an Offshore Patrol Vessel at a price described as bargain basement. The rub is that Thailand has had to contract for long-term servicing and supply of equipment which will generate income for BVT for years to come.

Main headlines from this issue

Israel’s civil procurement: Obtuse finance minister is “Breaking the law on IP”

War has broken out between Israel’s Minister of Industry, Trade and Labour, Binyamin Ben-Eliezer, and Finance Minister Yuval Steinitz over the imposition of the mandatory industrial cooperation requirements for infrastructure projects.

South Korea: Dapa to raise offset quota from late August

Korea’s Defence Acquisition Programme Administration (DAPA) has settled on ‘late August’ for publication of revised offset guidelines that will increase the ……

Algeria to manufacture defence equipment

Algerian President Abdelaziz Bouteflika has established two companies that will manufacture equipment for the country's military, a move aimed at building an indigenous defence industry to supply its armed forces and export to its neighbours.

In Malaysia ‘Might Muscles in on the offset process – threshold rising

Malaysia will double the offset/countertrade threshold from €10m to €20m and designate the value in Malaysian Ringgits instead of Euros, we are told. The Finance and Defence ministries have not yet approved the proposals.

China’s creative trade finance for the third world upsets the world bank

The Export Import Bank of China, known as Exim Bank, typically provides loans to support projects in third world countries at bargain interest rates, but with a catch: borrowing governments must contract China's state-owned companies to complete the project.

Main headlines from this issue

Subdued response from U.S. Defence Industry to reworked annual report

The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) has received just three comments in response to its proposals to update the information American companies must supply each year...

“ARMAGEDDON” for Western civil aircraft production as China reaps rewards of offset programmes

“Why do Western airframers such as Airbus and Boeing continue to donate know-how and tribal knowledge to China?” The answer is that technology transfer is required to sustain Western aircraft sales to China. This is tantamount to borrowing time.

Trade subcommittee for foreign affairs hears aerospace union’s pitch to ban offsets

Owen Herrnstadt, Director of Trade and Globalization Policy for the powerful trade union, the International Association of Machinists and Aerospace Workers, has appeared before the Trade Subcommittee for Foreign Affairs on Capitol Hill to argue against offsets.

Saab offers Brazil unique manufacturing opportunity

In a gambit that may throw Boeing’s offer into a tailspin, Saab said it is prepared to shift up to 50 percent of future Gripen production to Brazil if Saab wins the order for 36 fighters. The order is worth about €1.8bn.

Malaysia’s defence minister envisions Malaysia as a ‘Production Hub’ for Asean

Malaysia’s Defence Minister, Datuk Seri Ahmad Zahid, said several defence producers from Europe and the U.S. have agreed to make Malaysia their marketing base.

Main headlines from this issue

Secret German-Italian IP discussions under way

                                               ‘BIZARRE’ OFFSET LEFTOVER EXPOSED

A ‘special team’ in Division C of the German Federal Office of Defence Technology and Procurements (BWB) has begun discussing industrial participation benefits with Italian counterparts. The talkswhich started on July 1 concern the Italian MoD’s demands regarding a submarine programme.

UK MoD admit Oshkosh Truck Corporation “Failed to fulfil its IP commitment”

Britain’s Information Commissioner has allowed an appeal by CTO and ruled against the refusal of the UK Trade & Investment, Defence & Security Organisation (UKTI DSO) to disclose the identity of an allegedly delinquent industrial participation obligor.

Australia’s Defence Capability Plan 2009 identifies capabilities “To ensure self sufficiency”

The government’s concern is that Priority Industry Capabilities (PICs) remain in Australia. An overseas-based company can establish a local workforce...

Using Offsets as a financial instrument – The Blenheim model attracts government interest

Governments are now showing greater flexibility regarding the financing of defence purchases, claims Grant Rogan, Chairman and CEO of Blenheim Capital Services. As prime contractors find that they have less of a product to sub-contract, so governments are responding by agreeing to measures that have previously been regarded as off-limits.

Korean prospects in Indonesia rely on former industrial cooperation relationship

Korea’s Daewoo International Corp. is bidding to export two submarines to the Indonesian navy this year.