CTO Newsletter

Main headlines from this issue

EDA code of conduct on offsets Romania stays out – Norway steps in

In a dramatic eve of deadline development the Romanian MoD delivered a letter to the European Defence Agency (EDA) asking for more time to consider its position on the Code of Conduct on Offsets…… The Norwegian government has subscribed to the Code of Conduct on Offsets under an Administrative Arrangement…..

The EDA’s real message – “The codes of conduct on procurement and offset are ‘All or Nothing’ Ultimatums”

Dr. Aris Georgopoulos was surprised to learn that seven subscribing Member States (sMS) were apparently having second thoughts on membership of the Code of Conduct on Offsets. Three months ago he would have predicted that all sMS would accept it. His assessment is that……

Brazil turns the screws: Harsh F-X2 terms centre offset as a differentiator

Brazil has shocked contenders for its fighter aircraft tender with a severe interpretation of the offset stipulations. The Air Force is insisting that …

China’s “investment for food” initiatives may become an expensive disappointment

China’s agricultural countertrade policy may be running into difficulties. Over the past few years, China has sealed some 30 cooperation deals with developing countries in Africa and Southeast Asia. The agreements give Chinese companies access to farmland in exchange for technology, training and money.

Swaps having major impact on trade in asia – Indonesian telecom provider rides Chinese swap to build network

Indonesia’s largest telecom services provider, P.T. Telekomunikasi, has said it will use a currency swap to back a technology deal with Chinese providers.

Main headlines from this issue

Six contracts with armed forces mark revival of Philippines countertrade programme

Countertrade is undergoing a significant revival in the Philippines following several years of stagnation. The Philippines International Trading Corporation (PITC) is supporting a number of countertrade contracts for military accounts, particularly the Armed Forces of the Philippines and the National Police. 

India’s ‘National Offset Policy’ breaks for general election

India’s general election, which lasts for one month from April 16, has already claimed a casualty: the country’s national offset policy. R. Gopalan, Additional Secretary at the Ministry of Commerce, and the policy’s principal architect, has informed CTO that …

Ernst & Young and Assocham predict favourable outcome for India’s defence offset policy

India’s defence offset policy is expected to bring in $10bn during the 11th five-year plan, a joint statement by Ernst & Young and the Associated Chambers of Commerce and Industry of India (ASSOCHAM) predicts. 

Bell rings for Taiwan’s commercial offset programme

Taiwan is about to surrender its exemption under the WTO’s Government Procurement Agreement (GPA). This allows Taiwan to demand industrial benefits for purchases made for the rolling stock industry and for power projects. 

Regrets, he’s had a few – Now it’s fast forward for Brazil’s technology transfer revolution

Brazil’s Defence Minister, Nelson Jobim, re-stated a wish expressed many times of late…... Brazil has been slow to develop its defence industry, he acknowledged, and the government is now taking measures to catch up.

Main headlines from this issue

Countdown begines – seven Member States go to the wire on decision to “OPT OUT” of code of conduct

With the May 1st deadline for opting out of European Defence Agency’s (EDA) Code of Conduct on Offsets ticking away, a survey by CTO shows that at least seven Member States may choose to opt out, despite unanimously agreeing to the Code only last October.

UK refuses to identify obligor – admits to errors in disclosure

The UK Trade & Investment, Defence & Security Organisation (UKTI DSO), the successor to DESO, has again rejected CTO’s request to disclose the identity of a delinquent obligor under Britain’s Freedom of Information Act, declaring that disclosure is likely to be prejudicial to the interests of both the Government and the obligor…

Russia invites Guatemala to pay for arms with soft commodities

Guatemala's Vice-President said the Central American country is interested in buying Russian military hardware in exchange for soft commodities. The deal would involve Russia helping Guatemala modernize its obsolete arsenal. 

Denmark – Vulture convention yields benefits for Terma

 A get-together with local industry for competitors bidding for Denmark’s combat aircraft requirement, organised by CenSec, the Danish defence and security association, provided an initial opportunity for Danish companies to meet with potential offset obligors. CenSec has about 70 members.

Canada faces flack as leopard spots fade

Canada’s Defence Department wants to rebuild its newly acquired Leopard 2 tanks at facilities in Germany, cutting Canadian companies out of the work.

Main headlines from this issue

Pakistan asks the West for support through barters and swaps

Pakistan’s President, Asif Ali Zardari, has prepared concept papers to persuade the international community to assist Pakistan “in these troubled times” through mechanisms such as barter trade, debt swaps, oil supplies on deferred payments, and market access for Pakistani goods.

Algeria prepares a formal offset policy

Dialogue is currently ongoing between Algeria and certain GCC countries concerning the development and implementation of a formally structured offset programme.

Czech Republic snubs EDA with 153 percent offset requirements

Czech officials have announced that Austria’s Steyr-Daimler-Puch will deliver offsets worth 153 percent of the 14.4bn korunas ($670m) purchase price for 107 Pandur II armoured personnel carriers. The agreement appears to flout the imminent European Defence Agency’s Code of Conduct on Offsets.

Russia to supply military hardware – Bolivia to allow access to energy resources

Bolivia will receive helicopters from Russia and assistance to develop energy resources, Russian President Dmitry Medvedev said during Bolivian President Evo Morales’ Moscow visit in February. Morales said he would discuss the immediate purchase of Mi-17V-5 helicopters and loans of other aircraft to fight coca production.

Koran / Iraqi barter will secure Korea’s oil supplies for three years

South Korea and Iraq have signed a bilateral agreement according to which South Korea will help rebuild Iraq and …. Korea will receive enough oil to supply the entire nation for almost three years.

Main headlines from this issue

Abu Dhabi International Offset Conference 2009 reviewed

In a dramatic eve of deadline development the Romanian MoD delivered a letter to the European Defence Agency (EDA) asking for more time to consider its position on the Code of Conduct on Offsets…… The Norwegian government has subscribed to the Code of Conduct on Offsets under an Administrative Arrangement...

Waha Capital and Blenheim set up another offset investment fund

Waha Capital has been mandated to arrange and manage a financing programme to purchase military aircraft worth AED 11bn ($3bn). The deal includes the procurement of advanced Super Hercules from Lockheed Martin along with four C17 military transportation jets from Boeing.

Kuwait outlines business plan – Offset obligor committee established

Mazen Madooh, Managing Director of Kuwait’s National Offset Company (NOC), described his country’s offset business plan and announced the formation of an Offset Obligor Committee…

Joel Johnson: “Treat foreigners fairly”

Although Johnson sang the same song at the SMi conference in Turkey, he did add a new variation by declaring that offsets now are much more difficult to do — and there just may be a role for the U.S. Government.

Main headlines from this issue

Conference Report – India

The India Regional Offset Conference held in New Delhi in February was pure political theatre: entertaining, with high audience participation, and the ultimate demonstration of public accountability. DPP 2008 was neatly dissected…

India – Credit Banking

Discussing credit banking, Shashi Kant Sharma, Director General for Acquisition at the MoD, admitted that “certain issues” have not been fully answered but believes that vendors have misunderstood the new facility.

India – Technology Transfer

 If indirects represented one point of dissatisfaction for OEMs, technology transfer was a challenge for India, especially when it came to deciding their value.

India – “Mysterious DOFA” and the Chairman Who Knows Nothing

“DOFA to many of us is a rather mysterious organisation,” began David Wolf innocently. “Can you take us through the steps of obtaining pre-approval for an offset project? Secondly, how will DOFA monitor specific offset programmes and evaluate those programmes and issue credits to those obligors?”

Switzerland: Armasuisse drags its feet over Government’s insistence on policy changes

The contentious report on Switzerland's industrial participation and offset process prepared by the Swiss Audit Authority following its probe of Armasuisse, leaked last July, has so far failed to provoke the company into making the policy changes demanded of it by the government.

Main headlines from this issue

Malaysia to announce national countertrade policy, allows credit banking

Malaysia will compel its ministries to engage in the country’s countertrade process when purchasing from foreign contractors. The government will announce a national countertrade policy within the year.  Malaysia has also introduced new countertrade guidelines, effective now, that allow for the banking of offset credits…

Turkey’s new evaluation formula

Turkey has changed its evaluation score for offset proposals, with a variation in the coefficient category and preference for design projects that benefit SMEs.

Slovakia: The new offset law will have to be amended

Slovakia is considering amending its new offset policy. The policy was conceived as recently as December 2007 and became mandatory a month later...

Czech Republic doubles threshold and signals further policy review

The Czech Republic has significantly altered its priorities for offset fulfilment and is to revise its guidelines in preparation for compliance with the EDA Code of Conduct on Offsets. The threshold, presently €18m, is...

EDA: Transparency in all but name

CTO considers the reference to transparency to be insincere, paradoxical and duplicitous. We put it to a senior official that confidential information is to be submitted to the EDA by each SMS, later to be circulated amongst members, but not to be available for publication...

Main headlines from this issue

13th report to congress on the impact of offsets in defence trade slimmed down

The thirteenth annual report to Congress on the impact of offsets in defence trade has shrunk. The US Department of Commerce’s Bureau of Industry and Security (BIS) has made substantive changes to the report’s structure, acceding to concerns raised by US prime contractors.

A patriotic reflex has occasioned two annexes for the first time to be designated Not for Public Release. The information is considered competitive and sensitive, but without it the report’s jewels are missing.

US Interagency team anticipates spring dialogue on “Limiting the adverse effects of offsets”

The US interagency team that consults with foreign nations on ‘Limiting the Adverse Effects of Offsets in Defence Procurement’ submitted its third and final report to Congress in February 2007...

Malaysia revives its preference for bilateral barters – approaches made to several governments

Malaysia will barter $70m worth of palm oil for fertiliser with North Korea and Russia. Malaysia’s Minister of Plantation Industries and Commodities has also put forward proposals for bilateral barters with countries such as Morocco, Jordan, Syria and Iran.

Main headlines from this issue

Brazil begins military and civil regeneration through industrial participation

President Luiz Inacio Lula da Silva has launched a national policy to establish Brazil’s defence industrial base and support industries in the civil sector through enhanced industrial participation. A National Defence Strategy document lays down a timetable for various ministries to prepare for legislation to “stimulate participation by civil society.”

France and Brazil agree far-reaching technology transfer terms for helicopters and submarines

Brazil has signed contracts worth $12bn to buy 50 EC-725 military transport helicopters and five submarines from France under a bilateral cooperation agreement covering the extensive transfer of French technology.

Goca chairman resigns – new board takes over

Global Offset and Countertrade Association (GOCA) Chairman Neil Rutter and several Executive Committee members have resigned, with new appointments taking effect from 1st January.

Korea is preparing new version of offset guidelines

South Korea’s offset policy will change in 2009. CTO has learned that a new version will be issued perhaps as soon as May.

Russia rejects Cambodian claim that debt is forgiven

Cheam Yeap, Chairman of the National Assembly’s Committee of Finance, Banking and Audits, assured other legislators that Russia will cut 70 percent of Cambodia's debt. The Russian Finance Ministry denied that Russia agreed to forgive any debt.

Main headlines from this issue

Special Report: UK industrial participation in serious decline – MOD blocks enquiries

The number of industrial participation agreements implemented in the UK is in progressive decline. At the current rate it will be terminal within a few years. This is evidence, it seems, of restrictive budget cuts for defence acquisitions and a lack of political will in implementing an IP policy, even during a worsening recession and with unemployment in the defence industry on the rise...

Poland signs a blizzard of offset contracts as the year closes

Poland’s Ministry of Economy signed three offset contracts on December 10, 2008. By the end of the month, the country will have added offset contracts worth ZL1bn ($331m), representing an obligation of 100 percent of supply contract value in each case...

Recession bites into Turkey’s offset-generated defence exports

Turkish defence companies, which rely heavily on offsets for exporting their already limited products, will face a 25 percent decrease in Turkey’s overall exports because of the global financial crisis, say Turkish defence industry sources. This is despite the Turkish currency’s 25 percent decline in value against the dollar since the beginning of September...

Bulgarian industrialists complain “Offset programs are just a delusion” – demand protectionist policy

Chief executives of several Bulgarian defence sector companies have complained that the public procurement procedures of the Bulgarian Defence Ministry were formulated in a way that excludes Bulgarian firms from participating...

Main headlines from this issue

Israel lowers civil offset quota and allocates multipliers – policy “A victory for employment and investment”

Unless it can negotiate a new Government Procurement Agreement (GPA), 2009 will be the last year that Israel may demand industrial cooperation for civil procurements. Israel must also lower its 28 percent quota to just 20 percent with effect from January 1, 2009 for civil acquisitions made from countries that are signatories to the WTO agreement. Civil acquisitions from companies in countries which are not signatories to the GPA will continue at the 35 percent level...

Chinese company to discharge offsets in Israel

The Haifa Port Company, which tried its best to resist the Industrial Cooperation Authority’s imposition of an industrial cooperation commitment in the company’s tender documents for dockside cranes and equipment, has signed the winner - the Chinese company ZMPC - to a 35 percent industrial cooperation agreement...

Poland: Thales offset contract suspended as shipyard faces insolvency

Poland’s Deputy Defence Minister, Zenon Kosiniak-Kamysz, disclosed the shipyard's financial problems have caused the Defence Ministry to delay signing a contract with Thales Nederland for an electronic combat system for a corvette. The contract was understood to be for more than Z600m ($201m). The decision places in jeopardy construction of the first warship in free Poland, estimated to cost Z1.2bn...

Sri Lanka: Tea Association rejects government barter proposal

The Sri Lankan government has spoken of trying to arrange “some kind of barter deal” with major buying countries for its tea, but the Colombo Tea Traders Association (CTTA) warned that such an approach is an outdated concept. \The avenue of barter trade between friendly countries is not available anymore\" the CTTA said in a statement...

Main headlines from this issue

Australia raises threshold – Industry capability programme working well

Australia has raised its threshold for industrial participation. All tender responses to Australian defence equipment RfP’s worth more than A$50m ($34m) should now include plans that maximise opportunities for local industry where cost-effective. The requirement will be particularly important when adapting existing products to meet Australia’s requirements since local firms will have to provide through-life support. The previous threshold was A$10m but was not a fixed entry level...

New Zealand: MoD must campaign for foreign primes to engage with domestic suppliers

New Zealand’s Defence Industry Committee will be asked to confirm annually that the MoD and its agent, the Industry Capability Network (ICN), have appropriately promoted domestic suppliers’ capabilities to prospective overseas prime contractors...

India: Bell withdraws, citing an impossible offset requirement

Bell Helicopters has withdrawn its bid from the competition for India’s 197 light utility helicopters, citing expected to be implemented under an offset programme, the Ambassador noted...

Offset conference in UAE boycotted

The conference organised by IQPC on Defence Industry Partnerships in the Middle East flopped badly when speakers and delegates apparently boycotted the event. We hear that speakers who had taken exception when asked to pay attendance fees rang delegates to express their displeasure...