pieter taal deputy commissioner for military production netherlands ministry of economic affairs 3rd...
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Pieter TaalDeputy Commissioner for Military ProductionNetherlands Ministry of Economic Affairs
3rd International GtoG seminar, Jerusalem, may 7-9 2007
Offset & Industrial cooperation
a Dutch perspective
May 7-9 2007 3rd International Seminar of Offset and Industrial Cooperation, Jerusalem
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Contents
• Why is offset it around?
• Developments in the defence market
• Offset policy in the Netherlands
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Why is offset around?• Investing large amounts of tax payers money abroad
• System builders on closed national markets
• National defence industry, DTIB
• Strategic know how, smart buyer, smart user
• Guaranteed supply
• Innovation, spin offs and spill overs
• Revenues and employment
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“Project offset”: the game
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Is this how industry sees us?
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Is offset the only method ?
• National programmes
• Local content requirements
• Cost share = work share
• Offset
• Global Balance (OCCAR, LOI)
• Best Value (JSF)
• Open competition????
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Ambition in the Netherlands
• international level playing field
• competitive European defence industry
• and transatlantic cooperation
• participation of technologically advanced and competitive NL industry
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Developments in defence market
• Harmonization of demand, coordination of capabilities, planning and R&D planning, task specialization. Not all at once, but evolution
• From national companies via international groups with national players to international players
• EU/EDA: CoC and CoPBSC, Interpretation article 296, defence procurement directive (draft in 2007?)
• More offset, harmonisation of offset, more competition?
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Elements crucial for scenario’s • US initiates more ‘best value’ programmes or accepts a law against offset • Europe and US challenging partners who can create synergy, or lawyers and politic(ien)s in
between? • Internationally operating firms are allowed by national governments to optimize division of work • Acceptance of mutual dependence as security of supply? • As a result smaller companies in the supply chain experience a level playing field.• Offset is harmonized with key elements: competition and flexibility • Offset can only be fulfilled with military activities
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Dutch position on the use of offset
The Netherlands are against offset, but….It takes time before the situation makes it obsolete.For the time being it must bring best value closer: • Stimulate competition and economically sustainable activities as much as possible• Give clear guidelines and the obligor freedom to choose• Open communication. harmonize guidelines • Support mutual abatements or ‘quid pro quo’ • Do not limit offset fulfillment to military projects
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Offset in the Netherlands (1)
• 100% offset when > € 5 mln, also services
• Direct offset, other military offset and civil offset
• Agreement with MEA on offset prior to contract MoD
• Aim for 30 – 40% ‘firm projects’ before contract
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Offset in the Netherlands (2)
• Max. performance period 10 years
• Claiming and verification process
• Banking possibilities for valuable projects
• Deduction of foreign content above threshold (15-25%)
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Priorities
• Development, production and MRO of defence systems– Involvement from development phase– Single source – Abatements– Transfer of knowledge
• Civil Projects with and economic multiplier– Investments in venture capital– Marketing & sales support innovative SME’s
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Multipliers
• Basis: multiplier of 1
• Civil R&D: up to 3
• Defence related R&D: up to 10
• Starting single source relation: up to 5
• Marketing & sales support: up to 30 on out of pocket and higher in case of sales
• Venture capital: up to 30
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Cost of offset
• No separate cost for offset accepted
• Budget? – Find competitive & better suppliers – Offset is a marketing tool
• Mix ‘free’ offset like competitive suppliers and abatements with investments in venture capital
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Some figures
• Current obligations – Agreements : 81– Initial obligation € 3,6 mld– To fulfill: € 1,8 mld– Performance period: Av. 7,5 jaar
• Yearly ‘revenues’: – 2002: € 548 mln– 2003: € 618 mln– 2004: € 322 mln– 2005: € 573 mln– 2006: € 499 mln
Average: € 512 mln
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Who makes it happen?
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Thank you for your attention,
questions and remarks?