TURKISH INDUSTRIAL PARTICIPATION-OFFSET POLICY

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TURKISH INDUSTRIAL PARTICIPATION
-
OFFSET POLICY

A. Güzin ODUNCUOĞLU

Offset and Local Content Department



3rd International Seminar on Offset and
Industrial Participation

7
-
9 May 2007, JERUSALEM

MINISTRY OF NATIONAL DEFENCE

Undersecretariat for Defense Industries

2

PRESENTATION PLAN



Undersecretariat for Defense Industries (SSM)



Headlines of New Industrial Participation/
Offset
Directive
-
2007



Offset Commitment & Realization Figures



Notable
Offset Projects


3

UNDERSECRETARY

(MILITARY)




Direct Procurement

OFFSET

UNDERSECRETARY (CIVILIAN)

Undersecretariat for Defence Industry,
SSM




Co
-
production & Modernization

SSM


INDUSTRIALIZATION DEPARTMENT


Offset and Local Content Branch

STRUCTURE OF MOD

MINISTRY OF NATIONAL DEFENCE

4

UNDERSECRETARIAT FOR DEFENSE
INDUSTRIES / SSM


SSM
’s major responsibilities;




The Modernisation of the Turkish Armed Forces [TAF]



The Development of Turkish Defense Industry



The

management

of

offset

and

export

of

defense

industry

products


SSM

is

the

single

offset

authority

in

the

country

for

defence

procurement
.

5

0
10
20
30
40
50
60
70
80
90
100
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
YEARS
PROJECT
NUMBER OF PROJECTS MANAGED BY SSM

Signed Agreements

: US$ 7,6 B

On
-
going Agreements

: US$ 6,8 B

Total : US$
14
,
4
B

6

HEADLINES

OF NEW IP/O DIRECTIVE


INDUSTRIAL PARTICIPATION/OFFSET (IP/O)
DIRECTIVE


Effective as of 14.02.2007



www.ssm.gov.tr

7


HEADLINES OF NEW IP/O

DIRECTIVE


New Concept:
Industrial Participation/Offset


New
IP/O
Categories:


Category
-
A:

Local content


Category
-
B:

Defence, aeronautics/aerospace goods and services export


Category
-
C:


-

Technological cooperation,


-

New and/or expanded investment,


-

R&D activities



in defence, aeronautics and aerospace industry and/or other fields requiring high

t
echnolog
y.


8


Threshold



:

US
$

10

M


Obligation


:

50
%

of

the

Contract

Value



Penalty



:

6

%


Bank

Guarantee

:

6

%

of

the

obligation


Fulfillment

period


:

end

of

the

delivery

plus

2

years

HEADLINES OF NEW IP/O

DIRECTIVE

9


HEADLINES OF NEW IP/O

DIRECTIVE




Swap



Export

Guarantee

is

required

for

T/T

and

Investment



Pre
-
approval

for

each

offset

transaction



Causality

is

required

for

offset

projects



Banking

of

e
xcess

offset

credit
:



-

utilization

within

5

years

after

fulfillment



-

transfer

to

another

eligible

company



10

HEADLINES OF NEW IP/O

DIRECTIVE

MULTIPLIERS FOR EXPORT

Platforms


4

Systems


3

Software


3

Sub
-
system


2

Parts/components

1

11


HEADLINES OF NEW IP/O

DIRECTIVE


MULTIPLIERS FOR T/T, INVESTMENT, R&D

System

Integration


3

Network,

information,

satellite,

sensor

systems

3

Electronic

Warfare


3

Missile,

Guidance,

Control

3

Other

(Defense,

aeronautics/aerospace,

high

technology)

2

Investment

in

Advanced

Tech
.
Industrial

Park

(ITEP)

2

12

EVALUATION OF PROPOSALS (
1
)



F
ormat and the content of Offset Bank Guarantee Letter




Penalty Clause

(paying penalty does not relieve the commitment)



Escalation (according to Main Contract terms)



Turkish Law (arbitration is allowed)



Language (Turkish)

MUST CRITERIA

13

EVALUATION OF PROPOSALS (2)

OFFSET
CATEGORIES

First
Year

Second
Year

Third
Year

…..

Nth Year

TOTAL
(USD/EURO)


A. Local Content

B. Defense Goods and


Services Export

C. Technological


Cooperation,


Investment, R&D


TOTAL

14

CURRENT OFFSET
STATUS



60

OFFSET AGREEMENTS SIGNED SO FAR



20

OUT OF
60

OFFSET PROGRAMS WERE



SUCCESSFULLY COMPLETED



40

OFFSET PROGRAMS ARE STILL EFFECTIVE




TOTAL
OFFSET COMMITMENTS
:

US$
6
,
1

B



TOTAL OFFSET
FULFILLED

:

US$
3
,
2

B

COMMITMENT & REALIZATION FIGURES

15

OVERALL COMMITMENT
DIRECT
53%

INDIRECT
47%
2
,
9
B$

3,2 B$

Realized

COMMITMENT & REALIZATION CHARTS

16

OFFSET REALIZATION STATUS (
1985
-
2007
)

OFFSET CATEGORY

AMOUNT

( Mil. US$)

%

Defen
s
e

Goods

and

Services

E
xport


1084

34

E
xport of

Industrial G
oods and
S
ervices

1038

32

R&D, Tech. Coop., Investment, Others

724

23

Services for Turkish Armed Forces

359

11

T O T A L

3205


100

17

REMAINING OFFSET COMMITMENTS AS OF YEARS

0
50
100
150
200
250
300
350
400
450
500
2000
2002
2004
2006
2008
2010
2012
2014
2016
Million $
YEARS
DIRECT
INDIRECT
18

REMAINING OFFSET COMMITMENTS BY
COUNTRY (US$)

COUNTRIES


DIRECT
OFFSET

(Mil. US$)

INDIRECT
OFFSET

(Mil. US$)

TOTAL

(Mil. US$)


USA

850

523

1373

FRANCE

113

121

234

ISRAEL

65

152

217

GERMANY

116

64

180

SPAIN

125

0

125

ITALY

738

96

834

UK

37

1

38

19

GERMANY


ABEKING & RASMUSSEN



EADS
-
LFK



LÜRSSEN



RENK AG



MTU



ITALY

AGUSTA S.P.A
.

ALENIA


UK


ASTRIUM LTD.



THALES UNDERWATER SYS
.


SPAIN

EADS


CASA

USA

BOEING


RAYTHEON COMPANY


SIKORSKY


GENERAL ELECTRIC


LOCKHEED MARTIN

BAE SYSTEMS


ISRAEL

ELTA ELECTRONICS IND. LTD


ELBIT SYSTEMS LTD.

/ ISRAEL

ISRAEL AIRCRAFT IND
.
LTD. (IAI)


ISRAEL MILITARY INDUSTRIES (IMI)


FRANCE

EUROCOPTER INTERNATIONAL


THALES
AIRBORNE
SYST
E
MS

COMPANIES WHICH HAVE OFFSET
OBLIGATION

20

NOTABLE OFFSET PROGRAMS



AWACS (PEACE EAGLE)



MARITIME PATROL AND SURVEILLANCE AIRCRAFT



S
-
70
B SEA HAWK HELICOPTER PROCUREMENT



F
-
16
MODERNISATION PROJECT



MINE HUNTING VESSEL PROJECT



UNMANNED AIR VEHICLE



COAST GUARD BOATS



ELECTRONIC WARFARE SYSTEMS


21


Sikorsky

Inc
.

owns

50
%

partnership

of

Alp

Aviation
.



Alp

Aviation

manufacture
s

various

flight

safety

parts

and

assemblies

for

Sikorsky

helicopters
.


ALP

Aviation

is

the

sole

source

for

Tail

Rotor

Drive

Shaft

Assemblies

to

Sikorsky

Inc
.



SIKORSKY INC.


ALP AVIATION

COOPERATION IN SCOPE OF OFFSET (
1
)

22


A

long

term

cooperation

agreement

was

signed

between

Kalekalip

Defense

&

Aviation

and

Boeing
.



M
anufacturing

of

various

fuselage

and

wing

parts

and

all

of

the

special

processes

and

installations

with

respect

to

Boeing

737
,

747
,

767
,

777

airplanes
.


BOEING
-

KALEKALIP

COOPERATION IN SCOPE OF OFFSET (
2
)

23


Within

the

framework

of

the

“Airborne

Early

Warning

and

Control

(AWACS)

Aircraft”

program,

Boeing

will

provide

500

Mil
.

USD

worth

of

work

package

to

Turkish

Defence

and

Aviation

sectors
.


BOEING


Turkish Defence Companies

COOPERATION IN SCOPE OF OFFSET (
3
)

goduncuoglu@ssm.gov.tr

www.ssm.gov.tr

A. Güzin ODUNCUOĞLU

SSM

Offset and Local Content Department