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TURKISH INDUSTRIAL PARTICIPATION-OFFSET POLICYTURKISH 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 DEFENCEMINISTRY OF NATIONAL DEFENCEUndersecretariat for Defense IndustriesUndersecretariat for Defense Industries
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PRESENTATION PLAN
Undersecretariat for Defense Industries (SSM)
Headlines of New Industrial Participation/Offset Directive-2007
Offset Commitment & Realization Figures
Notable Offset Projects
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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
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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 defenceprocurement.
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1985
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1998
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2004
2005
YEARS
PR
OJE
CT
NUMBER OF PROJECTS MANAGED BY SSM
Signed Agreements : US$ 7,6 B
On-going Agreements : US$ 6,8 BTotal : US$ 14,4 B
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HEADLINES OF NEW IP/O DIRECTIVE
INDUSTRIAL PARTICIPATION/OFFSET (IP/O) DIRECTIVE
Effective as of 14.02.2007
www.ssm.gov.tr
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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 hightechnology.
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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
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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 excess offset credit:
- utilization within 5 years after fulfillment
- transfer to another eligible company
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HEADLINES OF NEW IP/O DIRECTIVE
MULTIPLIERS FOR EXPORT
Platforms 4
Systems 3
Software 3
Sub-system 2
Parts/components 1
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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
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EVALUATION OF PROPOSALS (1)
• Format 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
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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
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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
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OVERALL COMMITMENT
DIRECT
53%
INDIRECT
47%
2,9 B$ 3,2 B$Realized
COMMITMENT & REALIZATION CHARTS
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OFFSET REALIZATION STATUS (1985-2007)
OFFSET CATEGORYAMOUNT
( Mil. US$)%
Defense Goods and Services Export 1084 34
Export of Industrial Goods and Services 1038 32
R&D, Tech. Coop., Investment, Others 724 23
Services for Turkish Armed Forces 359 11
T O T A L 3205 100
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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
Mil
lio
n $
YEARS
DIRECT
INDIRECT
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REMAINING OFFSET COMMITMENTS BY COUNTRY (US$)
COUNTRIESDIRECT OFFSET
(Mil. US$)
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
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GERMANY•ABEKING & RASMUSSEN •EADS-LFK •LÜRSSEN •RENK AG •MTU
ITALYAGUSTA S.P.A. ALENIA
UK•ASTRIUM LTD. •THALES UNDERWATER SYS.
SPAINEADS – CASA
USABOEING RAYTHEON COMPANY SIKORSKY GENERAL ELECTRIC LOCKHEED MARTINBAE SYSTEMS
ISRAELELTA ELECTRONICS IND. LTD ELBIT SYSTEMS LTD. / ISRAELISRAEL AIRCRAFT IND. LTD. (IAI) ISRAEL MILITARY INDUSTRIES (IMI)
FRANCEEUROCOPTER INTERNATIONAL THALES AIRBORNE SYSTEMS
COMPANIES WHICH HAVE OFFSET OBLIGATION
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NOTABLE OFFSET PROGRAMS
• AWACS (PEACE EAGLE)
• MARITIME PATROL AND SURVEILLANCE AIRCRAFT
• S-70B SEA HAWK HELICOPTER PROCUREMENT
• F-16 MODERNISATION PROJECT
• MINE HUNTING VESSEL PROJECT
• UNMANNED AIR VEHICLE
• COAST GUARD BOATS
• ELECTRONIC WARFARE SYSTEMS
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Sikorsky Inc. owns 50% partnership of Alp Aviation. Alp Aviation manufactures 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)
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A long term cooperation agreement was signed between Kalekalip Defense & Aviation and Boeing.
Manufacturing 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)
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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)
A. Güzin ODUNCUOĞLU SSM
Offset and Local Content Department