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DEFENCE I OFFSET

Jarosław Kruk 

OFFSET AND MILITARY VARIETIES

10/05/2013

In accordance with a report prepared by reputable consulting firms Avascent and Fleishman Hillard, the value of transactions connected with offset in 2016 will amount to half a trillion American dollars www.strategicoffset.com. In the years 2005-2011 the sum of transactions connected with offset reached USD 214 billion. Analysts say that offset in the Near East and in Asia will strongly go up and Latin America will experience an offset jump.

Offset will go up the smallest in Europe, which – analysts say – is due to an expected drop in military expenses and a sort of anti-offset trend. They are of the opinion that Sweden, Italy and Holland have a reasonable offset policy which uses offset as a tool for strengthening their substantial defense industries.

Poland has been mentioned along with Greece, Finland, Spain and Portugal as a country which uses offset. We’ve had a bit of confusion with offset recently. The Ministry of Defense has announced a tender for a jet trainer without offset, which is contrary to the binding legislative act and a regulation based thereon where jet trainers and simulators for those jets are specified as requiring offset.

This is how the Ministry of National Defense accounts for this: since the Ministry has not found grounds to apply provisions under Article 346 of the Treaty on the Functioning of the European Union, then offset is not applied because what applies in the public procurement law. Recently it has been heard that those jets will also be used to train civil aviation pilots so this is not a strictly military equipment and therefore offset is ruled out.

I wonder whether those jets will ever be used to train civil aviation pilots… I have already mentioned several times that this view of the Ministry is wrong. Application of the public procurement law does not exclude offset, especially if it is known that the suppliers can be exclusively foreign. The case of the purchase of Cas is different. Freight planes aren’t mentioned in the regulation issued under Article 1 of the Offset Act. The legal tactics of the Ministry in the confrontation with the offerors who have  lost will be somewhat interesting, after all.

There are also positive sides. Soon the government will have a debate over a draft amendment of the Offset Act. The value of required offset is expected to amount to 50% of the procurement, be inextricably linked to the subject matter of the procurement, naturally only direct any supervised by the Ministry of Economy. Hopefully, towards the end of the year this draft amendment will become a binding law.

After all, experiences with offset should be carefully analyzed by Polish firms which deal with exportation of armament.  Recently Bumar has made me a nice surprise – in 2012 its export exceeded USD 100 million. If Bumar is thinking of development and gradually building an export position on traditional Asian markets, it has to learn to use offset and have an attractive offset offer. A practice of private firms with this respect will be very interesting, especially of WB on the Scandinavian market.

And there are two more issues worth mentioning: rumors can be heard from Brussels that someone is unhappy about the conditions of a tender for delivery of helicopters, because someone is behind with investment projects in Poland and may find it difficult to follow up. Hence, the special care of prominent representatives of the European Commission  for the conditions of competition in Poland, the issues of “polonization”, etc. Does this means that the tender is doomed to failure?

Hopefully it is not, but I’m not so optimistic about it.

In conclusion, defence24.pl has informed that Serbia intends to purchase on credit new MIGs29 in Russia and also the Military Aviation Works next to Beograd are to be modernized and used to establish a regional center of service and maintenance of MIGs. As far as I know, Poland uses the greatest number of MIGs 29 in our region. An ideal location for such a center would be Bydgoszcz. An ideal opportunity to make such a proposal to Russia is the upcoming visit of the Prime Minister Miedwiediew in Poland. I wonder whether the Ministry of Defense has any plans with this respect?

 

 

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