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TURKISH INDUSTRIAL PARTICIPATION-OFFSET POLICY

MINISTRY OF NATIONAL DEFENCE Undersecretariat for Defense Industries. 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. PRESENTATION PLAN.

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TURKISH INDUSTRIAL PARTICIPATION-OFFSET POLICY

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  1. MINISTRY OF NATIONAL DEFENCE Undersecretariat for Defense Industries 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

  2. PRESENTATION PLAN • Undersecretariat for Defense Industries (SSM) • Headlines of New Industrial Participation/Offset Directive-2007 • Offset Commitment & Realization Figures • Notable Offset Projects

  3. STRUCTURE OF MOD MINISTRY OF NATIONAL DEFENCE • UNDERSECRETARY • (MILITARY) • Direct Procurement • UNDERSECRETARY (CIVILIAN) • Undersecretariat for Defence Industry, SSM • Co-production & Modernization OFFSET SSM INDUSTRIALIZATION DEPARTMENT Offset and Local Content Branch

  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. Signed Agreements : US$ 7,6 B Total : US$ 14,4 B On-going Agreements : US$ 6,8 B NUMBER OF PROJECTS MANAGED BY SSM

  6. HEADLINESOF 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/ODIRECTIVE 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 technology.

  8. HEADLINES OF NEW IP/ODIRECTIVE • 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

  9. HEADLINES OF NEW IP/ODIRECTIVE • 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

  10. HEADLINES OF NEW IP/ODIRECTIVE

  11. HEADLINES OF NEW IP/ODIRECTIVE

  12. EVALUATION OF PROPOSALS (1) MUST CRITERIA • 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)

  13. EVALUATION OF PROPOSALS (2)

  14. COMMITMENT & REALIZATION FIGURES 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

  15. Realized 3,2 B$ 2,9 B$ COMMITMENT & REALIZATION CHARTS

  16. OFFSET REALIZATION STATUS (1985-2007)

  17. REMAINING OFFSET COMMITMENTS AS OF YEARS

  18. REMAINING OFFSET COMMITMENTS BY COUNTRY (US$)

  19. COMPANIES WHICH HAVE OFFSET OBLIGATION 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 SYSTEMS • GERMANY • ABEKING & RASMUSSEN • EADS-LFK • LÜRSSEN • RENK AG • MTU • ITALY • AGUSTA S.P.A. • ALENIA • UK • ASTRIUM LTD. • THALES UNDERWATER SYS. • SPAIN • EADS – CASA

  20. 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

  21. COOPERATION IN SCOPE OF OFFSET (1) SIKORSKY INC. – ALP AVIATION • Sikorsky Inc. owns 50% partnership of Alp Aviation. • Alp Aviation manufacturesvarious flight safety parts and assemblies for Sikorsky helicopters. • ALP Aviation is the sole source for Tail Rotor Drive Shaft Assemblies to Sikorsky Inc.

  22. COOPERATION IN SCOPE OF OFFSET (2) BOEING - KALEKALIP • 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.

  23. COOPERATION IN SCOPE OF OFFSET (3) BOEING – Turkish Defence Companies • 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.

  24. A. Güzin ODUNCUOĞLU SSM Offset and Local Content Department goduncuoglu@ssm.gov.tr www.ssm.gov.tr

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