Pieter Taal Deputy Commissioner for Military Production Netherlands Ministry of Economic Affairs

1. Offset & Industrial cooperation a Dutch perspective Pieter Taal Deputy Commissioner for Military Production Netherlands Ministry of Economic Affairs 3rd International GtoG seminar, Jerusalem, may 7-9 2007

2. Contents • Why is offset it around? • Developments in the defence market • Offset policy in the Netherlands 3rd International Seminar of Offset and Industrial Cooperation, Jerusalem

3. 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 3rd International Seminar of Offset and Industrial Cooperation, Jerusalem

4. “Project offset”: the game 3rd International Seminar of Offset and Industrial Cooperation, Jerusalem

5. Is this how industry sees us? 3rd International Seminar of Offset and Industrial Cooperation, Jerusalem

6. Is offset the only method ? • National programmes • Local content requirements • Cost share = work share • Offset • Global Balance (OCCAR, LOI) • Best Value (JSF) • Open competition???? 3rd International Seminar of Offset and Industrial Cooperation, Jerusalem

7. Ambition in the Netherlands • international level playing field • competitive European defence industry • and transatlantic cooperation • participation of technologically advanced and competitive NL industry 3rd International Seminar of Offset and Industrial Cooperation, Jerusalem

8. 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? 3rd International Seminar of Offset and Industrial Cooperation, Jerusalem

9. 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 3rd International Seminar of Offset and Industrial Cooperation, Jerusalem

10. 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 3rd International Seminar of Offset and Industrial Cooperation, Jerusalem

11. 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 3rd International Seminar of Offset and Industrial Cooperation, Jerusalem

12. 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%) 3rd International Seminar of Offset and Industrial Cooperation, Jerusalem

13. 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 3rd International Seminar of Offset and Industrial Cooperation, Jerusalem

14. 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 3rd International Seminar of Offset and Industrial Cooperation, Jerusalem

15. 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 3rd International Seminar of Offset and Industrial Cooperation, Jerusalem

16. 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 3rd International Seminar of Offset and Industrial Cooperation, Jerusalem

17. Who makes it happen? 3rd International Seminar of Offset and Industrial Cooperation, Jerusalem

18. Thank you for your attention, questions and remarks? 3rd International Seminar of Offset and Industrial Cooperation, Jerusalem