Information Memorandum on workshop on the critical success factors in the development of an Offset pogramme

The critical success factors in the development and fulfilment of obligations arising under an Offset programme.

Duration

The duration will be determined on a case by case basis depending on the specific training need.  The detailed course outline is contained in the Appendix found at the end of this memorandum

Overview

Offset refers to the range of benefits that a seller provides to the buyer (usually a government entity) as inducement or by way of a contractual commitment in order to secure a sale.

The workshop will begin by addressing the many fundamental issues arising from and associated with the question what is Offset?  This will be answered by way of contrasting the familiar considerations involved in an ordinary procurement with two actual Offset case studies, one in defence and the other, a civil procurement; government procurements being where Offset originates from.  This comparison will show the justification, without overlooking one’s obligations under any plurilateral or bilateral agreement that one may have acceded to, for the need for Offset where markets cannot function properly and where one is forced to deviate from the orthodox theory which relies on the superior efficiencies of the free market.

The second question, why Offset, will examine the reasons why countries turn to Offset and draw on the experiences of many countries that are ahead in its practice. Their experiences will be presented from both a qualitative and a quantitative perspective given the importance and inviolability of the value for money principle in government procurements.

The last part of the presentation will address the issues that are critical to the success of an Offset programme.       

Success begins from the beginning namely, the programme’s definition followed by the design, development and deployment stages.  A programme must seek out those proven best practices of other countries, and make changes if and where necessary always adapting the proven success factors to fit one’s needs, requirements and unique circumstances.

Success cannot follow simply from these alone.  Even more critically, a programme must be properly executed and governed; again following proven best practices.  Capabilities and capacities in Offset must also exist or be build if non-existent, by a country’s private sector in order to fully exploit Offset’s opportunities.

The use of actual examples and experiences will bring out the versatility of Offset, show what is achievable and why governments resort to it within the ambit of any plurilateral or bilateral agreements concluded; the complexities of and oppositions against Offset notwithstanding.

Brief background note on Offset

The raison d’être of Offset is to enable the buyer to derive value for its purchases.  Values that should, if possible, extend to helping the buyer serve the larger national interests (e.g. job creation, attracting tech transfer or foreign direct investments) thereby enhancing at the same time and not compromising, the objectives of the procurement originating the Offset.

Offset however suffers severely from an often puzzling mix of good and bad information in the public domain many emanating from huge sometimes opposing and strong partisan biases.  Not surprisingly Offset is also confusingly known by various other names like; industrial cooperation, industrial participation, industrial benefits, industrial capabilities, economic enhancement, and partnership for development, to name only a few.

Consider the following:  The U.S. Department of Commerce found in their May 2001 report that over 120 countries require Offset of some sort in respect of their defence procurement. [1]  It is not just the number of countries but who these countries are and how successful have they been with Offset?  What are the impacts these Offset practices have on others given the billions involved?  And, do their require Offset for defence purchases only or for both defence as well as civil procurement?  Fast forward to 2007, the U.S. Department of Commerce in its twelfth report found, from data collected, that Offset demands in respect of defence procurements are “persistent and increasing” and “may never be eliminated”. [2]

Offset is however no silver bullet.  Doing it incorrectly, may amount to protectionism or a breach of an applicable agreement concluded.  Developing and executing it badly may result in failures or losses.  Not applying it when the circumstances are appropriate and

1. a government may have failed to legitimately assist one’s citizens and local corporations face the challenges of globalisation and address the economic, social and political issues that have to be faced;

2. a private sector may have failed to make a sale or derive the benefits and opportunities Offset can offer (the two case studies to be discussed will show the relevance of Offset from the perspective of a private enterprise); and

3. More importantly, both would have failed to each discharge their respective responsibilities (whether times are good or bad, although the need is more urgent during the latter) to extract the maximum value possible under each given circumstances.  In the case of a government, such a failure would amount to a breach of an inviolable obligation when public funds or taxpayers’ monies are involved.

Such failings, if any, should raise questions when other countries – many of whom are technologically and industrially advanced – have and continue to demonstrate that enviable benefits are attainable if the right circumstances for the application of an Offset programme exists and when it is properly executed.

Brief resume of workshop leader     

DAVID HEW is a lawyer by profession with over 30 years of post qualification professional experience.  He has worked in Canada, India, Indonesia, Kuwait, Malaysia, Myanmar, Pakistan, Philippine, Portugal, Russian Federation, Singapore, Sultanate of Oman, South Africa, Switzerland, Thailand, the United Arab Emirates, United Kingdom, United States of America and Vietnam.

David Hew has acted as expert to UNCTAD and consultant to UN ESCAP.  He has advised in the design, development and execution of Offset programmes.  He graduated from the University of Singapore in 1977 with LLB and he is an Advocate & Solicitor of the Supreme Court of Singapore admitted in 1978.  Hew obtained his LLM from the National University of Singapore in 1989 and his MBA from the University of StrathClyde in 1991.

Mr. Hew has led several workshops on Countertrade, Offset and Structured Finance and has lectured worldwide in these disciplines. His articles on these subjects have been published in several publications including Euromoney’s Trade Finance and Jane’s Defense.  He had taught a course on the “Legal Aspects of International Business” for Singapore’s Professional Engineers and Certified Public Accountants in their continuing professional development program.

Mr. Hew completed compulsory military service as a combat officer in an armoured battalion.

In 1996 “World News” (an independent publication in the United Kingdom) presented Mr. Hew with its Hall of Fame Countertrade and Offset Lifetime Achievement Award “in recognition of lifetime services to global Countertrade and Offset trade” (see www.apca.net).