x Abu Dhabi, UAEWednesday 24 January 2018

Big aerospace guns sign new offset deals to help UAE

Major aerospace and defence firms have signed up to a new offset policy designed to help the UAE diversify its economy.

Major aerospace and defence firms have signed up to a new offset policy designed to help the UAE diversify its economy.

Boeing, Raytheon, EADS, Fincantieri, Nexter, MBDA, Lockheed Martin and Rheinmetall have all signed new long-term agreements for the upgraded offset system that was introduced last summer, representing the first major reform of the policy in 18 years.

Offsets require defence companies to contribute to the economy in exchange for arms contracts and are present in more than 100 countries worldwide.

Major infrastructure projects such as the Al Raha Beach residential project and the Dolphin gas pipeline were facilitated by offset deals.

"Over 70 per cent of defence contractors with offset obligations have transmitted their commitments to the new policy," said Saif al Hajeri, the chief executive of the Offset Program Bureau, the state-backed development agency responsible for implementing the offset framework.


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The new rules have been modified to support plans for an industrial base that delivers economic and social development through industrial partnerships, technology and knowledge transfer, and the creation of high-value jobs for UAE citizens.

Particular emphasis is put on building capacity locally for the making of end-user products such as strategic technical systems, infrastructure, transport equipment and oil and gas systems, as well as components such as advanced materials and electronics, precision manufacturing and technical services.

The old policy focused solely on "output" such as defence companies creating profitable joint ventures and employing nationals.

Last year it was estimated that defence companies would be obliged to generate economic output worth US$21 billion (Dh77.13bn) in the Emirates over the next five years, in exchange for an estimated $35bn worth of arms contracts, according to Blenheim Capital Partners, a financial services company based in the UK.

But the new policy also allows defence companies to generate offset credits for "inputs" such as contributing intellectual property and apprenticeship programmes. When the policy was announced last summer, the defence publication Jane's reported that defence contractors felt the new rules may force them to take on additional risk.


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However, Matar al Romaithi, the director of industrial development at the Offset Programme Bureau, said the offset policy had become more flexible for defence contractors and easier to implement.

Joost van Gemert, the head of corporate offset at Rheinmetall, based in Germany, welcomed the new rules.

"We are … very positive about the new offset policy," Mr van Gemert said. "It is much more open and very similar to the offset policies from European countries."