1. 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

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

3. INDUSTRIALIZATION DEPARTMENT Offset and Local Content Branch
STRUCTURE OF MOD
MINISTRY OF NATIONAL DEFENCE
UNDERSECRETARY (CIVILIAN)
Undersecretariat for Defence Industry, SSM
Co-production & Modernization
UNDERSECRETARY
(MILITARY)
Direct Procurement
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. NUMBER OF PROJECTS MANAGED BY SSM
Signed Agreements : US$ 7,6 B
On-going Agreements : US$ 6,8 B
Total : US$ 14,4 B

6. HEADLINES OF NEW IP/O DIRECTIVE
INDUSTRIAL PARTICIPATION/OFFSET (IP/O) DIRECTIVE
Effective as of

7. HEADLINES OF NEW IP/O DIRECTIVE
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/O DIRECTIVE
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/O DIRECTIVE
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/O DIRECTIVE MULTIPLIERS FOR EXPORT
Platforms 4
Systems 3
Software
Sub-system 2
Parts/components 1

11. HEADLINES OF NEW IP/O DIRECTIVE
MULTIPLIERS FOR T/T, INVESTMENT, R&D
System Integration 3
Network, information, satellite, sensor systems
Electronic Warfare
Missile, Guidance, Control
Other (Defense, aeronautics/aerospace, high technology) 2
Investment in Advanced Tech.Industrial Park (ITEP)

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)
OFFSET CATEGORIES
First Year
Second Year
Third Year
…..
Nth Year
TOTAL (USD/EURO)
A. Local Content
B. Defense Goods and
Services Export
C. Technological
Cooperation,
Investment, R&D
TOTAL

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

16. OFFSET REALIZATION STATUS (1985-2007)
OFFSET CATEGORY
AMOUNT
( Mil. US$) %
Defense Goods and Services Export
1084 34
Export of Industrial Goods and Services
1038 32
R&D, Tech. Coop., Investment, Others
724 23
Services for Turkish Armed Forces
359 11
T O T A L
3205
100

17. REMAINING OFFSET COMMITMENTS AS OF YEARS

18. REMAINING OFFSET COMMITMENTS BY COUNTRY (US$)
COUNTRIES
DIRECT OFFSET
(Mil. US$)
INDIRECT OFFSET
TOTAL
USA
850
523
1373
FRANCE
113
121
234
ISRAEL 65
152
217
GERMANY
116 64
180
SPAIN
125
ITALY
738 96
834 UK 37 1 38

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