1. 1 Ministry of Economy and Energy Offset Programs Directorate Republic of Bulgaria INTERNATIONAL CONFERENCE ON SECURITY AND DEFENCE R&D MANAGEMENT POLICY, CONCEPTS AND MODELS VARNA 29-31 MAY 2008

2. 2 THE ROLE OF THE OFFSET PROGRAMS AS A PART OF THE STATE POLICY FOR GUARANTY THE NATIONAL SECURITY AND THE ECONOMICAL INTERESTS OF THE COUNTRY IN THE CONTEXT OF PUBLIC-PRIVATE PARTNERSHIPS IN DEFENCE Ministry of Economy and Energy Republic of Bulgaria

3. 3 Ministry of Economy and Energy Offset Programs Directorate 1. What are the preconditions for the offset 2. 2. Bulgarian’s National Offset Policy 3. 3. The basic projects for modernization of the Bulgarian Armed Forces

4. 4 Ministry of Economy and Energy Offset Programs Directorate I. The strategic aim, which the country sets with the enforce of offset is to guaranty the national security and the economic interests of the Country through: Fulfillment of modernization of the National Arm Forces (NAF); Fulfillment of modernization of the National Arm Forces (NAF); Economic development of the Country. Economic development of the Country. What are the preconditions for the offset ? What are the preconditions for the offset ?

5. 5 Ministry of Economy and Energy Offset Programs Directorate This process requires huge public funds that are beyond the abilities of the new member- countries. The participation of the National Economy and its position in the globalizing world economy determines the applying of Offset. All these factors enforce the public sector to turn itself to the foreign producers which are powerful high technology Companies.

6. 6 Offset toward Bulgarian Company Transfer from the Fiscal for the Contracting Authority Payment of Fiscal resources Contractor of the Special Public Procurement Revenues in the Fiscal from taxes & customs duties Public Private- Partnership

7. 7 Ministry of Economy and Energy Offset Programs Directorate The fulfillment of the Offset programs by the Contractors of special goods and systems for the national armed forces, is turning to a State Policy for: The fulfillment of the Offset programs by the Contractors of special goods and systems for the national armed forces, is turning to a State Policy for: - guaranty the national security; - economic interest of the Country.

8. 8 Ministry of Economy and Energy Offset Programs Directorate The necessity of transformation and modernization of the Army, impose mandatory applying of the Offset as a system that could guarantee the fulfillment of the strategic goals of the foreign policy, foreign economic relations, inner policies and the national economy.

9. 9 Ministry of Economy and Energy Offset Programs Directorate II. Bulgarian’s National Offset Policy - The Offset in the Republic of Bulgaria is regulated under the Ordinance on the Award of Special-Purpose Public Procurements, adopted by the Council of the Ministers Decree 233/3.09.2004, amended by the Council of the Ministers Decree 1/5.01.2007, effective 23.01.2007. Offset definition: Compensatory obligations of a non - resident Contractor of a which the said Contractor undertakes to perform the economic activities. - The Offset is a Compensatory obligations of a non - resident Contractor of a Special-Purpose Public Procurements which the said Contractor undertakes to perform the economic activities. -The Offset has to bear benefits for the economical and regional development of Bulgaria in amount of 110% of the value of SPP.

10. 10 Ministry of Economy and Energy Offset Programs Directorate The Offset in Bulgaria is deviated to: Direct offset obligations related to the subject of the special- purpose public procurement award contract. Direct offset obligations related to the subject of the special- purpose public procurement award contract. Indirect offset obligations shall be all types of activities, services, acquisition of tangible and intangible assets, technologies, know - how, industrial property rights, which create new products; create new jobs; create value added, enhance the competitiveness of Bulgarian goods and services and increase the exportability thereof. Indirect offset obligations shall be all types of activities, services, acquisition of tangible and intangible assets, technologies, know - how, industrial property rights, which create new products; create new jobs; create value added, enhance the competitiveness of Bulgarian goods and services and increase the exportability thereof.

11. 11 Ministry of Economy and Energy Offset Programs Directorate The object of the compensatory arrangement can be the followings : Investments ; Investments ; Grant of licenses or transfer of intellectual property rights; Grant of licenses or transfer of intellectual property rights; Provision of technical equipment and/or technologies to resident persons ; Provision of technical equipment and/or technologies to resident persons ; Export support or collaborative outgoing in third countries. Export support or collaborative outgoing in third countries. The operative objectives which the State is set through the offset are: - achievement of sustainable economic growth; - increasing competitiveness of Bulgarian goods; - improve export opportunities and payment balance; - increasing employment.

12. 12 Ministry of Economy and Energy Offset Programs Directorate PRIORITY SECTORS Activities in the area of Computer Technologies; Activities in the area of Computer Technologies; Research and Development ; Research and Development ; Manufacturing (defense industry); Manufacturing (defense industry); Education; Education; Human health and social work activities; Human health and social work activities; Production and distribution of electrical and heating energy, gaseous, fuels and water; Production and distribution of electrical and heating energy, gaseous, fuels and water; Construction (without hotels, Malls, city and business centers and other conventional construction works) Construction (without hotels, Malls, city and business centers and other conventional construction works) Transport, storage and communications; Transport, storage and communications; Agriculture and hunting and related communications. Agriculture and hunting and related communications.

13. 13 Ministry of Economy and Energy Offset Programs Directorate The important amendments of the Ordinance, adopted 2007, are connected with : The establishment of the new official body in the offset, Interagency Council on Special-Purpose Public Procurements under a Compensatory Arrangement (ICSPPUCA); The mandatory stages to open a procedure for awarding SPP with an Offset Agreement; The competence of the Minister of Economy and Energy for preparing the procedure for awarding SPP with an Offset Agreement are affected; The offset coefficients are from 1 to 3, which role is to bind the Tender of the Offset to the priority sectors;

14. 14 Ministry of Economy and Energy Offset Programs Directorate The ratio of Direct Offset Obligation to Indirect Obligation is 30%-70% ; The ratio of Direct Offset Obligation to Indirect Obligation is 30%-70% ; The right is given to the Minister of Economy and Energy to sign the Offset Agreement; The right is given to the Minister of Economy and Energy to sign the Offset Agreement; The Contracting Authority shall appoint the Commission for selection the Contractor of a SPP and preparing the Contract for awarding of SPP & the Offset Agreement; The Contracting Authority shall appoint the Commission for selection the Contractor of a SPP and preparing the Contract for awarding of SPP & the Offset Agreement; The conclusion of a Framework agreement on the award of a SPP under a compensatory arrangements shall be ground of a Framework Offset agreement and for provisional performance of the Offset obligations (step for implementation of Pre-Offset) The conclusion of a Framework agreement on the award of a SPP under a compensatory arrangements shall be ground of a Framework Offset agreement and for provisional performance of the Offset obligations (step for implementation of Pre-Offset)

15. 15 Ministry of Economy and Energy Offset Programs Directorate III. The basic projects for modernization of the Bulgarian Armed Forces: 1. Development of the communication and information (CI) means for providing the necessary CI equipment, compatible to NATO requirements; 2. Acquisition of a new Multi-role Fighter; 3. Supplying the units, performing missions and tasks outside the national borders, with personal equipment and camping-marching gear; 4. Design and building of battle ships of “Multipurpose corvette” class; 5. National program on utilization and destruction of excessive ammunition; 6. Acquisition and modernization of second hand “ battle ships”; 7. Coastal radio location system for navigation control and coast guard- ”Ekran”; 8. Acquisition of systems for reconnaissance, early warning and monitoring of nuclear, chemical and biological agents.

16. 16 Ministry of Economy and Energy Offset Programs Directorate The following Four Projects for modernization of Bulgarian Army are in the process of fulfillment on amount about 84 mln. Euro Acquisition of new helicopters for the requirements of Air and Naval Forces of the Bulgarian Army – EUROCOPTER-France ; Acquisition of new helicopters for the requirements of Air and Naval Forces of the Bulgarian Army – EUROCOPTER-France ; Acquisition of new transportation Planes - ALENIA AERONAUTICA-Italy; Acquisition of new transportation Planes - ALENIA AERONAUTICA-Italy; Reequiping the Bulgarian Army with ground transportation vehicls - DAIMLER CHRYSLER-Germany ; Reequiping the Bulgarian Army with ground transportation vehicls - DAIMLER CHRYSLER-Germany ; Delivery of Armored Wheeled Vehicles - TEXTRON-USA. Delivery of Armored Wheeled Vehicles - TEXTRON-USA.

17. 17 Ministry of Economy and Energy Offset Programs Directorate The offset programs of the Contactors of the SPP prepared, accepted and executed with the assistance of the Ministry of Economy and Energy are important for the Bulgarian business. The State aids to the business to establish direct relations with high technology Companies from the whole world, creates conditions for direct investments in the Country, opens new markets, enhances the competitiveness of Bulgarian products and stimulates the Public - Private Partnership.

18. 18 Ministry of Economy and Energy Offset Programs Directorate Mr. Ivan Zherkov –Director Offset Programs Directorate Phone:+ 359 2 940 7905 Fax: + 359 2 940 7906 12, Kniaz Alexandar I Str., 1000 Sofia, Bulgaria http://www.mee.government.bg/offsetp/offs etp.html

19. 19 THANK YOU FOR YOUR KIND ATTENTION! Questions