Colombia´s Offsets Program

Colombia´s Offsets Colombia´s Offsets ProgramProgram

September 2007September 2007

Yaneth GihaYaneth GihaDirector of Planning & BudgetingDirector of Planning & Budgeting

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1.Overview

2.Offset defense policyObjectivesGeneral guidelines

3. Legal instrumentsFramework agreementComplementary agreements

4. Offsets value and multipliers

5. Final remarks

Table of contents

September 2007 Colombia´s Offsets Program

3 of 22September 2007 Colombia´s Offsets Program

OverviewOverview

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1.Overview




5. Final remarks

Table of contents


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OffsetsOffsets


ObjectivesObjectives


ColombiaColombiaMOD MOD


1. Self-sufficiency in the life cycle of the equipment

All types of defense equipment

30%30%

Acquisition and life cycle costAcquisition and life cycle cost

Offsets

70%70%Direct &

Indirect Military Offsets


2. Obtain industrial returns to strengthen strategic industrial sectors.

OffsetOffset


Direct & Indirect Industrial (Civilian

and Military) Offsets

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• The military industry is responsible of manufacturing, importing and marketing weapons, ammunition and explosives, accessories and complement elements to satisfy the needs of national defense and the industrial, mining and energetic sectors of the nation.

• CIAC (in a joint venture with CAMAN) is the

main center for maintenance and repair services for aircrafts.

• Naval Shipyard and corporation of Science and Technology in charge of design, construction, repair and maintenance of any kind of ship.


3. Increase the capacity of GSED enterprises.


Direct & Indirect Industrial (Civilian and Military) Offsets


4. Support social policies of the nation..


Although we have needs in many areas, we are focusing in four (4):

1. Physical rehab (in accordance to the Disability Public Policy). • Due to the internal conflict, Colombia is one of the countries with the

greatest number of anti-personnel land mine victims. • Victims: soldiers and civilians (poor peasants and children) in rural

areas where the fighting is most bitter. • 6.4% of the Colombian population (out of 40m).

2. Early childhood. • Public policy focusing in the improvement of education and living

standards of children under 6 years old.

3. Education and training.• Various areas: training ex-combatants to reintegrate to civilian life.

4. Bio – fuel (social + industrial).• Colombia is highly competitive in the production of prime material.• Need to enhance the industrial transformation capacity.

Indirect social and industrial Offsets

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1.Overview




5. Final conclusion

Table of contents


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General guidelines for the implementation of the industrial an social cooperation agreements in procurements that have 3 conditions:

1. Defense and security goods and services.

2. External Cash flow.

3. More than one million dollars or when reasonably the Ministry of Defense considers it convenient.

We will ask for offsets in commercial and Government to Government transactions, including foreign subcontractors.

Directive 14 – July 5, 2007


Offsets PolicyOffsets Policy

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1.Overview




5. Final remarks

Table of contents


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With the proposals, every supplier will include the Framework Offset Agreement subscribed.

Framework agreement


Legal instrumentsLegal instruments

The signature of the Agreement is a minimum requirement that does not give additional score.

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• General description of the industrial and social cooperation required.

• The offset percentage amount : 100%.

• The interest areas or eligible activities.

• The terms and conditions for projects presentation and approval.

• The procedures for projects approval and for adjustments or changes (annual report and meeting).

• Total duration of the offset agreement: 10 years.

• Penalties for non-fulfillment.

• Milestones: each project will have its own set of milestones.

Framework agreement: content



Y1Y1 Y2Y2 Y4Y4 Y10Y10

All projects must start before year 4: 5% penaltyNon-fulfillment: 5% + fulfillment obligation

or indemnity

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1.Overview




5. Final remarks

Table of contents


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• Approved projects will turn into Complementary Agreements.

• There will be as many complementary agreements as approved projects.

• These agreements will include the following:

1. The activities 2. The specific obligations of each party3. The timeline and milestones4. The multipliers and credits

Complementary agreements



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1.Overview



4. Offset value and multipliers

5. Final remarks

Table of contents


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• Range of Multipliers: 1 to 5.

- Exception of 0.2 – 0.7 multiplier to certain orders.

• No specific multipliers for direct or indirect offsets.

- Case by case within the ranges.

• Colombia’s multipliers were built in accordance to the needs, interests and policies.

Offsets value and multipliers


Offsets value and multipliersOffsets value and multipliers

Good projects will receive good multipliersGood projects will receive good multipliers

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Multipliers


Offsets value and multipliersOffsets value and multipliers

Technology Technology transfertransfer

2 - 52 - 5

Technology Technology transfertransfer

2 - 52 - 5OrdersOrders

11

OrdersOrders

11 Other ordersOther orders

0.2 – 0.70.2 – 0.7

Other ordersOther orders

0.2 – 0.70.2 – 0.7

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1.Overview



4. Offset value and multipliers

5. Final remarks

Table of contents


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• Colombia: new in the offset world.

• Good partner: we expect to make extraordinary acquisitions in the next 3 years but we always buy.

• We require 100% compensation, but remember 2 things:1. We have many needs many ways to fulfill the

obligation.2. We want to incentive business partnerships.

• Space for negotiation: within the limits of law and policy.


Final remarksFinal remarks

Questions?Questions?

Colombia´s Offsets Program

Documents

Transcript of Colombia´s Offsets Program