STRATEGIC DIRECTION
3
Develop new opportunities through offset agreements
The defence market is a political and protectionistic market. The market is excepted from the EEA's competition rules. This means that most countries choose national suppliers and pose offset requirements in connection with international procurements. Offset agreements entail that the seller country must undertake an obligation to purchase defence materiel from the buyer country equal to a value corresponding to the original purchase price. KONGSBERG/Norway faces similar requirements when we sell defence materiel abroad.
Offset agreements are important for maintaining and further developing a viable national defence industry, also in Norway. When large-scale Norwegian defence procurement orders are placed with foreign enterprises, offset agreements are used actively to secure work for Norwegian industry, especially the defence industry.
KONGSBERG is Norway's premier defence enterprise. KONGSBERG has a history of being awarded a large part of the offset agreements signed. Earlier major procurements, e.g. air defence systems and frigates, have led to new alliances and partners for KONGSBERG. Such agreements have often been decisive for gaining market access abroad. These projects also give employees and the organisation an important boost in respect of knowledge and technology.
The Government plans to make a proposition to the Storting in 2008/2009 for the acquisition of new fighter craft. This will be Norway's largest defence materiel procurement ever. The agreement will be profoundly important for the Norwegian defence industry, and strict offsetting requirements have already been posed.
In 2006, the Government shortlisted three candidates for the contract: JAS Gripen, Eurofighter Typhoon and F-35 Joint Strike Fighter (JSF). KONGSBERG is neutral to the choice of fighter craft. For us, it is important to be in position for any of the three alternatives and to find good industrial solutions, regardless of which type of fighter craft Norway chooses.
The candidates have promised significant industrial contracts: JSF directly linked to the fighter craft, and JAS Gripen linked to fighter craft production and offsets. Eurofighter has withdrawn its candidacy for the moment.
KONGSBERG has already signed long-term framework agreements with Lockheed Martin and Northrop Grumman for the production of composite products for the new Joint Strike Fighter. The agreements are conditional upon Norway selecting the JSF. The agreements will extend for eight years and call for the construction of a new composite factory.
Fighter craft
At age 40, the F-16 fighter craft will reach its maximum life expectancy
in about 2020. The Government will submit a proposition to the Storting
in late 2008 about buying new fighter craft. With a framework of
roughly
NOK 40 billion, this aircraft procurement will be Norway's largest
weapon procurement ever. In December 2006, the Government voted to
shortlist three candidates for the contract:
- Eurofighter Typhoon (Europe)
- JAS Gripen (Sweden)
- F-35 Joint Strike Fighter (USA)
Offset agreements
At the same time as the Armed Forces enters into agreements for the procurement of defence materiel with foreign vendors, they sign a contract that obligates the supplier to purchase Norwegian goods and services
- Offsetting continues to be an important element of international trade.
- Norway operates with the same regime as other European countries. The Government and the Storting will require offset agreements and industrial participation in connection with defence procurements.
- The Armed Forces' future investment plans imply increased imports (e.g. new fighter craft). This opens opportunities for new offset agreements which, in turn, form a basis for entering new geographical markets.
- All Armed Forces' contracts in excess of MNOK 50 with foreign vendors are initially supposed to generate 100 per cent offset agreements.