KUWAIT OFFSET PROGRAM

New Strategy For the Implementation of Outstanding

Offset Obligations

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Principles and Objectives of the Offset Program and its Evolution

Journey

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OFFSET CONCEPT AND PRINCIPLES

Offset Definition:

An obligation imposed on defense contracts that are signed by government entities with foreign entities and whose value is equal to or greater than KD 3 million, in addition to civil contracts whose value is equal to or greater than KD 10 Million.

Value of Offset Obligation

Equivalent to 35% of the net monetary value of the supply contract after deducting the Monterey value of any of the following if existent:• Subcontracts signed with Kuwaiti companies• Purchases of goods and services of national origin that are made within the context

of the supply contract• The monetary value of the Kuwaiti share in a joint venture that is subject to offset.

Types of Offset projects

• Direct Projects (Donation)• Indirect Projects

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OBJECTIVES AND MANDATES

OBJECTIVES

Transfer and integration of appropriate technology to

Kuwait

Creation of high-skill jobs for Kuwaiti nationals

Advancement of education & training opportunities for

Kuwaitis

MANDATES

Manage optimally the full cycle of the offset program, dealing with both foreign obligors and relevant government entities

Identify and assess offset investment opportunities to

achieve maximum benefits to both Kuwait and the obligors

Facilitate effectively and efficiently all procedures and

fulfillment steps to the obligors

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02

TRANSITION PHASE AND KDIPA ACCOMPLISHMENTS

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• Council of Ministers Resolution No. 691 Dated 26th May 2014

“Approving the transfer of the offset program from the jurisdiction of MOF to KDIPA”

• Council of Ministers Resolution No. 890 Dated 7th July 2014

“Suspension of offset program on all contracts that are tendered by Kuwait government”

COUNCIL OF MINISTERS DECISIONS PERTAINING TO OFFSET

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Re-assessed the Program’s viability

Identified the constraints and obstacles that confrontedthe program and specified suitable solutions

Reviewed previously adopted offset related rules andregulations to assess their accuracy.

Efficiently monitored the implementation of ongoingoffset projects, initiated under previous offsetmanagement.

TRANSITION PHASE

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Number of Obligations Transferred to KDIPA = 105

No. of the Outstanding

Obligations is 71

No. of the Ongoing

Projects is 19

No. of Completed

projects by NOC is 11

No. of offset releases

Provided by KDIPA is 4

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Procedures and Opportunities of the New Strategy

03

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Council of Ministers Resolution No. 1212 Dated 24th August 2015

“Permanent cancelation of offset program, and entrustment of KDIPAto coordinate and seek assistance from any concerned entities, that itdeems necessary, to implement the outstanding offset obligations, whiletaking into consideration the achievement of the economic developmentobjectives and the priorities of the economic development plan ofKuwait”

In line with the Directives of Resolution No. 1212, KDIPA cooperatedwith various Kuwait government and private sector entities with the aimof assessing and developing a number of government and private sectorprojects that could be implemented through utilizing the outstandingoffset obligations.

STRATEGY DEVELOPMENT FOR THE IMPLEMENTATION OF

OUTSTANDING OFFSET OBLIGATIONS

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A short list of projects were identified by KDIPA and werepresented to the Council of Ministers.

A framework for effective and efficient implementation of thesuggested projects was presented to the Council of Ministers.

The Council of Ministers adopted Resolution No. 400 on March27, 2017, approving a number of the identified projects whichwould achieve Kuwait’s economic and social developmentobjectives to implemented by one of the options.

STRATEGY DEVELOPMENT FOR THE IMPLEMENTATION OF

OUTSTANDING OFFSET OBLIGATIONS (Cont’d)

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3.1

OFFSET FULFILLMENT OPTIONS

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Option No. 1

AVAILABLE OPTIONS FOR IMPLEMENTATION OF IDENTIFIED OFFSET PROJECTS

Directly implementing a project chosen by the offset obligor to the

benefit of the concerned entity

Providing cash contributions to

finance the identified projects, by depositing the

total offset fulfillment

contributions in an account, which

would be reserved for that purpose, within the state

budget, in coordination with

the Ministry of Finance

Choosing a third party to implement one or more of the

list of identified projects, after securing the

approval of KDIPA and the concerned government entity.Option No. 2

Option No. 3

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ADVANTAGES OF AVAILABLE OPTIONS

Preapproved projects which are ready for execution

Each project has its own ready TOR

Ease and timely implementation

Clear and efficient procedures

Granted Multiplier of 5.5

Shorter period for offset fulfillment & obtaining release

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3.2

IMPLEMENTION PROCESS OF AVAILABLE OPTIONS

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Option No. 1

MOF SPECIAL ACCOUNT

KDIPA: Receives obligors’ requests for cash contribution.

KDIPA: Studies and reviews obligors requests in coordination with the concerned government entities.

OBLIGOR: If granted approval, remits the offset obligation cash value equivalent to the MOF special account.

MOF: Confirms the cash remittance.

KDIPA: Grants final offset fulfilment certificate to obligor.

KDIPA: Instructs the concerned bank to cancel the bank guarantee

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Option No. 2 DIRECT IMPLEMENTATION

OBLIGOR: Selects one or more of the approved projects.OBLIGOR: Submits project “Implementation Plan (IP)” to KDIPA in line with

the TOR.KDIPA: Reviews IP in coordination with relevant project beneficiary entity,

in line with TOR and decides on granting approval.OBLIGOR: If granted approval, signs implementation agreement with the

beneficiary entity.OBLIGOR: Maintains valid bank guarantee until completion of project

implementation.BENEFICIARYENTITY: Provide KDIPA with periodic progress reports on

project implementation.

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Option No. 2 Cont’dDIRECT IMPLEMENTATION (CONT’D)

OBLIGOR: Submits credit claims to KDIPA upon the completion of each pre-

agreed milestone.

KDIPA: Reviews and Compares submitted credit claims in line with IP and

grants offset credits.

KDIPA: Reduces obligor offset obligation corresponding to achieved offset

credits, and instructs bank to reduce bank guarantee.

KDIPA: Grants “Offset Fulfillment Certificate” upon obligor total

implementation of project.

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Option No. 3

IMPLEMENTATION THROUGH A THIRD PARTY

OBLIGOR: Notifies KDIPA of intention to implement offset obligation throughappointing a third party, providing details of its qualifications and expertise.

KDIPA: Coordinates with the project beneficiary entity through delegated officer toassess the capabilities of the third party.

THIRDPARTY: Provides its commitment to implement the project on behalf of offset

obligor, in fulfilment of offset obligation, and provides a bank guaranteeequivalent to that required from obligor.

OBLIGOR: Transfers monetary equivalent of its offset obligation value to third party,and provides KDIPA with proof of money transfer.

KDIPA: Instructs the concerned bank to cancel the bank guarantee of obligor andissues “Offset Fulfillment Certificate” to the obligor.

KDIPA: Follows up the implementation of project and offset fulfillment with thirdparty.

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ع ي خط تنفيذ المشر Content of Project Implementation Planمحت

ع :Project Profile:مالمح المشر

ر ع المخت .اس المشر Name of the selected project

ع مشر ط الرئيسي ل .النش Project main activity

اصف الم ط شر ته طبق ل مخرج أهدافه ع صف المشرلح ع لص .الفني المقررة من الج التي سينفذ المشر

Project description, objectives and outputs in

accordance with the conditions and technical

specifications indicated by the beneficiary for which

the project shall be implemented

تزمه مؤهال الشركه الم عخبرا .لتنفيذ المشر Experience and track records of the obligor to execute

the project.

ن الفني :Technical Aspects:الج

ل الزمني لمراحل التنفيذ الجد .الخط التنفيذيه Implementation plan and execution timeframe.

ه من مراحل تز في كل مرح همه من قبل الم مقدار المس قيمه ع المخطط له .المشر

Equivalent value of the contributions by offset obligor

in each of the stages of the project

ع ب المشر :صف متطع - الس اد الخ المالمعدا -ع- فره المشر البرامج التدريبي التي سيتز- همه من قبل الم ع المس . الدع من الخبراء حس ن

Specifyi g the p oject’s e ui e e ts of:- Raw materials and goods

- Equipment

- Training programs provided by the project

- Experts assistance

مشر ريده ل لي المعرف المط ت أس جي ل اع التكن .عان The required types of technologies and know-how for

the project.

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GUIDE FOR THE IMPLEMENTATION PLAN “IP”

ع ي خط تنفيذ المشر بع)محت Co( ت te t of Project I ple e tatio Pla Co t’d

ع عالق ى تنفيذه ن ئمه ع الق ع لمشر ه األطراف المعنيه بن بين .التع

The parties involved in the implementation of the

project and nature of business cooperation among

them.

ء التنفي اع أثن ن الخدم ب د ع من العق ب المشر ذ متط The project various requirements for contracts and

services during implementation.

لي ن الم :Financial Aspects:الج

ع تز في المشر م ي ل همه الك قيمه المس .طبيع Nature and total value of contribution of Obligor in

Project

لي ي/ تقديرا الخط الم ليف التنفيذ السن .تك Financial projections and Forecasted annual

implementation costs of project

التتخ ن قيمه االئتم ه فه لكل مرح التك همه فيض قيم المسعف المحدد مل المض ى الع ءا ع . المط بن

Cost for each stage of project, the contribution value of

obligor towards each stage and the corresponding

offset credits generated/reduction of offset obligation,

based on the granted multiplier.

الدراس ير التط ث ي البح ف عم تك طبيع Nature and cost of the R&D and other studies

ريع التدريبي المش ص ب Relating to Training Projects:خ

ن التدري فر خبرا المدربين الذين سي Qualifications of the trainers

فيره را التدريبي التي سيت ت اصف الد م Nature and specifications of the training programs

دا التي سيت منح (هل معتمدة)الش Granted Certificates (Certified /Not certified)

ي التدري المعدا التي سيت استخدام في عم اآلال Machinery and Equipment utilized in training

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3.3

PRE-APPROVED LIST OF PROJECTS

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LIST OF PROJECTS APPROVED BY THE COUNCIL OF MINISTERS

Governmental Sector Projects

1) Sabah Al-Ahmad Chair in Knowledge

2) Management of Organic Waste (Composting Project)

3) Central DNA Facility for Animals and Plants.

4) Development of Yarmouk Cultural Centre - Dar Al-Athar Al-Islamiyah.

5) Preservation, Protection, Development and Enlargement of Qaruh Island

6) Commercial Utilization of Products Extracted from the Catfish Skin for

treatment of Wounds, Inflammations and Some Neurological Disorders

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LIST OF PROJECTS APPROVED BY THE COUNCIL OF MINISTERS

Governmental Sector Projects

7) Hydraulic Systems Testing and Training Center.

8) Air Conditioning Laboratory and Testing Facity.

9) Dental Simulation Laboratory

10) Establishment of a Composite-Pipes Center and Testing Facility.

11) Education Program for Diabetes Care, Management and Research in

Kuwait

12) Advanced Infrastructure Management (AIM) Project

13) MEW Power Transmission and Distribution Capacity Building Centre

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LIST OF PROJECTS APPROVED BY THE COUNCIL OF MINISTERS

Private Sector Projects

Gustave Roussy Institute of Oncology – Kuwait

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Sabah Al-Ahmad Chair in

Knowledge

General Secretariat of the Supreme Council for Planning

and Development

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Management of Organic WasteComposting Project

Public Authority for Agriculture and Fisheries

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Central DNA Facility for Animals and Plants

Public Authority for Agriculture and Fisheries

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Development of Yarmouk Cultural Centre

Dar Al-Athar Al-Islamiyyah

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Preservation, Protection, Development and Enlargement of

Garuh Island

Kuwait University

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Commercial Utilization of products from the Catfish skin for the

treatment of Wounds, Inflammation and some Neurological Disorders

Kuwait University

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Hydraulic Systems Testing and Training Centre

Kuwait University

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Air-Conditioning Laboratoryand Testing Facility

Kuwait University

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Dental Simulation Laboratory

Kuwait University

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Composite-Pipes Centre and Testing Facility

Kuwait University

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Education Program for Diabetes Care, Management and Research

in Kuwait

Dasman Diabetes Institute

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Advanced Infrastructure Management Project

Ministry of Public Works

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MEW Power Transmission and Distribution Capacity

Building Centre

Ministry of Electricity and Water

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Gustave Roussy Institute of Oncology

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3.3

Closing Statement

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PRESERVED RIGHT OF OBLIGORS TO CHOOSE PROJECT

The Council of Ministers Resolution No. 400 confirmed the right of obligors to

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Choose and Implement one of the Listed Pre-approved

offset Projects

Develop and submit an offset project of its

choice, such that it will be assessed and

evaluated by KDIPA in line the economic

development objectives of Kuwait.

OR

Offset obligors shall be entitled for compensations corresponding to

any financial burdens that they may have incurred during the

transitory period. These include: Compensations corresponding to costs incurred for the provision

of bank guarantee.

Compensations corresponding to costs incurred for undertakingadditional studies that are pre-approved by KDIPA.

Upon the quantification of the compensation entitlements their

values shall be deducted from the pending obligation values.

COMPENSATION OF OBLIGORS FOR EXPENSES INCURRED DURING TRANSITARY PERIOD

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FOR ANY ADDITIONAL INFORMATION

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Please Contact:

Ms. Manal Jaber

Email: Manal@kdipa.gov.kw

Tel: +965-225054050 Ext: 6058