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KUWAIT OFFSET PROGRAM PROCEDURES & OPPORTUNITIES
Presented by: Mr. Mazen MadoohGeneral Manager, National Offset Company (NOC)
24 September, 2009, London
I. General Overview of NOC and KOPOverview of NOC role in Managing Kuwait Offset Program (KOP).
Highlights of NOC first 3-year strategic Business plan.
Profile of overall KOP record:Number and Value of Military & Civil contracts; Number of projects completed & sector distribution; investment opportunities,; examples of Military & civil contract obligors.
NOC Future Services and Success formula
II. KOP Guidelines: Summary of current offset procedures according to KOP Guidelines No. 9-2007.
III. Success Stories.
PRESENTATION OUTLINE
KUWAIT OFFSET PROGRAM: Evolution Journey
1992 – 2004Ministry of Finance
► Established in 1992.
► Started as a unit then a department within
the Ministry of Finance.
► Offset Program evaluated by World Bank in 2000.
►Temporary suspension of the program in 2004.
► World Bank conducted a thorough assessmentof the suspended program in 2005 and confirmedfeasibility and need to become a privately runprogram.
►Council of Ministers Decision No. 863 of 2005 to reinstate offset program and establish a company to manage it.
2006- 2008National Offset Company
► Established as a state owned enterprise K.S.C.C.in 2006
► Signed Management Contract with MOF to manage the Offset Program.
► Established organizational structure, selected Board of Directors, management and employees.
► Adopted new Offset Program Guidelines No.9-2007 as of 9 September 2007.
► Co-developed three year business plan and operating policies with E&Y finalized in April 2008.
► Entered into internal capability development program in offset with BCS for 15 months (Jan 2009 – April 2010).
NOC OBJECTIVES & TASKS
OBJECTIVES
► Transfer & settlement of appropriate moderntechnology.
► Creation of high-skill jobs for Kuwaiti nationals.
► Advancement of education & trainingopportunities for Kuwaitis.
TASKS
► Manages optimally the Full Cycle of the OffsetProgram dealing with both the foreign obligorsand relevant government entities.
► Identifies and assesses potential offsetinvestment opportunities.
► facilitates the establishment of Offset businessventures (OBVs).
► Raises awareness of the Offset Program amongvarious stakeholders.
NOC STRATEGY: BP 2008-2010
Present SERVICES New
MARKETSMarket
Penetration& Concentration
Product/service development
New
Market development
Diversification
• Stronger corporate brand image & Awareness.
• Stronger working relations with GOK, FCs, and CSI.
• Active Matchmaking.
• Facilitation of OBV implementation (Fast Track).
Consolidating core business through:
Defining Key Performance Indicators (KPIs) Utilizing CRM Upgrading staff internal capabilities Improving contract & Project management Matchmaking
Enhanced capabilities through the Evolved Organizational Structure:
Introducing Lead Generation (CR, business opportunities development, FastTrack)
Establishing Planning Department (strategic planning, market intelligence, Media& Marketing activities).
Forming Obligor committee (ongoing) & Transition committees (temporary) Introducing Government Relations section (Fast Track)
IMPACT OF NOC BUSINESS PLAN STRATEGY
NOC EVOLVED ORGANIZATIONAL STRUCTURE 2008
* Note: Non-Civil Sector refers to contracts relating to the defense and security sectors while Civil Sector refers to thecontracts relating to sectors other than defense and security sectors (i.e. education, healthcare, water & electricityetc.)
NOC Board of Directors
Projects Division
IT Non-CivilSector *
Contracts & Fund Mgt.
Project Mgt.
HR & Admin. Department
HR
Administration
Government Relations
Managing Director Office
Leads Generation Department
Projects Appraisal
Department
Contract &Project
Management Department
Internal Audit
Transition & ChangeManagement Committee
Finance & Accounting Department
Civil Sector *
Consultants UnitLegal Unit
Finance & Accounting
Planning Department
Strategic Planning &
Market Research
Marketing &Media
Obligor Committee
Business Support Division
NOC SERVICES MODEL
Foreign Contractors
Offset Obligations
Offset Business Ventures (OBVs)
Offset Funds
Direct Offset
Indirect Offset
NOC Services
Generators of Offset Obligations
Offset Fulfillment Options
GOK Tenders
GOK Economy Citizen
Value Chain: Professionalism, Accessibility, Flexibility
KUWAIT OFFSET PROGRAM RECORD (1992 – 2008)
Defense Contracts accounted for 50% of total value of Offset Obligations and 62% of total number of contracts.
Total Value of Offset Obligations by Government Entity
Total Number of Contracts by Government Entity
MOD
KAC
MEW
NG
MOI
MPW
Other
MOD
KAC
MEW
NG
MOI
MPW
Other
ValueUS$
3.46 Bn
# ofContracts
126
SECTOR DISTRBUTION OF COMPLETED OFFSET PROJECTS
Healthcare, 3
Education & Training, 13
Industrial , 11
Services, 7
Financial, 4
Other, 3
Total of41
OBVs
No. of Received concept papers for projects & funds:
31
under implementation
(up-to-date)
8
Obligors8
Private Sector23
OFFSET INVESTMENT OPPORTUNITIES (Jan. – Aug. 2009)
Approved Concept Papers 7
Pending Projects 21
Rejected Projects 3
KUWAIT OFFSET PROGRAM RECORD (1992 – 2008)
* Other include: Australia, Spain, Yugoslavia, Canada
Offset Obligors by Nationality USAUKFranceJapanChinaKoreaGermanyItalianNorwayBelgiumAustriaOther
A Total of 126 foreign companies
KOP CLIENTS: Examples of Military Contract OBLIGORS
KOP
Mecar
BAESystems
Aerospatial
Raytheon
Lockheed Martin
SimmelDifesa
Chemring
CMN
Boeing
Thales
KOP CLIENTS: Examples of Civil Contract OBLIGORS
KOP
Siemens
Mitsubishi
Mitsui
Kalpataru
China Gezhouba
Dossan
Hyundai
Airbus
Boeing commercial
Toshiba
NOC FUTURE SERVICES
Providing Matchmaking services between obligors and Kuwaiti private sectorcompanies.
Accelerating process of issuing licenses and government approvals for offsetprojects (Fast Track).
Providing Market Intelligence.
Assisting offset obligors in identifying Third Party offset performers.
Assisting obligors in identifying potential Financing sources to partiallyparticipate in financing the offset project.
NOC CREATING A WIN-WIN FORMULA!
Foreign Contractors Establishing and developing
new business relations.
Benefiting from various opportunity prospects in the State of Kuwait.
Developing a better position in & understanding of domestic business market.
Strengthening and integrating international production chains in a new and promising market.
Local Entities Diversifying the economic base
Strengthening local productive capacity and export potential for goods and services.
Enhancing R&D capability
Enhancing technical, administrative & managerial local skills.
Encouraging the development of local SMEs.
Increasing private sector competitiveness.
NOC
OVERVIEW OF KUWAIT OFFSET PROGRAM
NEW OFFSET GUIDELINESNO. 9-2007
GENERAL PRINCIPAL: 1 GL (9) - 2007
Supply Contracts Subjectto Offset
≥KD 10 Million
CivilContracts
≥KD 3 Million
DefenseContracts
CONTRACT CASES WHERE OFFSET IS NOT APPLICABLE
Contracts for non-industry related construction works.
All Public-Private-Partnerships (PPP) contracts signed with any Kuwaiti governmental entity.
Foreign Suppliers of goods on F.O.B. basis, directly or through a local agent/distributor.
GENERAL PRINCIPAL: 2 GL (9) - 2007
Offset Obligation
35% of Monetary Valueof the Supply Contract
GENERAL PRINCIPAL: 3 GL (9) - 2007
Offset obligation starts
Bank Guarantee 30 days from date of Signing SC
Signing of MOA
Signing of Supply Contract
Contract stage
Pre-tender - short listed
OBV starts within one year of Signing supply contract
Offset Credits OFC
Tentative multiplier
Business Plan Final Multiplier
Implementation stage
Concept Paper
Offset Milestones
Follow Up
GENERAL PRINCIPAL: 4 GL (9) - 2007
Deductions from Supply Contract
GENERAL PRINCIPAL: 5 GL (9) - 2007
minus•Expenses incurred by obligor in attaining Bank
Guarantee.
minus•Expenses incurred in assessing the value of
Technology Transferred to OBV.
minus•Off-contract purchases of goods & services of
national origin.
Deductions from Offset Obligation
Total Value of Offset Obligation
GENERAL PRINCIPAL: 6 GL (9) - 2007
1.Submitting the Project Concept Paper prior to Signing the Supply Contract by short-listed foreign contractors participating in GOK Contracts.
2.Signing an MOA with NOC prior to signing the supply contract.
3.Providing a Bank Guarantee: 6% of the value of the Supply Contract.
Pre-requisites
GENERAL PRINCIPAL: 7 GL (9) - 2007
OFFSET INVESTMENT OPTIONS
NOC Pre-Approved Direct or Indirect Offset Projects.
Own-Proposed Direct or Indirect Offset Projects with NOC Post-approval.
Participation in Offset Funds developed or approved by NOC.
GENERAL PRINCIPAL: 8 GL (9) - 2007
Schedule of Offset Multiplier Values
RangeType of Objective AchievedOffset
Project Category Education
and TrainingJob
CreationTechnology
Transfer
1.75 to 5.51.751.752Direct Offset
1.0 to 5.01.0 to 1.61.0 to 1.61.5 to 1.8Indirect Offset
3.5 to 5.5Funds
GENERAL PRINCIPAL: 9 GL (9) - 2007
JointVentures
Greenfield FDI projects
Brownfield investments
Direct Contribution
Procurement of National Goods &
ServicesAcquisition of existing OBV
others Third Party arrangements Offshore
TYPES of Offset Projects
GENERAL PRINCIPAL: 10 GL (9) - 2007
Pre-EmptiveOffset Credits
FutureOffset Credits
Transfer & Sale of Offset Credits
Potential Earning of
GENERAL PRINCIPAL: 11 GL (9) - 2007
Granting of Offset Fulfillment Certificate
Submitting First Year financial statement of the OBV.
Bank statement confirming transfer of obligor’s investment funds.
Proof of offset obligor equity ownership in the OBV.
Copy of OBV registration at Kuwait Ministry of Commerce & Industry.
Statement of members of the Board of Directors for shareholding companies.
GENERAL PRINCIPAL: 12 GL (9) - 2007
Special Offset Fulfillment Mechanism
NOC Board of Directors has the authority to provide offset facilities tolimited number of special government Contracts, subject to theapproval of the Minister of Finance.
NOC SUCCESS STORIES
VESSEL OPERATIONS SIMULATOR “MAIN BRIDGE”
AVIATION MAINTENANCE & TRAINING FACILITY
AMERICAN ACADEMIES & INTERNATIONAL INSTITUTES OF MANAGEMENT (AAIM)
PROJECT: EXPANSION OF TRAINING & EDUCATIONAL FACILITIES AT INFORMATION TECHNOLOGY INSTITUTE
CONTACT DETAILS
NATIONAL OFFSET COMPANY – KUWAITMr. Mazen M. Madooh, General Manager
: + (965) 2 247-1777TEL
: + (965) 2 244-5178FAX
: P.O.BOX 26363 Safat 13124P.O.BOX
: Al Salam Tower, 4.5th floor, Fahed Al Salem St., Kuwait City, Kuwait.ADDRESS
: www.kuwaitnoc.comWEBSITE
