“Local Content in Public Procurement and Offset Panel” from ATO

The first Local Content in Public Procurement and Offset Panel organised by the Ankara Chamber of Commerce (ATO) took place in Ankara with many participants in attendance. With participants from public agencies and organisations, universities and private sector representatives the topic of local content and offset was put on the table in detail. 

Speaking at the Panel, Defence Industry Undersecretary Prof. Dr. Ismail Demir indicating that offset had been applied for 25 years in defence industry procurements and stressed that foreign companies need to be shown the way. In his remarks Demir said:  “We need to take stock of our domestic industry and provide guidance to companies that seek ways to use offset. In this sense the more we can show the way, not only will our local content rate of technological weight increase but will also overcome events in the use and exhaustion of offset through ‘made-up’ concepts which we have seen examples in the past. As with offset itself, offset numbers, how it is used, how much it contributes to domestic industry and from where to where it brings our companies are very important. We need to identify the critical areas in the use of local content ratios and undertake our homework very well.” Expressing the view that the said applications must be the beginning for the industry to enter that sector, Demir stated that, “In a sense like the job of the starter to start the car. Later all the parts of our engine must be in place; the process starting with offset should continue by itself through co-operation. This is the main parameter of long-term co-operation. If we included a company with a local content requirement and the work finishes the minute the local content requirement ends this means that we have been unsuccessful. Success involves its continuity.”

In his remarks Demir also emphasized that what the domestic industry can do must be on the table in all relationships as a constant agenda. Many companies experiencing Turkey have had positive experiences and have taken the decision to continue said Demir and went on to add: “We need to curb negative experiences and enable business discipline. What is needed by companies that receive work with local content requirement is moving away from the comfort of ‘this work will come to me anyway’ to the attitude of ‘how can I continue this work for a lifetime?’ 

Şanal: “Offset Must Become Compulsory”

ATO Deputy Chairman Koray Güngör Şanal stressed the view that foremost in America and Europe and in many other countries around the world offset in public procurement is compulsory and said: “Making offset applications compulsory in public procurement will be a driving force in the push for industrialisation of our country.” Stating that the world’s most advanced economies have made local purchases compulsory in order to protect their industry, Şanal mentioned that with the “Buy American” law in the United States it has been made a requirement that all government purchases are produced in America and that American raw materials be used. Similar legal regulations exist in many other countries and that it must be a condition that domestic industry in Turkey is protected and developed in the same manner. Stating that in general the automotive, chemical, electronics, shipbuilding, textiles, iron and steel, defence industry, telecommunications and the automotive supply industry around the globe use offset, Şanal said: “Today approximately 15% of the total global trade is based on offset agreements.”

50% offset in public procurement will contribute 30 billion dollars annually to the Turkish economy

Şanal stated that offset had been in existence for over 50 years around the world and had entered Turkey’s agenda in the 1980s and that today it was successfully applied in the defence industry. Expressing the view that with offset applications in the defence industry the domestic contribution rate in the sector’s requirements had risen from 20% to around 50% in the last decade Şanal mentioned that offset agreements can be implemented in sectors where imports are high such as the health, transport, communications, IT and the energy sectors. Şanal said that it is estimated that Turkey will spend over 500 billion dollars in these sectors by 2023 and added, “In the event a 50% offset is applied in public sector purchases during this period, it is calculated that the contribution to the Turkish economy will reach 30 billion dollars through industry participation, export and technology collaboration.”

Targeting the establishment of a modern industry, Turkey needs to set a policy on the issue of offset and that a framework needs to be established in co-ordinating the units that will implement this policy said Şanal and added: “As a representative of the private sector that will carry out offset policies we are ready to assume responsibility.”

The President of the Ad Hoc Commission on Local Content and Offset Applications of ATO Musa Pireci stated that they are an ad hoc commission that is not found in any chamber of commerce in Turkey and said: “Our Commission’s mission is to provide co-ordination between public organisations, private sector officials, NGOs and universities relating to offset.” Pireci stressed the fact that local content and offset applications have become even more important due to Ankara being a city that has a high production capacity in the defence and medical industries and in the areas of transport and energy. Pireci emphasized that thanks to the successful offset applications in the defence industry Turkey has moved away from being a country that continuously imports arms to becoming a leading arms exporter in the world. Pointing out that the Ministry of Health plans overseas purchases of 130 billion dollars in the next 9 years, Pireci continued by saying: “If only half of this amount is done by offset this alone amounts to around 65 billion dollars which will have been transferred to domestic industry. Pireci added: “If our country can successfully expand offset applications in the health, energy and transportation sectors, the amount that will be transferred to local industry in the next 9 years will be at least around 200 billion dollars. We foresee that this amount will solve the current account deficit and contribute to an expansion in capacity.”

During the full day of the Panel speakers spoke on topics such as problems relating to offset applications, existing work in the public sector, local content and offset in energy, offset in the defence industry, applications and success in the aerospace industry, the expectations of universities from offset applications and global offset applications.