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Mon 11 Feb 2008 04:00 AM

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Kuwaiti class

NOC coordinates with other Offset Programs in the Gulf through a Joint Offset Committee established by the GCC Joint Financial & Economic Committee in March 2003.

NOC coordinates with other Offset Programs in the Gulf through a Joint Offset Committee established by the GCC Joint Financial & Economic Committee in March 2003.

With the GCC continuing to prove attractive to external investors, with GDP increasing in conjunction with the steadily rising price of oil, regional governments are acting to increase the benefits of these investments to local businesses.

Offset programs are one of the key facets to this strategy and the creation in late 2006 of Kuwait's National Offset Company (NOC) as a separate entity from its beginnings as a department within the Ministry of Finance show that the investment is reaping dividends.

With Kuwait's GDP estimated growth rate for 2006 standing at 12.7%, NOC Managing Director Mazen M. Madooh foresees strong economic growth going forward.

"The Gulf enjoys solid macro economic conditions with high GDP growth, making it one of the richest regions per capita," says Madooh, who has been with the program since the 1990s. "The area is also strong in terms of purchasing power due to buoyant oil prices and the diversified investment policy of oil revenues."

The state-owned shareholding corporation has set itself key target guidelines in order to achieve its vision of using the program to achieve national development goals and strengthen the private sector:

NOC describes its mission as to work through establishing viable, mutually beneficial, business ventures between foreign offset obligors and Kuwaiti investors. Madooh explains the program's intricacies: "Offset is a form of counter trade; it is a compulsory commitment requiring trans-national corporations that earn large government contracts to carry out an investment scheme as a prerequisite to winning that contract.

NOC is entrusted with the pivotal role of bringing together the offset obligors and the Kuwaiti private sector investors.

The benefits to both parties are clear in Madooh's mind: "Kuwaiti companies can benefit from the program through establishing viable economic relations, supporting their competitiveness and expanding their marketing and distribution channels internationally. It also gives them the chance to raise the efficiency and skill sets of Kuwaitis working in these companies.

For foreign investors there is access to a dynamic petrochemical industries base as well as lucrative investment opportunities in healthcare, educational services, infrastructure, transport and ICT amongst other sectors."

The offset programs can be either direct or indirect, whereby the projects are divided into those that directly serve the beneficiary government entity in areas relating to the investor's core competencies, and those where the investments are made in areas not directly related to their contracts; including maintenance, training, marketing and technology transfers.

Criteria for approving offset projects:

• The transfer and settlement of modern technology.

• The creation of jobs for Kuwaiti nationals.

• The advancement of educational and training opportunities to enhance the skill sets for nationals.

Since September 2006 NOC has been working extensively to complete the necessary administrative, financial, recruitment, organisational and legal requirements to bring the company to peak performance.

During this time NOC also finalised its first business plan to carry the company through to 2010 and has approved 40 offset project concept papers. One of the offset program's highlights was the unveiling in May of last year of a new technology and aviation maintenance and training facility in partnership with The Boeing Company and the Australian College of Kuwait (ACK).

The partnership was the first of its kind in the region aimed at making a positive contribution to young Kuwaiti aviation engineers - with Boeing supporting the facility's development at ACK's Mishref campus through an Industrial Partnership Agreement.

Complete with an ultra-modern aviation training workshop with hydraulic and pneumatic test benches, fuel solvent test facilities and an avionics testing unit, classrooms and a computer laboratory the centre is one of the best of its kind.

In November of last year the group officially launched its operations and introduced the new guidelines by which the program would work.

"Under the new guidelines the offset commitment remained at 35% of the monetary value of military contracts that are equal to, or exceed US$11m, and the civilian contracts that are equal to, or exceed, US$36.5m," explains Madooh.

However, some fundamental changes were introduced, especially relating to the multipliers system.

This system determines the incentives granted for the Offset Business Ventures (OBV), according to the extent to which they serve the three basic goals of the programme, namely; technology transfer, creation of jobs, training and educational opportunities. And, of course, if they were direct offset projects that serve the government authority with which the supply contract is signed."

Key services provided by NOC:

• Acceleration of licenses and government approvals for offset projects.

• Project studies and marketing surveys.

• Assisting offset obligors in identifying third party offset performers.

• Financial services for offset projects/funds.

• Matchmaking services between obligors and Kuwaiti private sector companies.

This is in marked contrast to the average global offset obligation which reaches around the 100% mark in Europe and 60% in the rest of the world.

The guidelines also provide several other benefits for foreign companies with offset obligations.

These include reductions in the value of sub-contracts granted to local Kuwaiti companies, from the total monetary value of the contracts subject to offset obligation and a reduction of the value of purchases of products and services of national origin (and that do not relate to the initial contract) from the total value of the offset obligation according to certain conditions.

Foreign companies looking to invest can also obtain pre-emptive offset credits before signing a contract, can benefit from future offset credits to cover obligations which could be imposed later and credit benefits in return for costs that they may shoulder for providing bank guarantees or outsourcing to international firms to determine the value of technology used in the OBV.

Speaking of the groundwork put into the company's business plan, Madooh foresees a bright future ahead: "This should be conducive to success in creating a cluster of promising investment and developmental projects, the positive impact of which will extend to various sectors in the local economy.

It will also support local small and medium enterprises, as well as various entrepreneurial initiatives."

"NOC represents a unique experience in the country," he continues.

It is the first time that a company has taken over the role of a governmental department. We will be endorsing private sector methods and practices in conducting business, focusing on efficiency, productivity, professionalism, best-practices and a customer service culture.

Joint initiatives:

NOC coordinates with other Offset Programs in the Gulf through a Joint Offset Committee established by the GCC Joint Financial & Economic Committee in March 2003.

This Committee held two meetings prior to the establishment of NOC in September 2006. In February 2007, NOC worked to reactivate this Committee, suggesting new areas of possible cooperation especially in the exchange of offset information and the launching of joint initiatives.

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