The Tawazun Economic Program - ECCO...
28
1 The Tawazun Economic Program: Putting theory into practice A presentation for the European Club for Countertrade & Offset (ECCO) June 14, 2012 Eurosatory, Paris This presentation (“Presentation”) is for information purposes only. It should not be used for any other purposes. No warranty or representation is given as to the completeness or accuracy of the information contained herein and no obligation to update that information is assumed. Recipients of this Presentation should form their own assessment of the matters herein and should not rely on this Presentation. This Presentation is not an inducement to enter into any transaction. By receiving this Presentation you are deemed to agree to the above and you confirm that you are a person of a type who may lawfully receive the Presentation.
Transcript of The Tawazun Economic Program - ECCO...
1
The Tawazun Economic Program:
Putting theory into practice
A presentation for the European Club for Countertrade & Offset (ECCO)
June 14, 2012
Eurosatory, Paris
This presentation (“Presentation”) is for information purposes only. It should not be used for any other purposes. No warranty or representation is given as to the completeness
or accuracy of the information contained herein and no obligation to update that information is assumed. Recipients of this Presentation should form their own assessment of the
matters herein and should not rely on this Presentation. This Presentation is not an inducement to enter into any transaction. By receiving this Presentation you are deemed to
agree to the above and you confirm that you are a person of a type who may lawfully receive the Presentation.
2
Content
• Introducing Tawazun Economic Council
• What is
o Tawazun Economic Council?
o Tawazun Holding?
• The Tawazun Economic Program
o Background and objectives
o The procurement process
o Models: Input and Output
o Benefits of working together
o Business focus areas
• Success stories
• Looking ahead: 2012 - 2013
3
Introducing: The Tawazun Economic Council
• New name: The UAE Offset Program Bureau has officially been renamed as Tawazun Economic
Council
• Timely move: We celebrate our 20th anniversary
• Alignment: ‘Tawazun’ - the Arabic word for balance – specifically included in the new name
reflects our mandate of creating sustainable economic and social benefit for the UAE and its
people
• New look: Undergone a refreshing of its brand’ ‘look and feel’
Tawazun Economic Council’s goals remain the same
4
What is Tawazun?
• Established in 1992 and oversees
implementation of the UAE’s Tawazun
Economic Program
(previously the Industrial Development Program)
• It derives economic and commercial
value from the UAE’s extensive defense
procurement program
• The Tawazun Economic Program has
created several multi-million dollar JVs in
various economic and industrial sectors
• Tawazun Economic Program is supported
by an active Offset Committee and
Defense Contractors Council (DCC)
5
What is Tawazun Holding?
• Fully owned subsidiary of Tawazun Economic
Council, established in 2007
• It is selectively building manufacturing and
engineering businesses
• Helping to contribute to the fast-growing
industrial backbone of the UAE
• It has established a solid track record in active
industrial investment both locally and
internationally
• It aims to develop profitable ventures through
long-term partnerships that add to the
country’s industrial manufacturing sector
• Focused on four areas: aerospace,
automotive, ammunitions, metals & technology
6
TAWAZUN ECONOMIC PROGRAM
A closer look at the
7
Background
ESTABLISHMENT
CHAIR
AIM
RESULTS
The Program was established in early 1992 by the
Tawazun Economic Council (formerly known as the Offset
Program Bureau)
Chaired by H.H. Mohammed bin Zayed Al Nahyan, Crown
Prince of Abu Dhabi, Deputy Supreme Commander of the
UAE Armed Forces
To drive economic and commercial value from the
country's extensive defense procurement program
By partnering with world-class players, the Program has
created several multi-million dollar economic and
industrial joint ventures
8
Objectives
• DEVELOP modern defense industry in UAE through building related industrial infra-
structure
• PROMOTE partnerships between the national and international industrial leaders to
facilitate modern technology transfer
• CREATE employment opportunities for UAE Nationals in specialized fields
9
HOW IT WORKS
10
Procurement process
11
Threshold “Based on contract value”
30% (MAX)
As input
contributions
70% (MIN)
As output
contributions
No obligation
(within 5 years)
GHQ contract
US$ 0-10M
GHQ contract
US$ 0-10M
12
Min. % required (Based on a study made on 2010)
60 %
of purchase
contract value
0
20
40
60
80
100
120
140
160
180
Austria UnitedKingdom
TheNetherlands
Norway South Africa Philippines Canada UAE Saudi Arabia
172
120 117
102 100 100 100
60
40
Avg
101
13
Duration and Milestones
5%
Upfront Grace period Fulfillment period (7 years)
10% 10% 15% 15% 20% 25%
Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7
Determined by the complexity of the project
• Construction of facility
• Import of Machinery
• Export licenses
• Etc.
UPFRONT GRACE PERIOD
MORE PLANNING = MORE REWARDS!
14
Hybrid Model – Input and Output
INPUT CONTRIBUTIONS
(MAX. 30% OBLIGATION)
Industry Enablers Knowledge
Empowerment
Equity Contribution
INPUT VALUE
(Multiplier between 1.0 – 2.0)
OUTPUT - RESULTS GENERATED
(MIN. 70% OBLIGATION)
Net Profit /
Export Sales
Hiring UAE
Nationals
OUTPUT VALUE
(Multiplier between 2.0 – 5.0)
15
Hybrid Model – Input
INPUT CONTRIBUTIONS
(MAX. 30% OBLIGATION)
Industry Enablers Knowledge
Empowerment
Equity Contribution
INPUT VALUE
COMPONENTS OF INPUT VALUE
Transfer of
Technology
and
Know-How
Industry Enablers
Achieving Certification.
Setting up and implementation of management
system processes.
IP contribution. (Provision of license)
Start-up team. (Expertise by DCs)
Knowledge Empowerment
Establish JV specific apprenticeship program.
Develop industry specific local expertise,
based on and related to apprenticeship
program.
Facilitate scholarship program benefiting JVs.
Equity
Contribution
Cash Contribution.
In-kind: Current value of Machines.
16
Hybrid Model – Output
OUTPUT - RESULTS GENERATED
(MIN. 70% OBLIGATION)
Net Profit /
Export Sales
Hiring UAE
Nationals
OUTPUT VALUE
MAIN ACTIVITIES MULTIPLIER
Export % of Sales
Additional Multiplier
5% - 20% 1.5
21% - 50% 2.0
51% & above 3.0
BONUS ACTIVITIES MULTIPLIERS
% Nationals Total employees
Additional Multiplier
10% - 30% 1.0
31% - 70% 1.5
71% & above 2.0
17
Underperforming
5% 10% 10% 15% 15% 20% 25%
Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7
Shortfall
8.5% Bank Guarantee
Unfulfilled obligation will be
rolled-over to
default account
Penalty will be wiped-out 50% 50%
18
Design Engineering
Defense
Industry
Manufacturing
System
Integration Manufacturing
Program
Management
Systems & Components
Land & Naval Systems
Munitions & Weapon Systems
Aerospace Systems Advanced Materials
Autonomous Systems
MRO Testing
Business Focus Areas
19
Land Systems
Advanced Armoring
systems
Aerospace
Aero Engine
Aero structure
Precision
Manufacturing
Precision machining
parts
Munitions
Guided Ammunition
Weapon systems Advanced Material
Armored Vehicles
Naval Systems
Ship building Systems
Other Technologies & systems
Oil & gas separator systems
Oil drilling rig
COMPONENTS
&
SYSTEMS
Business Focus Areas
20
BENEFITS OF WORKING TOGETHER
21
Success Enablers
What to expect from Tawazun
Economic Council:
• Direction on national requirements
• Local market knowledge and support
• Flexibility
• Dedicated point of contact
• Support DC to identify project opportunities
What Tawazun Economic Council
expects from you:
• Advance planning
• Defined points of contact
• Effective communication
• Understanding requirements
• Establishing projects that have
commercial and business since
22
Examples of accepted projects
Production and assembly of the 8x8 and 6x6 vehicles
76mm multirole modular system and guided ammunition
SAMOUM
Maintenance, repair and overhaul
AMMROC 8X8 Vehicles
Advanced Ammunition System
Short Range Air
Sefense System Anti Ship Missiles
Manufacturing 25/30 mm turrets Advanced Material
Metallic
Precision
Ammunition Manufacturing
Burkan Siham Al Khaleej Non-lethal
Ammunition Composite
Surface
Treatment
Autonomous System Shipyard Building
Etihad Ship Building
Remote Controlled Weapon Systems
Remote Controlled Weapon Systems Industrial Cooperation
23
SUCCESS STORIES
24
Maintenance, Repair And Overhaul In Aerospace: AMMROC
• Name: AMROC
• JV: Mubadala, Sikorsky and Lockheed
Martin
• Investment: AED 1,000,000,000
• Areas of Focus: Military aviation
maintenance, repair, and overhaul (MRO)
25
Shipyard: Etihad Ship Building
• Name: Etihad Ship Building
• JV: Fincantieri, Al Fattan and Melara
Middle East
• Investment: AED 300,000,000
• Areas of Focus: Shipyard, covering both
military and civilian applications with a
variety of vessels and boats
26
OUR PRIORITIES FOR
2012 - 2013
Looking ahead:
27
Our Focus Areas For 2012 - 2013
• CREATING projects in areas of focus
• EDUCATING local private sector about defense industry
• CREATING and communicating our long-term strategy
• DEVELOPING our human capital in line with our needs
