Rigid Offset Policy in Foreign Arms Contracts

摘要

Some countries, e.g. the Czech Republic, apply rigid offset requirements mandatory for all foreign arms contracts exceeding set threshold value, usually as a percentage of the price of underlying contracts. This rigid policy contradicts the fact that success of offset programs - regardless of the primary intent of the government demanding offsets - depends on many factors that are often specific for each individual contract or arms market segment and are subject to dynamic changes over time. This paper attempts to focus on key determinants of offset program success and classifies them as general, defense industry related and economic performance related. While factors of short-term benefits induced by offsets are relatively clear, the long term factors require valuation of each offset transaction considering current value of future costs and revenues.