On October 10th, the Financial Times published several pieces on defense contractors’ aggressive expansion into alternative overseas markets to compensate for shrinking NATO dollars.
“Over the next decade, the global value of the offset market is expected to reach $500bn, according to Avascent…”These markets include Brazil, UAE, Saudi Arabia, and India—“BUSI” markets—but also encompass countries like Algeria, Kazakhstan, Turkey, South Africa, and South Korea. Getting access to these alternative markets often requires offsets to close the deal. Until recently, offsets agreements, or side deals apart from the primary defense purchase, were often shrouded in secrecy, even when successfully applied and fulfilled. But with a market this large, and the intensifying competition within it, buyers and sellers will have to improve transparency to meet increasingly imposed regulations. “That could prove tough for some. Jon Barney, a Managing Director at Avascent, compared the task of measuring offset obligations to pouring sand from a dump truck into an hour glass. ‘I don’t think anyone expected offsets to become as big as they are today. The mechanics to track, manage, and report offsets have not kept up with their growth,’ he says.”
*Sources: IHS Jane’s, Sipri, Bloomberg, Avascent
Click here to read “Offset side deals spark calls for transparency“. (Subscription required.)
Click here to read “Defence group sweeteners grow to $75bn” which includes a company by company breakdown of offset obligations, supported by Avascent data. (Subscription required.)