Spotlight on offsets in the defence sector: a groundbreaking report
Thursday, 06 May 2010
Transparency International UK’s Defence Against Corruption programme (DAC) has launched a groundbreaking report: Addressing the Risks of Corruption and Raising Transparency, on the practice of incorporating offset arrangements in defence sector contracts.
The report, the first of its kind, explores the issue of offsets and focuses on practical, preventive anti-corruption measures to increase their transparency and reduce the scope for abuse.
Commenting on the report, Transparency International UK’s Defence Against Corruption Programme Leader Mark Pyman said:
“Offsets, arrangements made by purchasing governments with their suppliers requiring the contractors to reinvest a percentage of the value of the deal in the importing country, are illegal under many trade agreements and in most industries.
“We know from our work that offsets are big business, and yet they are very opaque and receive much less transparency and attention than they should given their susceptibility to high corruption risk. Many government and defence industry professionals share our view that the integrity around offsets transactions needs to be improved significantly.
“We are calling on governments, companies and defence industry associations to raise the integrity and transparency of contracts and reduce the corruption risk.”
The defence industry is often seen as more prone to corruption than others primarily because of the secrecy surrounding military spending and national security. Such a lack of transparency in a market estimated by the Stockholm International Peace Research Institute (SIPRI) in 2008 to be worth US $1.5 trillion, increases the risk of abuse.
The Government Procurement Agreement (GPA) of the World Trade Organization, the North American Free Trade Agreement (NAFTA) and the European Union prohibit offsets. However, the GPA and the EU make an exception for defence procurement, while the GPA also allows exceptions for developing countries
You can read the full report in pdf format or as an e-book.