In the case of defence-related procurement from foreign states the offset shall mean a contractual provision, established by the buyer, requiring the seller to buy goods or services from the buying country or offer other benefits or meet some other requirements.

The Ministry of Defence has been using offset in case of large-scale foreign procurements since the year 2007.

The task of the mediation of Estonian companies for the offset purposes lies with Enterprise Estonia.
For more information see the website of Enterprise Estonia »

In the case of defence-related procurement from foreign states the offset shall mean a contractual provision, established by the buyer, requiring the seller to buy goods or services from the buying country or offer other benefits or meet some other requirements

The valid guidelines on defence-related offsets set out the permitted forms of offsets, which include export of goods and services, co-operation in the sphere of research and development, investments, technology transfer and marketing assistance. By using the coefficients, the preferred spheres are services, which are related to research and development activities, state of art goods and strategic goods. Offset will be used in the case of procurement, with a scope above 150 million Estonian kroons. This limit will be decreased in the future.

The amendment of the offset guidelines is currently in process to consider the experiences gained in course of the first purchase and as the consequence of Estonian joining the counter procurement framework of the European Defence Agency. Future plans involve the publication of the guidelines at the website.


Objectives of Offset

In Estonia, offsets are used in the defence sector with the purpose of supporting a competent, competitive and demand-striven industrial capacity. Offsets contribute to the desired development of the Strategy for the European Defence Technological and Industrial Base (EDTIB), while facilitating the establishment of clusters, competitive at the global scale, and avoiding unnecessary duplication. Estonia supports the achievement of these objectives and will offer the defence industry advantages for their achievement, as this will give the defence industry, above all, an opportunity of strengthening its position in international task division. More generally, the use of offsets is intended to facilitate economic development in Estonia, as some of the funds, spent within the framework of the procurement contract, will remain in Estonian economy as the result.


Current Offset Arrangements

In the year 2005, the Government of the Republic decided, acting under a proposal from the Ministry of Defence, to link a procurement of a major warfare system with an offset requirement for the first time. Offset contracts with the total value of 56 million Euros were concluded with MBDA France and SAAB AB, simultaneously with the conclusion of a procurement contract for the acquisition of short range air defence system. As the offset requirement involved two companies, two separate contracts were concluded, the value of the financial obligation being 100%, the contract was successfully completed in february 2012.

In 2009, the Ministry of Defence entered into a contract for the acquisition of to medium range ground radars from Thales-Raytheon Systems Company, the total value of the contract being 22 million Euros, which will be also subject to a 100% offset requirements, which must be met by 2015.


Offset Parties and Administration System

The Ministry of Defence, the Ministry of Economic Affairs and Communication and Enterprise Estonia (EE) play the biggest role for the purpose of organising offsets.

The Ministry of Defence has the following functions:

• creation and improvement of legal framework for offsets;
• entry into offset agreements;
• formation of an offset committee and organisation of its work;
• organisation of industrial co-operation upon the conclusion of procurement contract with the business organisations concerned.

The Ministry of Economic Affairs and Communication has the following functions:

• giving EE tasks and guidance and co-ordination of its activities;
• ensuring EE with funds, necessary for the fulfilment of the functions, arising of these guidelines;
• guidance of economic aspects of the offset politics.

The Enterprise Estonia (EE) has the following functions:

• collection of information on Estonian entrepreneurs to be involved in co-operation with the Defence Industry Union and other appropriate business organisations;
• giving the offset obligees objective information on Estonian companies;
• notifying the Estonian enterprises of offset alternatives;
• checking the compliance of offset transactions with offset contracts;
• organising the reporting of offset obligees and Estonian entrepreneurs.

EE shall organise the involvement of entrepreneurs after the conclusion of procurement and offset agreements. EE shall use the implementation funds to notify the entrepreneurs of the aforementioned opportunity. EE shall organise the collection of information on products or services, offered by entities interested in offset, making it available to the offset obligee.