What is “Offset” and what is the Saudi British Economic Offset Programme?

Offset arrangements are agreed between a purchasing Government and a foreign supplier, where that supplier is required to re-invest a percentage of the contract value back into the purchasing country, thereby “offsetting” some of the expenditure that has been incurred.  Offset may be Direct, where the foreign supplier’s reinvestment is related directly to the goods and/or services it is supplying through the main contract, or Indirect where the investment is made in areas other than those affected by the main contract.

The Saudi British Economic Offset Programme (EOP) is a programme established between the Saudi Arabian (KSA) and UK Governments pursuant to the sale of military equipment from the UK.  It seeks to assist KSA in attracting inward investment and technology transfer through the creation of joint venture partnerships.  The programme is managed in the UK by the British Offset Office (BOO).

 Who are BOO?

The BOO forms part of the UK Ministry of Defence’s Saudi Armed Forces Project.  Alongside the crown servants in British Offset, there are staff seconded from BAE SYSTEMS, the prime contractor for the UK/KSA government-to-government military equipment sales.

What are BOO’s aims and objectives?

The primary objective of the BOO is to help identify, develop and establish commercially-viable and sustainable joint venture (JV) projects in KSA between a domestic partner and an overseas technology partner (although in certain circumstances technology licensing arrangements between local and foreign partners may be approved).  The creation of such JVs supports KSA’s aims to reduce its dependence on oil and gas, broaden its economy and diversify its industrial base, replace imports with domestic production and increase employment opportunities for Saudi nationals.

 Who is eligible for support from BOO under the EOP?

Support from BOO is available to both the prospective local and foreign partners in any proposed JV.  Although the EOP is a joint KSA/UK programme, BOO is not restricted to involvement solely with UK companies.  Companies from most countries are eligible for inclusion under the EOP.  As a result, JVs have already been established and discussions are on-going with technology partners from a wide range of countries including the UK, US, Germany, France, Italy, Japan and India.

 Which sectors are BOO interested in?

BOO is able to examine project opportunities in virtually all business sectors (with the exception of the primary extraction of oil and gas).  Key areas of interest are in downstream petrochemicals; engineering activity related to oil & gas, water, power and transport industries; pharmaceuticals and healthcare; renewable energy; although other areas such as logistics, agro-technology, downstream activity from mining, and training and education may also be considered.

 What incentives are available for companies that participate in the EOP?

Aside from the incentives available from the Saudi Government for all new businesses setting up in KSA, BOO has a number of its own specifically for participants working under the EOP.  These include, but are not restricted to:

Assisting with identification of JV opportunities and potential partners;

Assisting with market intelligence gathering and providing support for pre-feasibility, and other studies;

Arranging initial reconnaissance visits and introductory meetings in the Kingdom;

Providing access to the Saudi licensing and regulatory authorities via BOO’s high-level links with the Saudi Government;

Providing advice on “doing business” in Saudi Arabia, including incentive packages, costs and other relevant business information;

Financial support through the BAE Systems Project Finance Initiative (BPFI).

 What is the BPFI?

The BAE Systems’ Project Finance Initiative (BPFI) is a unique facility created by BAE Systems for the benefit of foreign investors working with BOO.  It has been designed to lower investment risk and enhance returns.  The BPFI scheme can provide, by means of a non-recourse loan, up to half of the equity investment required from the foreign partner into the JV. 

A schedule of loan repayments is sculpted in accordance with the anticipated dividend stream based on the financial projections for the JV project and would normally allow for a suitable repayment grace period for the early years of the project. 

Where can I obtain more information?

Please see contact details for BOO here.