Why offsets are the real deal

As anyone who sits at a major equipment negotiating table in the Middle East and Gulf States knows, getting deals done in the current climate is challenging.

It’s not just that the competition among suppliers increasingly reliant on export sales is tougher than ever, or that budgets are under pressure as governments seek to address the wider needs of their people, there is also an enhanced requirement for sellers to support financing and to be seen to be contributing to the economy they are supplying.
The ability to deliver a full lifecycle commitment to the purchaser is an increasingly important success factor.

What many people don’t realise is that well considered and properly managed offset programmes can help all parties achieve what they are striving for, and it’s worth exploring further whatever side of the negotiating table you sit at.
In the second half of 2012 it’s estimated that there are $100 billion of offset obligations outstanding around the world. In the MENA region alone this is expected to reach $150 billion by 2017 and $500 billion globally. For the governments and companies that harness offsets to their full potential, the value of these can be multiplied many times in actual benefit. For those who do not, the loss to economies and future deal pipelines can never be recovered.
In all the years that I’ve been involved in the offset field, I believe these are the most exciting for three reasons:
* Firstly, in a world where there are ever increasing calls for national resources, offsets provide an opportunity to bring together the requirements for national defence and major civil investment, with those of health, education, skills development and long-term employment.
* Second, a truly beneficial offset project can develop deep, long-term relationships between buyer and seller, which can serve to enhance the opportunities available for OEMs. Indeed, as shareholders become increasingly focused, values as well as value, demonstrating a long-term sustainable approach, can have quick benefits in home markets too.

* Finally, at a time when there are so many reasons for contracts and projects to be put on hold or cancelled, offsets provide a mechanism to keep them on track, securing jobs around the world in equipment manufacture, as well as development in the purchasing markets.
For governments the key to realising these opportunities lies in fully aligning offset programmes with national economic and strategic objectives, and ensuring they are set up to encourage investment – often easier said than done.
For companies the challenges of offsets are often seen to outweigh the benefits but this need not be the case. Increased regulation is driving increased transparency in the offset sector; this not only provides a clearer operating framework but brings with it the opportunity to build and celebrate the economic benefits of long-term partnership as well as securing jobs.

Just as they are being used to providing low-cost funding for major non-carbon energy projects such as solar and wind based renewable, offsets can and are being used to support education and sustainable job creation. Success lies in having long-term shared ambitions, not short-term obligations, thinking about the whole economy, not just the immediate requirement.
Having recently attended the World Economic Forum to discuss how offsets can be used to achieve these goals, and about to depart for the Rio+20 conference where offsets are being considered as a tool to support sustainable development, I am more convinced than ever that offsets can tip the balance in favour of better, more productive outcomes from national equipment and infrastructure spending.
For all of us at the negotiating table, now is our chance to secure these benefits.