Offset Programme

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The Government of the State of Kuwait purchases large amounts of goods and services from foreign contractors. As a direct result of these purchases, economic benefits accrue to households and businesses in the countries in which the foreign contractors procure materials and produce the goods and services. The most important of these benefits is long-term economic development through job creation and capital accumulation.

It is the desire of the Government of the State of Kuwait that these long-term economic benefits be shared on a more equitable basis between Kuwait and the foreign countries. The Government has decided that the best way to achieve this more equitable sharing is through a Counter-Trade Offset Programme (the Offset Programme), which promotes the expansion of the Kuwaiti private sector through long-term, mutually beneficial, collaborative business ventures between the foreign contractors and Kuwaiti businesses, entrepreneurs and private citizens in general. The Offset Programme, established by Decision No. 694/1994 , amended by order 13/2005,, requires all foreign contractors who meet certain criteria to participate in the Programme.

The guidelines issued by Ministry of Finance for the Offset Programme define the terms 'offset obligation' and 'foreign contractor' in Article NO.4. Offset obligations are triggered when the single cumulative value of supply contract(s) awarded to a foreign contractor is equal to or greater than KD 1 million. The offset obligation is effective as of the signature date of the supply contract and is equal to 30% of the monetary value of the said supply contract. 50% of the offset obligation must be completed in the first four years and 100% within eight years.

Foreign contractors are defined as business entities having all of the following characteristics:
The entity does not exist or operate under Kuwait laws as per the Ministry of Commerce and Industry, Department of Corporations
The entity has been awarded, as either prime contractor or sub¬contractor, a supply contract by the government or any of its public sector institutions
The goods and/or services to be provided under the supply contract are defined as foreign produced under Kuwaiti law
Kuwaiti business entities acting on behalf of foreign businesses that are formed to circumvent the Offset Programme will be deemed foreign contractors.
The Offset Programme Objectives
The Offset Programme aims to:
Promote mutually beneficial, collaborative business ventures between Kuwaiti nationals and foreign contractors with an emphasis on investments in the Kuwait private sector
Achieve sustainable economic benefits, including those of increasing export sales of locally-produced goods and services and substituting foreign-produced goods by domestically-produced ones
Enhance the ability of the Kuwaiti private sector to sustain high-technology industries through the expansion and creation of educational and training opportunities available to Kuwaiti nationals both locally and abroad
Facilitate the transfer of state-of-the-art technology to the Kuwait private sector
Support the Foreign Aid Programme of the State of Kuwait.
Economic Development
Collaborative business ventures will be evaluated for their ability to further capital accumulation and to promote economic development in the State of Kuwait. Particular attention will be given to the business' ability to generate foreign income through export sales and income transfers from abroad, promote development and financing through internal fund generation, and substitute domestically produced goods and services for imported ones.
National Manpower
The creation of skilled jobs for Kuwaiti nationals is a high priority of the Government and the ongoing education and training of Kuwaiti nationals for all levels of employment is a key objective of the Offset Programme. Personnel policies and human resource programmes should support the development of an experienced, competent and highly-skilled Kuwaiti labour force.
Technology Transfer
The transfer of technology appropriate for Kuwait is a primary objective of the Offset Programme. Knowledge intensive activities are the focus for the development of new manufacturing and service industries. These transfers can be achieved through various activities, such as the capitalization of certain technical skills and knowledge, license arrangements and the assignment of highly-skilled technical experts to the businesses that are established. The technology transferred must be updated on an ongoing basis in order to stay abreast of the latest technological developments and innovations and thereby maintain a competitive business base.
Kuwait National Offset Company
Incorporated in 2006, to implement the offset program within the Country’s overall strategy through establishing viable business ventures between foreign offset obligors & Kuwaiti investors granting mutual benefits to both, and fostering Kuwait sustainable economic growth.