Offset agreement: playground for corruption?
Offset agreements, – more complicated than regular countertrade transactions -, are applied mostly in the trade of military and aerospace goods and services. Although these Offset agreements are legal, Transparency International see it as the playground for corruption (*), others see it as protectionism, as sharing or partnerships, or simply as a marketing tool. Transparency International criticizes that lobbyists improperly influence the need for a particular defense-acquisition, manipulate the competitive decision procedure, and politics allow favors to be repaid to corrupt government officials. The author of this posting, formerly Controller at VAIC, New York City, is familiar with countertrades which had been executed by Voest Alpine and Intertrading (both state-owned companies during the time of Austrian Chancellor Bruno Kreisky). Bruno Kreisky promoted the countertrade business model to generate employment for “People” but was less captivated to “Profit” or “Planet” regarding the three-dimensional Triple Bottom Line (Prosperity, Planet, People – PPP) approach of Sustainability. In particular, Kreisky stimulated the exports to the former Soviet Union and its allies in the Eastern Europe. In connection with those countertrade transactions, stepped down politicians, business people or simple opportunists with good connections to politicians received generous commissions. To be fair in this regard, some of these people were excellent networkers and not a few received for their efforts the golden emblem of merit of Austria, Vienna or other federal states in Austria. Countertrade agreements are certainly an approach to promote bilateral fair trade particular with developing countries when the 17 SDGs (Sustainable Development Goals) and CSR (Corporate Sustainable Responsibility) are taken into account. Indeed Offset agreements dealing with weapons should be rejected for ethical reasons.
(*) Magahy, B, Vilhena da Cunha, F., Pyman, M., Defence Offsets: Addressing The Risks Of Corruption & Raising Transparency, Transparency International, (J. Muravska and A. Wegener eds.) 2010.
Roland Leithenmayr VFV