The countertrade option

Saturday , 13, April 2013 Leave a comment

Something I put together for a thread on PinoyExchange

The AFP’s priority is to acquire whatever capabilities it can in the soonest possible time. Given a choice between using imported technology that is available now, or waiting for indigenous solutions to mature . . . naturally they will go with what is already available.

HOWEVER, purchasing items from foreign suppliers does not automatically mean that it is a disadvantage for local industry. The key mitigating factor is in the mode of payment. This is where COUNTERTRADE comes into play. With countertrade, vendors are paid in kind, not money. Government money is used to buy local products which are then used to pay the vendor.

The lead agency for countertrade transactions is the Philippine Investment & Trading Corp. (PITC). Based on PITC statistics, the AFP is the largest user of countertrade transactions. The following modernization items were paid for using countertrade:

-> SIAI-Marchetti S211 trainer jets (Italy): 40% of the amount was paid for with the following items: Crude Coconut Oil, Garments/Fabric, various Copra products, various Porcelain, Black Tiger Prawns, Activated Coco Carbon, various Handicraft

-> Squad Automatic Weapons (Belgium): 85% of the acquisition was paid for with semi-processed rubber

-> Harris communication equipment (USA): 100% paid for with semi-processed rubber products, dessicated coconut, various handicraft

-> 105mm howizter upgrade (France): 100% paid for with copra products, desiccated Coconut, canned Tuna, assorted handicrafts