ABSTRACT
Providing offsets has become a major part of the international trade in arms, but there is debate over how substantive the benefits of offsets are. Questions have been raised about the accuracy of the estimated benefits to the economy (e.g., the actual value-added as compared to the purported value-added) and about what sort of linkages offsets form with the economy. This debate is of particular importance in South Africa where a large defense offset deal, on the order of $5 billion, announced in late 1998, is now taking shape in terms of the conceptualization and implementation of projects. The arms-related offset package-called the Strategic Defense Program-is one of the government’s expanding set of industrial participation projects. It includes both defense-related countertrade investment (the Defense Industrial Participation or DIP scheme) and nondefense related investment (the National Industrial Participation or NIP scheme). Both types of offsets, but especially the former, have been promoted by public and pri vate sector protagonists as a significant stimulus to industrial and developmental investment. The job creation element is also emphasized, although now less vigorously so than during the inception of the program.1 This chapter makes an original contribution to the literature in that it examines some of the purported offset-benefit issues at the regional and local levels.2 The chapter consists of three case studies, prefaced by an overview of South Africa’s regions and the relation between its regional development planning and the recent arms trade offset deal.
