Defence Offsets and Industrial Return: What Serbia Can Learn from the Swiss Model?

Major defence procurement is never only about equipment. When a country buys advanced aircraft, air defence systems, sensors, helicopters, or other strategic platforms, the real question is broader: what economic, technological, and industrial value does it return to the purchasing country?

This is where offset, industrial participation, and economic return programmes become important.

The Swiss F-35 programme is a useful reference point. Switzerland connected its fighter aircraft procurement with a structured offset framework that creates opportunities for Swiss companies. The idea is clear: when a foreign defence supplier receives a major national contract, part of that value should return to the national economy through industrial contracts, technology transfer, supplier development, research cooperation, production work, or other measurable economic activities.

Serbia’s Rafale acquisition from France should be viewed through the same strategic lens. The purchase of modern Western aircraft is a major step for Serbian defence modernisation. However, the long-term national benefit should not stop with the aircraft. Serbia should aim to transform this procurement into an industrial, technological, and innovation opportunity.

Aircraft Procurement as an Economic Development Tool

A fighter aircraft programme creates a long value chain. It includes maintenance, training, software, electronics, sensors, logistics, cyber protection, secure communications, simulation, engineering, spare parts, testing, infrastructure, and lifecycle support.

For this reason, industrial participation should not be seen as a secondary topic. It should be treated as a strategic pillar of the procurement itself.

In practical terms, Serbia should ask:

• Where will Serbian companies participate?

• Which Serbian institutes will receive know-how?

• Which sectors will be strengthened?

• How much measurable value will return to the Serbian economy?

• How can this programme support future export capability?

• And importantly, how can startups and innovative private companies also benefit?

Estimated Industrial Return Levels for Serbia

The reported Rafale contract value is around €2.7 billion. Based on international offset logic, Serbia should reasonably aim for a substantial industrial return package.

• A minimum serious industrial return would be approximately €800 million.

• A strong industrial participation package would be approximately €1.3–1.6 billion.

• A full strategic offset-equivalent package would be approximately €2.7 billion, equal to the value of the aircraft contract.

This should not be understood as direct money paid to Serbia. Offset and industrial participation usually mean measurable economic value delivered through contracts, technology transfer, local industrial work, research cooperation, training, certification, maintenance capability, supplier integration, and long-term business opportunities.

Why Startups Should Be Included

Traditionally, defence industrial cooperation often focuses on state-owned or established defence companies. That is understandable, because aviation and defence require high standards, security, certification, reliability, and government control.

However, modern defence innovation no longer comes only from large traditional manufacturers. Many critical technologies now come from startups and scaleups.

Artificial intelligence, cyber defence, drone systems, counter-drone technology, secure communications, satellite analytics, blockchain forensics, OSINT platforms, robotics, predictive maintenance, advanced materials, sensor fusion, and battlefield software are all areas where smaller innovative companies can deliver strategic value.

For Serbia, this is a major opportunity.

A part of the Rafale-related industrial cooperation should be connected to a Serbian Defence Innovation and Dual-Use Startup Fund. This fund could support young Serbian companies working in technologies relevant to aviation, defence, security, cybersecurity, AI, engineering, and advanced manufacturing.

This would not replace cooperation with the Ministry of Defence, the Serbian defence industry, or the Military Technical Institute. It would complement it.

A Practical Recommendation

Serbia should consider a balanced industrial participation model with three pillars.

• First, traditional defence industry cooperation should support established Serbian defence manufacturers, aviation maintenance capability, engineering institutions, and military-technical research.

• Second, academic and institutional cooperation should support the Military Technical Institute, universities, research laboratories, certification bodies, and technical education.

• Third, a dedicated innovation layer should finance startups and private technology companies in dual-use sectors.

This third pillar is very important. If even 10–20% of the industrial return were directed toward startup financing, pilot projects, accelerators, and technology validation, Serbia could create a new generation of defence and dual-use companies.

For example, if the industrial return were €800 million, a 10% innovation allocation would represent €80 million for startup and technology development. If the industrial return were €1.5 billion, a 10% allocation would represent €150 million. If the full strategic value reached €2.7 billion, even a limited innovation allocation could transform the Serbian dual-use ecosystem.

The Strategic Benefit

The greatest value of such a programme would not be short-term spending. The real value would be capability creation.

Serbia could strengthen aviation maintenance, create high-value engineering jobs, support export-ready technology companies, improve cyber and AI capability, and position itself as a regional hub for dual-use innovation.

This is exactly how defence procurement can become more than a purchase. It can become an economic development platform.

Conclusion

The Swiss model shows how a major aircraft procurement can be connected to structured industrial participation and measurable return for domestic companies.

Serbia now has a similar strategic opportunity with the Rafale programme.

The best approach is not to view industrial cooperation narrowly. It should not be limited only to traditional defence structures. It should also include startups, private technology companies, universities, research institutions, and dual-use innovation.

A modern air force is important. But the strongest long-term result would be a stronger national technology ecosystem around it.

IARPO thanks to the author, Mr. Bojan Ilic.

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