Wednesday, July 8, 2009

Indonesian Redtape Torpedoes Sub Sale Bid

Following a failed attempt to sell the T-50 supersonic trainer jet to Iraq earlier this year, Korea's attempts to sell submarines are also being torpedoed. Daewoo International, a Korean trading firm, said Tuesday its bid to export two domestic submarines to Indonesia has not been successful.

The company joined bidding for the deal, estimated to be worth about $1.2 billion, to supply two 1,400-ton diesel-powered Type-209 submarines to the Indonesian Navy. The subs are made by Daewoo Shipbuilding and Marine Engineering. Three more companies from Russia, Germany and France competed for the deal. But sources said the Indonesian Navy demanded unacceptable terms so Daewoo and the German and French firms dropped out. Only the Russian firm remained, forcing Indonesia to instigate a second round of bidding.

The modified version of the ``Chang Bogo'' class is currently in service in the Korean Navy, which operates nine domestically built submarines designed by Germany's Howaldtswerke-Deutsche Werft. Daewoo International said technical specifications requested from Jakarta were overly demanding.

Russia is considered its major competitor, since it is backed by well-established political ties with Indonesia and an offer of a $1-billion loan. In another negative sign, the incumbent Indonesian defense minister is said to be pro-Russian.
In the end, the second bid is likely to be a duel between Korea and Russia, according to informed officials, with the other two bidding countries skeptical about Jakarta's request on price cuts.

This is not the first time of the year that Korea has staggered in such a bid. In February, the Korea Aerospace Industries, Korea's only aerospace firm, lost in a competition to supply next-generation military jet trainers to the United Arab Emirates. The Middle Eastern country selected the M-346 by Italy's Alenia Aermacchi as the preferred bidder in the $1.3 billion deal.

Daewoo is planning to enter the second round of bidding for the subs, hoping to take advantage of ties cultivated since the establishment of its Indonesian unit in 1976.

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