Competition in Indonesia's submarine tender aggravates

05.09.2011 As is expected, Indonesian defense ministry will select preferred tenderer for delivery of new non-nuclear subs for national navy.

In 2009 Indonesian defense ministry addressed invitations to French, German, Russian, and Korean shipyards, although the program was annulled then due to lack of financing. Decision to choose a tender winner was postponed for 2011. For a long time official sources has been declaring that main candidates were Russia and Korea, but according to recent reports of Asian media agencies, joint proposal of Turkey and Germany has great chances of success as well.

Therefore, currently two out of three bidders are countries building Project 209 non-nuclear submarines under German license.

According to China Post, South Korean defense minister Kim Kwan-jin will visit Indonesia in Sept 7-9 with the view to discuss delivery of three Project 209 non-nuclear submarines; the contract cost is evaluated as $1.08 bln. If South Korea wins the tender, Daewoo Shipbuilding and Marine Engineering (DSME) would be a prime contractor for three 1,400-ton subs. The minister will be accompanied by representatives of nine Korea's largest defense companies which obviously also count on new orders.

As is said by experts, choosing South Korean offer would strengthen bilateral military technical cooperation. Previously, these countries had signed agreements on joint development of a new-gen fighter KF-X, delivery of six-by-six armored personnel carriers made by Doosan DST and trainer/multirole fighter T-50 Golden Eagle made by Korea Aerospace Industries. It should be mentioned that Indonesian Navy already operates two Project 209/1300 non-nuclear subs modernized in South Korea.

Another offer of Project 209 submarines for Indonesian Navy was tendered by a consortium of Turkish and German companies.

According to Hurriyet Daily News, Turkey's Undersecretariat for Defense Industries (SSM) plans to compete in the tender jointly with German company Howaldtswerke-Deutsche Werft (HDW).

Initially, it was supposed that HDW would attend the tender as a partner of Daewoo, but the South Korean company applied for tender alone. Being in peril of loosing potential contract, HDW offered Turkey's Undersecretariat for Defense Industries to take part in the tender. That proposal was made with regard to the fact that Turkish president Abdullah Gul had visited Indonesia in Apr 2011 and signed a bilateral agreement in the area of military industry.

Prior to that, Turkish industry along with HDW had built fourteen Project 209 and six Project 214 diesel electric submarines. In July 2011, a new contract between SSM and HDW took effect providing delivery of six new Project 214 non-nuclear subs to Turkish Navy. In June 2011 HDW handed over a certificate to SSM authorizing it to sell Turkish-built Project 209 subs to Indonesian Navy.

To improve competitiveness of own offer, director of SSM Murad Bayar told to Indonesian defense ministry that Turkey was ready to lease one or two Project 209 submarines until new subs would be completed. In addition, Turkey would train Indonesian personnel. Murad Bayar also promised to redirect significant portion of works to Indonesian companies including PT PAL and ensured the project would be fully supported by HDW. Additionally, the offer provides preferential payment terms.

In case SSM wins the tender, the submarines would be constructed at Golcuk shipyard by Turkish company Savunma Teknolojileri Muhendislik ve Ticaret A.S. jointly with Howaldtswerke-Deutsche Werft.

It should be noted that despite tough competition, Turkey and South Korea closely cooperate in defense sphere. Turkey produces KT-1 Wong Bee training airplanes under Korean license. In July 2008, South Korea agreed to transfer production technology of Altay main battle tank to Turkey. The $400-mln contract became the second largest Korea's export agreement after the $1-bln contract signed in 2001 when Samsung Techwin transferred technology of self-propelled howitzer K-9 Thunder also to Turkey. Korea Aerospace Industries is one of leading candidates to design a new generation fighter for Turkish Navy till 2020.