Thursday, September 17, 2009

Taiwan Procurement in Shambles



Taiwan Procurement in Shambles


Taiwan’s military procurement plans have been in chaos due to political infighting in the legislative assembly.

A stalled 2001 U.S. arms offer from the Bush administration that included eight diesel electric submarines, six Patriot Advanced Capability-3 (PAC-3) air defense systems and 12 P-3 Orion maritime patrol aircraft is unlikely to be approved before Taiwan’s 2008 presidential election.

“The political infighting is a factor in future procurement, but after the 2008 election, some degree of normalcy is likely to be restored,” said a U.S. defense contractor in Taiwan. “However, regardless of who wins, procurement of billion-dollar systems from abroad likely would continue to be controversial.

“There is a theory that if the KMT [Kuomintang] wins in 2008, defense spending could increase and things could go back to the way they were in the 1980s, with the DPP [Democratic Progressive Party] opposing rises in defense spending at the expense of welfare and environmental spending,” he said.

The United States is now Taiwan’s sole military arms supplier. Sales of French fighters and frigates during the 1980s and 1990s have met with scandal and intense disapproval from Beijing, resulting in killing all future sales to Taiwan.

In many ways, Taiwan is becoming more like Japan and South Korea, requiring co-production and assembly in Taiwan.

“Japan is willing to pay double the cost for a system if it means creation of jobs and income domestically, and that is why it is able to gain legislative support for high levels of defense spending,” the U.S. defense contractor said.

Taiwan’s current defense budget is just over $10 billion.

Air Force

The Air Force recently requested 60 F-16 Block 50/52 fighters, but the United States has been hesitant to approve the sale, fearing continued legislative inertia and diplomatic and economic retribution from Beijing. A preapproved budget for the fighters was blocked in Taiwan’s legislature in November.

The sale could be worth as much as $5 billion, with local assembly and industry offsets, but is not expected to be approved by Taiwan’s legislature until after 2008. U.S. release is likely, but only after the legislature passes the budget for P-3s and PAC-2 upgrades.

The Air Force also hopes to replace its aging S-2T Tracker anti-submarine aircraft. On paper, the military has two squadrons, but local sources indicate only four to six aircraft are operational at any given time. The service has been pushing hard for the P-3 Orion buy, valued at an estimated $1 billion.

Lockheed Martin and L-3 Communications are fighting over the contract. Lockheed was originally listed as the sole source for P-3s when the sale was first announced in 2001. However, L-3 jumped into the competition in 2006 claiming the bidding process was unfair. There is still debate here on whether L-3 should be allowed to bid, creating fears of further delays in the procurement.

Of the original three items offered by the Bush administration in 2001, only the Orions have survived the budget mayhem. Expectations are high the legislature will approve the budget before the election. However, new competition from L-3 could add delays of 24 to 30 months.

The Air Force also has a requirement for air refueling tankers and signals intelligence aircraft, but due to bureaucratic inertia, the military has made little headway.


Taiwan’s ground force plans to procure up to 800 armored personnel carriers to replace tracked M113 and V-150 four-wheel-drive APCs. The country expects to build an indigenously designed eight-wheel-drive CM-32 Clouded Leopard vehicle to meet that requirement, but design problems have postponed production.

The Army also has a requirement for a multiple launch rocket system (MLRS) and has developed the Thunder 2000 (Ray Ting) MLRS, but a variety of design flaws has delayed the program for many years. There is a small possibility the service will buy foreign. If so, the most likely candidate is the Lockheed Martin MLRS, on which the Thunder 2000 is based.

The service needs 30 attack and 80 utility helicopters, the total price tag for which would be more than $1 billion. The UH-1H utility helicopters, believed to number between 50 and 70 operational aircraft, are what is left of the 118 aircraft co-produced in the 1970s by Bell Helicopter at Taiwan’s Aerospace Industrial Development Corp. in Taichung.

Bell has been pushing the AH-1Z Cobra and the UH-1Y Huey, and with an option of remanufacturing Taiwan’s existing fleet of 63 AH-1W Super Cobras to AH-1Z standards. Part of the push has included a Bell contract with AIDC to assemble tail booms for the UH-1Y and AH-1Z helicopters being built for the U.S. Marine Corps.

Taiwan also is looking at the Sikorsky UH-60 Black Hawk and MH-60 Battle Hawk for utility and attack missions. Boeing wants to sell the AH-64 Apache Longbow and additional CH-47 helicopters, said U.S. defense contractors here. The Taiwan Army operates nine CH-47 Chinook helicopters delivered in 2005.

The legislature now is debating upgrading the Army’s PAC-2 system. Debate on the procurement of six PAC-3 batteries is not expected to resume until after the election.

Some argue Taiwan’s indigenous Tien Kung (Brave Wind) air defense missile system can defend the island at lower costs, Taiwan is facing more than 800 short-range ballistic missiles from China, and critics say six PAC-3 batteries would make no difference against a saturation attack.


The Navy has a requirement of eight diesel electric submarines, and though the budget has been declared dead for many years, there are high hopes of resurrecting the program after 2008.

At present, the legislature is only debating the passage of a budget that would fund a study of submarine designs and costs. U.S. Navy estimates are that eight new submarines would cost Taiwan $11.7 billion if done through the U.S. Foreign Military Sales program.

There is growing advocacy for a domestic program, with U.S. industry assistance based on the Perry-class frigate program at China Shipbuilding in Kaoshiung. Taiwan built eight Perry-class frigates in the 1990s under the Foreign Military Sales program. There is increasing pressure to forgo a Pentagon plan to build the entire platform in the United States and instead manufacture hulls in Taiwan with technical support and purchases of equipment like sonar and periscopes from U.S. contractors.