Taiwan Sub Contest Finally Taking Shape
By WENDELL MINNICK
TAIPEI — One of Asia’s biggest pending procurements is the $11.7 billion Foreign Military Sales (FMS) program to build eight diesel-electric attack submarines for Taiwan. General Dynamics Electric Boat likely will be pitted against Northrop Grumman Shipbuilding-Newport News, with Lockheed Martin and Raytheon fighting over the combat system contract.
Taiwan’s state-owned China Shipbuilding Corp. and the military-run Chungshan Institute of Science and Technology will likely get a large piece of the pie. Taiwan’s Navy has four diesel electric boats in its inventory, with two Dutch Hai Lung-class (Sea Dragon) submarines and two former World War II-era U.S. Navy Guppy II-class subs procured in the early 1970s and used only for training purposes.
Taiwan’s subs are aimed at deterring a Chinese naval blockade and protecting its sea lanes of communication, on which the island’s existence depends. Taiwan’s two Sea Dragon subs must cover the Taiwan Strait and Pacific coastal areas.
The addition of eight submarines will signify a remarkable boost to Taiwan’s self-defense capabilities and offset China’s growing ability to deny vast areas of the Taiwan Strait and Pacific Ocean to Taiwan and possibly Japanese or U.S. forces.
U.S. President George W. Bush offered submarines to Taiwan in 2001. Divided into two phases, design and build, the program has been one of the most controversial arms deals the United States has granted to Taiwan. China has repeatedly and adamantly demanded an end to U.S. arms sales to Taiwan, and Taiwan’s legislature aggravated U.S.-Taiwan relations for years by continuously blocking the submarine budget.
However, a budget for $62 million for the design phase was approved by Taiwan’s legislature in June 2007 with total costs for the first phase estimated at $360 million.
“This $360 million is spread out in three payments over three years [in the annual defense budget], with the first year around $60 million or so,” said Mark Stokes, former country director for China and Taiwan in the U.S. Office of the Secretary of Defense from 1997 to 2004.
In January, Taiwan submitted a formal letter of request (LoR) to the U.S. Navy’s International Programs Office for a letter of offer and acceptance (LoA) for designing and building the eight subs.
“The exchange of a LoR and LoA represents a government-to-government contract and would cover Phase 1 of the submarine program — the end result being construction-ready architectural drawings,” said Stokes, who supports Taiwan’s submarine program.
“Phase 1” is scheduled to last three years, but is dependent on if third-party designs (i.e. French, German or Spanish) could become available. This is deemed as unlikely, as China has applied considerable political pressure to prevent any European arms sales (including designs) to Taiwan. “The expectation is that the Javits Report would include the Taiwan submarine program, and initiation of the congressional notification process should be in the June time frame,” Stokes said.
After the 50-day notification process is completed, the LoA will be sent to Taiwan around August for signature. After a month, Taiwan will be required to deposit funding in the FMS account, and the U.S. Navy will send out a request for proposals (RfP) to U.S. industry for both design and construction with six months to reply. Final selection of a prime contractor is expected in mid-2009.
However, a former U.S. defense official assigned to the American Institute in Taiwan (AIT), the de facto U.S. Embassy in Taipei, said the legislature will have problems finding the money for phase two, the build program.
“The legislature needs to take a deep breath and pass a special budget for this $8 billion to $10 billion deal,” he said. “No ship build of this size has ever been passed before, so they have to come up with a plan for funding this unusually large amount of money.” Cooperation from the U.S. side is questionable, and past opposition from the U.S. Navy may delay further progress on the deal, he said.
“It will take more than funding a few million dollars for more study. NAVSEA [U.S. Naval Sea Systems Command] has to pitch in and facilitate cooperation from the U.S. side to make this happen. NAVSEA is strongly influenced by our nuclear Navy, so we need to see NAVSEA have a change of heart,” he said.
“If these two things are not doable, then there can’t be a sub program supported by the U.S. side. My prediction is that even if Taiwan formally asks for the subs, right now, the U.S. administration will not do anything except defer a decision for the next administration.” Stokes agreed that gatekeepers in the Pentagon bent on killing the program could cause problems.
“I wouldn’t rule out a scenario in which there is a stall in the congressional notification or residual bureaucratic resistance within the U.S. Navy,” he said. “If the latter, Taiwan could spend $360 million and not have much to show for it three years from now.” The U.S. Congress has fully endorsed the sale of the subs.