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Turkey, Germany seek submarine sale of $1 bln

ANKARA – Hürriyet Daily News | 8/26/2011 12:00:00 AM | ÜMİT ENGİNSOY

A joint group of Turkish and German companies are competing with a South Korean attempt to sell two HDW-class 209-type diesel submarines to Indonesia

A team of Turkish and German companies, as well as Turkey’s procurement office, are jointly looking to sell two HDW-class 209-type diesel submarines to Indonesia in a $1 billion deal, a senior Turkish procurement official said Friday.

“Our package is excellent. We are hopeful and waiting for Indonesia’s decision,” said the official, who spoke on condition of anonymity.

The only competitor for the German-Turkish partnership is South Korea’s Daewoo Shipbuilding and Marine, which emerged as the favorite after French and Russian bidders for the Indonesian Navy’s tender fell off.

Daewoo was expected to bid together with Germany’s Howaldtswerke-Deutsche Werft, or HDW, but later decided to join the competition on its own.

Facing the threat of being left out of the deal, HDW, a subsidiary of ThyssenKrupp Marine Systems, then approached the Undersecretariat for Defense Industries, or SSM, Turkey’s defense procurement agency, to seek the Indonesian contract jointly; at the same time, President Abdullah Gül was paying an official visit to Indonesia in April during which the two countries signed a comprehensive defense industry cooperation agreement. Both Muslim nations, Turkey and Indonesia share close political and cultural ties and are developing their industrial relations.

HDW is also co-manufacturing six modern U 214-type diesel submarines with Turkey for the country’s Navy. Turkey earlier built 14 U 209-type submarines with the German company that Indonesia now wants to buy.

In June HDW sent a letter to SSM, confirming that “SSM is entitled to market and sell HDW class U 209 1,400-tonne submarines to be built in Turkey for the Project of Procurement of Diesel Electric Submarines by the Indonesian Navy.”

A decision on the bid is expected either late this year or in early 2012.

A 2-billion-euro submarine deal between SSM and HDW for the joint manufacture of six U 214 platforms for the Turkish Navy formally took effect July 1.

[HH]]Sweetening the deal

In an effort to win the bid over their Korean rivals, SSM is reported to be offering sweeteners. In a letter sent to Indonesian Adm. Soeparno, who uses one name like many Indonesians, SSM chief Murad Bayar said, “Our offer includes one or two 209-class submarine leases to the Indonesian Navy as a ‘gap-filler’ solution until your submarines have been built.”

Bayar also pledged a maximum work share for Indonesian defense companies, including the Indonesian national shipyard PT-PAL, in emphasizing HDW’s full support for the Turkish bid.

“A very attractive and advantageous financial package will be included as well,” Bayar said.

“Our Navy and defense companies shall provide full support to your Navy and defense companies for operational and maintenance training, as well as military exercises in the shallow waters of your country,” he said.

“As a well-known worldwide brand and proven technology, 209-Class submarines will increase your country’s industrial capabilities and will bring us a chance to share our knowledge to provide regional peace and stability,” Bayar said.

In a letter to Indonesian President Susilo Bambang Yudhoyono in late July, Gül confirmed and reiterated Turkey’s sweeteners and stated his desire for increased defense industry cooperation.

If the Turkish bid is chosen, the two Class-209 submarines will be built at Turkey’s Gölcük naval shipyard in the northwestern province of Kocaeli by the Turkish company STM under license from HDW.

[HH] South Korea optimistic

Despite Turkey’s hard push for the deal, many in the South Korean press are convinced that their country will win the bid. The Korea Times quoted a South Korean industry source as saying that “Indonesia will likely pick Korea as the preferred bidder for its submarine acquisition program, worth $1.08 billion.”

One South Korean official said he was aware of his country’s rivalry in the project with Turkey, but did not comment further.

Despite competing against each other this time, Turkey and South Korea are very close allies, particularly in terms of the defense industry. Turkey is building howitzers under a South Korean license and the two countries are jointly producing basic aircraft trainers for the Turkish Air Force. South Korea’s Korea Aerospace Industries is among the strongest candidates in a bid being offered by Turkey to design, develop and manufacture a fighter aircraft by 2020.

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