Submarine plan triggers internal dispute

Government officials and the navy are locking horns over its plan to procure a submarine.

While the navy insists on going ahead with its procurement plan, the ruling Pheu Thai Party has opposed it since it was in the opposition camp.

After assuming the post of defence minister last September, Sutin Klungsang, who represents Pheu Thai, announced he would shelve the navy's submarine procurement plan with China and push for a frigate instead.

This decision stemmed from China's inability to install a German engine in an ordered submarine.

Swap deal

Mr Sutin is now looking to finalise talks this month with China on the government's plan to procure alternatives to the submarine.

This follows his visit to China last month for talks.

Mr Sutin said China was open to the Thai proposal to procure either two offshore patrol vessels (OPVs) or a frigate instead of a S26T Yuan-class submarine after the Chinese were unable to meet an engine installation requirement.

Mr Sutin said a final agreement was unlikely to be reached over a single discussion, but expressed confidence the talks would be finalised this month.

After that, the new deal would be submitted for cabinet approval this month as well, he said.

Mr Sutin said he laid out a number of proposals during the meeting in China with three issues in mind -- the navy's needs, the country's interests and the need to ensure the 7 billion baht-plus paid for the submarine does not go to waste.

The Thai delegation conveyed to China the Thai public's concerns about the quality of the Chinese-made engine was because it had never been used before.

While China was open to the swap proposal, it insisted the exact prices and models of the frigate and OPVs would have to be discussed, Mr Sutin said, noting the issue was unlikely to harm bilateral relations as long as the proposal was reasonable.

However, the change has raised concerns at China Shipbuilding & Offshore International Co (CSOC), which was contracted to build a submarine under a government-to-government deal with Thailand.

Construction of the first sub was reportedly halfway finished already. Construction had been delayed due to the Covid-19 pandemic and was on hold due to the engine issue.

The original agreement, signed in 2017 for a S26T Yuan-class submarine, stipulated a German-made diesel engine. But the plan needed revision after Germany refused to sell the engine to China as it is designated as a military/defence item.

The restriction followed the EU's instruction to impose an arms embargo on China in 1989. Beijing then proposed a Chinese-made engine as an alternative, but it did not materialise.

Navy's options

However, a source at the Defence Ministry said a ministry panel on the navy's purchase of a Chinese submarine has come up with two options for the navy to consider.

The first is that if the navy wants to go ahead with the submarine project, it should seek cabinet approval to amend the contract to allow a Chinese CHD620 engine to be used in the submarine as a replacement for the German MTU396 engine, the source said.

The panel also suggested that if the navy also wants to extend the contract duration by another 1,217 days to take possession of the sub after the original deadline ended on Dec 30 last year, cabinet approval is also required, the source said.

The panel also concluded the CSOC's offer to pay 200 million baht in compensation for the delayed construction of the submarine was too small as Thailand deserved more compensation, the source said.

For a second option, the panel suggested that if the cabinet refuses to approve the contract extension or the use of the Chinese engine to replace the Germany one, or if China fails to supply the engine as stipulated in the original contract, the navy may consider cancelling the submarine procurement contract and demand damages from the company, the source said.

However, the source said most panel members favoured the navy going ahead with the sub procurement project.

Frigate friction

Another issue that could also create friction between the government and the navy is the frigate procurement project.

The opposition Move Forward Party (MFP) accused the government in parliament early this month of attempting to embezzle budget funds for the navy's procurement of a new frigate.

The issue, known as the "change money" scandal, was raised by Wiroj Lakkhanaadisorn, an MFP list MP, on the last day of a general debate in which no censure vote was cast.

The "change money" scandal refers to when a buyer purchases a product at a pre-arranged, inflated price and the seller gives the amount of money, which is the difference between the actual price and the inflated one, back to the buyer.

In this case, it is seen as an act of alleged embezzlement of state funds.

Mr Wiroj claimed a navy informant told him that someone from the government tried to contact the navy to ask for the "change money" from the navy's procurement of the frigate, but the navy refused.

The source claimed that as a result, a special House committee vetting the 2024 budget rejected the navy's request for a budget to buy the new frigate in the 2024 fiscal year.

The committee also dismissed the navy's appeal against its decision to reject its request for the budget.

Mr Wiroj said the new frigate, which would be assembled locally under the procurement plan, is crucial to the navy's core mission as HTMS Rattanakosin is scheduled for decommissioning in two years.

If this goes ahead, the country will have only three frigates in service, which may not be enough for the navy's maritime defence missions, he said.

Mr Wiroj also said the new frigate would be the first of its kind to be assembled in Thailand.

He said the assembly process will create jobs and income for local workers, transfer technical know-how in shipbuilding and use locally made construction materials.

"The rejection of the budget request means a lost opportunity, and the navy may have to wait until 2026 before it can request a budget again," he said.

But Mr Sutin insisted the navy's frigate purchase will still go according to plan, but it may happen in other fiscal years, not the current 2024 fiscal year.

The navy had earlier asked for 17 billion baht from the 2024 budget to fund its frigate procurement plan, which it looked to use over the next five years. Approximately 1.7 billion baht would be spent in the first year.

The new frigate would be deployed along the Andaman coast, a source said.

Responding to Mr Wiroj's claims about the "change money" scandal, Prime Minister Srettha Thavisin said during the debate that Mr Wiroj should produce evidence to back up his claims.

In light of the controversy surrounding the submarine and frigate procurement, all eyes are on how the relations between the government, and particularly Mr Sutin and navy chief Adm Adung Phan-iam, who retires on Sept 30, will play out.