As Korea and Germany compete to win the Canadian Patrol Submarine Project (CPSP), the government and domestic corporations are preparing a range of economic cooperation plans to present to Canada.
Because the submarine project is a massive program valued at up to 60 trillion won, Canada is demanding sizable offsets. With these cooperation plans becoming the decisive factor in the bid, the industry views this project as moving beyond the level of offset trades into the realm of "diplomacy."
According to the military and the defense industry on the 12th, the Korean government and domestic corporations including Hanwha Ocean are devising cooperation plans across more than 10 sectors, including energy, space and aviation, defense, agricultural and livestock products, advanced technology, and infrastructure.
The Korean and Canadian governments have discussed the matter several times and are still in talks. An official with the National Defense Committee said, "After failing to win the Polish submarine project, the importance of the Canadian project has grown," adding, "We are drawing up specific plans based on more than 10 proposals."
Sustained engagement with the Canadian government is seen as essential because the Canadian submarine project requires not only traditional defense-industry "offset trades," such as technology transfer and local production, but also cooperation on a different level. A government official said, "Canada wants comprehensive industrial cooperation."
As an industrial cooperation measure, Canada's economic revitalization projects are being mentioned. To mitigate the damage from its trade war with the United States, Canada previously decided to pursue expansions of liquefied natural gas (LNG) facilities; mines including rare earths; nuclear reactors; ports; and high-speed rail, among others. The government is reviewing which projects in these fields can meet Canada's needs.
Defense companies seeking to participate in the bid and the government plan to present cooperation measures before the request for information (RFI) deadline in March next year. In the Polish submarine bid, the Korean side, judging that Poland needed a submarine for training, announced at the last minute it would provide a Jang Bogo-class submarine free of charge. The move aimed to improve the chances of winning, and the proposal originated from an idea by a domestic company.
Offsets are also under review. In the defense industry, purchases of Canadian aircraft or helicopters are being discussed. Canada is home to the well-known aircraft and jet manufacturer Bombardier. Germany introduced three of Bombardier's Global 6000 business jets under a project to build the Pegasus airborne signals intelligence fleet, and is said to be considering additional purchases. Korea also selected Bombardier's Global 6500 as the airframe for an electronic warfare aircraft designed to disrupt an adversary's air defenses and radio command networks. However, only one unit is scheduled to be brought in.
For helicopters, purchases of military and civilian helicopters from Canada's Bell or Collins Aerospace are being discussed. These corporations also produce helicopters for fighting wildfires. A defense industry official said, "We understand there is a need for sales within Canada," adding, "Because we can propose modifying and developing them with our technology, this can be a card to present in terms of offsets."
In addition, given concerns about a gap in Canada's submarine capabilities, some also say that, as in the Polish project, the free transfer of a retired Korean Navy submarine could be a card for Korea. Canada decided to introduce submarines because the Victoria-class submarines currently in operation are nearing retirement. A shipbuilding industry official said, "Providing a submarine free of charge would also be a practical cooperation measure."
However, it would be difficult for Hanwha Ocean and HD Hyundai Heavy Industries, which are participating in the Canadian submarine bid, to propose these various cooperation measures themselves. This means cooperation and support from the government or other corporations are necessary. Other corporations are also said to recognize this situation.
Previously, the Canadian government mentioned to the Korean government the establishment of a local Hyundai Motor plant. Hyundai Motor had judged that its U.S. plant alone could adequately serve the North American market.
In the industry, there is also a view that the various cooperation plans from the Korean side should not end up serving the interests of specific corporations. In a bid pursued through public-private cooperation, the bidding company would reap profits in the trillion-won range if it wins, while corporations participating in cooperation may not receive benefits on the same scale as the bidder. A government official said, "To improve the chances of winning, a decision on the level of providing one submarine free of charge is also necessary."