South Korea put political weight behind its bold, high-stakes bid to sell submarines to Canada on Thursday as Prime Minister Mark Carney got a look at one of the country’s new boats and toured the shipyard that would do the construction.
South Korea Prime Minister Kim Min-seok accompanied Carney during the visit to the Hanwha Ocean Ltd. facility in Geoje, 96 kilometres from Gyeongju, where the Asia Pacific Co-operation (APEC) summit is being held. Earlier in the day, Carney also met with South Korea’s new president, Lee Jae Myung.
Hanwha Ocean and its partner Hyundai Heavy Industries have been fairly aggressive in pitching the KSS-III (Batch 2) submarine to Canada, delivering an unsolicited, detailed proposal to the federal government last winter — just ahead of the last election.
The submarine Carney got to see was only recently launched and built for the South Korean navy. Yet, in a bold marketing move, it flew a Canadian flag from its mast, while a second boat under construction nearby had Korean and Canadian banners draped across it.
Aging subs to retire by 2035
Showing the prime minister the boat under construction was a not-so-subtle demonstration by the Koreans that their production lines are active and they can live up to the pledge to deliver four submarines to Canada by 2035 — the navy’s deadline to begin retiring the four, old Victoria-class boats.
Defence Minister David McGuinty and Vice-Admiral Angus Topshee, commander of the Royal Canadian Navy, also took the tour.
Hanwha Ocean executive, Steve Jeong, a former vice-admiral in the Korean navy, said Carney had a lot of specific questions and seemed impressed with what he saw.
The visit was significant because it’s a sign the federal government is prepared to move swiftly toward a decision, perhaps as soon as next year.
While in Berlin in August, Carney announced the hunt for a few submarine builders had been narrowed down to two companies, Hanwha Ocean and ThyssenKrupp Marine Systems (TKMS) of Kiel, Germany, which the prime minister visited.
South Korea’s competition: Germany
One of the weaknesses in the German bid is that Canada likely wouldn’t see the first TKMS-built submarine until 2032, and it would be later in the decade when the other boats arrive.
The submarine replacement program will be managed out of the newly created Defence Investment Agency (DIA).
The cabinet secretary in charge of it, Stephen Fuhr, said a few weeks ago that Ottawa will favour the submarine pitch that creates the most Canadian jobs when it decides whether to award a contract.
Topshee, meanwhile, said both the Korean and the German submarine meet the navy’s requirements, but he noted the submarine replacement project doesn’t yet have a budget.
“I’m going to be looking for, hopefully, the measure in the budget to provide the funding to actually acquire the submarines that the prime minister has been shopping around for,” he said.
What it could cost
Over the period 2017-18 to 2023-24, actual capital defence spending fell short of planned amounts by $18.5 billion.
Annual capital spending is projected to peak at $25.7 billion in 2030-31 and exceed $10 billion every year except 2043-44.
The government’s commitments to meet North Atlantic Treaty Organization (NATO) spending targets contributes to this increase, though this report does not assess the capital plan relative to those targets.
“The scale of the planned increase raises questions about the government’s capacity to manage a higher volume of procurement activity and the domestic defence industry’s ability to support it.”
