Officials involved in an indigenous submarine project largely agree that the government should dissolve its contract with Ching Fu Shipbuilding Co (慶富造船) to cut its losses and move ahead with building submarines, sources familiar with the project said.
Ching Fu, which was contracted to build six minesweepers, was last month revealed to have engaged in fraudulent activity involving nine banks that had agreed to grant the shipbuilder a NT$20.5 billion (US$681 million at the current exchange rate) syndicated loan led by state-run First Commercial Bank (第一銀行).
Ching Fu defaulted on the loan, causing the banks to lose up to NT$20.1 billion.
Photo: Lin Hsin-han, Taipei Times
The firm must pay the consortium NT$1.7 billion in surety bonds by the end of this month as a guarantee of repayment, an official said on condition of anonymity.
If Ching Fu defaults on the payment, it would fulfill a condition for the Ministry of National Defense to dissolve the contract by the end of this month at the earliest, another official said on condition of anonymity.
However, the consortium does not want the project to be terminated, the sources said, adding that during a meeting last week, the group asked the ministry to delay the deadline by six months.
Some bank representatives reportedly proposed that First Bank assist Ching Fu in restructuring its finances to ensure the project’s continuance, while some military officials spoke about the possibility of the ministry paying Ching Fu a large amount in compensation if the contract is dissolved.
An official close to the issue said that the mainstream opinion among agencies is to dissolve the contract to free up government funds, as there will be more uncertainties if the project is carried through.
The project is only in its second year, unlike the nearly completed Taipei Dome build-operate-transfer project, so it is a suitable time to terminate the ministry’s contract with Ching Fu, the official said.
The consortium’s requests at the meeting were peculiar, as it should defer to the government’s decisions rather than try to influence them, the official said, adding that the banks’ propositions would be forwarded to the Ministry of Finance.
After President Tsai Ing-wen (蔡英文) took office, the focus of the program has been on building submarines rather than minesweepers, the official said, adding that agencies should not put the cart before the horse.
The Chinese Nationalist Party (KMT) has been engaging in a “typical political smear campaign” against the administration over the past week to shift the blame for the actions of the former KMT administration, the official said, adding that it can be ended by dissolving the contract.
In related news, Ching Yang Aqua Marine Enterprises Co’s (慶陽海洋企業) contract with the National Museum of Marine Biology and Aquarium might be terminated, as the financial troubles of Ching Fu, its parent company, are affecting its ability to meet its obligations.
The museum said in a report to the Ministry of Education that it might take over the building and operation of its Marine Ecology Aquarium for two years, as Ching Yang is severely behind schedule.
Only the foundations for the aquarium have been built, even though it was scheduled to be completed in May, the museum said.
The museum on July 25 established 11 goals with Ching Yang aimed at ensuring the project’s timely completion, museum staff member Ho Lin-tai (何林泰) said.
Although Ching Yang achieved the first goal before July, it failed to complete the second and third goals before September and this month as scheduled, Ho said.
In accordance with the contract, Ching Yang has been fined NT$100,000 for every day it has lagged behind schedule, Ho said, adding that if it cannot meet its obligations by Dec. 12, the museum would terminate the contract.
If Ching Yang does not make the deadline, it would be fined a total of NT$10 million, the museum said.
Additional reporting by CNA
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