Mon, May 07, 2012 - Page 3 News List

Difficult choices faced on F-16 deals

BREAKING THE BANK:Rumors of hidden non-recurring costs and a budget crunch could force the Taiwanese government to choose between upgrades or new planes

By J. Michael Cole  /  Staff reporter

Two F-16 aircraft are pictured in Hualien County on July 16 last year.

Photo: Yu Tai-lang, Taipei Times

Questions emerged at the weekend as to whether Taiwan could afford both a multibillion-dollar upgrade program for its F-16A/B combat aircraft and new F-16C/Ds, amid claims that the price for the upgrade had been inflated since the deal was announced last year.

The air force received a Letter of Answer from the US last week on the US$5.3 billion upgrade package for its 145 F-16A/Bs and is now reviewing the prices of the items on the list, Air Force Command Headquarters said yesterday.

“We will sign an agreement on the deal only after we have completed an overall review and have determined that all the items meet our requirements or demands,” it said in a statement.

About one week before the letter was received, Washington said it would give “serious consideration” to long-stalled efforts by Taipei to acquire 66 F-16C/Ds. A notification to the US Congress in September last year approved the upgrade package, but did not include the new aircraft.

The possibility that the US could agree to upgrade the F-16A/Bs and release the F-16C/Ds might now force the cash-strapped ministry to make a difficult choice. Since 2008, the US has agreed to about US$13 billion in arms sales to Taiwan, which has also embarked on a costly effort to adopt a fully professional military system by 2015.

In an article published on Saturday, Defense News said the US Air Force had been pressuring Taiwan to pay for nonrecurring engineering (NRE) costs related to the research, development, testing and integration of the Active Electronically Scanned Array (AESA) radar, a key component of the upgrade package. The article said those costs were not included in the September notification.

An unnamed consultant for the ministry told the magazine that Taiwan was “getting a raw deal” from the US, because the additional money Taiwan would need to spend on NRE costs would “break the bank.”

The same day, Chinese Nationalist Party (KMT) Legislator Lin Yu-fang (林郁方) said the additional NRE costs could make the upgrades more expensive than acquiring new F-16C/Ds.

Preliminary negotiations have already been conducted and the Taiwanese air force is of the opinion that the US price is too high and the government’s finances will simply not stretch that far, Lin said.

The air force yesterday denied that the price for the upgrade package had been inflated, but declined to specify the amount of the deal.

A defense sources told the Taipei Times earlier this year that Taipei could avoid the NRE costs by waiting for South Korea to decide which type of AESA radar it would adopt as part of the upgrade program for its 135 KF-16C/Ds. Two firms, Raytheon Corp and Northrop Grumman Corp, are bidding for the AESA program and Seoul is expected to make its decision this month or next month.

The US Air Force, which is also scheduled to upgrade 350 of its F-16s, could save money by having other countries, such as Taiwan or South Korea, pay for the NRE costs.

In February, the Executive Yuan informed the air force that it would only allow US$3.7 billion for the upgrade program. While the military insists on acquiring the AESA radar, it could lower the cost by opting not to acquire some of the items included in the notification, such as certain types of Joint Direct Attack Munitions (JDAM) kits.

The letter received last week is said to have reflected the US$3.7 billion ceiling set by the Executive Yuan after Taiwan negotiated for the removal of items it did not seek to acquire.

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