Fri, Feb 20, 2004 page4

• State-owned firms vie for defense cash

  TARGET MARKET The lack of a genuine defense industry has prompted two state-run corporations to link hands in a bid for lucrative military contracts

  • By Brian Hsu / STAFF REPORTER
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  State-run enterprises Aerospace Industrial Development Corp (AIDC) and China Shipbuilding Corp (CSBC) yesterday signed a strategic-alliance agreement to cooperate on ventures relating to the defense industry.

  The alliance will see the companies work on air, land and sea weapons systems.

  The companies are targeting the repairs and maintenance corner of the defense market, which would cover land vehicles, fighter planes and warships.

  AIDC chairman Tong Sun (孫韜玉), who took office on Tuesday, called the agreement between the two companies the "best proof" that the government was accelerating efforts to develop the defense industry.

  Sun, who was the first director of the armaments bureau in the Ministry of National Defense, has, in recent years, been deeply involved in ministry plans to open up the military's repairs and maintenance divisions to the private sector.

  The ministry encountered great difficulty in the push to privatize because there is no substantial defense industry in the country.

  Another difficulty is that most private companies that deal in defense-related business are small and do not have the ability to handle large-scale contracts, such as for the repair and maintenance of the military's hardware.

  In comparison, the AIDC and CSBC, though state-run enterprises, are much better qualified and equipped to do the job.

  The two are eventually to be privatized to lay a foundation for the defense industry.

  Speaking yesterday at a ceremony marking the signing of the strategic-alliance agreement, Vice Minister of Economic Affairs Chen Ruey-long (陳瑞隆) said that he was optimistic about the initiative.

  "This is a very good beginning. We hope the two companies can join hands and get more business opportunities from the military," Chen said.

  CSBC chairman Hsu Chiang (徐強) said: "In the future, the two companies will share resources, complementing each other's work and deriving mutual benefit from that."

  But for the moment, there is no indication of what projects the two companies will work on.

  Keven Cheng (鄭繼文), editor-in-chief of Defense International magazine, said an eight-wheeled armored vehicle being developed by the army might be a good example of how cooperation between different branches of the government will proceed.

  "There are many government departments or affiliated institutions involved in the project. They include the AIDC, the Chung Shan Institute of Science and Technology, the China Steel Corporation, and the Industrial Technology Research Institute," Cheng said.

  "Such cooperative methods set a good example for those who follow," he said.

  "But I do not see any examples of this kind happening between the AIDC and the CSBC anytime soon," he said.

  Though operating in quite different fields, the companies have been diversifying their investments in recent years to better adapt to shrinking orders from the military.

  In addition to aircraft-related business, the AIDC has commenced production of parts for the army's Humvee vehicles, while the CSBC is trying to convince the marine corps that it has the ability to overhaul the aging LVTP5 amphibious tank.
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