Seoul to dig deep paying for F-X

The South Korean government faces a splitting headache in trying to raise additional funds for the next-generation fighter jet project, which Boeing of the United States seems to have locked up after the first round of evaluation.

The Ministry of National Defense aimed to spend no more than 4.3 trillion won ($3.3 billion) for its purchase of 40 warplanes, but Boeing's offer was $4.46 billion, according to the provisional contract signed Feb. 19.

The Defense Ministry will drive a hard bargain with Boeing once its F-15K wins the "playoff" against the French-made Dassault Rafale next month. "Even if we have to postpone signing the formal contract, we will beat down the price," a senior ministry official said. The ministry reportedly plans to use the production line of the KF-16s here for building F-15Ks to save at least $100 million.

The ministry also plans to negotiate about the offset package with Boeing. Seoul required more than 70 percent of the contract value for the offset package, and Boeing's original offer was 72 percent, assuming that the project would worth $4 billion. When Boeing's bid later turned out to be $4.46 billion, its offset package's value dropped to 64.6 percent.

The Defense Ministry estimates that to pay the higher price, at least 100 billion won extra will be needed annually until 2009, even the F-15K price is cut by $100 million. The first installment of $147 million should be made this year, if the contract is signed in May, and the annual payments will increase gradually to 1.2 trillion won annually after 2005. The ministry is considering delaying payment for the Patriot missiles from Raytheon Corp. and freezing other procurement programs, another Defense Ministry source said.

Meanwhile, a ministry official disclosed Thursday that Rafale topped the first evaluation by 1.1 percentage points. "We do not plan to make details of the evaluation report public, as promised to the bidders beforehand," he added.

The French firm, however, requested "detailed information on this first phase evaluation." Yves Robins, Dassault's vice president, charged in a statement that "Rafale's closest competitor needed other factors than technical, operational, financial, technological and industrial ones to be selected."

by Kim Min-seok