U.S. firm wins naval system bid

The South Korean Navy awarded a multi-billion dollar arms deal to a U.S. company on Wednesday for a combat management system for its new destroyers.

After testing two systems, the navy said it will buy the U.S.-based Lockheed Martin's Aegis package to arm its three new 7,000-ton class destroyers, code-named KDX-III. A system built by Thales Derland of the Netherlands was the other contender.

Protesters were quick off the mark, gathering in front of the Defense Ministry after the announcement to voice their displeasure.

South Korea will pay $950 million for the system, $270 million less than the price quoted in the initial bidding stage. The U.S. contender offered an offset package equivalent to 49 percent of the contract value, including the value of technology transfer, satisfying the required 30 percent, the navy added.

"Evaluations and negotiations for the two systems have been carried out since December 2001," the navy said. "The U.S. Navy shipboard Aegis system satisfied all requirements in the tests conducted from last November to this May by a team of experts from the navy and the Agency for Defense Development."

Commodore Bae Hyeong-su, who heads the navy procurement project, said the Aegis system will be installed on 100 ships around the world by 2010 and is already a known quantity. "In contrast, the Dutch system has not yet been completely verified," Mr. Bae added.

The navy has already commissioned Hyundai Heavy Industries to design the new KDX-III destroyers; the design will be completed by the end of 2003 and a shipbuilder will be named in 2004. The first ship equipped with the Aegis system is due in 2008; the rest will be completed by 2012.

The navy delayed the selection when the U.S. Defense Department cancelled its plan to develop one of the missiles to be used in the combat system. The United States recently told South Korea that it will develop a modified version of the missile by 2005, allowing the South Korean Navy to proceed.

"The interceptor missiles are expected to protect our navy from North Korea's missile threats and air attack," a senior naval officer said. "Thus, our patrol boats operating near the border will no longer be threatened by the North's Styx missiles, as happened in last month's naval clash."

by Lee Chul-hee