Indonesia, DSME Set to Strike Deal for Submarines
(Source: Korea Joongang Daily; issued Feb 20, 2019)
Korean shipbuilder Daewoo Shipbuilding and Marine Engineering (DSME) is in the final stages of negotiations for a massive deal to export submarines to Indonesia, company sources told the JoongAng Ilbo on Wednesday.

According to the sources, the Indonesian Navy is planning to purchase three new submarines from DSME for $1.2 billion. Jane’s 360, an online defense media channel, also reported last week that Indonesia and DSME are close to signing an order for the three 1,400-ton submarines, a modified version of the South Korean Navy’s Chang Bogo-class diesel-electric attack submarines.

If the contract is awarded to DSME, the shipbuilder will have won two consecutive submarine deals with Indonesia. In 2011, Korea won a $1.1 billion contract for three 1,400-ton submarines as part of Indonesia’s 2024 Defense Strategic Plan.

The three new submarines are to be built by DSME in cooperation with the Indonesian state-owned shipbuilder PT PAL.

“During the final negotiation stage, discussions will take place on how to split the work,” said a defense industry source. “Component production and final assembly will be done at the Okpo Shipyard in Korea and a shipyard in Surabaya, Indonesia.”

According to the sources, the contract is expected to be signed next month as the two sides have no major disagreements. The contract was supposed to be signed last year, but Indonesia requested more time for review and the deadline was postponed to March this year.

DSME opened a technology cooperation center at the PT PAL Shipyard in October last year as part of its efforts to secure the contract. One month later, it signed an agreement with the shipyard to form a consortium.

Sources said DSME also had an advantage because Indonesia is already operating Korean-built submarines. DSME’s deal with Indonesia in 2011 was Korea’s largest defense export project at that time. With the contract, Korea became the fifth submarine exporter in the world. Of the three submarines purchased by Indonesia, two were built in Korea and delivered later, and the last one is currently being built at the PT PAL Shipyard.

If DSME secures the follow-on order, Korea will supply six out of the 12 new submarines that the Indonesian Navy plans to introduce.

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