A Korean defense company has won a multi-billion dollar contract to build dozens of new armoured personnel carriers for the army, in a major boost to ties with one of Asia’s economic and democratic powerhouses.
Korean firm Hanwha beat out Germany’s Rheinmetall after a five-year tender process to seal the deal to build 129 infantry fighting vehicles, according to Department of Defense Australia press release.
However, the contract is not as lucrative as initially promised after the number of vehicles to be built was slashed from 450, a casualty of the Defence Strategic Review.
Cabinet’s national security committee made the decision on Tuesday, with the Korean and German governments and the bidders contacted on Wednesday. The decision could be announced as early as Thursday.
The contract will underpin defence ties with South Korea, as Australia looks to strengthen relationships with regional partners at a time of rising tensions with China. It also softens the government’s recent decision to halve the number of self-propelled howitzers it will buy from Hanwha.
The deal is a boost for Geelong’s economy, where Hanwha is building a new factory near Avalon airport to assemble armoured vehicles in Australia. However, it is unclear how much assembly will take place here, with the companies given the option of submitting bids based on building overseas.
Because of Hanwha’s location in his electorate, Defence Minister Richard Marles recused himself from the decision-making process.
The total cost of the project had ballooned from $18 billion to $27 billion before the project was cut back in April.
Hanwha’s vehicle, called the Redback, reportedly emerged as the army’s preferred choice following testing, although Rheinmetall’s Lynx also met the capability requirements.
Rheinmetall – which is already building a different kind of armoured vehicle at a factory near Brisbane – was seen as having a better offer for local industry, including the prospect of exports to Germany.
A deal worth $1 billion to sell Queensland-made Boxer vehicles is under a cloud because of the decision.
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