Thailand’s controversial submarine project faces further uncertainty and delays after Defense Minister Phumtham Wechayachai failed in his efforts to secure the German MTU 396 engine for installation in the Chinese-made Yuan class warship.
Phumtham said recently, after a meeting with German counterpart Boris Pistorius in Berlin, that the European Union (EU) continued to impose restrictions on export of weapons and equipment for military use to China.
Germany as a member of the EU and the North Atlantic Treaty Organization (NATO) military alliance was obliged to comply with such a restriction, Phumtham explained.
“We understand Germany’s reasons, and today’s inquiry was made to seek clarity. Thailand reaffirms its continued interest in acquiring high-quality technology from Germany, and the cooperation between the two countries remains strong,” Phumtham told reporters.
Phumtham, who was in Germany on May 13 for the sixth United Nations Peacekeeping Ministerial Meeting, declined to reveal if his government has any other alternatives to fix the knotty problem that is holding up the project.
Uncertainty and delay
The Navy made a decision in the middle of last year to take up the Chinese offer of the S26T Yuan class submarine with a CHD 620 Chinese engine plus 200 million baht in compensation for the loss of time and money.
The offer and the decision were the result of the deal the Defense Ministry, together with the Navy, made with China in May last year during the tenure of then prime minister Srettha Thavisin and his Defense Minister Sutin Klungsang.
Instead of cash, the 200-million-baht compensation would comprise free training simulators for the Navy worth 125 million baht and training courses worth 75 million baht. As part of the deal, the engine warranty was extended from 2 to 8 years.
Opposition member of Parliament Wiroj Lakkhanaadisorn, who is chairman of the Military Affairs Committee of the House of Representatives, said earlier that the deal made by the previous government was not good enough to give the project the go-ahead. He said the compensation China was offering was too little compared to the opportunity cost.
The Navy had signed a 13.9-billion-baht contract in May 2017 with China Shipbuilding & Offshore International Co Ltd for the procurement of a submarine.
The submarine could not be delivered to the Navy before the expiry of the contract at the end of 2023, as the project was delayed due to the pandemic and encountered problems acquiring the German engine specified in the contract.
The German manufacturer refused to sell the MTU 396 engine for installation in the submarine due to an EU embargo on sale of equipment to China for military use after the Tiananmen bloody incident in 1989.
The Chinese company has already completed 64 per cent of work in building the warship, and the Thai military has released 7.7 billion baht in payments — about 63 per cent of the total cost.
The Navy also has spent more than a billion baht in building infrastructure and facilities such as docks, maintenance shipyards, torpedo warehouses as well as command and communication stations.
Many of the facilities, such as the warehouse and weapon-testing buildings, have been completed, while construction of the docks was halted after the COVID-19 pandemic.
Amid such uncertainties, the Navy has not been able to propose a budget for the balance payment for the warship and facilities. The annual budget bill for fiscal year 2026 is scheduled for consideration by the House of Representatives in late May, according to parliamentary sources.
“Technically speaking, the submarine project could face a delay until at least fiscal year 2027, even if the government made a final decision today,” said one MP, adding, “... anyway the Chinese ship builder requires a 1,270-day extension of the contract to complete construction of the submarine.”
Opposition backing for two frigates
In the upcoming 2026 fiscal year, the Navy would propose a budget of 35 billion baht over five years for two 4,000-ton frigates, with a condition to build one or both of them domestically under the offset policy.
The newly proposed frigate would be the most advanced warship to be commissioned in the Thai fleet with stealth technology, an anti-drone system and a three-dimension radar.
In a post on his Facebook page on May 15, opposition MP Wiroj supported the Navy’s proposal to acquire two frigates with the offset policy of promoting economic linkage to the domestic shipbuilding industry and job creation for the Thai economy.
A frigate is a warship capable of operating in all three dimensions—air, surface and underwater.
It plays a vital role in maritime security missions, protecting the lives and property of Thai citizens who earn their livelihood in Thai waters, as well as safeguarding the nation’s marine natural resources and national interests, both on the sea surface and beneath it, he said.
Currently, the Thai Navy has only three frigates. The newest frigate, HTMS Bhumibol Adulyadej, was commissioned in 2019, while the aging HTMS Taksin and HTMS Naresuan joined the fleet in 1995.
The Navy is preparing to decommission the HTMS Rattanakosin corvette next year, he said, adding it would be too risky to have only one new frigate protecting the Thai sea.
There are unconfirmed reports that the Budget Bureau might approve only one frigate in the coming fiscal year due to budget constraints and a sluggish economy.
Wiroj argues that frigates should be acquired in pairs to achieve economies of scale, which would make the construction more cost-effective compared to building just one ship.
More importantly, building two ships simultaneously enables knowledge transfer and technology sharing between the first and second vessels, he said.
Avoiding a fiscal burden
Although acquiring only one ship may require a smaller budget in the short term, it would result in significant long-term losses, including in tactical operations, ship maintenance, mission training and the development of the domestic defense industry, he said.
Regarding budget concerns, Wiroj suggested that allocation for the acquisition should be set as a multi-year commitment for both ships, allocating a moderate amount initially.
Additional funding can be requested in subsequent fiscal years based on the progress of the project. If implemented this way, the procurement would not become a fiscal burden beyond what the country’s financial situation can manage, he said.
“I do firmly believe that this project is worth supporting if the Navy’s frigate procurement is carried out under conditions that genuinely benefit the nation,” Wiroj said, adding, “… particularly if a substantial portion of the construction is done domestically, supported by a transparent and effective offset policy that yields long-term advantages to both the Navy and the industrial sector.”
The Industry for National Defense and Security Association and the Thailand Shipbuilding and Repair Association have expressed their support for the frigate project, stating their readiness to collaborate and actively participate in the shipbuilding process.
They estimate that once the project begins, at least 30% of the ship's value will be composed of materials and equipment classified as local content.
