The Royal Thai Navy's warship projects — the controversial submarine and newly proposed frigates — are unlikely to take off as the Pheu Thai Party-led government has not demonstrated the political will to make decisions.
With Prime Minister Paetongtarn Shinawatra set to be grilled by the opposition in a censure debate in late March, any progress on these projects appears increasingly uncertain.
The Navy made its decision in the middle of last year to take up the Chinese offer of the S26T Yuan class submarine with a Chinese engine of CHD 620 plus a 200-million-baht compensation for the financial loss and wasted time.
The Chinese offer came following discussions held by the Defense Ministry and the Navy with Beijing in May last year during the tenure of then Prime Minister Srettha Thavisin and Defense Minister Sutin Klungsang.
Since then, the Defense Ministry has been sitting on the project and the incumbent Defense Minister, Phumtham Wechayachai, has not indicated when the government would make any decision, according to a senior naval official.
Rather than forwarding the proposal to the Cabinet, the Defense Ministry has suggested that the Navy seek opinions from seven relevant agencies, including the Foreign Ministry, the Finance Ministry, and the Council of State to facilitate the decision.
Paralysed by indecision
“We complied with all requirements and have been waiting for the final decision from the government for nearly a year. Nobody can tell what went wrong with the decision-making process,” the official said on condition of anonymity.
The Navy signed a 13.9-billion-baht contract with China Shipbuilding & Offshore International Co, Ltd. (CSOC) in May 2017 for the procurement of a submarine.
The Chinese company has already completed building 64 per cent of the submarine, and the Thai military has released 7.7 billion baht in payments — about 63 per cent of the total cost.
The boat was supposed to be delivered to the Navy in 2023, but the contract expired at the end of the year when the Chinese company failed to procure the German-made MTU 396 engine to install in the submarine due to an embargo imposed after the 1989 Tiananmen Square bloody incident. The Thailand-China contract stipulates the German MTU 396 engine for the submarine.
Bad submarine deal
There was a big debate among decision-makers, politicians and naval officers on whether the failure to install the German engine in the submarine was tantamount to a failure to meet the contract condition, resulting in the termination of the contract.
However, the contract could not be deemed to be terminated as the Thai side had already accepted the Chinese failure to obtain the German MTU 396 engine as a ‘force majeure’, a source close to the issue said. “This meant that the Navy relinquished its right to scrap the contract.”
Under the deal made last year, the Chinese offered the Navy free training simulators, a 125-million-baht discount, and training courses worth 75 million baht. The engine warranty was extended from two to eight years.
The revised terms, which still need official endorsement from the Thai Cabinet and the Chinese Central Military Committee, would require an amendment to the 2017 principal contract and a 1,270-day extension for delivery of the submarine.
If the Thai Cabinet makes the final decision now, the submarine would be delivered by the end of 2028.
Opposition MP Wiroj Lakkhanaadisorn, House of Representatives chairman of the Military Affairs Committee, said the government had reached a bad deal with China as the 200-million-baht compensation was too little compared to the financial loss and the delay suffered by Thailand.
“The Navy should demand at least a billion baht in compensation for the loss and waste of time,” he told the naval officials.
Wiroj and members of the Military Affairs Committee discussed the matter with senior officials of the Navy, including Admiral Nattaphon Diaowanik, commander of the Royal Thai Fleet, when the committee visited the Sattahip Navy base on February 24.
During the visit, the Navy took the House delegation on a tour of the Navy base to see facilities that have already been built for the submarine over the past few years.
The Navy also has spent more than a billion baht to build 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 already been completed, while construction of the docks was halted after the COVID-19 pandemic.
Officials told the committee that many facilities could be utilized for other kinds of warships such as frigates and corvettes if the Navy failed to procure the submarine.
Bid for two frigates
In fiscal year 2026, the Navy would propose a plan requiring a 35-billion-baht budget over five years for two 4,000-ton frigates with a condition to build one or both of them in Thailand 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.
Under the offset policy to promote economic linkage to the domestic shipbuilding industry and job creation for the Thai economy, it would be the first frigate to be built in Thailand by a consortium of Thai shipbuilders, according to Wiroj.
The opposition would not oppose the frigate project if the boats and their parts were built and assembled by domestic shipbuilding firms, he told the naval officials during the visit to the Sattahip base.
The Industry for National Defense and Security Association and the Thailand Shipbuilding and Repair Association (TSBA) recently expressed their support for the frigate project, stating their readiness to collaborate and actively participate in the shipbuilding process.
Boost for local economy
It is expected that once the project begins, at least 30% of the ship's value will be composed of materials and equipment classified as local content.
Additionally, continuous investment from shipyards awarded the contracts is anticipated to sustain employment for engineers, technicians and specialists.
This initiative aims to counter the severe downturn in the shipbuilding industry over the past several years, which has led to the closure of multiple shipyards, a TSBA official said.
The Navy has consulted with at least 11 domestic shipbuilders to explore the possibility of the frigate project, according to a Navy official who added that six of them had come up with concrete proposals.
Still, the Navy needs to rely on foreign suppliers for combat management systems. Several military equipment manufacturers from Germany, Italy, Turkey and South Korea were interested in the new frigate project, a Navy official said.
However, the Navy would face a budget dilemma if it decided to continue the submarine project and also proposed to acquire two frigates at the same time, due to budget constraints and the sluggish economy.
Initial conversation with the Budget Bureau suggests that if the Navy pursues the submarine project, the government would be able to afford only one frigate, a source said, and noted that building only one frigate would not be viable for the domestic shipbuilding industry.
