Canada Evaluates Submarine Bids with Economic Cooperation in Mind

Canada is currently assessing bids from South Korea and Germany for its multibillion-dollar Canadian Patrol Submarine Project (CPSP). Stephen Fuhr, Canada’s Secretary of State for Defense Procurement, emphasized that the selection process will prioritize the bidder that can deliver the most significant economic benefits to Canada. This announcement came during Fuhr’s visit to Hanwha Ocean’s shipyard in Geoje, South Gyeongsang, on February 2.

The CPSP is projected to be worth up to 60 trillion won (approximately $41.2 billion), which includes maintenance, repair, and operations over a 30-year period. The construction costs alone are estimated at around 20 trillion won. Hanwha Ocean and HD Hyundai Heavy Industries are competing against Germany’s Thyssenkrupp Marine Systems for the contract. Fuhr noted that both bids meet the Royal Canadian Navy’s operational requirements, but the final decision will hinge on cost, delivery timelines, and the broader economic implications for Canada.

Fuhr highlighted that both South Korea and Germany are recognized as significant automotive manufacturing nations. He suggested that collaboration in the automotive sector could enhance economic ties beyond defense, potentially leading to broader business opportunities. As part of the bidding process, Canada has mandated that bidders provide industrial offsets, which include local investments and technology transfers.

Strategic Importance of the Submarine Competition

Fuhr oversees Canada’s defense procurement policy and the newly established Defense Investment Agency, which aims to reform the military acquisition system. His role is pivotal in the submarine competition, which he described as a strategic contest between nations. The winning bidder will likely establish a long-term partnership with Canada, lasting for decades.

The economic value of the bids is crucial, with Fuhr emphasizing that job creation and foreign direct investment are central to Canada’s economic restructuring efforts. Reports indicate that Canadian officials are actively pursuing production investments from major automotive companies, including Hyundai Motor and Volkswagen, as part of the CPSP negotiations. However, industry insiders have noted that Hyundai has expressed challenges in establishing a new vehicle manufacturing plant in Canada, instead proposing collaboration on hydrogen-related projects. Meanwhile, Volkswagen is exploring plans to build an electric vehicle battery plant in the country.

During his visit to Hanwha Ocean, Fuhr toured the shipyard alongside approximately 30 Canadian government and industry officials, including representatives from major Canadian shipbuilders. The delegation inspected advanced production systems, including robotic welding equipment, and boarded the Jang Yeong-sil, a 3,600-ton submarine proposed by Hanwha Ocean.

Next Steps in the Bidding Process

The visit to Hanwha Ocean was guided by CEO Kim Hee-cheul and Vice Defense Minister Lee Doo-hee. Kim described the visit as an essential review of the company’s proposal, asserting that Hanwha Ocean aims to provide an optimal solution for the Canadian Navy while fostering growth with Canadian industry as a trusted partner.

Canada is expected to receive final bids for the CPSP in March, with a decision anticipated in June. In a show of support for the bid, the South Korean government dispatched a special envoy delegation to Canada, led by presidential chief of staff Kang Hoon-sik, with Hyundai Motor Group Executive Chair Euisun Chung also participating. Hanwha Ocean has already signed memorandums of understanding with Canadian companies to facilitate shipbuilding cooperation, while HD Hyundai has proposed extensive partnerships in shipbuilding and energy sectors.

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This strategic competition not only highlights the importance of defense procurement but also underscores the potential for broader economic collaboration between Canada and its international partners.