Taiwan Navy to seize bonds from scandal-ridden Ching Fu Shipbuilding

Navy could soon start process to cancel minesweeper contract

The Ching Fu Shipbuilding wharf. (By Central News Agency)

TAIPEI (Taiwan News) – The Navy sent an emissary to the Kaohsiung branch of the First Commercial Bank (第一銀行) to demand the transfer of a NT$1.69 billion (US$56 million) in advance payment bonds from scandal-hit Ching Fu Shipbuilding Co. (慶富造船) to the national treasury, reports said Wednesday.

Ching Fu defaulted on a NT$20.5 billion (US$679 million) syndicated loan from state banks for a NT$35.8 billion (US$1.18 billion) contract to build six minesweepers for the Navy.

The affair has since ballooned into a major defense scandal, triggering questions about why a company as small as Ching Fu was allowed to bid for such a major Navy contract, and whether the administration of then-President Ma Ying-jeou (馬英九) was involved in any illegal pressure.

The Navy seized an earlier sum of NT$700 million (US$23 million) late last month.

If the company has not made the necessary improvements to its contract by December 8, the Navy will start the procedure to cancel the agreement with Ching Fu for the minesweepers, the Central News Agency reported.

The government has vowed to get to the bottom of the affair while continuing with the domestic development of important defense projects.

If as expected, Ching Fu is unable to continue with the minesweeper project, a new bidder will have to be found, with contracts for elements supplied by overseas manufacturers having to be renegotiated.