The Taiwanese defense ministry has declared it has completed the design phase of Taiwan's first indigenous submarine project, with blueprints and prototype to be completed by 2020 and 2024, respectively. But that announcement comes amid concerns that, as in the past, Taiwan’s military procurements have been saddled with fraud.

The “contract design phase” of the submarine program to which the Taiwanese government has so far committed NT$49 billion (US$1.6 billion) over seven years refers to the settling for general requirements and hoped-for capabilities, including armaments, hull strength and electronics capabilities.

The US State Department in April last year gave the go-ahead for US defense companies to sell technology for the new submarine project, which is being carried out by China Shipbuilding Corporation (CSBC), Taiwan’s main shipbuilding company.

The Taiwan navy is still reeling from revelations that Ching Fu Shipbuilding, a local contractor in a minesweeper project, last year committed loan fraud involving at least 14 Taiwanese banks just in time for suspicions to blow up over the submarine project.

A US national defense official who asked to remain anonymous in October last year suggested that Gavron Ltd, the Gibraltar-based consultancy that was put in charge of the contract design, is not capable of carrying out the NT$600 million (US$19 million) project.

The official was quoted in the Taipei Times as saying he was worried that Gavron might acquire classified information on systems provided by the US to China Shipbuilding via the submarine program.

Taiwanese investigative journalist Tsai Han-shun then took a closer look at Gavron, finding that it is, in fact, a shell company that had originally been registered in the UK as a beverage and tobacco retail company, went out of business in 2016, and was then revived as a Gibraltar-registered firm.

Tsai also found out that four similar overseas entities were registered over the past year by Taiwanese owners, including retired military or people with connections to win defense procurement tenders.

“Through my investigation, I believe that family members of Andrew Wang are in the background of some of these companies,” Tsai told the Taipei Times.

Wang, a notorious arms broker for the French defense giant Thomson-CSF, was the main protagonist in Taiwan’s massive Lafayette frigate scandal in the 1990s. French officials were said to have paid as much as US$500 million in bribes to officials both in Taiwan and China to facilitate the Taiwan navy’s procurement of the French-made frigates.

Wang is said to have died in 2015 at age 86 although some believe he faked his death to avoid prosecution. Taiwanese investigators are still attempting to chase down Wang’s family after they found that the price for the six frigates was inflated to US$2.6 billion. The family apparently transferred the gains to banks in Switzerland, Austria, Liechtenstein, Luxembourg, the Isle of Man and Jersey as well as to bank accounts in nine other countries.

After the body of Yin Ching-feng, a Taiwanese naval captain and the head of the navy procurement office, was found in the ocean off Taiwan in 1993 and who reportedly was about to blow the whistle, Wang disappeared and was never seen again. He was convicted in absentia of the murder.

The other protagonists who have died since are a Taiwanese bank official who acted for the naval dockyards; a French intelligence agent (who fell to his death from his Paris apartment); a former Taiwan-based Thomson employee, and Yin's nephew.

Kuo Hsi, who was also linked to the Lafayette scandal, is listed as chairman of a shell company now involved in the submarine project, according to local media.

It doesn’t make Gavron appear anymore legitimate by the fact that despite the huge sensitivity of any major arms program by the Taiwan military, an Asia Sentinel query conducted in late 2018 found that Gavron has sought to recruit its team of Kaohsiung, Taiwan-based experts in “submarine project integration” openly through the online recruitment website www.eurojobs.com.

Scandal or no scandal, legislators have been shown around 700 foreign export permits related to the contract design phase and were told that several foreign contractors that had initially agreed to contribute walked away amid pressure from China.

The project is moving forward in the teeth of voluble Chinese objections, since a capable submarine fleet would be among the last weapon platforms China wants to see under Taiwan command, given that it could greatly complicate any Chinese attempts to invade or blockade the island.

“Developing a blueprint of the submarine, the next step, will be technically challenging, but this, too, should be feasible,” said Timothy R. Heath, a senior international defense analyst with the California-based RAND corporation in an interview with Asia Sentinel. “The greater difficulty will be in the securing of needed parts that can’t be manufactured in Taiwan, and in the actual construction of the submarine. Given the unpredictability of some foreign suppliers, several of whom have already withdrawn their offers, and Taiwan’s inexperience in building an advanced diesel submarine, these will pose the most serious challenges for the submarine project in coming years.”

Taiwan currently has four submarines, but two of them, so-called Tench-class American boats (pictured above) date to WWII and are the oldest submarines still in service anywhere in the world. They are used only for training. The other two are Dutch-built Swordfish class diesel subs acquired in the early 1980s and upgraded in 2008 to fire UGM-84 Harpoon anti-ship or ground attack missiles, giving Taiwan limited capability.

It’s no secret that Taiwan doesn’t have the technical expertise to build the main diesel engine, torpedoes, and missile systems on its own. Ironically, it now seems that the most serious challenge to getting the project done will not be posed by China but local fraudsters.

Said John Pike, director of the Globalsecurity.org think tank: “It’s dreadful. I had wondered how Taiwan had found a company that both knew how to build submarines and was not afraid of Beijing -- it sounded too good to be true.”

Jens Kastner (kenslastner@googlemail.com) is a Taiwan-based journalist and longtime contributor to Asia Sentinel