South Korean delegation heads to Canada to lobby for submarine project

By Jack Kim and Hyunjoo Jin

SEOUL, Jan 26 (Reuters) - South Korea's presidential chief of staff said on Monday he was heading to Canada with Hyundai Motor 005380.KS executives and representatives of shipbuilders Hanwha 042660.KS and HD Hyundai 329180.KS in a bid to win a major submarine contract.

South Korea is competing against Germany's TKMS in a race to win the Canadian project for a new fleet of up to 12 diesel-powered submarines, estimated by industry sources to be worth more than $12 billion.

Chief of Staff Kang Hoon-sik said given the competition against a manufacturing superpower like Germany, "we believe the prospects are not necessarily easy".

"I hope to ... directly convey the excellent performance of our submarines as well as the government's commitment to expanding industrial and security cooperation between our two countries," Kang told reporters, before departing for Canada with Industry Minister Kim Jung-kwan.

The submarine project would be one of South Korea's biggest defence procurement projects and would translate into an economic benefit of more than 40 trillion won ($27.62 billion) and the creation of 20,000 jobs, Kang said.

South Korean President Lee Jae Myung has pledged to build the world's fourth-largest defence industry as he seeks to beef up the military in the face of North Korea's nuclear threat.

HYUNDAI SAYS NO CAR FACTORY PLANNED IN CANADA

Hyundai Motor Group Executive Chair Euisun Chung is joining the South Korean delegation to Canada, a person familiar with the matter said.

Chung is expected to lend his support for South Korea's bid by discussing local cooperation with Canada in various areas, Yonhap news agency said, as Canada seeks to offset agreements from South Korean firms.

Kang said in a media interview earlier this month that Canada had asked for a car plant to be built locally by Hyundai.

Hyundai said in a statement that it does not have plans to build a car factory in Canada at this time, but said its parent group was reviewing a range of cooperation opportunities including in the hydrogen sector, leveraging Canada's strengths.

South Korean and Canadian companies signed six agreements on Monday to cooperate in fields such as steel, artificial intelligence, rare earths development, satellites and sensors, South Korea's industry ministry said in a statement. Five of the six agreements were signed by Hanwha Group affiliates.

Hanwha Group also said on Friday it aimed to create a large number of jobs in Canada by 2040, through cooperation across various sectors, including submarines.

Last week, TKMS CEO Oliver Burkhard told Reuters the German company was in talks with Norwegian and German companies to offer a multi-billion-dollar investment package to Canada in a bid to win the submarine tender.

Canada, a NATO founding member, has the longest coastline in the world including the Arctic and plans to buy new submarines to modernise underwater surveillance and deterrence as its four-vessel fleet from the 1990s grows increasingly obsolete.

($1 = 1,448.2000 won)