TAIPEI, Taiwan, and ROME — Leonardo-Finmeccanica has launched a massive public relations effort in Taiwan to save an agreement with a local aviation company to honor a 2014 deal to co-build the M-346 Advanced Jet Trainer (AJT) for filling Taiwan's air force requirement for 66 aircraft to replace aging AT-3 Tzu Chung attack/trainers.

The local aviation company, Aerospace Industrial Development Corporation (AIDC), signed a teaming agreement for the transfer of technology, co-production and technical assistance for the M-346, but the election of a new president, Tsai Ing-wen, has thrown a wrench into the deal.

Tsai has pledged to develop indigenous weapon systems and wean Taiwan off its dependence on foreign-made arms.

Tsai has put AIDC and the Air Force in a difficult position. The new government wants to build a completely indigenous trainer, dubbed the XAT-5 AJT, according to a senior AIDC official. The Leonardo agreement is still in effect, he said, but the new president wants to change it.

"Leonardo is trying to save the agreement with a big public relations effort, but we are waiting for a final decision on whether the president will accept open bidding that will include foreign companies or go with a totally indigenous product," he said.

The decision is expected in September.

A Leonardo spokesperson said AIDC and the M-346 are strongly linked.

"AIDC is the local partner for the Honeywell M-346's engines, assembled in Taiwan by the ITEC [International Turbine Engine Company] consortium, participated by AIDC," the spokesperson said. "Considering that, we can say that the Taiwanese M-346 version will have at least 50 percent of its content made in Taiwan. Within that, one of the scopes of the collaboration between Leonardo and AIDC is to guarantee to the transfer of competences to AIDC to perform possible customizations and/or upgrades to the aircraft configuration."

Despite the urging of Tsai to indigenously build the aircraft with minimum foreign assistance, Taiwan might have no choice but to go with the M-346 option, said a Taiwan defense analyst. The indigenous option, by comparison, is of a higher risk and requires significantly more research and development, estimated by AIDC to cost of $2.3 billion for the entire program from birth to death.

"If I were Taiwan, I would probably make it a requirement that the avionics suite be sourced locally, via AIDC or Chung-Shan Institute of Science and Technology, since that is the only area where there could be any real added value in the whole project," said the Taiwan defense analyst. Local licensed production of the aircraft would also be an important factor to allow Tsai to save face, he said.

"Having said all that, it is important to remember that defense industry policy issues are poorly informed and underdebated in Taiwan," he said. "So the XAT-5 program would likely devolve into indigenous versus foreign controversies, without real thought being given to just exactly how much Taiwan's aerospace industry could hope to gain by adopting a totally indigenous trainer of which the Air Force will be the sole user with a very limited installed base of 66 aircraft that would be extremely difficult to sustain."

Taiwan's AT-3 aircraft were built in the 1980s and built by AIDC with foreign assistance. The replacement will be fielded to two bases: one in Taitung to replace the aging F-5E/F Tigers and the other in Kangshan to replace the AT-3s.

Tom Kington is the Italy correspondent for Defense News.

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