Text Fwd: US Defense Firms Considers Transparency Pledge

Korea Times
02-19-2010 18:08
[Exclusive] US Defense Firms Considers Transparency Pledge
By Jung Sung-ki
Staff Reporter

Representatives from U.S. defense firms doing business here have discussed the idea of submitting a declaration of transparency to Cheong Wa Dae, amid Seoul's crackdown on irregular weapons acquisition deals, an industry source said Friday.

During a meeting at the American Chamber of Commerce (AMCHAM) in Korea in Seoul, Tuesday, some of the executive officers complained that the proposed policy to fight corruption in arms deals was too rigid and not realistic, the source said, requesting anonymity.

Participants included representatives from Lockheed Martin, Boeing, Raytheon, Northrop Grumman and General Electric, he said.

"The representatives were engaged in a debate over arms acquisition policy that has been proposed by the government," the source told The Korea Times.

"They put forward the idea of presenting a pledge of transparency to the presidential office as part of anti-corruption efforts but failed to reach an agreement."

In recent months, President Lee Myung-bak and other government officials have called for a new arms-buying mechanism, citing rampant corruption in arms contracts such as overblown commissions for purchasing arms overseas, inflated unit costs and the leakage of classified military information.

Against this backdrop, Defense Minister Kim Tae-young said late last year in a report to President Lee that the government would reduce the amount of arms bought through the roughly 600 arms agents who do business in the country.

Instead of such commercial sales, which currently account for 65 percent of procurement, the ministry will encourage more government-to-government foreign military acquisition programs, the minister said.

Officially, the arms agents receive about 3-5 percent in commissions from procurement spending, but industry officials said their actual take is much higher, particularly in large deals. So the government wants to introduce a standard price cap on the payments.

"Most of the participants at the AMCHAM meeting discussed ways of meeting the new standards, but some of them complained of the Korean government's rigid approach to the issue," said the source.

A Lockheed Martin executive officer said the current commission payments rate is quite low, so agents sometimes engage in behind-the-scenes deals.

He argued that reducing the number of agents would not be a fundamental solution in that context.

gallantjung@koreatimes.co.kr