BAE proposes UK government financing to Malaysia for Typhoon jet deal

KUALA LUMPUR (Reuters) - BAE Systems will provide Malaysia a UK government-backed financing deal if it decides to replace its fleet of combat jets with the Eurofighter Typhoon, senior company officials said.

A Eurofighter Typhoon fighter jet flies vertically over a beach during an airshow in Torre del Mar, southern Spain, July 31, 2016. REUTERS/Jon Nazca

Malaysia has for several years been weighing France’s Rafale jet and the Eurofighter Typhoon, built by a European consortium including Britain’s BAE, as it looks to buy up to 18 jets to replace its Russian MiG-29s - most of which are grounded.

The contest, potentially worth over $2 billion, is one of the biggest fighter deals under consideration in Asia, although a decision has been delayed due to upcoming national elections and a shift in Malaysia’s focus towards upgrading aerial surveillance capabilities.

“We have an offer on the table...It’s competitively priced and we have offered UK government financing so the Malaysian government can spread the payment over a longer period,” Alan Garwood, the Group Business Development Director for BAE Systems said in an interview in Kuala Lumpur.

“We can offer training, local partnership and lots of jobs,” he added.

Financing would be provided via the UK Export Finance export credit agency.

BAE Systems, which leads the regional sales campaign for the Typhoon, is built jointly by BAE, Italy’s Leonardo and Airbus. The company is looking to further a regional drive with the sale of its multi-role combat jet to Malaysia.

BAE believes Malaysia will arrive at a decision after the elections, which must be held by August.

“I sense there is an appetite to move forward in the next couple of years,” BAE Systems Malaysia & Southeast Asia managing director John Brosnan said.

“We would like to see some progress made in the year after the election....because governments tend to make these kind of decisions slightly earlier in their time in office than later,” he added.

Malaysia’s economy has been on a recovery over the last year, after a few years of slow growth and a currency slide due to weak oil prices.

“We think there is a window of opportunity there with the strengthening economic position,” said Brosnan.

BAE is in competition with France’ Dassault Aviation - makers of the Rafale - which until recently was seen as frontrunner.

Prime Minister Najib Razak said in March last year the Rafale deal was discussed during then-French President Francois Hollande’s visit to the Southeast Asian nation, but that Malaysia was “not ready yet to make a decision”.

Dassault was awarded a contract in 2016 to deliver 36 Rafale jets to India, and the company sass it is still in talks to make additional sales to New Delhi.

Reporting by Praveen Menon and Tim Hepher; editing by Simon Cameron-Moore