Vietnam courts Western defence deals, Thales says

The Communist-ruled country is one of several Southeast Asian nations seeking to expand surveillance and maritime patrol capabilities, sparking fierce competition for regional deals estimated to be worth up to several hundred million dollars.

"Vietnam is opening to Western suppliers, which was not the case two or three years ago," said Marie-Laure Bourgeois, vice-president for South and Southeast Asia at France's Thales , Europe's largest defence electronics supplier.

"There has been a revival of tensions recently in the South China Sea and this is increasing demand for surveillance systems. Countries in the region want to ensure they have enough awareness of what is happening at sea and in the air."

Vietnam is embroiled in a complex set of territorial disputes with China and four other parties -- Brunei, Malaysia, the Philippines and Taiwan -- over waters giving access to untapped oil and gas reserves and valuable fishing grounds.

China's claims, the broadest, cover all of the Spratly and Paracel islands and most of the South China Sea.

Concern over possible hostilities or an accidental confrontation spiked in May last year when Vietnam and China exchanged fresh accusations of sovereignty violations, although the issue has since come off the boil.

Israel is seen as the front-runner to win the radar contract Thales was bidding for in Vietnam, but other opportunities lie ahead, Bourgeois said.

"There are discussions with the Vietnam authorities which are no longer just buying Russian equipment. We have participated in discussions on radar and are still in some discussions," she told a group of reporters on the eve of the Singapore Air Show.

Israel and Vietnam have stepped up bilateral contacts of late, but any defence deals are months away, a source at Israel Aerospace Industries told Reuters, asked about the comments.

On Thursday, the Israeli company announced a $150 million contract to supply radar to an unidentified Asian country.

CHINA CONCERN

"Vietnam has traditionally bought Soviet or Russian technology but it is emerging as a possible market for others," said James Hardy, Asia-Pacific Editor for Jane's Defence Weekly.

"We have seen Vietnam increase its ties to the West in the past few years, partly as a way to gain insurance against China, whose intentions in the South China Sea are their number one concern, Vietnam is emerging as a possible market."

There are limitations on how far diversification can go since the United States prohibits weapons sales to its former foe.

Assistant U.S. Secretary of State Kurt Campbell said in Hanoi last week that Vietnam needed to improve its record on the human rights front before moving ahead with closer military ties.

In late December, China's Vice President Xi Jinping, widely expected to take over as top leader from late 2012, called for better relations with Vietnam, saying the two countries should properly handle their differences and do more to build trust.

In mid-October, the two countries signed an agreement aimed at containing the dispute, though later in the month Vietnam and the Philippines agreed to expand non-military cooperation in the South China Sea.

The waters are strategically important as the shortest route between the Pacific and Indian Oceans. Half the globe's oil tanker traffic passes through the disputed area, underpinning demand for defensive systems and border surveillance systems expected to be on display at the Feb. 14-19 air show.

Asia's growing urbanisation and strong commercial air traffic are also driving demand for civil systems, like a monorail in the Malaysian capital, and air traffic control networks.

"More and more Koreans and Chinese are spending their holidays in Southeast Asia. Air transport is one of the major sources of growth here," Bourgeois said. (Addtional reporting by John Ruwitch and Dan Williams; Editing by Robert Birsel)