Malaysia's air force has invited companies to discuss a long-standing airborne early warning requirement, although industry sources say budget constraints mean any decision is not likely until 2012 at the earliest.
"We know the Malaysians are keen on the airborne early warning capability, but there remain serious questions about Kuala Lumpur's ability to fund the procurement," says an industry source.
A funding request was made, and rejected, earlier this decade. The Royal Malaysian Air Force is likely to seek funding for eight AEW aircraft under the 2011-15 10th Malaysia plan, but there are doubts over whether this will be approved, the sources say.
The Northrop Grumman E-2D and Saab 2000 Erieye are the main contenders for the contract, with officials from both companies likely to hold talks with the defence ministry in coming weeks. An Embraer E-145 with the Erieye radar had been considered earlier, but that appears to have been dropped from the list.
The service has said in the past that it requires a relatively lightweight, low-cost system to improve the situational awareness of its Boeing F/A-18D and Sukhoi Su-30MKM pilots. The aircraft should also be capable of monitoring naval vessels, especially in the Malacca Straits.
A large part of Malaysia's defence budget is taken up by payments for its Su-30MKMs, and the urgent need over the next few years is to replace its army's Sikorsky S-61 Nuri helicopters.
The RMAF is also seeking four maritime patrol aircraft to replace its Beechcraft King Airs, with the Alenia Aeronautica ATR 42 MP, Indonesian Aerospace CN-235 MPA, Fokker 50 and Saab 340 the likely contenders. But budget constraints mean this could go hand in hand with a naval requirement for anti-submarine warfare helicopters, which could also be included in the ninth Malaysia plan.