THAILAND'S planned purchase of eight McDonnell Douglas (MDC) F-18C/D fighters is being held up by finance ministry demands for counter-trade to underwrite part of the deal.

The Thai Government is in receipt of a US letter of offer and acceptance (LoA) for the aircraft, but has not yet signed it. The LoA has a 90-day validity and expires at the end of May, after which foreign-military-sales pricing on equipment is subject to revision.

MDC is being pushed to accept an undisclosed amount of Thai primary produce as part payment for the F-18s. Government policy normally requires barter trade worth up to 30% of a contract's value.

Some Western aerospace manufacturers have already had to accept counter-trade, including Northrop Grumman's recent RTADS III radar sale to Thailand. Alenia was similarly forced to take Bt700 million ($2.8 million)-worth of local produce, including rice, chickens, toys and rubber gloves, in part exchange for six G222 transports.

In spite of high-level resistance to the move, the Thai military is increasingly being forced to accept counter-trade as part of its equipment-procurement process, in an effort to reduce the country's soaring deficit (Flight International, 17-23 April).

A finance-ministry spending cap of $400 million on any single purchase has already forced the Royal Thai Air Force to split its F-18 procurement into two eight-aircraft batch purchases. It is seeking additional funding in 1997 for the eight remaining fighters.

The follow-on F-18 deal was likely to be raised in the Thai parliament on 20 May, as part of a wider debate on the country's planned 1997 defence budget. The Government is facing growing opposition calls for cuts in military expenditure.

Thailand has already been forced to economise and to drop some big-ticket items from the next budget, including the planned Bt28 billion Star of Siam satellite programme (Flight International, 8-14 May). The Royal Thai Navy's Bt17 billion submarine project is also facing the axe.

Source: Flight International