"It has been decided that a 'phase-in cooperative shipbuilding construction package' would be adopted as a government policy and upon which, negotiations with the United States would be held," government spokesman Lin Chia-lung told reporters.

The package would have Taiwan technicians build one-third of the third and fourth submarines, and two-thirds of the fifth and sixth ones before building the last two on its own, according to the decision made Wednesday by a special committee presided over by Vice Premier Lin Hsin-i.

The strict conditions are aimed to ensure transfer of technology to Taiwan's state-run China Shipbuilding Corp. (CSBC), officials said, citing a report by foreign submarine experts that the CSBC would be able to build conventional submarines once some equipment is added to the shipyard.

The CSBC has already built eight frigates for the Taiwan navy modelled on the US-designed Perry class vessels.

US President George W. Bush approved the submarine sale in April 2001 as part of Washington's most comprehensive arms package to the island since 1992.

Since then, however, the program has progressed at a snail's pace as the United States has not built conventional submarines for more than 40 years.

The US navy's submarine program chief, Rear Admiral John Butler, has been quoted by Jane's Defense Weekly as saying no final request for proposals would be sent to potential builders until Taiwan signs a letter committing funds.

The island's China Times reported in August that Taiwan has inched a critical step forward in its plan to acquire the submarine fleet from the United States after paying 3.0 million US dollars to kickstart the deal.

The United States had demanded a 333 million-dollar advance to secure the multibillion-dollar deal, it said.

The hefty downpayment demand drew complaints from Taipei, prompting reports that the plan could be killed or Taiwan could opt to pick up used subs on the international market. The downpayment was then slashed to 7.5 million dollars.

The paper said Washington would make a presentation to Taipei in October on what submarine models were available from defense contractors Northrop Grumman and General Dynamics, which are expected to offer bids.

China and Taiwan split in 1949 at the end of a civil war, but Beijing has repeatedly threatened to invade Taiwan if it declares independence.

Taiwan navy's submarine fleet consists of two 50-year-old Guppy-class diesel-electric boats, both in very poor condition, and two Dutch-built Hai-Lung-class boats commissioned in 1987/88.

WAR.WIRE