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The Prime Minister is planning to avoid any mention of cancelling the half a billion dollar ferry contract with a South Korean company while he visits South Korea.
Despite lawyers from the Ministry of Foreign Affairs earlier warning the government of a risk to New Zealandβs relationship with South Korea and the need for βcareful and deliberate communicationsβ with the countryβs Government if it broke the contract, Christopher Luxon will not be raising the issue when he meets with the South Korean President today - nor does he plan to raise it with anyone else he meets during his two day visit to South Korea. The Prime Minister also sees no need for any damage control with the ship builder itself.
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βThe Prime Minister has no meetings planned with Hyundai Mipo Dockyard
He does not expect to raise i-Rex in any scheduled meetings,β Luxonβs spokesperson told Stuff.
In 2021 Hyundai Mipo Dockyard signed a $551m fixed-price contract with Kiwirail to build two mega rail-enabled ferries to replace the ageing Interislander fleet, which have been beset by problems. cancelled by the government in December last year when the overall cost of the iRex project, including major land and port works to accommodate the huge ships, ballooned to almost $3 billion.
I just put it to you, visiting a country & having to avoid speaking to your hosts about how you pulled out of a $2 billion contract with them by text isn't ideal. But the TikTok scenes are awesome & it sure beats having to go to the Maori King's funeral.#KoruClubPM #OutOfTouch pic.twitter.com/2gyeeuLldT
β Christopher Luxon NatGPT (@rugbyintel) September 3, 2024
When Cabinet was considering axing the deal, official documents show that MFAT reminded the government that South Korea is New Zealandβs 6th largest trading partner and warned that it is a source of potential international investment, expertise and collaboration.
The Ministry also pointed out that Hyundai previously built HMNZS Aotearoa for the New Zealand Defence Force.
The cancellation of the i-Rex project was so significant for Hyundai that the company reported it to the Korean stock exchange,reportedly filing a notice that the contract was cancelled at KiwiRailβs request and that the shipbuilder will claim for design costs as part of its negotiations and termination.
The Prime Minister doesnβt believe cancelling the deal poses any risk to our trading relationship with South Korea.
βNew Zealand and South Korea have a strong trading relationship and the Prime Ministerβs visit alongside a senior business delegation will be exploring opportunities to strengthen that relationship. We do not consider the cancellation of i-Rex to have an impact,β said Luxonβs spokesperson.
MFAT advised South Korean government officials that the project would be cancelled shortly before the public announcement was made.
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The Finance Minister, Nicola Willis, would not tell Stuff when a solution would be reached to replace the Interislanders, only to say the government is βworking at pace on optionsβ and announcements will be made as soon as it is appropriate to do so.
The termination deal with Hyundai is still being negotiated and the government will not be drawn on the potential cost to the taxpayer of breaking the contract.
βWe are confident our ultimate solution will come at less cost to the taxpayer than the at least $3 billion price tag for Project iReX. This was a project mired with cost blow-outs, delays, and significant practical problems. It was the right decision to stop it,β Willis told Stuff.
Two months ago Willis told the Nelson Tasman Chamber of Commerceβs Aspire conference on Friday that a decision was imminent.
βWe will make an announcement pretty shortly about the way in which we intend to ensure the purchase of new ferries, and we are confident that we can do that,β she said in early July.
