* UK in talks with Brazil, Malaysia about project - Fox
* UK to use market to keep defence projects on budget
By Adrian Croft
LONDON, June 6 Britain has seen very wide interest in a planned collaborative project to build a new Navy frigate and talks are being held with partners including Brazil and Malaysia, Defence Secretary Liam Fox said on Monday.
The planned new Type 26 frigate, also known as the "global combat ship", is being developed by British group BAE Systems (BAES.L).
"We have got a very wide interest in (the Type 26)," Fox said, at an event organised by ConservativeIntelligence, a political website.
"We have got partners talking to us from as far away as Malaysia and Brazil about how they can be in this programme," he shaid.
Britain is keen to boost its exports, particularly to emerging market giants, to help lift its economy clear of recession. Sharing the cost of major defence projects would also be a boon when Britain has cut its defence budget to help curb a big budget deficit.
BAE Systems won a 127 million-pound ($208 million) four-year contract to produce the specification for the new class of warship in 2010.
The first ships of the new class are expected to enter service with Britain's Royal Navy in the 2020s.
Britain offered Brazil the chance to become a partner in the project last year and the government has said that several other countries are interested, including Malaysia, Australia, New Zealand and Turkey.
"There are conversations ongoing at government, Navy and industry level with a number of other potential partners," a BAE Systems spokeswoman said, without naming them.
She said the company hoped to make some formal offers to other countries to participate in the programme this year.
The new type 26s are expected to cost between 250 and 350 million pounds each, according to defence sources.
Fox said he wanted the Type 26 programme to be the "maritime equivalent" of Lockheed Martin's (LMT.N) F-35 Joint Strike Fighter project "where we build a basic vessel that can be adapted to a range of different uses and at different levels of specification."
Lockheed Martin is developing the Joint Strike Fighter for the U.S. military and eight international partners. The company and subcontractors Northrop Grumman Corp (NOC.N) and BAE Systems are developing three variants of the plane.
Fox also said he intended to use the discipline of the market to ensure defence contractors kept major projects on time and on budget. Major projects have been plagued by delays and cost overruns in the past.
Managers of projects that failed to keep projects on schedule and on budget will be called before a new Major Projects Board, which Fox said would meet for the first time next week, and would be given three months to fix the problem.
"If they don't get it right, I will publish those projects ... so that the stock market can see which ones are at risk. I intend to fully use the market to discipline the defence industry to produce what we want at a cost and time that we want to see," he said.
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