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Indonesia’s KF-21 fighter jet deal cut back -- what’s next?

May 7, 2024 - 17:22 By Kim Arin

KF-21 fighter aircraft (Yonhap)

Indonesia’s latest proposal to slash its share of the costs for the joint project to develop the South Korean KF-21 fighter jet appears to have left South Korea with no option but to cover the remainder.

According to South Korea’s Defense Acquisition Program Administration on Tuesday, the Indonesian side has proposed to pay one-third of its agreed share -- which is about 600 billion won ($441 million) -- by the deadline about two years from now.

The proposal came after Indonesia has repeatedly missed deadlines on the payment timetables since the project was launched in 2015, having paid just 380 billion won to date.

Under the initial agreement, Indonesia was due to pay for about 20 percent of the project or 1.7 trillion won, cut later to 1.6 trillion, in exchange for the transfer of some key technologies.

To make up for its reduced financial contribution, Indonesia would receive fewer technology transfers from South Korea, the DAPA explained.

With the first batch of fighter jets slated to be delivered in 2026, South Korea will most likely carry on with the next stages of the project with or without full Indonesian input.

Choi Kyung-ho, the DAPA spokesperson, told a press briefing Tuesday that the South Korean government has been “coordinating with our Indonesian counterparts closely on the success of the KF-21 project.” The two sides were “in final discussions” over the proposed changes in payments, he said.

South Korea will likely determine the next steps at the regular meeting of the government committee for defense acquisition programs set for later this month.

Jung Kwang-sun, who spearheaded the KF-21 project at DAPA, told The Korea Herald that it was “technically possible to adjust the amount of technologies being transferred to correspond with the cut in the payment.”

He said it was “probably difficult for” South Korea to accommodate Indonesia's requests to push the deadlines for payments, given the way the government budget is organized.

On the extent of the burden posed for South Korea as a result of Indonesia failing to provide payment, he said the remaining stages of the project were mainly test flights, which “thankfully shouldn’t cost as much.”

In March, South Korean authorities busted two Indonesian nationals working at the Korea Aerospace Industries for allegedly trying to sneak away portable drives containing confidential KF-21 secrets. The police investigation of the potential secret theft is ongoing.

The DAPA spokesperson said that the South Korean government has not yet reflected the possibility of a leak in its coordination with Indonesia.

Expanding defense exports is one of Yoon Suk Yeol administration’s key policy aims, with South Korean firms clinching major deals with countries like Poland last year.