06 April 2011

Korea Set to Endure Bad Terms for T-50 Export to Indonesia

06 April 2011

KAI T-50 Golden Eagle (photo : KAI)

Jakarta asks Seoul to buy more planes, accept penalty write-offs

Indonesia has asked South Korea to write off $20 million in penalties over the former’s delayed delivery of CN-235 transport aircraft in return for buying the T-50 Golden Eagle supersonic trainer jet, which can also be used as a light attack plane, according to government and industry sources Tuesday.

Jakarta also requested Seoul purchase four more CN-235s under a barter deal, the sources said.

The Seoul government is reviewing the offer positively as it has fought an uphill battle to gain the first exports of the jet following back-to-back defeats in trainer contests in the United Arab Emirates and Singapore.

The per-unit price of the CN-235 plane, built by the state-owned PT Dirgantara Indonesia (PT DI), is $25 million, similar to that of the T-50, jointly developed by Korea Aerospace Industries (KAI) and Lockheed Martin of the United States. The T-50’s price is presumed to be around $20-$25 million.

Under the envisaged new deal, if approved, the value of the original $400 million contract to sell 16 T-50s to Indonesia could be lowered to less than $280 million.

The value could be further reduced because KAI is obliged to share profits with Lockheed, which has technology export license over the T-50.

“Such a trade deal would certainly be disadvantageous for South Korea, but there are very few options since Seoul has been pressed to get the first overseas sale of the trainer jets,” an informed government source told The Korea Times on condition of anonymity.

Jakarta’s calm response to a break-in at an Indonesian delegate’s hotel room here in February was seen as an effort to increase its negotiating leverage over the deal, he said.

Last week, a Cheong Wa Dae official told reporters that Indonesia would soon announce the KAI-Lockheed team as the preferred bidder in its trainer acquisition program.

The presidential secretary said Indonesia’s Defense Ministry would send a letter confirming its selection of the T-50 as the preferred model as early as this week. The T-50 is competing with Russia’s Yak-130 and the Czech-built L-159B.

But Indonesia has neither confirmed nor denied its selection of a successful bidder.

T-50 cutaway (image : Flight International)

South Korea ordered four CN-235 aircraft for maritime patrol operations in December 2008. Under the $100 million contract, PT DI was to deliver the aircraft by the end of 2010.

But none have been received by the Korea Coast Guard (KCG) yet. “The Indonesian firm recently sent a document to us, saying the delivery will be delayed,” said Koh Jae-young at the KCG’s public affairs office. “Two aircraft will be delivered in May and the remainder are to be delivered by August.”

Indonesian authorities cited production line problems for the delay, he said.

In consultation with the Defense Acquisition Program Administration (DAPA), the KCG is in negotiation with PT DI for compensation over the delay. The amount of compensation is estimated at around $20 million, according to KCG and DAPA officials.

“At the request of the KCG, we’re reviewing legal procedures related to Indonesian compensation for the delayed delivery of CN-235s,” Maj. Choi Jong-oh at DAPA’s public relations office said, declining to elaborate.

The CN-235 is a medium-range twin turboprop airplane, jointly developed by Spain’s CASA and PT DI, formerly known as IPTN. The plane is used for VIP transport, maritime patrols, airlifts, and troop carrying.

South Korea has 20 CN-235s, 12 built in Spain and eight in Indonesia. The latest order was for a maritime patrol aircraft modified from the CN-235-110 equipped with advanced radar detection and thermal imaging systems.

Indonesia is a key arms partner of South Korea. Seoul has sold KT-1 Woongbi basic trainer jets and hundreds of military vehicles to Indonesia.

In a summit last December, President Lee Myung-bak and his Indonesian counterpart Susilo Bambang Yudhoyono agreed on efforts to jointly manufacture tanks, submarines and fighter jets.

(Korea Times)

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