Korea Confident of KF-X Deal with Indonesia

08 April 2021

KF-X fighter (photos : ROKArmed Forces)

Korea confident of fighter deal despite default

Indonesia is defaulting on a deal with South Korea to build fighter jets, sitting on its contribution to the project worth at least 8 trillion won ($7.1 billion), but Seoul is confident that it could manage the undertaking without the Southeast Asian country.

The KF-X program, in which Korea holds 80 percent of shares while Indonesia seeks 20 percent and technology know-how, is set to reveal its prototype jet Friday -- but Indonesia has so far paid just $22 million, about 13 percent of what it owes.

Indonesia has reportedly asked Korea to cut its burden in half or approve a loan and help build local production lines, though the Korean government denies it has received any such request.

The Indonesian defense minister, who will attend the unveiling ceremony in Korea, is expected to address the dispute with his Korean counterpart. Indonesia has not made clear why it needs the assistance. The local economy, now reeling from COVID-19 fallout, is reportedly among the reasons.

“There is nothing yet, no material change to the contract between the two countries. We’re still looking into what we can do about it,” a senior Seoul official said.

The director general in charge of the program at the arms procurement agency was clearer on Indonesia’s potential pullout.

“Even if we come to cease partnership, the program will go on,” the director general said in February when he was briefing reporters at the KF-X production site to show last-minute preparations for the Friday’s rollout ceremony, which takes place at the same site in Sacheon, South Gyeongsang Province.

Korea’s confidence lies in the fact that it can build prototype jets, without Indonesian help, to test them before starting mass production, which could begin in 2026 at the earliest. Korea expects to make 120 jets. Indonesia, which will be given one prototype along with the technology know-how, is responsible for 48.

Also, Korea would not be dealing with surging costs for mass production even if Indonesia withdraws from the commitment, according to a senior Seoul official familiar with the project.

“Let’s say Indonesia pulls out -- though that’s not what we think will or should happen -- the total costs for the entire fleet will not be as heavily affected as some say it would,” he said.

An official at the arms procurement agency said Korea would not have to return what Indonesia has paid up either, as their contract prevents such an action in the case of recurring defaults. But that is purely a technicality on which the agency would consult with Indonesia, the official said.

Nevertheless, the government is seeking to work the situation out with Indonesia, the agency said.

Seoul is seen as trying to embrace Indonesia, the largest buyer of Korea’s weapons. It accounted for 17 percent of Korea’s arms exports from 2014 to 2018, according to the Stockholm International Peace Research Institute.

“Breaking the partnership -- which is essentially turning our back on Indonesia -- is not a smart move,” a Seoul official said, adding it would also affect Korea’s long-term initiative to carve out its presence in the aerospace market.

“Partners are like insurance. We need an outsider on the program to sell it to the outside world,” the Seoul official said. (KoreaHerald)

S. Korea, Indonesia pushing for defense ministerial talks

SEOUL, April 5 (Yonhap) -- South Korea is in talks with Indonesia to set up defense ministerial talks on the occasion of an upcoming rollout ceremony showcasing a prototype of South Korea's first indigenous fighter jet this month, the defense ministry said Monday.

Whether Indonesia, a partner for the KF-X project, will send senior officials to the rollout ceremony has been a focus of attention as it could be a sign the country remains committed to the joint project amid speculation it is seeking to quit the business.

Sources said Indonesian Defense Minister Prabowo Subianto is expected to attend the event, which will take place in the first couple of weeks of April, but the ministry has yet to confirm his attendance.

"A ministerial meeting will be possible if Prabowo visits South Korea. We are cooperating with all possibilities open," ministry spokesman Boo Seung-chan told a regular press briefing. "As Minister Prabowo has also visited Japan, we are actively having discussions with Indonesia."

Indonesia had promised to shoulder 20 percent of the new fighter's 8.8 trillion-won (US$7.9 billion) development cost, but it has stopped making payments after investing 227.2 billion won with around 600 billion won overdue.

Amid a media report Indonesia has asked to halve its contribution for the project, the arms procurement agency denied adjustment in the burden sharing ratio.

"The report that it has demanded the construction of local production facilities is also not true," Defense Acquisition Program Administration spokesman Col. Seo Yong-won said.

Asked to comment on the reported request of $5 billion worth of loans from South Korea, Seo said, "It is not a question to be answered by the arms procurement agency."

(YonhapNews)