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The prototype of the KF-21 Boramae fighter aircraft at Korea Aerospace Industries in Sacheon, South Gyeongsang Province (Blue House pool photo)

Decisions regarding Indonesia’s overdue payments and payment methods for the joint KF-21 Boramae fighter jet project with South Korea are expected to be settled early next year.

According to an official from the Defense Acquisition Program Administration (DAPA), KF-21 manufacturer Korea Aerospace Industries and Indonesia’s Ministry of Defense have decided to revise the cost-sharing agreement by the first quarter of next year to specify the annual contribution, including unpaid amounts as well as future payments.

In 2015, Indonesia had agreed to bear 20% — about 1.7 trillion won, or US$1.47 billion — of the total cost of the project (8.8 trillion won, or US$7.46 billion) and participated as a joint development operator for KF-21 but stopped its paying financial contributions from the second half of 2017, citing its difficult economic situation. Currently, Indonesia’s unpaid amount for the project stands at 800 billion won.

South Korea and Indonesia held working-level talks on Wednesday and Thursday in Jakarta, where they agreed to maintain the existing contribution of Indonesia at 20% over the same period (2016-2026). It was also agreed that Indonesia would pay 30% of its contribution (about 480 billion won) not in cash, but in kind.

Following the signing of their final agreement on Nov. 11, parties from Korea’s Defense Acquisition Program Administration and Indonesia’s Ministry of Defense pose for a photo. (Yonhap News)

According to the DAPA official, the payment options for Indonesia are various, including military supplies, ordinary products, underground resources, among others. The official added that details regarding the specific types and quantity of goods will be discussed at a later date.

Even if Indonesia decides to pay with natural resources, no agreements that would harm domestic importers will be signed, the official said, explaining, “For example, if palm oil is used to pay for the project, then this can be sold abroad without having to enter South Korea first.”

Indonesia’s total contribution to the project has fallen from the original 1.7 trillion won to 1.6 trillion. Since the KF-21 fighter jets were designated as defense goods in 2017, they were exempt from value-added tax and other types of taxes, further reducing the project’s total cost. This has the consequence of allowing Indonesia to pay less in total contributions.

By Kwon Hyuk-chul, staff reporter

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