Why S. Korea is partnering with Indonesia to develop fighter jets

Posted on : 2021-11-12 17:25 KST Modified on : 2021-11-12 17:25 KST
After hiccups in the joint venture, Korea’s Defense Acquisition Program Administration announced that it had reached a final agreement with the Indonesian Ministry of Defense on Thursday
The rollout ceremony of the prototype of the KF-21 Boramae fighter aircraft on April 9, held at Korea Aerospace Industries in Sacheon, South Gyeongsang Province. (Blue House pool photo)
The rollout ceremony of the prototype of the KF-21 Boramae fighter aircraft on April 9, held at Korea Aerospace Industries in Sacheon, South Gyeongsang Province. (Blue House pool photo)

The rollout ceremony of the prototype of the KF-21 Boramae fighter aircraft on April 9 attracted considerable public interest and was even attended by South Korean President Moon Jae-in himself. In its first appearance, the fuselage of the prototype was decorated with the flags of South Korea and Indonesia, a nod to the joint development of the fighter by the two countries.

Korea’s domestic jet fighter project has been described as the biggest weapon development program in the country’s history. Simply developing the fighter will cost 8 trillion won (US$7.45 billion), and the total price tag rises to 18.6 trillion won (US$15.75 billion) when production is added in.

The Indonesian government agreed to pay 20% of the development costs — 1.73 trillion won, or US$1.47 billion — in stages, in exchange for receiving one prototype and technical documentation. It was then planning to produce 48 of the fighters at home.

The goal is to hold a test flight in July 2022 and begin mass production in June 2026. But even if the fighter goes into mass production, that doesn’t mean the end of the project. Ultimately, its success depends on whether Korea can find buyers overseas.

Korea Aerospace Industries (KAI), which is manufacturing the fighters, won’t turn a profit unless it can achieve economies of scale by exporting a certain number of the fighters. That economic reality is why Korea chose to partner with Indonesia in developing the Korean jet fighter.

KAI’s break-even point for production is 300 fighters. It’s slated to deliver 120 fighters to the Republic of Korea Air Force, but that’s not enough to get the project in the black. If Korea can supply the fighter to Indonesia and then use the country as a base for making sales to other countries in Southeast Asia, it can achieve economies of scale.

South Korea and Indonesia have a long record of defense cooperation on such projects as the KT-1 basic trainer aircraft, the T-50 supersonic advanced trainer jet, and submarines. The position of the defense industry is that the only regions where the KF-21 (a 4.5 generation fighter with limited stealth capabilities) is likely to find buyers are Southeast Asia and the Middle East.

That makes Indonesia’s participation in the Korean fighter project about more than its 20% financial contribution — it’s directly linked to lining up buyers, which is crucial to the success of the venture as a whole.

Indonesia had been delaying payments on the project since late 2017, citing economic problems. That attitude was reportedly due to a combination of factors, including domestic politics and a reassessment of its weapons procurement system.

After tussling over financial contributions, the two countries finally agreed to maintain Indonesia’s original contribution of 20% of the development budget. In effect, the Korean fighter project has cleared one major hurdle.

Korea’s Defense Acquisition Program Administration (DAPA) announced on Thursday that it had reached a final agreement on the agenda of the joint development program for the KF-21 with the Indonesian Defense Ministry. (In Indonesia, the plane is called the IF-X.) The two countries agreed to stick with the original contract, under which Indonesia will cover 20% of the development costs, with payments to be made between 2016 and 2026. However, Indonesia will be allowed to pay roughly 30% of its contribution in kind.

The agreement was reached in working-level talks in Jakarta on Thursday, with DAPA chief Kang Eun-ho and a senior official from the Indonesian Defense Ministry in attendance. This was the sixth round in a series of working-level talks on the project agenda since January 2019.

“The final agreement was delayed because of COVID-19 and other factors, but this agreement is very significant since our two countries were able to conclude the negotiations to our mutual benefit through adequate dialogue. I expect this final agreement will contribute not only to resolving the issue of Indonesia’s unpaid contributions but also to quickly stabilizing the joint development project,” Kang said.

By Kwon Hyuk-chul, staff reporter

Please direct questions or comments to [english@hani.co.kr]

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