S. Korea, Indonesia finalize fighter jet costs amid default rumors

South Korea and Indonesia reached an agreement Wednesday on the payment Indonesia would have to make for their joint fighter jet project after concerns for months that Jakarta could default on the deal to produce a cheaper, less-stealthy alternative to the US-made F-35.

The KF-21 program -- in which Indonesia seeks a 20 percent share and technology know-how while Korea holds the rest -- aims to mass produce jets as early as 2027, but the Southeast Asian nation had hardly paid its contributions to the project worth at least 8 trillion won ($6.7 billion).

A COVID-hit local economy was reportedly one of the reasons behind the delay, though Seoul denied that Jakarta had asked it to either cut its burden in half or approve a loan for its contributions and help build local production lines.

“Indonesia will make payments over the next five years until 2026, and thirty percent of that would be in-kind transfers,” Korea’s Defense Acquisition Program Administration said, without elaborating.

The arms procurement agency said the two countries will discuss what goods or assets to use instead of cash at a separate meeting later, with one DAPA official saying they could involve natural resources.

In April, President Moon Jae-in hailed the prototype of the KF-21, known as Boramae, as the backbone of the Air Force that marks a new era of a more self-reliant military, at the unveiling ceremony.

The project, first conceived in 2001, gained traction in 2010 when Indonesia agreed to shoulder costs in exchange for technology transfer. But Korea had since faced difficulties in securing key software from the US for its 4.5-generation warplanes, and payments from Indonesia.

Seoul had repeatedly played down rumors that Jakarta could walk off, saying a pullout would not affect the program. Korea expects to produce 120 jets, while Indonesia is responsible for making 48 jets and is given one prototype along with the technology know-how.

“We have a separate routine, so what we make here goes to our storage and what Indonesians build there goes to theirs,” a DAPA official said, though he declined to confirm the exact number of jets to be produced for production for security reasons.

The weapons buyer said 32 Indonesian workers are currently working here alongside Korean engineers, and the number will hit 100 by December. Indonesia represents Southeast Asia’s largest defense market.

By Choi Si-young (siyoungchoi@heraldcorp.com)