Following his keenly watched visit to Indonesia earlier this month, the head of South Korea’s Defence Acquisition Program Administration (DAPA) has proposed suspending cooperation with Indonesia on the Korean-origin supersonic fighter KF-21 Boramae’s development project.
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In an attempt to address issues related to Jakarta’s postponed payments for the collaborative development of the Korea Aerospace Industries (KAI) KF-21/IFX 4.5-generation fighter, the chairman of South Korea’s Defense Acquisition Program Administration (DAPA) Eom Dong-hwan traveled to Indonesia in early October.
On October 6, the Indonesian Ministry of Defense (MoD) announced that Eom Dong-hwan met with Prabowo Subianto, the Indonesian Minister of Defense. However, both sides maintained a studied silence related to the conclusion of their discussions.
On being probed by Janes at the time, DAPA said it was continuing to normalize the Republic of Korea-Republic of Indonesia (RoK-RI) Joint Development of the KF-21. However, it added the caveat that since the discussions were taking between the two sides, the disclosure of details was restricted.
In a recent statement, an Asia Times report said the DAPA Chief has hinted that all may not be well despite their elaborate discussions to preserve the partnership and proceed with the program. The DAPA Chief reportedly noted that Indonesia had not contributed 991.1 billion Won and the project would be thoroughly reviewed shortly. EurAsian Times could not independently corroborate this information.
Attending the National Defense Commission’s government audit held at the National Assembly in Yeouido on October 16, the DAPA Head said, “We should take a root measure regarding Indonesia’s non-payment of the KF-21 project share.”
He further conveyed his position to the Indonesian side by saying, “To terminate the KF-21 project normally, the share must be paid. If we do not submit a reliable and actionable plan for the three years of 2023-25 by the end of October, we will have no choice but to review the whole business from the beginning.”
Since Indonesia joined the program, it has been able to pay just a tiny amount of the total share, causing uproar in South Korea. Regardless, it has said on several occasions that it wanted to resolutely engage in South Korea’s KF-21 Boramae advanced jet fighter program, even though it has frequently failed to meet the payment deadline.
An unnamed source from PT Dirgantara Indonesia (PTDI), an Indonesian state-owned aircraft manufacturer, said it would not back down from its commitment to South Korea’s KF-21 Boramae 4.5 generation fighter program, even if it missed a payment deadline. The source noted that Indonesia had contributed 21% of its cost share until June 2023.
Despite several reassurances, the Indonesian Ministry of Defense failed to officially announce the payment schedule for 2024–2026 by the end of June this year, following which, the DAPA announced on July 3 that it would kickstart talks with the Indonesian officials to resolve the issue and make sure the two partners remain steadfast in their joint development of the KF-21 fighter jet.
Although the non-payment of dues has become a sticking point, Jakarta has complained about problems arising from participating in the KF-21/IFX initiative. On October 2, Presidential Chief of Staff H. Moeldoko said that the sustainability of the KF-21/IFX cooperation program is impacted by three main difficulties, which include- “intellectual property rights, the agreement, and marketing rights.”
Moeldoko noted that the cost share allocation for the project “was delayed and needed renegotiation to solve this issue.” The payment issue “had become a decision taken by the finance ministry,” he added. “This collaboration has put a stake in the political relations between Indonesia and South Korea. We have to consider it seriously,” he said.
With the discussions between the two sides likely hitting a roadblock, as evidenced by the DAPA chief’s comments, there is concern that the joint development of the KF-21, which was expected to bolster the Indonesian air power, may have hit a slug all over again.
Indonesia Just Wouldn’t Pay Its Dues
Indonesia seeks a 20% stake in the KF-21 program and technology transfer, while Korea holds the rest. It had committed to pay about US$1.2 billion, or 20% of the project’s total cost of US$6.2 billion, for the engineering and production development stage, overseen by Korea Aerospace Industries (KAI).
However, reservations have been raised about Indonesia’s commitment to the advanced warplane development project, which was started in 2015, due to the country’s payment suspension from January 2019 to November 2022.
Since it entered the contract, Indonesia has paid only 278.3 billion Won out of a total of 1.2694 trillion Won in full due to the deterioration of its economic situation. Yet, in April 2023, it was reported that Indonesia would receive a KF-21 prototype once it met its financial obligations stipulated in the agreement.
According to reports, Jakarta owes about 991.1 billion Won in dues that it hasn’t been able to pay despite repeated warnings. For this reason, some in Korea have argued that the KF-21 business contract should be terminated.
Speaking to EurAsian Times, Shashank S Patel, an analyst closely following the dynamic geopolitical landscape of East Asian countries earlier said, “Cash-strapped Indonesia already dropped South Korea in its submarine program earlier as a primary partner due to payment difficulties, but the trajectory in the jet program will find its course of succession.”
Nonetheless, Indonesia has been looking to bolster its air fleet, consisting of some 49 fighter aircraft, including 33 F-16s, 11 Su-30s, and five Su-27s, with the Russian-origin Su-30 serving as its primary fighter. It had plans to buy the Su-35 from Russia but was dissuaded by the United States.
In February 2022, Indonesia signed a deal with France to buy 42 Rafale warplanes from Dassault Aviation and is also now finalizing a purchase of US F-15EX fighter jets, which has likely not gone well with South Korea.
The Asia Times report mentions unambiguously that Indonesia decided to purchase 42 French Rafale fighter jets and signed a memorandum of understanding (MOU) to buy 24 US-made F-15EX fighter jets without determining how it would pay its dues for the KF-21 program.
The report then quotes the DAPA chief as saying that since Indonesia was showcasing a mismatch in its reasoning for non-payment of dues and its new purchases, “I asked for active financial input on interstate contracts.”
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