S.Korea mulls plan B as Indonesia falls behind on KF-21 project payments

Indonesia, a partner of South Korea’s KF-21 fighter jet development project, has failed again to notify the Korean government of its plan to pay its share of the project's cost, putting their partnership in jeopardy.

The Defense Acquisition Program Administration (DAPA), Seoul’s arms procurement agency, said on Wednesday that Indonesia didn’t provide its payment plan by the end of October as promised.

The KF-21 is a joint project between Korea and Indonesia to develop a next-generation supersonic combat plane with Korea’s homegrown technology for key components.

In 2016, Indonesia agreed to shoulder some 1.3 trillion won ($958 million), or about 20% of the multi-billion-dollar project in return for a deal for the Southeast Asian country to receive a prototype of the fighter jet and technical support for the local production of 48 units in Indonesia.

Jakarta has so far paid 278.3 billion won with the remaining 991.1 billion won overdue.

Earlier this year, Indonesia said it would inform Korea of a payment schedule by the end of June but it didn’t. It later said it would submit a plan by the end of October.

BACK TO SQUARE ONE

Minister of DAPA Eom Dongwhan said during a parliamentary audit of the arms procurement agency last month that it would “have no other choice but to send the joint project back to square one” if Jakarta keeps breaking its promises.

For Jakarta not to keep up with its payments undermines trust in its commitment to developing an advanced multirole warplane for the air forces of the two nations, he said.

At a DAPA briefing to the Ministry of National Defense on Tuesday, a DAPA official said it is looking into various possibilities over what to do with its partnership with Indonesia while awaiting Jakarta’s payment plans.

He said DAPA also plans to revise its basic agreement with Indonesia on the joint project by the end of this year to help solve the payment issue.

In April 2021, Korea unveiled a prototype of the KF-21 fighter jet, nicknamed Boramae, at Korea Aerospace Industries Ltd. (KAI), Korea’s sole military aircraft maker.

Korea plans to gradually replace the country’s aging fleet of F-4 and F-5 fighters, third-generation US-designed jets introduced in the 1960s.

Once fully operational, the KF-21 combat plane, dubbed a 4.5-generation jet because of the lack of a stealth function, could also replace Korea's fourth-generation F-16s and F-15Ks.

With a maximum payload of 7,700 kilograms, the new warplane will have 10 pods for air-to-air missiles and other weapons, capable of flying at 2,200 kph with a flying range of 2,900 km.

In January, the KF-21 successfully made its first supersonic flight over Korean skies.

BUYING FIGHTER JETS FROM THE US, FRANCE AND QATAR

Industry watchers said Korea’s trust in Indonesia has significantly weakened as the Indonesian government is buying fighter jets from other countries while delaying its payments to Korea, citing “financial constraints.”

In August, Jakarta signed a memorandum of understanding to purchase 24 units of the F-15EX, a 4.5th-generation combat plane, from US firm Boeing Co. The contract follows its purchase of 12 second-hand French-made Mirage fighter jets from Qatar in June.

In February 2022, Indonesia inked a $8.1 billion contract to buy 42 Dassault Rafale fighter jets from France.

Choi Hyun-ho, a military commentator at online Korean military information provider Milidom, said Indonesia may be seeking to buy fighter jets that can be immediately deployed in combat, instead of the KF-21, which is still in the development stage.

“Indonesia currently operates Russian fighter jets and aged F-16s. With those old planes, it may find it hard to defend its expansive territory composed of around 17,000 islands,” he said.

Analysts said Indonesia’s procrastination could be politically motivated as Defense Minister Prabowo Subianto, who’s also the son-in-law of former President and strongman Suharto, is expected to run for the presidency in next year’s election.

He may be tempted to renegotiate the terms of the KF-21 contract in a way that is favorable for Indonesia, analysts said.

KAI, the Korean aircraft developer, said it would have no financial difficulties even without Indonesia’s contributions. A company official, however, said it has a “plan B” and is considering whether or when to put it into action.

Industry officials said some countries, including Poland and the United Arab Emirates, have shown interest in the KF-21 project, tapping into the possibility of a partnership with Korea.

Write to Dong-Hyun Kim at 3code@hankyung.com

In-Soo Nam edited this article.