Korea has accepted Indonesia’s proposal to significantly reduce its financial contribution to their joint KF-21 fighter jet development project, lowering the Southeast Asian nation’s obligation from US$1.2 billion (Rp18.7 trillion) to US$440 million.
This decision was announced by the Defense Acquisition Program Administration (DAPA), Korea’s state arms procurement agency on Friday, August 16, 2024.
Originally, Indonesia had agreed to contribute 1.6 trillion won (Rp18.7 trillion), but this has now been reduced to 600 billion won, reflecting a significant reduction of nearly two-thirds.
This decision comes as Indonesia faces difficulties meeting its financial obligations for the project, which was launched in 2015 with the aim of developing an advanced supersonic fighter jet.
The project was initially designed with Indonesia funding 20 percent of the 8.1 trillion won total cost, in exchange for technology transfer and participation in the production process.
“We considered the bilateral relations between the two countries and other factors such as whether we would be able to fill the financial hole,” DAPA stated.
Following this new agreement, DAPA plans to ensure the project’s success and meet public expectations despite the revised cost-sharing structure.
As a result of the reduced financial contribution, the benefits Indonesia will receive, including technology transfer, will be scaled down proportionally.
However, specific details on the reduction in technology transfer have not been disclosed.
Indonesia has so far contributed only about 400 billion won to the project. Economic challenges, exacerbated by the COVID-19 pandemic, prompted Indonesia to seek a reduction in its financial responsibility.
Despite this reduction, the Korean government and Korea Aerospace Industries (KAI), who are the main contributors to the project, are now required to absorb the financial shortfall.
To mitigate this impact, Korean officials have identified ways to reduce the total project cost from 8.1 trillion won to 7.6 trillion won.
This adjustment means that Korean partners will need to contribute an additional 500 billion won to ensure the project is completed by its scheduled deadline in 2026.
Despite delays in Indonesia’s payments, the KF-21 project remains on schedule. The first production models of the advanced fighters, which are intended to replace Korea’s aging F-4 and F-5 jets, are expected to be delivered to the Korean Air Force in late 2026.
In July, DAPA announced that KAI had officially begun production of the KF-21 at its headquarters in Sacheon, South Gyeongsang Province.
In June, KAI signed a 1.96 trillion-won contract with DAPA to build 20 KF-21 units by 2027. Korea’s military plans to eventually operate a total of 120 KF-21 jets by 2032.
“Through this project, we aim to secure the capabilities to develop our own fighter aircraft, which is expected to reinforce our military strength and contribute to its arms exports,” DAPA stated.
