Lee Hyo-jin covers the Bank of Korea, the banking industry and broader financial news. Her previous beats include foreign affairs, North Korea and general reporting on Korean society.
Korea Eximbank urged to exercise caution in financing support for Indonesia's KF-21 deal
A KF-21 fighter jet engages in a test flight over Sacheon, South Gyeongsang Province, Feb. 16, 2025. Courtesy of ROK Air Force
By Lee Hyo-jin
The state-run Export-Import Bank of Korea (Korea Eximbank) should tread carefully in extending financing support to Indonesia as the Southeast Asian nation moves to finalize a deal to purchase Korea's first domestically developed KF-21 fighter jet later this month, industry officials said Tuesday.
Indonesia is a co-developer of the KF-21 program, but the project has been marred in controversy due to Jakarta's delayed payments and alleged technology leaks, raising questions about its reliability as a partner. Jakarta had initially planned to acquire 48 KF-21 jets, but is now expected to purchase only 16 at first due to budget constraints.
Military commentator Kim Dae-young said concerns over Indonesia's reliability have persisted since the early stages of the joint project.
"There have long been questions about whether Indonesia is a reliable partner, so financing support needs to be handled with extra care," Kim said. "While the size of the loan remains unclear, the finance authorities will need to carefully assess factors such as the country's creditworthiness."
Indonesia plans to purchase 16 fighter jets in its initial order, with the deal likely to be signed during President Prabowo Subianto's March 31 visit to Seoul for a summit with President Lee Jae Myung, according to sources. The deal would mark the first export of the fighter jet.
Jakarta is considering securing export financing from Eximbank, the sources said. In defense deals, such financing is typically provided by the exporting country's policy bank, which extends loans to the purchasing government.
"The Indonesian government typically decides whether to use export financing at the final stage of a deal and then requests financial proposals," an Eximbank official said. "We have not received any official request, but we will actively provide support if it is made."
President Lee Jae Myung shakes hands with Indonesian President Prabowo Subianto during their summit on the sidelines of the Asia-Pacific Economic Cooperation summit in Gyeongju, North Gyeongsang Province, Nov. 1, 2025. Courtesy of presidential office
A defense industry official said on condition of anonymity that financing support should be structured cautiously with contractual safeguards.
"It is appropriate for Eximbank to provide support to Indonesia to sustain long-term defense cooperation, but the authorities must take into account past issues in the project, which have weighed on public sentiment in Korea regarding Jakarta’s credit profile," the official said. "There have already been delays in Indonesia's cost-sharing payments, and if similar problems arise with loans, we would have little recourse."
Launched in 2015, the KF-21 Boramae is a 4.5-generation fighter jet project that is set to enter mass production this year. Indonesia had originally agreed to shoulder about 20 percent of the 8.1 trillion won ($5.43 billion) program through 2026 in return for technology transfers and a KF-21 prototype.
After continued payment delays, the two sides ultimately agreed in June 2025 to reduce Jakarta's contribution to around 600 billion won — roughly one-third of the original commitment — along with a scaled-down level of technology transfer.
The project also faced renewed skepticism after allegations surfaced in December 2024 that Indonesian engineers dispatched to Korea Aerospace Industries, the KF-21 manufacturer, were involved in leaking sensitive data.