Kang Seung-woo is the Business Desk editor at The Korea Times. Prior to this position, he covered politics, national affairs, finance and sports.
Will President Jokowi's visit settle KF-X payment issue with Indonesia?
A KF-21 Boramae takes off at the third Flying Training Wing of the Air Force in Sacheon, South Gyeongsang Province, Tuesday, for its first flight test. Courtesy of Defense Acquisition Program Administration
By Kang Seung-woo
Indonesian president to arrive in Seoul, Wednesday
By Kang Seung-woo
Although the domestically developed KF-21 Boramae fighter jet took to the skies for the first time last week, the issue related to Indonesia's payment for the joint fighter jet program is still grounded as Jakarta has yet to keep its word to pay its share of the total cost.
However, there is a glimmer of hope for a settlement of the overdue payment problem, as Indonesian President Joko Widodo will make a visit to Korea to hold a summit with President Yoon Suk-yeol, during which the two leaders are expected to discuss and reach a conclusion on the issue.
The KF-X project is aimed at manufacturing a fighter plane with higher capabilities than a KF-16. Korea and Indonesia signed a deal in 2010 to cooperate on the project, under which the Southeast Asian country would fund 1.6 trillion won, amounting to 20 percent of the total development cost of 8.8 trillion won ($6.71 billion), in exchange for a number of planes to be manufactured there for the Indonesian Air Force, as well as technology transfers. But Indonesia has been defaulting on the deal, failing to pay 800 billion won it promised as of this month, citing financial problems.
The Indonesian leader's trip to Korea carries extra significance as the KF-21 aircraft completed its first-ever flight test successfully on July 19, after the project was initiated over two decades ago. During the flight, the fighter jet flew with the Korean and Indonesia flags attached in tandem on its body to mark the joint project.
“The payment issue is anticipated to be discussed during the summit,” said a senior official of the presidential office.
Last November, the two sides newly agreed that Indonesia will make 30 percent of its total payments in kind, although the country has since reneged on the agreement.
“We failed to revise the contract by the end of the first quarter due to a change in government in Korea. However, Indonesia is still committed to the KF-X, as evidenced by its 39 engineers working at Korea Aerospace Industries (KAI), and we believe the payment issue would be settled soon,” the official said. KAI is the nation's lone aircraft manufacturer that produced the KF-21.
Shin Jong-woo, a senior researcher at the Korea Defense and Security Forum, also presented a similar view.
“The Defense Acquisition Program Administration (DAPA) is determined not to deliver the KF-21s to Indonesia without the payment of its share. In addition, a successful maiden flight of the KF-21 will play a positive role in addressing the overdue payment issue when Widodo visits here,” Shin said.
Indonesian President Joko Widodo / Korea Times file
Shin, who traveled to the Farnborough International Airshow recently, said there was keen attention on the KF-21.
“In that respect, Indonesia, which had been lukewarm on the KF-X project, is more likely to be enthusiastic about it,” he said.
A defense industry official also looked forward to the Widodo visit helping to get the joint development project back on track.
“I expect the Widodo trip to come up with positive results for the KF-X program,” he said.
Amid Indonesia's payment failure, speculation was rampant that the country might withdraw from the KF-X program. In addition, its purchase of Rafale jets during the default added to the conjecture.
However, last November, representatives of DAPA and its Indonesian counterpart had multiple rounds of negotiations to reach a conclusion that Jakarta's cost-sharing portion of 20 percent and the timeframe for payment from 2016 to 2026 will be retained.
Shin said it would not be easy for Indonesia to pull out of the KF-X program as it does not have a 4.5-generation fighter jet with stealth capabilities.
“The Rafale that Indonesia decided to buy recently is not a stealth fighter jet, so the KF-21 is a more attractive option, something the country cannot ignore,” he said.