By Lee Tae-hoon
Concerns are growing over the cost of purchasing high-end fighter jets as government reports reveal that Korea may have to spend at least 1.8 trillion won ($1.6 billion) more to stick to its original plan.
Seoul is currently planning to purchase 60 advanced multi-role fighters and a package of items to operate them, such as a pilot training system and ammunition, with a budget of 8.29 trillion won.
It has set aside 5.947 trillion won just for the purchase of the airframes and engines.
A classified National Assembly review for 2012 defense spending shows that all three jets being considered for the last and final phase of the country’s fighter jet procurement program (FX-III), are outside the budget range.
Based on a report by the Korea Institute for Defense Analyses (KIDA), it estimated that it would cost 6.932 trillion won to procure the bare bones of Lockheed Martin’s F-35, the cheapest aircraft among the three contenders.
The price of the Typhoon from the European Aeronautic Defense and Space Company and the F-15 Silent Eagle from Boeing were estimated to be 7.781 trillion won and 8.352 trillion won, respectively.
“By simply averaging the three, it can be deduced that it would cost another 183.4 billion won,” the report noted.
The parliamentary review underlined that the government’s low estimate is also based on the assumption that the exchange rate stays at 1,050 won per dollar. Currently, one dollar is exchanged at 1,127 won, up 77 won from the forecast.
It warned that the actual cost of purchasing the new fleet of aircraft will be much higher than anticipated if the U.S. dollar continues to remain strong against won.
However, a senior official of the Defense Acquisition Program Administration (DAPA) downplayed the concern, saying the price will likely go down as the three bidders compete against each other.
“It is true that all three fighter jets fall are outside our budget, but DAPA expects that the participants of the FX-III race will offer to lower their prices by as much as 15 percent in order to win the multibillion dollar deal,” he said.
The official said DAPA will suspend the jet acquisition program for another round of feasibility studies if the cost rises more than 20 percent above the original budget.
According to an industry insider, DAPA has told representatives of the three foreign defense companies that the price will account for 30 percent of all factors that determine the winner of the heated competition.
DAPA released a request for proposal (RFP) for the FX-III Monday. Russia’s Sukhoi, which was listed as one of the four contenders last year, has decided to pull out of the competition.
Korea has purchased 60 F-15s from Boeing, which won both the FX-I and FX-II projects in 2002 and 2008.
Seoul plans to receive proposals from the three possible bidders, for the FX-III project by June 18 and carry out testing and evaluations until September before selecting the winner in October.
The government eliminated two key initial compulsory requirements in an attempt to get more companies to enter the competition for the nation’s largest-ever arms deal.