Indonesia Seeks Reduced Financial Burden

According to reports in the Soul media in the past several days, a team of officials from the Defense Acquisition Program Administration (DAPA) and executives from Korea Aerospace Industries (KAI) are in Jakarta for talks aimed at establishing a new working agreement for the KF-X/IF-X fighter development programme. This follow’s Indonesia’s failure to pay several hundreds of millions of dollars in development funding.

The meeting takes place against the background of statements from Indonesian Defence Minister Prabowo Subianto – in post slightly less than a year – that he needs to review the overall defence budget and procurement priorities before committing to substantive agreements. Indonesia originally agreed to payments of KRW1.7 trillion (€1.2 billion), equating to about 20% of the total project budget. To date it has only paid approx. KRW200 billion and ceased payments in late 2017, citing the nation’s deteriorating economic circumstances. The original agreement called for payments to be complete by 2026, but Jakarta is now seeking to reduce its contribution from 20 to 15%, in line with a proposal it made in late 2018. There has also been a proposed payment in kind rather than cash, with a suggestion made last year that CN-235 aircraft manufactured by PT Dirgantara Indonesia could be counted as part of the contribution.

Also at issue is an Indonesian demand for greater technology transfer from Korea – but here Seoul is in a difficult position due to the necessity for US permission for export of some of the technologies linked to the programme. Development, meanwhile, is forging ahead despite the disagreements between the original partners. At the beginning of September, KAI announced it had beguns final assembly of the first prototype for KF-X, which is scheduled for completion next year.