[Yang Nak-gyu's Defence Club] The 'KF-21 Half Negotiation' in Crisis

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[Asia Economy Yang Nak-gyu, Military Specialist Reporter] Although the cost-sharing negotiations with Indonesia, a co-developer of the Korean fighter jet (KF-21), have been completed, the deal is considered a 'half-hearted negotiation.' The deadline for Indonesia's unpaid contributions has not been set, and some payments will be made in kind, raising questions about the proper valuation of the amounts.

According to the Defense Acquisition Program Administration (DAPA) on the 12th, DAPA announced that it signed the final agreement after the 6th working-level meeting on KF-21 cost-sharing with the Indonesian Ministry of Defense in Jakarta the previous day.

Indonesia agreed to maintain the existing contract to bear about 1.7 trillion won, which is 20% of the KF-21 system development cost (8.8 trillion won). The payment period for the contributions also remains from 2016 to 2026.

Regarding this, DAPA explained that the cost-sharing negotiations, which had been a major obstacle, were concluded after nearly three years, and the joint development project has been normalized on the surface.

However, the payment schedule for the overdue contributions amounting to 800 billion won, which Indonesia was supposed to pay by this year, was not agreed upon. This accounts for about 47% of the total contributions, nearly half. In particular, Indonesia agreed to pay about 30% (approximately 510 billion won) of the total 1.7 trillion won contribution in kind, making it unclear whether the overdue contributions will be paid in kind or if future payments will be made in kind.

In 2018, Indonesia signed a memorandum of understanding (MOU) to pay a significant portion of the purchase price for 11 Su-35 multipurpose fighter jets (about 1.23 trillion won) from Russia through offset trade, providing Indonesian agricultural products such as coffee, tea, and palm oil as payment in kind. Because of this, Indonesia is likely to pay the KF-21 contributions in kind with natural resources or raw materials.

The KF-21 development project is a joint venture between Korea and Indonesia, investing 8.8 trillion won from 2015 to 2028 to research and develop a 4.5-generation fighter jet.

Indonesia agreed to bear part of the project cost in exchange for receiving one prototype and technical data, and to locally produce 48 next-generation fighters in Indonesia. However, it has defaulted on payments since 2017 due to economic circumstances. In September of the following year, Indonesian President Joko Widodo visited Korea and requested renegotiations, including a reduction in the contribution ratio, leading to working-level negotiations starting in January 2019.

Meanwhile, the first prototype of the KF-21, which was delivered this year, is currently undergoing ground tests. The initial flight test is scheduled for early 2022, with system development expected to be completed by 2026.

This content was produced with the assistance of AI translation services.