Indonesia’s Delayed Payment Raises Concerns over Korea’s Fighter Jet Project
Indonesia’s prioritization of other arms deals over its financial obligations has created a crisis in the delivery of Korea’s domestic fighter jet project, the KF-21 ‘Boramae’. The country’s lack of investment in the KF-21 has raised doubts about its commitment to the joint development project with Korea. Instead, Indonesia has recently signed a Memorandum of Understanding with Boeing to purchase F-15EX fighter jets, demonstrating a focus on immediate usability and reliability.
Experts analyze that Indonesia’s decision to invest in fourth-generation fighters like the F-15EX and the Rafale indicates a preference for ready-to-use aircraft, rather than a development project like the KF-21. As Indonesia faces limitations in defending its vast territory, it seems to be arming itself with American and French fighters to meet its security needs.
The delayed payment of approximately 800 billion won ($694 million) by Indonesia has further intensified concerns. The Indonesian government had agreed to contribute 1.7 trillion won ($1.5 billion) towards the KF-21 project with Korea by 2026. However, due to budget constraints, only a fraction of the promised amount has been paid, leading to a significant delay.
The Korean government has not taken any immediate action to resolve the payment issue, but has instead expressed patience. A meeting between high-ranking officials from both countries is being considered to address the matter. However, Indonesia’s true intentions remain unclear, making it challenging for the Korean government to formulate a clear response.
Moreover, critics argue that Korea’s failure to include penalty provisions in the initial investment contract with Indonesia has allowed the country to delay payments and renegotiate terms. This has raised questions about the effectiveness of the agreement and the need to consider alternative investment partners.
One potential alternative is Poland, which has expressed interest in participating in the KF-21 project. The Polish defense industry company, PGZ Group, has approached Korea Aerospace Industries (KAI) for joint development opportunities. The Defense Acquisition Program Administration (DAPA) has stated that it will review Poland’s proposal if the government formally requests defense cooperation.
The situation has sparked discussions on whether Korea should pursue a “Plan B” and explore new investment partnerships. Some analysts suggest that actively considering Poland’s proposal could offer an alternative to Indonesia’s wavering commitment.
As Indonesia’s presidential elections draw near, speculation arises about the influence of the country’s complex political landscape on its fighter jet purchases. Defense Minister Prabowo, who is expected to run for the presidency, is believed to be seeking personal achievements and indirectly pressuring South Korea and KAI to secure funds for his electoral campaign.
The Korean government must navigate these uncertainties and ensure the success of its domestic fighter jet project. Prompt action and strategic decision-making are crucial to resolve the payment issue with Indonesia and secure reliable investment partners for the KF-21 project.
By Kim Dong-hyun 3code@hankyung.com
“We need a fighter we can use right now.“
800 billion ‘the value of trauma‘ Instead of paying off, focus on other weapons
Korea also changes investment partners, etc. ‘plan B‘ when considering
As Indonesia purchases weapons such as fighter jets and helicopters from countries such as the United States and France, a crisis has been put in the delivery of Korea’s next domestic fighter jet project, the KF-21 ‘Boramae’. This is because Indonesia seems to be focusing on other arms businesses instead of paying back 800 billion gained from ‘fraud’.
Experts analyze that Indonesia, which wants to introduce fighters that can be used immediately, is stingy in investing in the KF-21, which is not clear if it will produce reliable performance. The Indonesian government signed a Memorandum of Understanding with Boeing last month to purchase F-15EX fighter jets. There is also an absurd argument from Yonhap News that “Indonesia has nothing to regret in negotiations with Korea.” It is seen that it is time to consider changing contracts with other countries that want to participate in the KF-21 project, such as Poland.
Indonesia will “deliver US F-15EX and Black Hawk helicopters”
On the 22nd of last month, Indonesia signed a memorandum of understanding (MoU) with Boeing, an American aircraft manufacturer, to purchase 24 F-15EX 4.5-generation fighter jets. The F-15EX is the latest improved version of the F-15 fighter.
Initially, the Defense Security Cooperation Agency (DSCA) under the US Department of Defense approved the export of 36 units, but the actual delivery target is estimated to have fallen by around 30%. “I am very pleased to make the commitment to procure the important F-15EX fighter jet for Indonesia,” said Indonesian Defense Minister Prabowa Subianto. F-15EX fighter. / American Boeing Indonesia is an investor in the joint development of the Korean KF-21 (Boramae) supersonic fighter with Korea. Instead of properly paying the contributions promised to South Korea for the development of the KF-21, in recent years, other countries have been buying fighter jets en masse.
In February last year, it agreed to buy 42 Rafale fighter jets from France for 8.1 billion dollars (about 10.8 trillion won). In June this year, it also decided to buy 12 used French Mirage 2000-5 fighter jets from Qatar. The Rafale model was displayed at the Egyptian defense exhibition held in December 2021. / Reuters Yonhap News Not just fighters. On the 23rd of last month, right after the contract for the F-15 model, the Ministry of National Defense of Indonesia signed a contract with Lockheed Martin of the United States to buy 24 S-70M Black Hawk helicopters for the transport of troops . Contracts related to helicopter remodeling, system upgrades, maintenance and repair were also signed in Indonesia. Last month, it also bought 12 new drones worth 300 million dollars (about 400 billion won) from Aerospace in Turkiye.
There is a lot of speculation as Indonesia shows such a move while the contribution for the KF-21 fighter jet, which is being developed jointly with us, is in arrears. Indonesia agreed to pay about 1.7 trillion won, or 20% of the total development cost related to the KF-21 project with Korea, by 2026. According to the contract, when the development of the KF-21 is complete, Indonesia will receives one prototype and various technical data and produces 48 fighters locally.
However, after paying only 227.2 billion won by January 2019, the contribution was not paid for almost four years due to lack of budget. In November last year and February this year, additional payments of 9.4 billion won and 41.7 billion won were paid, respectively, but compared to the original plan, about 800 billion won were late. Indonesia announced that it would pay about 500 billion won in kind, which is about 30% of the total contribution, but even this did not proceed properly, raising uncertainty about continued participation in the project.
The Korean government is taking the attitude of waiting for the payment patiently. An official from the Ministry of Defense Acquisition Program said, “We plan to devise countermeasures after confirming Indonesia’s intention, such as holding high-level meetings with Indonesia.” There is also a possibility that Eom Dong-hwan, the head of the DAPA, will visit Indonesia to discuss related issues soon.
However, Indonesia’s ‘true intention’ is said to be unclear, and the Korean government is also having difficulty formulating clear countermeasures. I guess Indonesia wants to keep its promise to us. Indonesian President Joko Widodo said in July that “Indonesia still has financing obligations to Korean partners.”
There is no penalty as a ‘penalty’ in case the contract is not fulfilled… “Consider plan B”
Experts believe that they are looking for a fighter that can be put into action immediately rather than the KF-21, which is in the development stage, given that they have expressed their intention to buy the fourth generation fighter, the F-15EX and Rafale . Choi Hyeon-ho, CEO of Mildom and a military contributor, said, “Indonesia currently operates Russian fighter jets and an old F-16 fighter jet, but it faces limitations in defending its vast territory that includes about 17,000 islands.” Rather than waiting, there is an intention to try to arm with American and French fighters.” Indonesian Defense Minister Prabowo Subianto/ AFP With Indonesia’s presidential elections approaching next year, claims are being made that Indonesia’s complex political landscape is affecting fighter jet purchases Defense Minister Prabowo, the son-in-law of former Indonesian dictator Suharto, is expected to run for next year’s presidential election.
It is an observation that there is an intention to promote his own achievements while putting indirect pressure on South Korea and the manufacturer Korea Aerospace Industries (KAI), which needs export performance. Local people also raise doubts that the decision to buy fighters is linked to securing money for the presidential election. Local media, including Compass, reported that “Minister Prabowo contacted a French arms dealer” regarding Indonesia’s import of second-hand fighter jets from Qatar.
Local media in Indonesia often dictates a ‘strong stance’ on Korea. It is argued that if Indonesia is excluded from the KF-21 project, Korea would rather lose. Indonesian media Jonajakarta said, “If Indonesia operates the KF-21 Boramae, other countries such as the Philippines, Malaysia, and Thailand will also be encouraged to buy (of the KF-21).” “If Indonesia is forced out of the KF-21, the Indonesian government will buy the US F-35 and there will be no place for the KF-21 in the Southeast Asian market.”
Some point out that the problem is that Korea did not properly create penalty provisions as penalties when signing an initial investment contract with Indonesia. An official from the domestic eastern defense industry said, “Indonesia’s attempt to change the terms of the contract, such as offering payment in kind, can be seen as an attempt to re-sign the contract on terms favorable to their country.” abuse of the terms of the contract which are not meant to be met.”
Accordingly, there are comments that it is time for Korea to consider ‘Plan B’ such as changing investment partners. A typical example is the argument that active consideration should be given to Poland’s proposal showing interest in the KF-21 project. In April, PGZ Group, a state-owned enterprise in the defense industry in Poland, was said to have asked KAI to participate in the joint development of the KF-21. A DAPA official said, “If the Polish government officially requests future defense cooperation, we intend to review it.”
Reporter Kim Dong-hyun 3code@hankyung.com
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