Marina Ika Sari
Researcher, ASEAN Studies Program
Commemorating Indonesia-South Korea Golden Anniversary: What Is The Fate Of The KF-21 Project?
September 2023 marks the 50th anniversary of Indonesia-South Korea diplomatic relations. Indonesian Ministry of Foreign Affairs Retno Marsudi emphasized how both countries are more than close friends - they are rather special strategic partners. In a similar tone, the Indonesian Ambassador to Korea, Gandi Sulistiyanto, also stressed how Indonesia and South Korea share common values, principles of mutual respect, trust, solidarity, democracy and an open economy. It is noteworthy that Indonesia is the only ASEAN country designated as holding a Special Strategic Partnership with South Korea, effective since 2017, mirroring the importance of Jakarta to Seoul.
Cooperation in the defense sector is one of the priorities of the Indonesia-South Korea Special Strategic Partnership. Under an Agreement on Cooperation in the Field of Defense signed by both states on 12 October 2013, the most advanced defense cooperation is in the defense industry sphere. Indonesia has imported $4.3 billion in South Korean arms, making it the country’s largest export destination among ASEAN states. Moreover, it is the only country having imported Korean-built submarines and the first to import Korea’s KT-1 and T-50 training aircraft.
Not with standing Indonesia being a major defense export destination, South Korea's most significant relationship in defense equipment procurement is the KF-21 fighter jet project. The KF-21 project represents a government-to-government cooperation program between Indonesia and South Korea, aiming to develop a 4.5-generation fighter jet. Eventually, the project aims to increase the defense capabilities of both nations, especially in terms of defense equipment, and as an effort for both countries to achieve independence in the defense industry.
However, the project has been facing a bumpy road with impediments such as delayed payment from the Indonesian side and limited technology transfer from South Korea to Indonesia. Indonesia joined the KF-21 project in 2015 and agreed to shoulder about 20 percent of the 8.8 trillion won budget. Nevertheless, it failed to make payment from January 2019 until last February and is currently known to be about 800 billion won behind on payments.
Since the KF-21 is a multiyear program, the financial issue cropped up during President Joko Widodo's administration, a victim of divergent priorities and interests among relevant ministries associated with the project. Although Indonesia has consistently expressed its commitment to partaking in the project through presidential and Defense Ministry statements, it again missed the deadline to provide South Korea with a new payment timetable, last June.
With regard to the transfer of technology, South Korea was committed to providing Indonesia 129 key technologies for the KF-21. In the event, this could not be entirely carried out, as South Korea also used the technology from the US, which has not yet provided an export license to Indonesia. As a result, the US could not provide four technologies to both parties.
From a South Korean standpoint, the KF-21 project, representing the most expensive military project in Korean history, will be a crucial player for air defense in future battlefields and will play a great role in deterring North Korean threats. Unlike the situation in Indonesia, the KF-21 project has been in the Korean public spotlight. Hence, the Korean public and media question Indonesia's commitment to continue the joint production, pointing to its unpaid total contribution.
During a series of ASEAN-related Summit meetings this month, President Joko Widodo and President Yoon Suk Yeol concurred to solidify cooperation in security and the defense industry, to deepen the Special Strategic Partnership between the two countries. Although both sides agreed that they would work closely together to complete the next-generation fighter joint development project, Indonesia has not yet fulfilled its payment obligation.
Recently, Poland and the United Arab Emirates have shown interest in getting on board with the KF-21 project. The two countries even stated they could replace Indonesia's investment in the project. To address this issue, Indonesia must take further actions to reaffirm its stance and commitment, if it indeed still wants to continue the project collaboration.
Firstly, Indonesia must review the KF-21 project by conducting a coordination meeting between relevant agencies, to produce a comprehensive assessment such as the Ministry of Defense, the Ministry of Foreign Affairs, the Coordinating Ministry for Political, Legal and Security Affairs, the Ministry of Finance, the Indonesian National Armed Forces, Indonesian Aerospace Inc., the House of Representatives, and the Indonesian Investment Coordinating Board. Several issues must be discussed and reviewed, including Indonesia's defense budget, the transfer of technology scheme, the benefit of Intellectual Property Rights (IPR), cost-benefit analysis, and the marketing process, to reach a common understanding among them.
Secondly, Indonesia must create a new payment timetable to convince South Korea of Indonesia's commitment to the project. Lastly, the Indonesian government must intensively negotiate and lobby the South Korean government to seek a win-win solution and accommodate the interests of the two parties. All in all, this mega project of defense equipment procurement should not become a stumbling block for robust bilateral relations between Indonesia and South Korea.
This article was first published in Independent Observer on 22 October 2023 and can be found at: https://observerid.com/commemorating-indonesia-south-korea-golden-anniversary-what-is-the-fate-of-the-kf-21-project/