The Indonesian government in December 2018 finally paid 132 billion won (118 million US dollars) to South Korea as a 2016 fee for the development of the KF-X combat aircraft program. Although the 2017 and 2018 fees have not been paid, South Korea considers these payments sufficient to erode fears that Indonesia will exit this strategic project.
South Korea is determined to continue the KF-X program and hopes that Indonesia will actively participate in all stages of its development. Moreover, Korea Aerospace Industries (KAI) as the main contractor of KF-X since last year has established relationships with various manufacturers from Europe to Asia who will supply the main sub-systems of the combat aircraft. With technical assistance from Lockheed Martin, KAI believes, the first KF-X prototype could be completed in 2021. However, Indonesia is not as strong and confident as that.
Since the cost share agreement was signed in January 2016, Indonesia in less than two years has stopped paying the KF-X fee because it considers that the benefits of the program are not worth the costs incurred. In the initial agreement, Indonesia would bear 20 percent of the development costs—estimated at 7.5 billion US dollar—until 2025.
Dozens of Indonesian engineers who were involved in the development of KF-X in South Korea were sent home in early 2018. However, after a meeting between President Joko Widodo and President Moon Jae-in, the Indonesian Government in October 2018 announced the start of renegotiation of the KF-X program with South Korea, which will run for a year.
Reducing Contribution and Orders
A source said that the Indonesian government wanted to reduce its contribution to KF-X to 15 percent. Indonesia is also said to want to drastically reduce the number of combat aircraft to be purchased, from the original plan of 48 units to half or even less, while South Korea will buy around 150 KF-X units. Then, it was said that Indonesia also demanded that the KF-X production be carried out by PT Dirgantara Indonesia (PTDI) in Bandung, West Java, along with the right to sell aircraft.
The division of labor for aircraft manufacturing will only be regulated in the next agreement before the production stage starts in 2026. However, since the beginning, Indonesia has understood that production is likely to still be carried out in South Korea, while PTDI will only get a share of making airframe components, namely wings. Therefore, Indonesia wants the distribution of production work to be agreed upon in advance as the main condition for the continuation of its participation in the KF-X program.
All of these demands are a reflection of how Indonesia has tried to overcome various problems that have plagued its participation in the KF-X since South Korea declared it a 4.5 generation fighter program with the ability to surpass other non-stealth fighters on the market but still below the F-35. South Korea sees the KF-X as a means of enhancing its aerospace technology capabilities previously honed through the development of the T-50 jet trainer with Lockheed Martin. Meanwhile, Indonesia considers the KF-X as a technology transfer platform to increase its level from the field that has been mastered, namely the development of turboprop aircraft.
An engineer involved in the KF-X program said that Indonesia has mastered 90 percent of turboprop aircraft technology and 60 percent of the technology needed to build combat aircraft. Technology transfer through the KF-X program is expected to make Indonesia’s technology mastery in the development of combat jets equal to that of turboprop aircraft.
Indonesia’s involvement in the KF-X program is inspired by the success of a number of partnerships between the two countries in the transfer of technology for the main weaponry system (alutsista) in the maritime sector through the production of landing platform dock ships and submarines at PT PAL.
For decades, South Korea has indeed honed its mastery of maritime technology so that it once dominated the shipping industry market. However, the South Korean aerospace industry sector has a large dependence on technology from the United States, which has been known to apply the concept of defense globalization. Through this concept, the US is happy to provide technology to other countries in order to expand the influence of international politics while building structural hegemony which then creates technology dependence (Caverley, 2007).
South Korea also applies a defense globalization approach to Indonesia by offering technology transfer. This recipe has previously been successfully applied in Indonesia by the Airbus Group through a strategic partnership with PTDI in aircraft development and component production. As a result, Airbus received continuous orders for aircraft and helicopters from the TNI defense equipment procurement program.
As it turns out, Indonesia is always looking for ways to get closer to sources of advanced aerospace technology with the aim of achieving independence for the defense industry. However, Indonesia later realized that the KF-X program had become entangled in the net of the US military industrial complex, which put defense collaboration under a complicated political process in Washington.
Without an agreement on technical cooperation between Indonesia and the US and the status of our country as not an ally of the superpower, Indonesian engineers are prohibited from accessing technical data from Lockheed Martin who provided KAI with 21 key technologies for the development of the KF-X.
Access to Lockheed Martin’s technology can only be opened if there is an increase in the status of relations between Indonesia and the US, as happened to India. President Barack Obama in 2016 recognized India as a “major defense partner” with access to nearly all US military technology.
In mid-2018, President Donald Trump raised India’s status to STA-1, making it the third Asian country after Japan and South Korea to be considered equivalent members of NATO. India can achieve this special status after tough negotiations for a decade. Although it is not impossible, it is difficult to imagine that Indonesia can achieve this in the near future, especially when it is trying to balance the influence between the US and China in the region.
Therefore, considering the value of the technology that will be obtained is far from expectations, the policy makers of the Indonesian defense sector in early 2018 almost decided to leave the KF-X program. What’s more, Indonesia has longer experience than South Korea in aircraft development, so technology transfer at KF-X actually goes both ways. The Indonesian Air Force as a prospective KF-X user also feels that the aircraft produced by this program are bearable, not sophisticated enough to face future challenges when the skies of the region will be filled with 5th generation combat jets.
In the next decade, Australia and Singapore plan to operate the F-35, while China has prepared two stealth fighters. A number of European countries such as Britain, Germany and France have even announced plans to develop the 6th generation combat aircraft.
Indeed, Indonesia’s involvement in the KF-X program is not only about increasing defense capacity, but also related to political aspects. The length of time Indonesia has made a decision on the KF-X, from postponing payments since 2017 to the renegotiation decision in October 2018, is more related to concerns that the decision to withdraw from this program will damage the already close bilateral relationship.
South Korea currently ranks fifth in foreign investment in Indonesia.
Sweetener to Preserve
Therefore, there is no need to wait until October 2019 to find out the results of the KF-X renegotiation. With an already tight deadline for the KF-X, South Korea only needs to make up for the 5 percent shortfall in development costs that Indonesia won’t pay.
The rights to produce and export KF-X are also not a tough thing to give Indonesia. In a similar program like the Eurofighter, a minority stake like that of Spain is not a barrier to self-assembly and a share in the market for aircraft sales. South Korea can make the production and sell rights as a sweetener to make Indonesia want to survive in the KF-X program.
It is reasonable to suspect that all of this is in order to maintain the influence that has been planted and has previously succeeded in making Indonesia the first buyer of the KT-1 trainer aircraft, T-50 trainer jets and Chang Bogo submarines. The KF-X program will pave the way wider for South Korea to create a kind of structural hegemony in Indonesia’s defense sector. However, once again, South Korea’s dependence on US technology will still be an obstacle to its realization.
Rahmad Budi Harto was a Senior Consultant at Kiroyan Partners.
Source: Kompas.com, January 18, 2019.