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Indonesia considers counter-trade to support KFX/IFX project

21 July 2019
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Indonesia is looking to support its involvement in the project to develop the KFX/IFX fighter aircraft with South Korea through the potential counter-trade of locally built CN235 transport aircraft.

The possible trade deal was confirmed by Indonesia's minister for security affairs, Wiranto (who goes by a single name), on 19 July.

In comments to the state-run Antara news agency Wiranto indicated that Indonesia could offer the CN235 aircraft to the South Korean government in lieu of cash payments for its continuing involvement in KFX/IFX development programme.

"We are adjusting [our involvement in the KFX/IFX project], so, for instance, in coming stages we don't have to pay in cash but in other [forms of exchange]," he said. Wiranto went on to identify the CN235 aircraft, which is produced by state-run company PT Dirgantara Indonesia (PTDI) under licence from Airbus, as a potential product for barter exchange.

Wiranto also confirmed that the Indonesian government wanted to reduce its financial commitment to the KFX/IFX project but did not want to damage its strong defence ties with South Korea and diminish the technological gains it was looking to secure through the development programme.

In October 2018 the Indonesian government announced that it will renegotiate with South Korea its financial involvement in the KFX/IFX project because of "national economic conditions". The renegotiated package is expected to be finalised by October 2019.

Elements of the deal under review include Indonesia's overall financial commitment; the agreed percentage of development costs to be covered by Indonesia; production workshare and expenses; technology transfers to Indonesia; and Indonesia's access to intellectual property.

By late 2018 Indonesia had accrued a shortfall on the project of nearly USD200 million.

Indonesia has indicated a potential plan to offer South Korea its locally produced CN235 transport aircraft (pictured here in Cameroonian colours) in exchange for continued involvement in the project to develop the KFX/IFX fighter aircraft. (Airbus Military/S-Flores)Indonesia has indicated a potential plan to offer South Korea its locally produced CN235 transport aircraft (pictured here in Cameroonian colours) in exchange for continued involvement in the project to develop the KFX/IFX fighter aircraft. (Airbus Military/S-Flores)

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