Defense cooperation between South Korea and Indonesia faces potential disruption following a recent statement from Seoul’s Defense Acquisition Program Administration (DAPA). 

The announcement, hinting at the possible termination of Indonesia’s role in the KF-21 Boramae fighter jet project by the end of October due to financial and technological disagreements, raises significant concerns.

The primary risk lies in the sudden financial strain for South Korea, potentially requiring the country to absorb unforeseen costs originally meant to be shared. 

A secondary risk that cannot be understated is the potential diplomatic fallout with one of the largest countries in the Indo-Pacific, threatening to shift long-term strategic partnerships and regional political dynamics.

BORAMAE

The KF-21 Boramae is South Korea’s project to develop an advanced multi-role fighter jet, representing a significant leap in the nation’s aerospace and defense capabilities. Initiated with the dual objectives of replacing its aging fleet of F-4s and F-5s and making South Korea self-reliant in aerial defense technology, the KF-21 is designed to bridge the gap between fourth- and fifth-generation fighters.

The project underscores South Korea’s goal to be a key player in the global aerospace sector, reducing dependency on foreign imports and potentially opening avenues for exports.

The collaboration with Indonesia materialized in 2010, predicated on mutual benefits: South Korea would shoulder the lion’s share of the development costs and, in return, gain access to Indonesia’s considerable aerospace market, while Indonesia would receive technology transfers, a stake in the defense project and an uplift for its local industry. 

The agreement stipulated a 20% project cost coverage by Indonesia, approximately $1.3 billion, alongside active involvement in development and production.

However, Indonesia’s wavering financial commitment — the country has paid only a fraction of the pledged amount — has strained relations and project dynamics. DAPA’s recent announcement, hinting at a potential discontinuation of this joint venture, stems from these financial tensions and unmet obligations.

South Korean President Yoon Suk-yeol meets with Indonesian President Joko Widodo during the sidelines of the G7 Summit in Hiroshima, May 21, 2023 | Image: ROK Presidential Office

FINANCIAL AND INDUSTRIAL RISKS

Halting cooperation with Indonesia on the KF-21 project carries profound financial and industrial risks that go beyond immediate fiscal concerns.

With Indonesia’s payments falling behind, South Korea has already shouldered an unanticipated financial load, straining the project’s budget and the country’s defense spending. If cooperation ceases, South Korea must absorb this deficit entirely, reallocating funds from other defense initiatives or national programs, a move that could stir domestic debate over budget priorities.

Besides the direct financial burden, South Korean aerospace entities, both public and private, have geared up to produce the KF-21 — a process that includes extensive resource allocation, workforce training and facility preparation. A sudden funding void might lead to production delays, workforce downsizing and a loss of invested resources, disrupting the domestic aerospace and defense industry.

Small and medium-sized enterprises involved in the project’s supply chain could face significant losses, potentially leading to a ripple effect in related industries.

The ROK also faces a blow to its reputation on the international stage. The KF-21 project is not merely a bilateral endeavor; it’s a statement of South Korea’s capacity to lead large-scale defense initiatives. An end to this collaboration could lead to a loss of confidence among current and potential international partners.

This is particularly crucial as South Korea also aims to further collaborate with Poland. Under its agreement with Warsaw, the ROK has agreed that hundreds of its main battle tanks and self-propelled howitzers will be manufactured under license in Poland. 

Prospective buyers or collaborators will likely scrutinize the KF-21 project’s stability and South Korea’s reliability as a partner. 

DIPLOMATIC AND GEOPOLITICAL RISKS

Discontinuing cooperation with Indonesia also carries substantial diplomatic and geopolitical risks.

Severing ties with Indonesia on this high-profile project could cause a diplomatic rift between the two nations, which have historically enjoyed cordial relations. 

This partnership, viewed as a cornerstone of cooperation between ASEAN countries and South Korea, might suffer, undermining South Korea’s Indo-Pacific strategy. The fallout could jeopardize not only defense but various other sectors like trade, tourism and cultural exchanges.

In the broader geopolitical landscape, South Korea’s position could become precarious. The KF-21 project, a symbol of Seoul’s growing defense capabilities and regional influence, contributes to the country’s stance as a significant player. A disruption in the project might diminish South Korea’s standing and influence in regional security matters.

There is also the consideration of existing and future multilateral defense collaborations. Other countries might reassess their engagements with the ROK, questioning its commitment to long-term projects.

Then-ROK defense minister Lee Jong-sup and Polish defense minister Mariusz Błaszczak give an address in front of South Korean K9 self-propelled howitzers in Poland, Feb. 24, 2023 | Image: ROK Ministry of National Defense via Facebook

MITIGATING RISKS

South Korea’s venture into developing the KF-21 underscores its aspiration to transcend its role from a purchaser to a producer of sophisticated defense systems. This ambition, however, is predicated on successful international collaborations, both for shared expertise and financial solidity.

This situation necessitates a thorough reevaluation of South Korea’s defense policy, especially concerning international collaborations. The complications with the KF-21 program highlight the fragility of international defense partnerships, particularly when they involve significant financial commitments and technology sharing.

Going forward, South Korea will likely reassess how it negotiates, structures and maintains such partnerships, potentially instituting more stringent safeguards and contingency measures to protect its interests.

The current predicament underscores the necessity for South Korea to have robust backup plans and explore alternative partnerships. Reliance on a single partner for a project as extensive as the KF-21 is inherently risky. 

To mitigate such risks, South Korea will likely diversify its defense collaborations, possibly engaging with a wider range of countries or even considering multinational defense consortiums.

AVAILABLE OPTIONS

Despite DAPA’s remarks, the Yoon Suk-yeol administration will likely continue to emphasize diplomatic dialogue to resolve the conflict amicably. These discussions could focus on financial restructuring, technology-sharing clauses or even project timelines, ensuring that the renegotiated terms are feasible and satisfactory for both parties.

South Korea will also likely explore alternative funding and technological partnerships. Diversifying its partnership portfolio would not only spread the financial and technological risks but also enhance the robustness of the KF-21 program. Engaging with other nations, such as Poland and the United Arab Emirates, could provide the program with the financial infusion it needs.

Moreover, there will likely be calls for South Korea to strengthen its domestic capabilities, which will require bolstering research and development and incentivizing innovation. The Yoon administration will thus come under greater scrutiny for its decision to slash the country’s R&D budget in the 2024 budget proposal.

For now, the potential end to cooperation between South Korea and Indonesia on the KF-21 project continues to loom large, presenting wide-ranging risks that could have major repercussions for Seoul’s role globally.

Edited by Alannah Hill