Indonesia to renegotiate fighter jet deal with South Korea to ease forex burden

JAKARTA (Reuters) – Indonesia is seeking “lighter” financial terms in a renegotiated project with South Korea to jointly develop a mid-level fighter jet, in a move aimed at supporting the rupiah by reducing use of the country’s foreign exchange reserves, a senior Indonesian official said.

The Indonesian government has rolled out a number of policies to support the ailing rupiah, which include cutting energy imports and delaying a number of infrastructure projects, as the currency trades near a 20-year low.

“Due to national economic condition, the president has decided to renegotiate to make Indonesia’s position lighter for matters related to funding,” chief security minister Wiranto said in a statement published on the ministry’s official website on Friday.

Indonesia has failed to meet deadlines of the payment which were due in the second half of 2017 and first half of 2018, an official from South Korea’s Defense Acquisition Program Administration (DAPA) said, declining to be named citing diplomatic sensitivity.

Indonesia and South Korea agreed in 2014 to develop a fighter jet, in a project estimated to be worth around $7.9 billion. Indonesia had agreed to pay 20 percent of the development costs. (https://reut.rs/2q3GtSO)

Wiranto said negotiations will cover issues such as the amount of Indonesia’s contribution to the development costs, production expenses, technology transfers to Indonesia, intellectual property rights and marketing.

He added President Joko Widodo had communicated the plan to President Moon Jae-in during his visit to South Korea in September.

An official at South Korea’s DAPA was unaware of Indonesia’s request for lighter financial terms.

“We expect no problem or trouble in the project caused by the payment delays and there would be no change in terms between the two countries,” the official said.

Indonesia’s investment coordinating board chief Thomas Lembong said the government will form a team responsible for the renegotiation while looking to maintain South Korean investors’ confidence in the Southeast Asian economy, according to the statement.

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