Indonesia to co-develop $8 billion South Korea fighter jet project

South Korean Air Force F-15K fighter jets fly in the sky during celebrations to mark the 65th anniversary of Korea Armed Forces Day, at a military airport in Seongnam, south of Seoul, October 1, 2013. REUTERS/Kim Hong-Ji

SEOUL (Reuters) - South Korea’s arms procurement agency said on Monday that Indonesia had agreed to pay 20 percent of the development costs of a mid-level fighter jet programme that some analysts said could cost up to $8 billion (5.01 billion pounds).

The Defense Acquisition Program Administration (DAPA) said in a statement that it signed a basic agreement to develop the “KF-X” or “Boramae” fighter jet with the Indonesian defence ministry.

The jets, to be delivered from 2025, are expected to be developed with the help of Lockheed Martin LMT.N as part of an offset agreement. Indonesia is currently the only foreign partner in the KF-X programme, which gained momentum in South Korea this year after repeated feasibility studies and debate over whether Korea should buy or develop its own mid-level jets to replace ageing F-4s and F-5s.

Indonesia first agreed to participate in early feasibility studies of the programme in 2010.

The planned twin-engine fighter jet was estimated to cost up to 8.5 trillion won to develop, according to a South Korean state-run think tank, while production cost is roughly expected to cost around 10 trillion won, a source with direct knowledge of the project told Reuters.

The source declined to be identified as not authorized to reveal cost details to media.

DAPA plans to choose a lead developer by December, with Korea Aerospace Industries 047810.KS and Korean Air Lines' 003490.KS aerospace division intending to compete, both companies' spokesmen said.

The Indonesian government will choose a local institution to work with the lead developer to co-develop the jet, a DAPA spokesman said, without elaborating.

Reporting by Joyce Lee; Editing by Miral Fahmy