Wednesday, April 13, 2011

Indonesia Seeks Offset Barter Over T-50 Jet Buy

14 April 2011

KAI T-50 Golden Eagle (photo : Yunjin Lee)

SEOUL - Indonesia wants South Korea to buy four more of its locally built CN-235 maritime patrol aircraft in an offset barter deal over Indonesia's purchase of 16 T-50 trainer jets, according to government and industry sources here.

On April 12, the Seoul government announced that it won exclusive rights to negotiate the sale of the T-50 Golden Eagle, co-developed by Korea Aerospace Industries (KAI) and Lockheed Martin of the United States, to Indonesia. The T-50 had competed with Russia's Yak-130 and the Czech-built L-159B.

Jakarta notified Seoul of a plan to "treat KAI as the de facto preferred bidder" for its advanced trainer acquisition contest, according to a spokesperson for South Korea's presidential office Blue House.

"Both governments agreed in principle to sign a memorandum of understanding on the sale of the T-50 within the next nine months," he said.

In a news conference at the Ministry of National Defense, KAI Chief Executive Officer Kim Hong-kyung said the T-50 would be sold "much cheaper" than its original price tag of $20 million to $25 million.

"We asked our suppliers to lower the costs of manufacturing T-50 spare parts, and based on those efforts, we offered a per-unit price far lower than standard price," Kim said. He hinted that the total value of the trainer deal would be lower than the estimated $400 million, which is based on a per-unit price tag of $25 million.

"The final value of the trainer deal could be decided after negotiations," said Kim, expressing hope to conclude a final agreement within two months.

"Through negotiations, both sides will discuss a wide range of issues, such as the price, delivery timing, ground-based training equipment and systems, integrated logistics support and replacement parts," Kim noted.

Once a final contract is signed, the first delivery of T-50s will be made in 2013, he added.

The T-50 was defeated in competitions in the United Arab Emirates (UAE) and Singapore, where both countries selected Italy's M-346 trainer.

The single-engine T-50 features digital flight controls and a modern, ground-based training system. It is designed to have the maneuverability, endurance and systems to prepare pilots to fly next-generation fighters, such as the Eurofighter Typhoon, the F-22 Raptor, the Rafale and the F-35 Joint Strike Fighter. The jet has a top speed of Mach 1.4 and an operational range of 1,851 kilometers.

Other potential customers include the United States, Israel, Greece and Poland.

According to industry sources, Jakarta requested that Seoul purchase four CN-235 aircraft built by PT Dirgantara Indonesia (PT DI) in return for buying T-50s. The per-unit price of the CN-235 is known to be around $25 million. Seoul purchased four of the aircraft in 2008.

Indonesia also asked South Korea to write off $10 million in penalties over the former's delayed delivery of CN-235 planes under the 2008 deal that was worth $100 million. The first batch of two of the four planes had been scheduled to be delivered to the Korea Coast Guard in December and the remainder in April.

PT DI sent a document to the Coast Guard recently, saying delivery would be delayed for production problems, Coast Guard spokesman Koh Jae-young said.

In addition, Indonesia demands South Korea pay for the costs of integrated logistics support, according to sources.

"Indonesia is expected to offer to locally produce some of the 16 T-50s to be ordered, should a contract be signed," a source said. "How many aircraft Indonesia wants to produce locally could be a contentious issue during negotiations."

Seoul and Jakarta had a similar barter trade deal in 2001 when South Korea bought eight CN-235 transport planes in return for selling 12 KT-1 Woongbi basic trainers.

The CN-235 is a medium-range twin-turboprop airplane, jointly developed by Spain's CASA and PT DI, formerly known as IPTN. The plane is used for VIP transport, maritime patrols, airlifts and troop carrying.

South Korea has 20 CN-235s, 12 built in Spain and eight in Indonesia.

In a summit last December, President Lee Myung-bak and his Indonesian counterpart, Susilo Bambang Yudhoyono, agreed to jointly manufacture tanks, submarines and fighter jets.

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