Indonesia to pay less for joint fighter jet after S.Korea tax exemption

Korea Aerospace Industries

15/11/2021 09:25

By Josh Smith and Hyonhee Shin
    SEOUL, Nov 15 (Reuters) - Indonesia will be exempt from
paying value-added tax on its portion of a joint fighter jet https://www.reuters.com/business/aerospace-defense/korea-aerospace-says-fighter-jet-helicopter-prototypes-track-ahead-expo-2021-10-15
 development project, South Korea's defence procurement agency
said on Monday, saving Jakarta around 100 billion won ($84.85
million).
    Under revised calculations, Indonesia's will have to pay 
1.6 trillion won ($1.35 billion) of the 8.1 trillion-won
project, an official with South Korea's Defense Acquisition
Program Administration (DAPA) told reporters. 
    Classifying the fighter jets as defence goods exempts them
from value-added taxes and lowered overall costs of the
programme by 500 billion won, the official said.
    "We've pushed for the designation since 2014 ... and
belatedly received approval, which resulted in the saving of 500
billion won of total expenses," the official said.
    The next-generation KF-21 fighter jet developed by Korea
Aerospace Industries  047810.KS  (KAI) in a project partially
backed by Indonesia is designed to be a cheaper, less-stealthy
alternative to the U.S.-built F-35, on which South Korea relies.
    In 2018 Indonesia sought to renegotiate to take pressure off
its foreign exchange reserves and later offered to pay its share
of the cost in the form of a barter.
    The two sides agreed last week that Indonesia would keep its
pledge to shoulder 20% of the development cost, including making
in-kind payments for 30% of its share, DAPA said in a statement
at the time.
    The official on Monday said that agreement stands.
    KAI said last month the KF-21 is on track to meet its
deadlines. Ground testing is being conducted this year, with
first flights expected in 2022.   

($1 = 1,178.6100 won)

 (Reporting by Josh Smith; Editing by Simon Cameron-Moore)
 ((JoshSmith1@thomsonreuters.com;))