Korea Aerospace Industries has signed a $400 million deal to sell 16 T-50 trainer jets to Indonesia, marking South Korea’s first export of the aircraft.
South Korea’s largest planemaker will deliver the jets to the Air Force by 2013 to replace the country’s aging fleet, the Sacheon, South Korea-based company said late on Wednesday in an statement. The deal will help Korea Aerospace sell the plane to Israel, Poland and the US, according to the statement.
The contract makes South Korea the first country in Asia to export supersonic jets, whose market has been dominated by the US, the UK, Russia, France and Sweden. The deal comes as Korea Aerospace prepares an initial public offering in Seoul.
“Korea is relatively a new and small player in this industry. This could be a good reference for the upcoming deals,” said Im Jeong-jae, a fund manager at Shinhan BNP Paribas Asset Management.
“This kind of deal is definitely helpful for the company’s planned share sale.”
While South Korean sources said the deal would go ahead, Indonesian officials said it was news to them.
A spokesman for the Defense Ministry, Brig. Gen. Hartin Asrin, said on Monday that the ministry had no information regarding the deal. “We don’t know about the deal yet. We have yet gotten the information,” he said.
First Marshal Bambang Samudro, a spokesman for the Air Force, was similarly informed. “From the information we have, the plan to buy the South Korean aircraft is still being discussed in the Defense Ministry,” he said.
Korea Aerospace was approved to list its 97.5 million shares on the Korea Exchange, the bourse operator said on Thursday in a statement without saying how much the firm sought to raise. The company and its shareholders may raise more than 800 billion won ($735 million) in the IPO, South Korea’s Edaily reported on Thursday.
South Korea won exclusive negotiation rights with the Air Force in April after its T-50 trainers beat Russia’s Yak-130 and the Czech Republic’s L-159. Lockheed Martin, the world’s biggest defense company, provides the jet’s avionics systems, flight control systems and wings. The engines are made by General Electric.
South Korea will transfer technology to Indonesia as part of the agreement, the statement said. Korea Aerospace sold its KT-1 propeller training aircraft to Indonesia in 2001. Indonesia last year also joined a South Korean project to develop KF-X fighter jets, contributing 20 percent of development costs.
South Korean President Lee Myung-bak agreed with his Indonesian counterpart, President Susilo Bambang Yudhoyono, to study jointly manufacturing weapons, including tanks and submarines, during his visit to Bali in December. The country is Indonesia’s fifth-largest trading partner.
Arms exports from South Korea reached a record $1.2 billion in 2009. The country aims to boost annual overseas sales of weapons to $4 billion.
South Korea “is nearly a first-world nation, and it feels that building and exporting arms is an expression of its determination to become a respected regional power,” said Richard Bitzinger, a senior fellow at the S. Rajaratnam School of International Studies in Singapore.
“There might be a fit when it comes to marrying Korea’s defense industry with those of other equally ambitious wanna-be arms producers. The problem is whether Korea has the technological critical mass to be able to lead such projects.”