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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 (N:LMT) 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 (KS:047810) and Korean Air Lines' (KS:003490) 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)