A KF-21 fighter prototype conducts a test flight in this Jan. 17, 2023 photo. Korea accepted Indonesia's proposal to drastically reduce the Southeast Asian country's financial contribution to their joint project of developing a new fighter jet, the state arms procurement agency said Friday. Courtesy of Defense Acquisition Program Administration

Korea accepted Indonesia's proposal to drastically reduce the Southeast Asian country's financial contribution to their joint project of developing a new fighter jet, according to the state arms procurement agency.

The Defense Acquisition Program Administration (DAPA) said Friday that it approved the suggestion of cutting Jakarta's contribution to the KF-21 project from 1.6 trillion won ($1.2 billion) to 600 billion won, about one-third of the original amount.

This decision comes amid Indonesia's struggle to meet its obligation to pay its part of the project, through which the country sought to obtain technical data and know-how as well as the opportunity to participate in the production process in return for the cost-sharing.

"We considered the bilateral relations between the two countries and other factors such as whether we would be able to fill the financial hole," DAPA said in a statement. "After finishing the (new) cost-sharing deal with Indonesia, we will aim to meet public expectations by finalizing the project successfully."

DAPA officials said the benefits that the Indonesian government stands to gain from the project, namely technology transfer, will also be reduced proportionally. However, they have not provided details as to how they will do so.

Indonesia initially agreed to fund 20 percent of the 8.1 trillion won program, which was launched in 2015 to develop an advanced supersonic fighter jet. Yet the Southeast Asian partner has so far contributed only about 400 billion won. Citing economic issues that emerged during and after the COVID-19 pandemic, it asked the government and participating companies in Korea to reduce its financial responsibility.

The decision to accept the request means that the Korean participants — the Korean government and Korea Aerospace Industries (KAI), who initially covered 60 percent and 20 percent of the total cost respectively — will now have to absorb the financial impact.

On a positive note, Korean officials said they have discovered ways to trim the total project cost to 7.6 trillion won. This means the Korean partners will have to pay an additional 500 billion won to complete it in 2026 as scheduled.

Despite the payment delays, the project is on track to start delivering the advanced fighters, designed to replace Korea's F-4 and F-5 Cold War-era jets, to the Air Force in 2026.

In July, DAPA said KAI officially began production on the KF-21 at its headquarters in Sacheon, South Gyeongsang Province.

The previous month, KAI signed a 1.96 trillion-won agreement with DAPA to build 20 KF-21 units through 2027. Korea's military seeks to build even more units and operate a total of 120 KF-21s by 2032. The first production model is scheduled to be delivered to the Air Force in late 2026.

"Through this project, we aim to secure the capabilities to develop our own fighter aircraft, which is expected to reinforce our military strength and contribute to its arms exports," DAPA said.