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Korea Aerospace Industries Ltd., Korea’s largest plane maker, signed a $400 million deal to sell 16 T-50 trainer jets to Indonesia, marking South Korea’s first export of the aircraft.

Korea Aerospace will deliver the jets to the Indonesian air force by 2013 to replace the country’s aging fleet, the Sacheon, South Korea-based company said late yesterday in an e-mailed statement. South Korea was given exclusive negotiation rights in April after its T-50 trainers beat out Russia’s Yak-130 and the Czech Republic’s L-159, 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 U.S., the U.K., Russia, France and Sweden, the company said. South Korea, whose arms exports reached a record $1.2 billion in 2009, aims to boost annual overseas sales of weapons to $4 billion in 2020.

The Indonesia deal will help Korea Aerospace sell its T-50 trainer jets to Israel, Poland and the U.S., the statement said. Lockheed Martin Corp., the world’s biggest defense company, provides the jet’s avionics systems, flight control systems and wings. The engines are made by General Electric Co.

South Korea will transfer technology to Indonesia as part of the agreement, according to the statement. 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 President Susilo Bambang Yudhoyono to study the possibility of jointly manufacturing weapons including tanks and submarines during his visit to Bali in December. South Korea is Indonesia’s fifth-largest trading partner.

Lee’s administration plans to expand South Korea’s total arms production to $10 billion in 2020. The military build-up comes as the country faces increasing threats from North Korea, which fired artillery onto a South Korean island in November, killing four people, in the first shelling of South Korean soil since their 1950-53 war.

Kim Jong Il’s regime is also blamed for torpedoing a South Korean warship in March that claimed the lives of 46 sailors. The Korean peninsula remains in a technical state of war since the conflict ended in a cease-fire, not a peace treaty.

Korea Aerospace is planning an initial share sale in South Korea this year. The company’s shareholders include Samsung Techwin Co. and Hyundai Motor Co., South Korea’s largest carmaker.


Bloomberg