Under the terms of the agreement which is part of a bilateral defence treaty signed with the country, Indonesia will grant 20% of the cost in the development of the KF-X programme.
Additionally, the company signed a second work assignment contract with PT Dirgantara Indonesia (PTDI), for the future division of labour.
Kai said in a statement reported by Yonhap News Agency: "The contract effectively means all preparation for investment and division of labour related to the plane’s development is concluded."
Last year, the South Korean Defence Acquisition Program Administration (DAPA) selected KAI to carry out the KF-X domestic fighter jet development programme.
Under the terms of the agreement, KIA will develop an indigenous fighter jet with technological assistance from Lockheed Martin to replace the Republic of Korea Air Force’s (ROKAF) aging fleet of F-4D / E Phantom II and F-5E / F Tiger II fighters.
The contract will see KIA develop six test planes including the completion of system development for the jets by June 2026, reported The Korea Times.
Valued at KRW8.5trn ($7.64bn), the KF-X programme is aimed at producing 120 fighter jets by 2032.
The engine provider for the fighter jets as well as the work on their design and component production is yet to be confirmed.
The South Korean Government is set to fund 60% of the development costs, while the remaining 40% of funding is expected to be shared by KAI and Indonesia.
Image: The officials signing the agreement. Photo: courtesy of Korea Aerospace Industries.