MANILA, Philippines — The P18.9-billion government-to-government contract for 12 FA-50 fighter jets is supposed to be a done deal with the Korean Aerospace Industry (KAI), especially after President Benigno Aquino III visited the country in October to sign a Memorandum of Understanding (MOU) on defense cooperation.
But there are major issues that now put the contract in limbo. Defense Undersecretary for Finance Fernando Manalo said they will know "within the year" if the contract will still push through or not.
"The lead-in fighter is within the process of negotiation with the government of South Korea and there are major issues that we still have to hurdle. The negotiation is not over," Manalo said on Monday, December 2.
"Within the year, magkakaroon ng liwanag kung tuloy or hindi tuloy," Manalo added.
The Philippines and South Korea disagree on at least 2 issues: payment terms and the timetable for the delivery of spare parts. Manalo said the Philippines will present before the end of December its "firm position" on the disagreements and expect South Korea to respond.
Hoping the issues will be resolved, Manalo said the defense department is not entertaining other bidders yet.
South Korea is asking for a 52-percent downpayment or P9.8 billion. Under the law, the Department of National Defense can only agree to a 15-percent downpayment.
But Manalo said this is up to Malacañang because it's a government-to-government contract.
South Korea also wants 180 days or about 6 months to deliver the spare parts. DND wants 30 days to 45 days upon receipt of the notice. This will be applicable during the warranty period, which is usually a period of 2 years.
"We are already preparing our firm position and then we are going to submit it to KAI for them to determine whether that is acceptable or not. We cannot let the issue hang for a very long time. They will have to decide if they will accept it or not," said Manalo.
As territorial disputes intensify in the region, the FA-50 is meant to build the fighter capability of the Air Force after it retired the last of its US-designed F-5 fighters in 2005.
The Armed Forces of the Philippines is acquiring assets to improve its capability to defend the country's maritime territory. President Aquino in May this year announced an initial P75-billion fund for military upgrade.
Aside from fighter jets, the Armed Forces is also acquiring 2 new frigates also worth P19 billion. These are the 2 major items to be acquired using the fresh funds.
BRP Gregorio Del Pilar and BRP Ramon Alcararaz are currenlty the Navy's most capable warships. They were recently acquired from the US Coast Guard to patrol the West Philippine Sea. (READ and WATCH: Maiden voyage of PH's most capable warship)
Naval helicopters will also arrive within the month to expand the monitoring capability of the warships.
The 2 brand new frigates will be more capable than Alcaraz and Del Pilar. It will be capable of submarine warfare and will be able to carry missiles. The DND will open the bid for the new frigates on Wednesday, December 4. Based on the schedule, delivery is expected in 4 years.
At least 11 firms are reportedly interested in joining the bid, according to an earlier report in the Philippine Star.
As it acquires new assets to defend the country's maritime territory, the Armed Forces is also improving its naval detachment in Puerto Princesa, Palawan, that is facing the disputed Spratly Islands. (READ: PH to upgrade naval detachment facing Spratlys)
A shore-based missile with an allocation of P6.5 billion is also in the pipeline. — Rappler.com