Samsung Aerospace is offering to increase its stake in South Korea's proposed KTX-II programme, in an effort to prop up waning political support for the advanced-trainer/light-strike aircraft in the face of impending defence cuts.
The move follows a recent Korean Development Institute (KDI) study of the financial feasibility of the planned $1.5 billion programme. While it is understood that the KDI report fails to either fully endorse or dismiss the project, it does point to the need for industry to take a larger stake than the 20% agreed.
Samsung in response has proposed increasing its risk-sharing and revenue investment from 7% to as much as 17%. Under a memorandum of understanding (MoU) signed in July 1996, Lockheed Martin agreed to take a 13% stake in the KTX-II project, but refuses to go beyond that.
The US manufacturer, furthermore, is warning that it will not commit any more funding or resources to preliminary design work beyond July, unless the South Korean Government can finally commit to launching full-scale development the tandem-seat trainer. Lockheed Martin's MoU with Samsung expires in July (Flight International, 9-15 April).
Despite Samsung's offer, local defence observers are increasingly pessimistic of a go-ahead before South Korea's presidential election at the end of the year. "It will help give it a chance, but it's certainly not a kicker that will make KTX-II a 100% go-programme," says an industry official.
The administration in Seoul has repeatedly delayed discussing the KTX-II, as domestic political attention has focused more on the country's growing number of corruption scandals.
The South Korean economy, at the same time, is in the depths of a depression, which is in turn putting pressure on the defence budget.
South Korea's armed forces are being asked to make a 10% cut in this year's $17 billion defence budget, about 30% of which is spent on equipment procurement. In an effort to preserve its Samsung-manufactured Lockheed Martin F-16C/D Korean Fighter Programme, the air force is looking to cut other major acquisitions.
At risk is a planned purchase of up to 20 new Lockheed Martin C-130J transports and a follow-on purchase of eight Lockheed Martin P-3C maritime-patrol aircraft. Initial funding for both programmes was included in this year's defence budget. "There is now significant doubt as to whether these programmes will now roll on time," says a source.
Source: Flight International
