Palace OKs payment scheme for Korean fighter jets

Posted at 02/21/14 4:47 AM

MANILA, Philippines - Malacanang has approved the payment scheme for the purchase of 12 lead-in fighter trainer jets from South Korea, taking the deal to acquire the air assets a step closer to completion.

The defense department has been allowed to make an advance payment of 15 percent of the total contract price to South Korean firm Korean Aerospace Industries (KAI).

The project has an approved budget of P18.9 billion and is one of the big-ticket items in the military’s upgrade program.

Malacañang has also granted the defense department’s request to tap a progress payment scheme, wherein the government will pay the supplier on a mutually-agreed upon schedule.

The approval of the payment scheme was contained in a memorandum signed by Executive Secretary Paquito Ochoa Jr. on Feb. 13.

Defense Undersecretary Fernando Manalo confirmed the approval of the payment scheme for the multibillion-peso project.

Sources told The STAR the defense department is seeking to complete the negotiations with KAI within the week. Officials are now preparing a contract on the payment scheme.

The government is planning to spend P18.9 billion for the jets to boost the country’s territorial defense capabilities.

It will also spend P135.99 million for the basing support systems of the jets.

KAI initially wanted 52 percent down payment to cover manufacturing costs, but it dropped the payment scheme and agreed to a progressive payment.

Under the new scheme, the government would deliver payments upon completion of certain “milestones” or progress related to the construction of the jets.

Earlier, Defense Secretary Voltaire Gazmin said the delivery of the jets could start in June 2015.

Another issue that was settled was the turnaround time, the period required for the delivery of the jets’ spare parts under a two-year warranty.

It usually lasts 30 to 45 days but KAI initially wanted it prolonged it to 180 days. Both parties have agreed to 60 days.