On 11 October 2011, Daewoo Shipbuilding and Marine Engineering (DSME) announced that it had begun final-phase negotiations with the Republic of Indonesia Government on the construction and sale of three Type-209 submarines.

The announcement is a significant step in South Korean arms exports. It marks both a quantitative and qualitative progression. Valued at USD1.1 billion, the contract will be Korea’s largest single overseas defence contract. Importantly, it also marks South Korea’s entry into the global submarine exports market. DSME competed with bids from France, Russia, and Germany until the June 2011 announcement that South Korea and France were preferred bidders.

The announcement is also a further confirmation of the status of South Korea-Indonesia defence cooperation. In September 2011 South Korea and Indonesia signed a defence cooperation agreement, which included provisions for the holding of regular, bilateral talks on the joint production, marketing and development of defence systems that are used in both countries.

As noted previously, South Korea and Indonesia are also cooperating in a number of projects. This includes the next generation fighter (K-FX) joint development project; the Indonesian purchase of the T-50 Golden Eagle trainer aircraft; the Korean purchase of the CN-235 transport aircraft made by Bandung-based PT Dirgantara Indonesia; and the PT Pindad and Doosan DST manufacture of Tarantula armored vehicles for the Indonesian military.

In April 2009, DSME won a USD75 million submarine overhaul contract from the Indonesian Navy, which included replacement of radar, sonar, combat system;  and reassembly of the ship hull and loading equipments. The overhaul contract placed South Korea in a strong position to secure the current contract.

DSME is expected to coordinate details of the contract with Indonesia’s defence ministry and aims to conclude negotiations by November 2011.