Indonesia’s Su-35 Fighter jet Purchase Finalized With 85% Offsets

Indonesia has finalized the purchase of 11 Su-35 fighter jets with 85% offsets which includes 50% commodity exports to Russia and 35% in aircraft maintenance, repair and overhaul (MRO) of the $1.1 billion deal.

"It has been decided by our cabinet to finalize the procurement of 11 Sukhoi Su-35 fighter jets. This is a remarkable effort of our defense minister, Russian state-owned firm Rostec, and PT Perusahaan Perdagangan Indonesia (PT PPI), as they have now agreed to invest," the Indonesian Investment Coordinating Board (BKPM) Chief, Thomas Lembong, said in Jakarta Monday, according to Antara News.

Russia would invest in aircraft maintenance, repair and overhaul (MRO) industry for Sukhoi jet fighters that were purchased by Indonesia, the BKPM chief said.

He stated that the law on defense and law on defense industry have stipulated the requirement of minimum 85 percent offset for each purchase of defense equipment, which means that the expense from the states funding should be returned through trade and investment activities.

"Of the total 85 percent of the procurement, 50 percent would be paid in barter trade(commodity exports) and the remaining 35 percent with investment contract," he elaborated. The total procurement of the jet fighters is amounted at US$1.145 billion.

The Trade Ministry has appointed PPI and Rostec to undertake the barter trade. Indonesia would send some commodities, including rubber and palm oil.

"Their investment value is 35 percent of the total $1.145 billion in order to build a spare part factory for the MRO industry," he continued.

He added that the jet fighter procurement would be finalized by the Defense Ministry. "BKPM and Trade Ministry will follow." The barter trade deal of SU-35 between Indonesia and Russia was signed on Aug 10.