Bloomberg News

Philippines Nears $443 Million Deal for South Korea Fighter Jets

January 30, 2013

The Philippines is close to reaching an 18 billion peso ($443 million) deal to purchase 12 fighter jets from South Korea as it moves to bolster its defenses amid tensions with China over disputed territory.

Defense Assistant Secretary Patrick Velez today said the government intends to finalize a contract with Korea Aerospace Industries Ltd. (047810) by the end of February and two could be delivered in the next six months. The Philippines hasn’t had an operating fighter jet since 2005.

“The military upgrade is already a priority before our incident with China,” Edwin Lacierda, a spokesman for President Benigno Aquino, told reporters today. “It is not aimed at any particular country. It is our obligation to modernize our military hardware.”

Asian countries including China and Japan are increasing military spending as the region grapples with maritime disputes involving oil, natural gas and fishing rights. The Philippines has tussled with China over control of areas in the South China Sea where both claim sovereignty, leading to a standoff over the Scarborough Shoal last year.

The jets will be used for training, disaster response and fending off enemy forces, Lacierda said. The Philippines may also seek bids for the supply of an unspecified number of naval warships by April, Velez said.

The Philippines last flew its Vietnam-era Northrop-Grumman Corp. (NOC:US) F-5 fighter jets in 2005, Aquino said in an interview last May.

Doubling Fleet

The Philippines also plans to acquire 10 Coast Guard patrol ships from Japan from 2014 to 2017, doubling the size of its current fleet. Japanese Foreign Minister Fumio Kishida met Philippine counterpart Albert del Rosario in Manila this month to strengthen ties.

Japan is set to increase its defense budget for the first time in 11 years and boost Coast Guard spending as Chinese ships have made increased incursions into waters near islands claimed by both countries. The budget increase for Japan’s Coast Guard is the first in six years.

China’s military spending, projected to be about 670 billion yuan ($107.7 billion) in 2012, has more than doubled since 2006 and is the second-highest in the world behind the U.S.

The Philippines last week moved to challenge China’s maritime claims before a United Nations tribunal after exhausting political and diplomatic avenues for a negotiated settlement. Vietnam and the Philippines reject China’s map of the waters as a basis for joint development of oil and gas.

Chinese and Philippine vessels squared off early last year over the Scarborough Shoal, a disputed land feature in the waters claimed by both countries. The U.S. has been vague about whether a mutual defense treaty with the Philippines covers the contested islands.

The FA-50, South Korea’s first fighter jet, is a light combat fighter based on the T-50 trainer jet. Korea Aerospace said it signed a 711.2 billion won ($656 million) contract in 2011 to provide 20 FA-50 jets to South Korea by 2014.

To contact the reporters on this story: Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net; Norman P. Aquino in Manila at naquino1@bloomberg.net

To contact the editor responsible for this story: John Brinsley at jbrinsley@bloomberg.net


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