South Korea's sole aircraft manufacturer Korea Aerospace Industries Ltd. said Thursday that it signed a formal deal to jointly develop its next-generation fighter plane with Indonesia.

The agreement reached in Jakarta between KAI and Indonesia's defense ministry calls for Jakarta to foot 20 percent of the cost in the development of the Korean Fighter Experimental program.

The company also signed a second contract with its Indonesian counterpart PT Dirgantara Indonesia outlining the future division of labor.

"The contract effectively means all preparation for investment and division of labor related to the plane's development is concluded," the aerospace company said.

Starting from April, Indonesia will pay for 1 percent of the program, with its contribution to rise above 2 percent from 2017 onwards, it said. Overall, the Southeast Asian country will inject some 1.6 trillion won ($1.33 billion) into the projected 8.7 trillion won program.

KAI said PTDI will send 100 engineers to South Korea in May so they can take part in the structural design of the new aircraft, and play a part in the various stages of development. U.S.-based Lockheed Martin will also take part in the development by providing aviation-related technologies and expertise.

Once the plane is built, Indonesia will get one prototype and various technical data and information.

The KF-X planes will be twin-engine fighters aimed to replace South Korea's aging fleet of F-4 and F-5 fighters, and be sold abroad. Seoul wants to get the planes in service by 2025.

"Successful development of the KF-X will expand bilateral ties between South Korea and Indonesia in the areas of national defense and economic cooperation," KAI President Ha Sung-yong said.

Ever since an understanding was reached with Indonesia on systems development on Dec. 28, the company has shifted its resources to move forward with the KF-X program, he said. (Yonhap)