Airbus Military and Dirgantara Indonesia, also known as Indonesian Aerospace, will launch an upgraded version of the C212 tactical transport aircraft, with the new version to be offered to both civil and military customers.
The aircraft will be designated NC212 and will offer new digital avionics and a new autopilot, says Airbus Military.
The civilian variant will have capacity for up to 28 passengers, compared with 25 for the C212.
"The agreement foresees joint development, manufacturing, commercialisation and customer support to cover the needs of the civilian, cargo and military light aircraft market segments for the next decade," says Airbus Military.
It estimates a market for 400-450 aircraft of this size in the next decade. A final assembly line for the NC212 will be established at Bandung in Indonesia.
Airbus Military and Dirgantara have collaborated on a number of aircraft, including the C212, CN235, and most recently the C295 - at the Singapore air show in February 2012, Jakarta announced an order for nine C295s.
In addition, Airbus Military staff work alongside Dirgantara staff. They provide assistance in areas such as marketing and engineering.
"In this new agreement, Dirgantara and Airbus Military will work together to manufacture and market the NC212 worldwide, offering a modernised, very competitive light military aircraft," says Dirgantara president director Budi Santoso. "This will result in strengthening the position of Dirgantara as a leading player in the region, exactly as we have set out to do in our strategic co-operation agreement with Airbus Military."