DefenseIndustryinIndonesia

After
decades
of
underinvestment,
Indonesian
government is recently demonstrated strong efforts in
bolstering national defense. Indonesias Armed Forces
(Tentara Nasional Indonesia, TNI) is making a set of
major capability overhaul in its main weaponry system,
particularly on its navy and air force. MoU in defense
sector development had been agreed with Russia
(signed on 2007), China (2008), and Vietnam (October
2010). Two major powers in Pacific region, US and China,
are increasingly attracting Indonesia for military
engagements.
In early 2010, President Yudhoyono (The 6th President
Republic of Indonesia) had publicly stated that
Indonesias strong economic performances in recent
years had made it possible for the country to allocate
more for defense sector. He also stated there is a dire
need to modernize the militarys armaments, and
Indonesia has significantly lagged behind peers in the
region in term of defense spending. President said the
development is aim at maintaining national security,
disaster relief, and peace-keeping operations. Statement
of Chief of TNI confirmed Presidents concern, as he
stated that readiness level of Indonesian weaponry
system was only 62% (the Army), 31% (Air Force), and
17% (Navy). According to Military Balance 2010,
Indonesias defence spending is far behind its neighbor.
Australias defense spending is 2.2 % of GDP (2010),
Malaysia 1.8 % of GDP (2009), Singapore 4.8 % of GDP
(2009), while Indonesia is only 0.8 % of GDP (2009).
Following recent border spats with Malaysia, there's a
perception among Indonesian public that the country's
military weakness has been taken advantage of by
neighboring countries. In 2011, the country's defense

budget increased to USD 6.3 billion (over USD 1 billion

more than previous year), taking spending beyond the
1% of GDP for the first time in many years. President
Yudhoyono targeted that the ratio should reach 1.5% of
the GDP by 2014.
RecentDevelopmentofIndonesiasMainWeaponrySystem
Ministry of Defense launched Weaponry Development
Plan in late 2010 that consisted of three five-yearly
phases until 2024. The first phase, 2010 2014, will cost
IDR 150 Trillion (+/- USD 16.7 billion), which large part of
it will be allocated to revitalize domestic defense
industries. The fund would come from three sources,
namely foreign loan/export credit, domestic loan, and
national budget. IDR 100 Trillion is expected to come
from foreign/domestic loan, and the rest is from national
budget. It is worthy to note that in the modernization
efforts of TNIs antiquated equipment, government
choose to strengthen the operation of state-owned
strategic industry companies, including airplane
manufacturer PT Dirgantara Indonesia (PT DI), weapons
manufacturer PT Pindad, electronic manufacturer PT
LEN, various research & technology agencies, and
shipbuilder PT PAL to boost local production of military
equipment, instead of relying on foreign productions.
National Planning Minister said that half of Indonesias
military equipment procurement is expected to be
supplied by the domestic strategic industries. Minister
Purnomo stated that he expects TNI would nearly reach
Minimum Essential Forces level by 2014.
In line with the above grand strategy, Defense Ministry
plans to obtain 180 modern Sukhoi fighter aircraft by
2024. This would be in addition to the 50 nextgeneration fighters which Indonesia agreed in July 2010
to develop jointly with South Korea, which could also be

in service by the early 2020s. The first squadron of

Indonesias Sukhoi was finally completed by the arrival
of three Su-27SKM fighters in Makassars base on Oct
2010, in addition to three Su-30 MK2s arrived in 2008 and
2009 (all six were worth USD 300 milion), and two Su27SK and two Su-30MK fighter jets purchased in 2003.
The Ministry is also aiming to buy F-16 Fighting Falcons
to replace its Hawks.
Three Mi-35 military transport helicopters for Indonesian
Army had been delivered on late September 2010,
financed by Russian state credit to the Indonesian
government, an agreement which was signed during
[Russian Prime Minister, then President] Vladimir Putin's
visit to Indonesia in September 2007. Indonesia now has
11 modern military attack helicopters, including six MI17V-5s previously purchased from Russia. Furthermore,
The Defense Ministry is planning to buy two submarines
(probably from Russia or South Korea) worth between
USD350 and $400 million each. The submarine
procurement would be used to secure an indigenous
submarine-building capability; enabling transfer of
technology to PT PAL to build additional boats
domestically (the Ministry is planning to buy additional
three submarines). In August 2010, the defense ministry
ordered a destroyer escort warship to PT. PAL worth USD
220 million in cooperation with Demen-Schelde Naval
Shipyard (Netherlands) that is expected to be finished in
2014. Previously in 2009, the Navy completed the
accession of new four corvettes in Sigma class (Ship
Integrated Geometrical Modularity Approach) made by
the same company; worth 170 million euro each and
financed by credit export scheme. Indonesia currently
has 8 corvettes, while defense ministry stated that the
ideal number should be 52, considering Indonesian huge
water territory. Indonesian army also made significant
purchase; among them were 10 new combat vehicles on

May 2010.
Indonesia also eyes the modernization of radar. Lack of
radar makes sea and aerial territory particularly in the
countrys eastern part vulnerable to infiltration by
foreign ships or planes. Military officials said that the
southern parts of Papua province, such as Merauke, were
not yet covered by radar facilities. Ideally, Indonesia
should be equipped with radar able to monitor up to a
1,000-kilometer radius. The presence of radar could help
to monitor border security, especially given the limited
number of marines posted in border areas and on outer
islands. TNI had set up 55 outposts, manned by 1,480
personnel along the border with Malaysia, spanning a
border covering 2,400 kilometers, while TNI soldiers are
only posted to 94 out of the 144 outposts sited along the
border between Papua and Papua New Guinea. There
were still at least ten disputed border areas in East and
West Kalimantan, not yet resolved by Indonesia and
Malaysia.
Indonesiasarmindustriesdevelopment
On June 2010, President issued Presidential Regulation
No 42/2010 as a legal basis for the establishment of
Policy Committee for Defense Industries, chaired by
Defense Minister with members: Deputy Defense
Minister, Minister for State-Owned Enterprises, Industry
Minister, Minister for Research and Technology, Chief of
TNI, and Police Chief. The committee serves as a high
level coordination function to formulate and execute
governments plan to revitalize national defense
industries. At the moment the Committee is working on
the drafting of Law on Revitalization of National Defense
Industries to be submitted to the parliament.
PT Pindad, the state-owned weapon manufacturer
secured IDR 1.3 trillion annually since 2010, mostly

come from the Defense Ministry, which had so far

ordered weapons, ammunition and Panser armored
personnel carriers. The value of the orders from the
Defense Ministry rose sharply from IDR 650 billion in
2009. The ministry had also ordered 80 million bullets,
up from 40 million last year. Pindad produces
ammunition, armored personnel carriers, assault rifles,
grenade launchers, pistols, submachine guns and riot
control water-cannon vehicles.
PT Dirgantara Indonesia will cooperate with Korean
Aerospace Industry in constructing a new generation jet
fighter (said to be between 4th and 5th generation)
which would have higher technology than the recently
acquired Russian-made Sukhoi jet fighters. The jet
fighter program is code-named KFX for Korean Fighter
Experimental and will need some $6 billion in
development costs. Dirgantara president director Budi
Santoso said that 60 percent of the total capital needed
would be financed by the South Korean government
while KAI and the Indonesian Defense Ministry would
both disburse 20 percent each. According to the initial
plan, South Korea would buy some 200 of the fighters
and Indonesia would purchase another 50.

State Ministry of Research and Technology will develop

1000 rockets D-230/R-Han-122 from 2010 2015 period,
of which 200 had been delivered to TNI in 2011. PT LEN,
Research Agency of the Army, and the State Ministry of
Research and Technology also will develop the state-ofthe-art anti jamming combat communication system for
TNI.
Conclusion
The less advanced Indonesian weaponry system

compare to other countries in the region will always be

an influential public highlight. This had been bolstered
by fatal causalities in recent months and high-profile
territorial disputes that occurred several times in recent
years. After all, with vast territory and huge population,
the current Indonesian military power is far from
adequate, leaving the room for further expansion.
Nationalist political parties in the parliament, most
notably PDI-P and Gerindra, will always urge for budget
increase in the defense sector. Furthermore, Ministry of
Defense is to further diversifying its military sources
other than Russia and USA that creates cooperation
opportunities for other countries in the defense sector.
The future of this industry in Indonesia is pretty bright.
Opportunities does not always come in the form of
direct buying of military equipment, but also from
supplying materials and technologies as the third party
supplier. Indonesia is developing its domestic military
industry very fast, and any products as well as know-how
from developed countries that are related to this sector
(electronics, robotic, physics engineering, etc) would be
highly appreciated.
S

Doing business with military-related industry in

Indonesia is quite hard at the beginning. Adding transfer
of technology through training & personnel development
and Industrial cooperation in the offering would make
the business more politically feasible and economically
sustainable.