CHAPTER 4

EXPLANATION AND RESULTS

This chapter elaborates all data from the research that has been done
before. All the data in this chapter is elaborated from interviews and literary
study. This chapter is divided into two parts. The first part explained about the
background of ASEAN Community and how the idea of ADIC is perceive, the
development of defense industry in Southeast Asia, the possibilities of ADIC
and Indonesias defense industry in near future. The second part described
the analytical result using level of analysis and simple TOWS analysis.
4.1.

Results of Research

4.1.1. Background of ASEAN Community

Association of South East Asian Nations or ASEAN has become the
one of the strongest regional cooperation of developing countries. The
ASEAN Declaration which taken by the five founding country of ASEAN in
1967, serves as the base of the cooperation between ASEAN countries. The
urgency of a more integrated ASEAN is getting higher, therefore at the 9 th
ASEAN Summit in 2003, the ASEAN leaders agreed on the establishment of
ASEAN Community. It was started by the ASEAN Vision 2020, which agreed
upon a shared vision of ASEAN as a concert of Southeast Asian nations,
outward looking, living in peace, stability and prosperity, bonded together in
partnership in dynamic development and in a community of caring societies.
At the 12th ASEAN Summit in January 2007, the leaders affirmed their
strong commitment to accelerate the establishment of an ASEAN Community
by 2015. As the plan went, leaders of ASEAN realized that ASEAN needs a
legal basic to create a clear norms and values before reaching the ASEAN
Community in the 2015. At the 13th ASEAN Summit in Singapore on
November 2007, the ASEAN Charter was declared. The ASEAN Charter
serves as a firm foundation in achieving ASEAN Community by providing legal
status and institutional framework for ASEAN. It also codifies ASEAN norms,
rules and values; sets clear targets for ASEAN; and presents accountability
and compliance (ASEAN Secretariat, 2014). The ASEAN Charter entered into

force on 2008; it marks the beginning of ASEAN Member Countries to be

under a new legal framework.
ASEAN Community consists of three pillars, the ASEAN PoliticalSecurity,

ASEAN

Economic

Community,

and

ASEAN

Socio-Cultural

Community. Each pillars has their own purposes to support the establishment
of ASEAN Community. They form the Roadmap for an ASEAN Community
2009-2015. ASEAN Socio-Cultural Community (ASCC) is focused on
nurturing

the

human,

cultural

and

natural

resources

for

sustained

development in a harmonious and people-oriented ASEAN (ASCC, 2014).

ASEAN Political-Security Community (APSC) is focused on ensuring
countries in the region live at peace with one another and with the world in a
just, democratic, and harmonious environment. The APSC blueprint
envisages ASEAN to be a rules-based community of shared values and
norms; a cohesive, peaceful, stable and resilient region with shared
responsibility for comprehensive security; as well as a dynamic and outward
looking region in an increasingly integrated and interdependent world (APSC,
2014). The ASEAN Economic Community (AEC) is one of the mostanticipated goals in the road to ASEAN Community. ASEAN Community 2015
is expected to have an economic integration. AEC envisages the following
characteristics:
a.
b.
c.
d.

a single market and production base;

a highly competitive economic region;
a region of equitable economic development;
a region fully integrated into the global economy.

Those characteristic envision the idea of ASEAN Defense Industry

Collaboration (ADIC) as it is setting the goal forwards to ASEAN Community
2015.
4.1.2

The Idea of ASEAN Defense Industry Collaboration

Developing defense industry has been a longing idea between ASEAN

countries. Within limited amount of resource and high requirement for

armaments, developing defense industry in Southeast Asia only left as an
ambition and short on reality. Bitzinger (2013) explained that back in 1960s,
several states in the region have attempted to manufacture their own arms,
but not much came of these efforts. Indonesia itself has invested considerable
2

resources to established strategic industry on land system, aerospace, and

shipbuilding, but they failed to become self-sustaining ventures. The
industries also only produce small useful amounts of military products.
Furthermore, Bitzinger explained that back then Vietnam and Philippines have
constructed naval vessels, Thailand has assembled trainer jets, Malaysia
attempted to develop manufacturing aerospace product, but somehow it still
lack of success stories from South East Asia defense industry.
In 2011, Indonesia and Malaysia have agreed to promote the
establishment of ASEAN Defense Industry Collaboration (ADIC). 1 The
initiative signed in May 2011 at the 5 th ASEAN Defense Ministers Meeting in
Jakarta. It is being said on the joint declaration that the first idea of ADIC was
to encourage the development of industrial and technological strength, and to
seek opportunities; to promote technological sharing based on the principle
and basis of flexible, voluntary and non-binding participation. Before the
initiative signed by the ASEAN Member Countries, the proposal of making a
defense industrial collaboration was tabled at the ASEAN Defense Ministers
Meeting Retreat in Bangkok on 2009 and it continued at the 4 th ASEAN
Defense Minister Meeting on 2010 in Hanoi. The idea of making an industrial
collaboration was well received and endorsed by some ASEAN Defense
Ministers, including Prof. Purnomo Yusgiantoro, Indonesia Minister of
Defense at that time. The concept paper explained that the establishment of
ASEAN Defense Industry Collaboration comes from a reality that ASEAN
Member States are net purchasers of defense and security equipment, the
defense industry has been growing significantly particularly in the last two
decades. The emergence of forming defense industry collaboration was also
driven by the fact that most of ASEAN member countries are still the importer
of defense industry products. At that time, Indonesia, Malaysia, Singapore and
Thailand conduct almost no trade amongst each other (Raghavan and BenAri, 2011).
Dr Ahmad Zahid Hamidi, Minister of Defense of Malaysia, one of the
initiator of ADIC along with Prof. Purnomo Yusgiantoro, also explained the
1 See Novan Iman Santosa article on The Jakarta Post, Malaysia, Indonesia pace ASEAN
military industry, http://www.thejakartapost.com/news/2011/05/19/malaysia-indonesia-paceasean-military-industry.html, published on May 19 2011, accessed on September 4 2015.

importance of formalizing the platform of ASEAN Defense Industry

Collaboration in one of his writing about ADIC. 2 Dr Hamidi explained that over
the years certain ASEAN countries have developed some form of industrial
and technological capabilities, in which to the extent of being able to provide
some degree of support to their respective armed forces. Furthermore,
ASEAN countries have different strength and opportunities that could be
integrated towards developing a more concerted regional based industrial
growth with the aim of reducing the over dependence on imports, and also
sustaining the economic development within the region in terms of research
and development, jobs and outflow currency (Hamidi, 2010). Fulfilling the
military capability and developing the industrial and technological sector, ADIC
fits harmoniously in between two pillars of ASEAN Community, which is
ASEAN Political Security as well as ASEAN Economic Community. The
implementation of ASEAN Defense Industry Cooperation (ADIC) at the
multilateral level could be viewed as moving the ASEAN Political Security and
Economic agenda further.
As for Indonesia itself, Prof Purnomo Yusgiantoro on separate
occasion told the writer that ADIC is needed because Indonesia is one of the
ASEAN Tier 1 countries. Alongside with Singapore, Thailand, and Malaysia,
Indonesia is one of the most developed countries in ASEAN, which in this
case should be ready to face the ASEAN Community integration in every
aspect including in defense aspect. Through ADIC, Indonesia can reach some
benefit in developing the defense industry and also gearing the economic
growth forward through the industry.3 As the country with the highest GDP in
the region, Indonesia is looking forward to cooperate with other member
countries for ASEAN Community 2015. Indonesia is also actively seeking the
opportunity to maintain peace and stability in the region. The road to ASEAN
Community is one of the ways for ASEAN Members Countries to prove that
the balance of power in the region can be maintained. Furthermore, Prof
Yusgiantoro had given an example, in the developed country such as US,
defense industry has played a vital role towards numerous of technological
2 See ASEAN Defense Industry Collaboration (2010) written by Dr Ahmad Zahid Hamidi for
Jurnal Asia Pertahanan dan Keselamatan.
3 As explained to the writer on interview with Prof Purnomo Yusgiantoro, December 12 th 2015

development by creating spin-offs into the civil sectors. It has also become a
major source of revenue of the country in terms of exports. It is indeed a new
idea and concept for ASEAN member countries, yet ASEAN still on the
earliest phase of developing the modern defense industry. However, the
necessity of fulfilling the defense and security equipment is real, thus ASEAN
nations become dependent on imports of defense equipment from various
manufacturers around the world. In this regard, ADIC is considered as a
platform, which can embody all the different strengths and opportunities that
could be integrated into a concerted regional defense industrial base.
After signed the initiative, the first concept paper of ADIC was also
agreed in 2011. ADIC planned to be in force at the same time as ASEAN
Economic Community implemented in December 31 st 2015. However,
although ADIC workshop being held every year, the progress of implementing
ADIC on the planned term seems to be delayed. In March 2015, the 1 st ADIC
Networking Program was being established. For the first time in ADIC short
history, the entire stakeholder from government, user, and industry gathered
in one special meeting discussing the possibilities of having a collaborative
work. Although the meeting was not producing something, but this meeting
somehow waken up the idea of ADIC again after several time being
neglected. On the 1st ADIC Networking Program discussed the possibilities of
collaboration between stakeholders and also how to implement a real and
comprehensive cooperation in ASEAN Member Countries.
The agenda to discuss ADIC continued on the 4 th ADIC Workshop,
which is also, happen to be the 1 st ADIC Consultation Meeting. It was held in
Laos on January 27th 29th 2016. As agreed on the concept paper, the
consultative group meeting is tasked to plan, implement, and monitor the
agreed projects under ADIC. The 1st ADIC Consultation Group Meeting
succeeded in endorsing the final framework for the implementation of ADIC. 4
Although the framework has been drafted since the first time ADIC was
agreed upon, it was still going on uncertain debates. The networking program
in 2015 has woken up the real agenda to establish the framework of
implementing ADIC before going further with the idea of collaboration.
4 Based on interview with Colonel Mirad Fahri, Dittekindhan Ditjen Pothan, Kementrian
Pertahanan Republik Indonesia, February 11th 2016

Framework for the Implementation of ASEAN Defense Industry Collaboration

becomes the basic to enforce ADIC in ASEAN member countries.
There are some points in the frameworks should be the remarks of
ADIC establishment, which are the principles; scope and form activities of
ADIC; collaboration and cooperation; and sharing of technological and future
partnership. The validity of all clauses on the framework will be reviewed
every 3 years and shall come into effect on the adoption of ADSOM. By
establishing the framework, ADIC now has certain foundation and goals to
obtain. During the 1st consultative group meeting, Indonesia, Malaysia, and
Singapore expressed their willingness to help other ASEAN member
countries.5 Furthermore, the final framework being finalized on ADSOM-Plus
WG which held in Luang Prabang, February 22 nd 24th 2016.6 The agreed
final ADIC framework included scope and forms of activities may include, but
not limited to the following:

Education and training in the defense industry sector;

Joint venture and co-production of an agreed project;
Joint research and development of an agreed project;
Joint promotion on the project development.

If ASEAN member countries formed cooperation within the scope and

activities of ADIC final framework, it offers huge opportunity in the area of
defense industry. ADIC shall be a major milestone of creating a coordinated
defense industrial and technological base in the region.
4.1.3ASEAN Growing Defense Industry
In recent years, certain ASEAN member countries have been
developing its defense industries and have taken some initiatives to support
their respective armed forces. However, the rapid development of defense
industry is also triggered by brisk economic development and increasing
security threats across Asia Pacific. According to Deloitte Asia-Pacific Defense
Outlook 2015, by 2018 the global defense spending is expected to see the
increasing of Asia Pacific defense budget by 19%, excludes China and US
5 Based on interview with Colonel Mirad Fahri, Dittekindhan Ditjen Pothan, Kementrian
Pertahanan Republik Indonesia, February 11th, 2016
6 Interview with ADSOM-WG Committee, due to terms and condition, name is being
confidential

(Deloitte, 2015) while almost 10% of the increased number is coming from
ASEAN member countries. Deloitte research on Asia Pacifics defense budget
growth finds that there are several categories in which ASEAN member
countries can separated into.7 These categories are important to see how
dynamic ASEAN member countries spending their defense budget and how it
is very crucial in defining the future of each nations defense industry.
The first category put Brunei and Singapore together in Higher-Income
Spenders countries. On this category, the country has the ability to extending
strategic advantage with high technology equipment. Deloitte explains that
Brunei and Singapore defense program recently focused on acquisition of
sophisticated command and control capabilities. Recently Brunei just
increased their defense budget by about 2,5% of GDP (The Diplomat, 2016).
Despite Bruneis economic turnover last year, by only depending into oil and
gas commodities they have to cut 2015 defense spending by over 25%,
Brunei still tries to fulfill the defense needs. In terms of breaking down the
budget, Brunei spares its biggest expenditure to personnel expenses and
upgrading defense capability. On the other hand, Singapore already raised
their defense budget for the upcoming 2016 2017 fiscal year by 6,4% over
2015. Singapores Minister of Defense planned to spares the defense budget
for operating expenses and development expenditures. 8 Singapore is also
well known for their interest of Lockheed Martin F-35 acquisition. These two
countries clearly showed that they anticipated positive economic growth per
year to enabling the intention to exploit advanced technology as a source of
strategic advanced.

7 See Deloittes Asia Pacific Defense Outlook 2015 and Stockholm International Peace
Research Institute (SIPRI): World Military Expenditures.
8 See Singapores Minister of Finance Heng Swee Keat on Budget 2015 Round Up Speech
http://www.singaporebudget.gov.sg/budget_2016/home.aspx, accessed on July 15 th, 2016.

Figure 4.1 Higher-Income Spender countries in Asia Pacific region

Source: Deloitte Asia Pacific Defense Outlook 2015
Figure 4.2 showed the comparison of ASEAN member countries (Brunei and
Singapore) defense expenditure expected growth towards other higherincome spender countries in Asia Pacific region. This figure also shows the
trend of Singapore and Brunei defense budget and its expenditure
breakdown. The projected numbers showed by the figure based on trends of
GDP growth over years and how GDP growth affects military expenditure.
The second category in which ASEAN countries included into is
Lower-Income Spender. Myanmar is the one ASEAN member countries
included into the category. Most of countries in this category have slow
economic growth projected over the next years, yet they are keep increasing
the defense budget and pushing the procurement and R&D spending forward.
According to Deloitte, Myanmar has a relatively small defense budget
comparing to other ASEAN countries, but they have higher percentage of
defense budget to GDP compared to other ASEAN country. Myanmar has
some security situation that can be considered as a threat, direct border with
Bangladesh and continued ethnic rebels threat. This projected Myanmar to
keep increasing the defense budget and improving their bilateral security with
some neighboring countries.
According to Deloitte, most of ASEAN countries are defined into
Lower-income economizers, which have limited defense budget and also
small increasing percentage of defense expenditure each year. Deloitte even
projected that the amount of combined budgets of the countries will total less
than 15% of China projected defense spending. Indonesia, Cambodia, Lao
8

PDR, Malaysia, Philippines, Thailand, and Vietnam fall into this category.
However, they overcome the minimum defense budget with building security
and defense cooperation within their neighboring country. Most of those
countries put their biggest component of defense expenditure on research
and development.

Figure 4.2 Lower income economizers in Asia Pacific region

Source: Deloitte Asia Pacific Defense Outlook 2015
Consequently with the condition of most of ASEAN defense budget,
building bilateral and multilateral relationship to develop strong and durable
defense industrial capabilities projected better future for the domestic defense
industry. However, no matter how small the number of growth in each nations
defense industry, in the last decade there are some significant growths on the
percentage of defense expenditure towards each ASEAN member country
GDP. As for remarks, Indonesia has the highest GDP among ASEAN member
countries by US$ 861 billion in 2015. The second highest GDP, Thailand,
reach US$ 395 billion in 2015, not even half of Indonesia GDP.

5
4.5
4

Brunei

3.5

Cambodia
Indonesia

Laos
Malaysia

2.5

Myanmar

Philippines
Singapore

1.5

Thailand
1

Vietnam

0.5
0
2010.0

2011.0

2012.0

2013.0

2014.0

2015.0

Figure 4.3 Percentage of defense expenditure towards GDP in 2010

2015
Source:

Elaborated by writer from various databank (World Bank Data,

SIPRI, IMF)

From the chart above, it can be concluded all of ASEAN member countries
has less than 5% allocated defense budget from the GDP. According to Prof.
Yusgiantoro, interviewed in early December 2015, 9 the amount of defense
budget in ASEAN countries is not sufficient. However, to increase the amount
of defense budget is also not an option for developing country such ASEAN
member countries. The only option for ASEAN member countries to fulfill the
defense requirement, especially in operational area, is to have a collaborated
industry bilaterally or multilaterally. This option is also supported by Prof
Yusgiantoro opinion to categorize the defense industry towards national
development of a country. The categorizations are:

The first category is rich country which does not developing their own
defense industry. This type of country mostly located in oil rich region
such Middle East country eg. Saudi Arabia, Kuwait, Jordan, etc. They

9 Interview with Prof. Purnomo Yusgiantoro in Indonesian Defense University on December

9th 2015

10

have strong equipment with sufficient specification and technology but

they do not develop their own defense technology. They simply buy the

defense technology from other country.

The second category is developed country with matured defense
industry such Unites States, Great Britain, Germany, and most of
developed country. On those countries, the defense industry is also
gearing the economic development. Defense industry becomes one of
the sources of income for the country, because the industry is not only
supporting the defense procurement but also distributing their defense

product to other countries.

The third category is developing country with developing defense
industry. This category includes most of ASEAN member countries,
which still developing their defense industry to support their defense
requirement under limited budget. Cooperation between countries is
needed in order to fulfill the defense requirement.

Looking at the categories above, ASEAN member countries mostly included in

third category, except Brunei Darussalam, small oil rich country in the middle
of South East Asia. Developing the nation defense industry is a collaborated
effort not only from the government but also from the user and other aspects,
which can support the defense industry.
4.1.4

Indonesia Defense Industry History

As for Indonesia, the history of its defense industry goes a long way

back. It has been established before the Republic of Indonesia independence

in 1945 under the name of the colonial. There were several strategic
industries owned by the Dutch colonial such as NV de Broom, NV de Vulcaan,
NV de Industrie, NV Braat, and NV Molenvliet to support their arms and
weapon needs. After the independence of Republic of Indonesia in 1945 the
government started to nationalize Dutch arms companies. The government
turned those companies into state-owned companies such as PN Boma, PN
Bisma, PN Indra, PN Barata and PN Sabang Merauke (Afrida and Widhiarto,
2011). In the 1960 to 1965, Indonesian government was trying to develop the
manufacture industries. The government regulations in 1960 along with the

11

regulation in 1967 reformed state owned companies into BBI (Boma Bisma
Indra), Barata Indonesia, Krakatau Steel, INTI, PAL Indonesia, PINDAD, LEN
Industri, and Dahana. In the early 1980, the government established Defense
and Security Regulatory Team (Tim Pembina Industri Hankam/TPIH) followed
by the Strategic Industry Regulatory Board (Dewan Pembina Industri
Strategis/DPIS) in 1984. The aim was to build a more integrated defense
industry development. (Afrida and Widhiarto, 2011; BPHN, 2011; Yusgiantoro,
2014).
During the 1980s to 1990s, Indonesia went to a glorious phase of
dominating local defense industry. IPTN progressed co-development of CN235 transport aircraft, a joint venture 10 project with CASA of Spain. CN-235
was adapted both for military purpose and civilian purpose. IPTN also
manufactured components for F-16 fighters and British Hawk trainers
purchased by the Indonesian Air Force (Bitzinger, 2013). Bitzinger later
explained that PT PAL has constructed German-designed 57 meters patrol
boats for Indonesia Navy. Consequently, PT Pindad produced under license
the Beligian FN FNC assault riffle, as well as submachine guns from Italy,
mortars from Findland and Israel, and grenade launchers from Singapore
(Singh, 1989).
In 1989 with the president regulation number 59, Strategic Industry
Regulatory Body (Badan Pengelola Industri Strategis/BPIS) had been
established. It serves as the main integrated regulator for Indonesia strategic
industry. BPIS assigned to build, develop, and manage all ten Indonesia
strategic industry, namely PT. Dirgantara Indonesia (national aerospace
company); PT. PAL Indonesia (national shipbuilding company); PT. Pindad
(national armament/ordnance company); PT. Dahana (national explosive
industry); PT. Krakatau Steel (national steel industry); PT. Barata Indonesia
(national heavy equipment industry); PT. Boma Bisma Indra (national
diesel/machine company); PT. Industri Kereta Api (national train company);
10 A joint venture is a long term commitment by two or more parties to conduct joint
economic activity through the creation of a new entity. These parties contribute funds,
facilities, services, share revenues, expenses, and control of the enterprises. In defense, joint
venture is an international subsidiary owned and operated by defense firms in two or more
countries for the purposes of co-developing or to study future possible co-production or codevelopment (Bitzinger, The Modern Defense Industry, 2009, ed. Richard A. Bitzinger, pp.
312)

12

PT. Industri Telekomunikasi Indonesia (telecommunication industry); and PT.

LEN (national electronics company). Indonesias defense industry went into a
critical state when 1998 crisis hit Indonesia. A lot of state-owned company
went bankrupt, so did strategic industries. However, with the ongoing crisis in
1998, the government was more focused on restoring Indonesia economy
(Yusgiantoro, 2014). The International Monetary Fund (IMF), which provided
financial aid to Indonesia during the crisis, instructed Indonesia to end
financial support of inefficient local high technology, which leads to the
dissolution of BPIS (IMF, 2000; Afrida and Widhiarto, 2011, RSIS Policy
Report, 2013). Restoring the economy condition became the main focus of
Indonesia government in 2000 until 2010.
Defense industry went back into the concern of Indonesia government
under the reign of President Susilo Bambang Yudhoyono. The former
president and his cabinet set up a grand defense strategy, which manifested
into Renstra (strategic plan) I, II, and III. One of the strategic plans was
restructuring defense industry by the establishment of Defense Industry Policy
Committee/KKIP (Komite Kebijakan Industri Pertahanan). 11 Defense industry
is considered as an important aspect of national defense, which later
expected to support national economy. Thus, to endorse the idea of
revitalizing Indonesia defense industry, under the Susilo Bambang Yudhoyono
reign, the government stipulated Law No. 16/2012 about Defense Industry.

11 See the President Regulation No. 42/2010 about the establishment of Defense Industry
Policy Committee (KKIP). KKIP roles and functions further explained in the Law No. 16/2012
about Defense Industry. KKIP formation was confirmed in the President Decree No. 59/2013.

13

Figure 4.4 Indonesia Defense Industry History

Source: Ekonomi Pertahanan Teori & Praktik, Purnomo Yusgiantoro,
2014.
Defense Industry Policy Committee (KKIP), to reach a more reliable
and sustainable defense industry, planned to focus on developing domestic
products.12 The basic principle is to prioritize domestic products if the
classification of defense equipment needed has been able to be completed in
Indonesia. If the products cannot be produced domestically then third parties
must carry out the acquisition, usually by foreign parties. The acquisition by
third party is usually done by government in co-production, transfer of
technology, or offset settlement. The growing interdependence to foreign
entities cannot be avoided. The wave of globalization has forced strategic
partnership with more advanced countries in the realm of the defense industry
(Bandoro, 2014). Not to forgetting Indonesia is still having a joint production
KFX/IFX project between Indonesia PT. DI and Korea KAI.

12 KKIP Policy on the development of defense industry as mandated in the KKIP meeting
2010-2014. See Purnomo Yusgiantoro, Ekonomi Pertahanan Teori dan Praktik, pp. 267.

14

Figure 4.5 Weaponry Level of Development

Source
Ekonomi Pertahanan Teori
Yusgiantoro, 2014.

&

Praktik,

Purnomo

The Figure 4.5 above explained main defense equipment that can be
further developed by Indonesia based on level of development phase and
level of technology readiness. This weaponry development has been done by
research and production cooperation, where some of the weapon is already
developed, produced, and being exported. the level of development is divided
into (Yusgiantoro, 2014):

Tier 1: On this category the weaponry products have already

mass-produced by Indonesian defense industry with high
percentage of local content and proven to have technological
readiness. Senapan Serbu (SS) licensed from Belgia, Landing
Platform Dock made of PT PAL, and Anoa made of PT Pindad
are some of Tier 1 products. Tier 1 product used by Indonesian

user (military, police) well as by some neighboring country.

Tier 2: Weaponry included in this category cannot fully produce
by Indonesia defense industry. Only limited component made by

15

Indonesian defense industry and the whole product has small

amount of local content. Tier 2 products also have less
technological readiness than Tier 1 product. This category
included fast missile boat (Kapal Cepat Rudal) KCR-60, which
produced in Indonesia but using Chinas combat management

system (C-705 from CASIC).

Tier 3: This category included weaponry that cannot be
produced in Indonesia due to technological readiness, yet some
of its component made by local defense industry. The UAV
(Pesawat Terbang Tanpa Awak/PTTA) fall under this category.
Currently, Indonesia defense industry made UAV merely for
surveillance purpose, however Indonesia still needs ideal UAV

not only with surveillance capability but also attack capability.

Tier 4: Weaponry system included into this category has not
been able to be produced by Indonesia. Some of the weaponry
in this category still on the design concept level. KFX/IFX Project
included in this category because most of the works done in
Korea.

The four tier on the weaponry level of development illustrated in figure

4.5 categorized by its technology readiness and level of development. This
categorization depends on variables that affects schedule of development or
level of technology. As time goes by, equipment can move to another tier,
faster or slower than the other equipment (Yusgiantoro, 2014, pp. 262-263).
Indonesia defense industry certainly will develop, although that depends on
how the government direct the development of defense industry through
supportive policy.
The Indonesian government through the ministry of Defense is not only
aiming national market as the target of defense industry, but also to foreign
country especially in Southeast Asia. According to the ex-Minister of Defense
Purnomo Yusgiantoro, as quoted in Wira Magazine 2014, the defense
industry market in Southeast Asia region is projected to reach US$ 25 billion. 13
ASEAN is quite a large market for the defense industry. Thus, there is an
importance in the growth of the defense industry collaboration in ASEAN.
13 See Produk Industri Pertahanan Indonesia Dilirik Dunia written by WIRAs editorial team
on WIRA Magazine 2014 Special Edition.

16

Such collaboration is absolutely required to create independence of the main

weaponry system, expansion of the economic growth, and further progress for
the integration of ASEAN. In line with the idea of modernization of weaponry
system and the integration of ASEAN, ADIC or ASEAN Defense Industrial
Collaboration is another breakthrough to strengthen not just the national
defense but also the regional defense.
4.1.5The Challenges of ADIC
ASEAN, with the ASEAN Community 2015, is the best foundation to
establish cooperation within Southeast Asia countries. ASEAN member
countries have developed different industrial technological capabilities and
their industries are in different stages of achievement across capabilities. In
recent years, Indonesia has been producing Anoa APS-2 and APS-3 6x6
armored personnel carriers and Singapore has been performing a lot of
research and development with foreign parties to support its defense industry
(IHS Jane Eurosatory, 2014). However, the development of each ASEAN
member countries in defense industry can be a burden to establishing ADIC.
Each country has different level of industrial maturity, thus in conducting
collaboration needs at least equality on economic scale if it is not
technological.14
The economic gap between each ASEAN countries is just too big to
become the basic of collaboration. The difference between the highest GDP
country and the lowest is too wide. Even comparing to the size of the country
and also the number of people of the country towards GDP, it still unbalanced.
Indonesia has the highest GDP in the region by US$ 861 billion, followed by
Thailand in US$ 395 billion and Malaysia by US$ 296 billion. Singapore, a
city-state in Southeast Asia region, generates GDP in the amount of US$ 292
billion in 2015. Collaboration will only effective if there balanced between
countries. This imbalanced between ASEAN member countries has become a
challenge, not only for establishing ADIC, but also to establishing other
integration process as well. Although the concept of paper has already been
14 Interview with Colonel Tek Dr. Gita Amperiawan, Deputy Director of Defense Engineering,
Directorate General of Defense Potential, Ministry of Defense of the Republic of Indonesia, on
February 11th 2016

17

signed, and the framework is also established but there are still significant
challenges in developing defense industry. According to Bitzinger (2013),
desire and determination are insufficient substitute for arduous effort,
technology, and money when it comes to arms manufacturing. Indonesia,
Singapore, and Malaysia might overcome the challenges to keep up with the
technology as the program goes, because of the former experience in
defense industry, but the other countries, which are low in technology also in
money, such Laos, Cambodia and Myanmar. Prof Purnomo Yusgiantoro
keeps explaining about the easiest way to have collaboration in defense
industry is to agree upon reducing or removing tariff barrier in defense
equipment export.15 However, even reducing tariff could be a burden for a
country that has not ready to face the economic integration and common
market.
The process of integration in ASEAN comes from the idea of ASEAN
Community 2015, which is should be started in early 2016. ASEAN
Community is constantly confronted by doubts on its supposed centrality and
ability to act as a bloc (IBON International Policy Brief, 2015, pp. 7). ASEAN
member countries had repeated failure to act as a bloc in regional issues.
They also often had taken different position in important negotiation at
international issues. This issue pointed by Colonel Gita Amperiawan over an
interview conducted in early February 2016. By the time of interview he
pointed out that ADIC is a great idea to be conducted in a region, especially to
develop the region defense industry. However, in ADIC forum he previously
attended, he did not see any common idea or fundamental goals in every
country towards the implementation of ADIC. Indonesia, Singapore, and
Malaysia promised to help other ASEAN member countries in developing the
technology. However, Singapore still felt hesitant to do transfers of technology
if nothing comes into their benefit. Collaboration means having common policy
before conducting projects together, both on domestic policy and also regional
policy. This must be put into the countries consideration because defense
industry is a high cost industry using high technology that involves a lot of
stakeholders.
15 Interview with Prof. Purnomo Yusgiantoro in Indonesian Defense University on December
9th 2015

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As for Indonesia, the government has important roles in developing

defense industry, because monopsony system in Indonesia makes the
government as the sole buyer of the local defense industry company
(Yusgiantoro, 2014, pp. 185). The government can regulate the system in
defense industry including set up the price and control the content of product.
On this point, the government has to see ADIC as an opportunity to market
Indonesia defense industry product. Therefore, the government has to involve
deeper in the defense industry, not only making regulation towards it, but also
joining the process of defense acquisition. Prof. Purnomo Yugiantoro called
the scheme of involvement as defense industry incorporated. This idea was
actually developed when Philippines wanted to buy PT PALs Landing Perform
Dock (LPD) Ship, the Ministry of Defense helped in lobbying the counterpart
in Philippines.
4.2Analysis on ADIC Implementation towards Indonesia Benefit
4.2.1

Level of Analysis on ADIC Implementation

4.2.2

TOWS Analysis on ADIC Implementation towards Indonesia

Benefit
Regarding to this, ASEAN member countries have different abilities
and opportunities that could be integrated into a better security cooperation.
This is where defense industry collaboration plays the part of encouraging
development of industrial and technological strength. 16 A regional based
defense industry is also seen as a way to reduce the over dependence on
imports and at the same time sustain the economic development in terms of
research and development, jobs, and outflows of currency (Hamidi, 2010). In
order to get the benefit from ADIC, Indonesia shall analyze the threats,
opportunities, weaknesses, and strength of Indonesia in ADIC amongst other
ASEAN member states. The analysis shall be the guidance to plans the
strategy of Indonesia in facing ADIC. Houben et. al (1999) explained that the
current strategic position forms a very important point of departure for the
development of a future strategy. Furthermore, the studying of the
competition, the current strategic prospects, performances from the past, the
16 The quoted word is written on the ADIC concept paper. See also CSISs Current Issues
No. 25 ASEAN Defense Industry Collaboration written by Sneha Raghavan and Guy Ben-Ari.

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market possibilities, and the market environment shall provide insights

concerning information required for the indication of strengths and
weaknesses.

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